Tata Steel, which saw its net profit plummet in the first quarter of fiscal 2023-24, expects the second half of the year to be better. But Europe may see economic rebound only next year, Managing Director and Chief Executive Officer TV Narendran told Moneycontrol in an interview on July 25.
Narendran said the company is optimistic about strong steel demand in India and is on track for its planned capital expenditure of Rs 16,000 crore for the year.
On July 24, Tata Steel reported that its net profit declined 93 percent year on year to Rs 525 crore in the first quarter of 2023-24 as its Europe operations reported a loss for the third consecutive quarter.
“We expect H2 to be much stronger than H1 for multiple reasons. We expect that China exports will reduce in H2, which will bring more stability to international steel prices. The India demand post monsoons should be strong, leading up to the elections,” Narendran said.
China has been increasing its steel exports amid weak global demand, which has led to moderation in the price of the commodity. Narendran said that he expects that globally, inflation will slowly cool off and there may be a pause on rate hikes, which may support the steel industry.
“Europe will slowly recover. Next year will be better than this year from a macroeconomic point of view…I think it will be next year before you really see economic activity come back strongly in Europe,” he said.
Tata Steel’s Europe revenues were £2,083 million in the June quarter, and its EBITDA loss stood at £153 million. The company witnessed lower revenues due to a reduction in volumes even as there was an increase in realisations.
Capex on
Tata Steel spent Rs 4,000 crore in the first quarter of FY24 and is on track to spend the entire Rs 16,000 crore planned for the year.
“Traditionally India had consumption-led growth. Over the last few years, we are seeing more investment-led growth. That's good for steel; in this industry, the intensity of growth is higher when it is investment-led growth,” Narendran said.
Tata Steel’s India business reported a strong showing with both production and deliveries growing. Crude steel production was around 5 million tonne, up 2 percent YoY, primarily driven by a ramp-up at Neelachal Ispat Nigam Ltd, which was acquired by a subsidiary of Tata Steel in 2022.
But even as the company scales up capacity, in line with its target to double it to 40 million tonne per annum by 2030, it is also hoping to resume its deleveraging plan.
“We are also focused on our debt. We have said that every year we want to reduce the debt by a billion dollars. Ever since we said it, apart from last year, every year we have done it. This year, the first two quarters have been more challenging than we thought. But we have not given up on that target,” Narendran said.
The company’s net debt rose to Rs 71,397 crore at the end of the June quarter from Rs 67,810 crore at end-March 2023.
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