Tata Steel Q3 Preview: Net loss on the cards amid lower realisations

tata steel

Tata Steel Ltd is expected to report a loss for the December quarter, primarily driven by lower sales realisation in India and Europe, which offsets the positive impact of reduced coking coal costs and higher sales volumes. The company will announce its earnings on January 27.

According to a poll of eight analysts conducted by Moneycontrol, the revenue is projected to be Rs 52,846 crore, reflecting a decline of 2 percent sequentially and 4.5 per cent year-on-year. The poll also forecasts the company to report a loss of Rs 371 crore for the quarter, compared to a profit of Rs 815 crore on a QoQ basis and Rs 848 crore YoY. EBITDA is expected to fall by 24 percent both sequentially and YoY to Rs 4,703 crore.

Analysts pointed out that India’s EBITDA per ton (EBITDA/t) is expected to be Rs 11,810/t, down 33 percent YoY and 9 percent QoQ, due to lower steel price realisation, partially offset by reduced coking coal costs. Meanwhile, Europe’s EBITDA/t loss is likely to narrow to $53/t, from $75/t in Q2FY25 and $178/t in Q3FY24, driven by stronger performance in the Netherlands, although the UK continues to weigh on results.

What factors are driving the earnings?

Provisional sales in India stood at 5.29 MT, reflecting a growth of 8.4 percent YoY and 3.5 percent QoQ, while Europe posted 2.09 MT, up 7.7 percent YoY but down 1.9 percent QoQ.

Lower realisations: Revenue expected to decline due to lower steel price realisation in India and Europe, though higher sales volumes will provide partial support.

Weak operational performance: EBITDA likely to decrease due to the combined impact of lower sales realisation in India and Europe, which counteracts the benefits from lower coking coal costs and increased sales volumes.

Declining EBITDA per ton: India’s EBITDA/t is anticipated to decline YoY and QoQ, while the European EBITDA/t loss is expected to narrow due to improved Netherlands performance, despite challenges in the UK.

What to look out for in the quarterly show?

In the upcoming quarterly report, key areas to watch include updates on the Electric Arc Furnace (EAF) project at the UK’s Talbot, insights into the profitability and cash flow from European operations, and progress on the company’s capacity expansion plans.

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