Tata Steel in Q3: Weak Europe ops may play spoiler

On the back of muted domestic demand and weak performance of its global subsidiary, Tata Steel is likely to post a consolidated net loss in December quarter, say analysts.

The company will announce Q3 numbers later in the day.

According to CNBC-TV18 poll estimates, the company's Q3 net loss is likely to shrink 31 percent quarter-on-quarter to Rs 250 crore on higher interest cost and lower margins in most of its subsidiaries.

Revenues may decline 4 percent to Rs 32,500 crore due to lower steel prices in domestic and international markets, states the poll. Did you read: See muted steel demand; sell SAIL, buy Tata Steel: Citi

Kotak Securities expects Tata Steel's domestic business margins to improve 70 basis points driven by lower coking coal and slightly better volumes. Tata Steel Europe, (its subsidiary) is expected to continue with weak performance as Q3 is the weakest season in Europe.

The company is likely to report net loss of Rs 342.4 crore, down 25 percent  QoQ. Sales are also likely to dip around 4 percent to Rs 32827.4 crore quarter on quarter, according to the firm.

Prabhudas Lilladher expects losses to come down 33.6 percent to Rs 260 QoQ as other than Europe operations, other subsidiaries are likely to do better at operating level. Overall revenues will also decline 12.5 percent to Rs 29865.9 crore due to a subdued demand environment in various markets.

Key factors that may impact Tata Steel's Q3 earnings

There could be marginal decline in flat product prices

Capacity utilisation from its new commissioned 3 metric tonnes per annum facility in Jamshedpur is shaping up well and is operating at satisfactory levels.

Sales volume likely to come higher at 1.887 metric tonnes, 16 percent up QoQ.

Domestic business may report flattish EBITDA/tonne at USD 265/tonne

Cost inefficiencies continue due to delay in commissioning coke oven batteries forcing the company to buy coke from the open market

Weak performance from Europe and other subsidiaries will continue to nullify Indian operations profit

Steel prices declined 5 percent QoQ in Europe to their two-year low levels

EBITDA pressures to continue due to subdued steel realizations and limited benefit of raw material price fall: