Both the companies are expected to report subdued topline, bottomline numbers in the second quarter
The production and sales numbers of steel companies have brought to fore the pain the sector is going through, with the economic slowdown dampening demand from key clients.
"The production was lower due to prolonged severe monsoon in general and fall in demand from auto sector in particular," JSW Steel said in a statement.
In an earlier interview, the company's Jt Managing Director & Group CFO Seshagiri Rao had said that the economic slowdown has dampened demand from clients in infrastructure and auto sectors.
JSW Steel's production in the second quarter dropped by 8 percent from a year earlier, to 3.84 million tons. For the six months of the financial year, the numbers fell, by 3 percent to 8.08 million tons.
Almost similar has been the case with Tata Steel. The company's numbers have got a boost from the addition of the capacity from the erstwhile Bhushan Steel, which is now called Tata Steel BSL. Overall, the company's production was marginally higher at 4.5 million tons, compared to 4.3 million tons a year ago.
Its European unit Tata Steel Europe, however, saw a drop in production, from 4.32 to 4.14 million tons in the second quarter of the financial year.
Its sales though have suffered more in India, even as it was marginally higher in Europe.
"During the quarter, lower volumes to automotive segment were compensated by higher exports while deliveries in branded products and retail segment and industrial product and projects segments were maintained. Tata Steel India's crude steel production was flat on QoQ basis," said the company in a statement.
Neither of the companies has till now talked about a production cut, but if things remain the same, it could be inevitable.
"A production cut could be the answer. If not in this quarter, in the next quarter we could see a big cut in supply, all the variables remaining the same," Rao had said in the earlier interview.
While auto industry is seeing one of its worst slumps, a lag in government spending in the infrastructure space has hurt demand for steel.
Essar Steel, whose creditors have approved its sale to ArcelorMittal, reported a 6.4 percent increase in production in the first six months, from 3.42 million tons to 3.64 million tons.
Impact on numbers
The lower volumes signal a rougher ride when the two companies report their financial numbers in the coming weeks.
ICICI Direct expects Tata Steel to report net profit at Rs 288.4 crore down 90.7 percent year-on-year (down 58.9 percent quarter-on-quarter). Net Sales are expected to decrease by 19.2 percent.Similarly, the brokerage house expects JSW Steel's net profit to drop by 77.1 percent to Rs 479 crore. Net sales are expected to decrease by 15.3 percent.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.