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View Promises →Tata Steel Limited — Q2 FY24
Tata Steel's Q2 FY24 consolidated EBITDA of INR 4,315 crore (8% margin) was dragged by deep losses in Europe, with UK EBITDA loss of GBP 132 million and Netherlands loss of EUR 110 million.
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Tata Steel's Q2 FY24 consolidated EBITDA of INR 4,315 crore (8% margin) was dragged by deep losses in Europe, with UK EBITDA loss of GBP 132 million and Netherlands loss of EUR 110 million. India standalone EBITDA was INR 6,917 crore (19% margin), supported by stable demand and lower coking coal costs. The UK restructuring plan (EAF transition at Port Talbot) triggered a INR 12,961 crore impairment in standalone books. Management guided India realizations up INR 2,200/ton QoQ in Q3, but Europe remains challenged until Netherlands blast furnace relining completes in Q3. Key risk: prolonged weakness in European spreads and execution risk in UK transition could delay cash flow breakeven.
टाटा स्टील की दूसरी तिमाही में कुल कमाई (EBITDA) 4,315 करोड़ रुपये रही, लेकिन यूरोप में भारी घाटे के कारण यह कम रही। यूके में 132 मिलियन पाउंड और नीदरलैंड्स में 110 मिलियन यूरो का नुकसान हुआ। भारत में कंपनी ने 6,917 करोड़ रुपये का मुनाफा कमाया, जहां मांग स्थिर रही और कोकिंग कोल की लागत कम हुई। यूके में पुराने प्लांट को बदलने की योजना के चलते कंपनी को 12,961 करोड़ रुपये का एकमुश्त घाटा लिखना पड़ा। कंपनी का अनुमान है कि अगली तिमाही में भारत में स्टील की कीमतें 2,200 रुपये प्रति टन बढ़ेंगी, लेकिन यूरोप में मुश्किलें तब तक रहेंगी जब तक नीदरलैंड्स का भट्ठा दिसंबर तक ठीक नहीं हो जाता। मुख्य जोखिम: यूरोप में कमजोर मांग और यूके में बदलाव की योजना में देरी से कंपनी को नकदी संकट हो सकता है।
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European steel spreads remain weak
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Read Transcript →Quarter Snapshot
India crude steel production
5 million tons
+5% YoY
India production stable QoQ, up 5% YoY; deliveries grew 6% YoY to ~5 million tons.
India EBITDA per ton
INR 14,365
flat QoQ
Standalone EBITDA per ton stable QoQ despite INR 2,400/ton drop in net realizations.
UK EBITDA loss per ton
GBP 127
wider QoQ
UK EBITDA loss per ton worsened by GBP 127 QoQ due to operational issues and lower spreads.
Tata Aashiyana revenues (LTM)
INR 1,700 crore
+70% QoQ
E-commerce platform for home builders saw 70% QoQ revenue growth, crossing INR 1,700 crore in 12 months.
What Changed vs Last Quarter
NEW
India net realizations expected up INR 2,200/ton QoQ in Q3
Management guided a sequential improvement of INR 2,200 per ton in India net realizations in Q3 FY24, aided by resilient domestic demand.
NEW
UK transition to be cash neutral during transition period
Management aims to run the UK business in transition such that it is cash neutral or cash positive, excluding one-time restructuring costs.
NEW
India capacity target of 40 million tons by FY30
Tata Steel plans to reach 40 million tons of India capacity by 2030 through expansions at Kalinganagar, Neelachal, Bhushan, and EAF projects.
UPDATED
Netherlands EBITDA positive from Q4 FY24
After blast furnace relining completion in Q3, Netherlands is expected to turn EBITDA positive in Q4 FY24.
DROPPED
Q2 India realization decline of ₹3,100/ton
Net realizations in India expected to drop by about ₹3,100 per ton quarter-on-quarter due to falling international prices and seasonality.
DROPPED
Q2 Europe realization decline of GBP 38/ton
Net realizations in Europe expected to drop by about GBP 38 per ton quarter-on-quarter.
DROPPED
Net debt/EBITDA target of 2.5x by year-end
Management aims to bring net debt/EBITDA back to 2.5x by end of FY24, from 2.9x in Q1.
NEW RISK
European steel spreads remain weak
Current spot spreads in Europe are low due to high coking coal prices and subdued demand, which could delay the turnaround in Netherlands and UK.
NEW RISK
UK restructuring execution and union negotiations
The UK transition plan is subject to union consultation and regulatory approvals; delays or higher-than-expected costs could increase cash outflows.
NEW RISK
Net debt may remain elevated near-term
Despite strong India cash flows, net debt increased by INR 5,600 crore QoQ; management expects it to stay around current levels for the next two quarters.
RISK GONE
UK structural challenges and potential restructuring costs
UK operations face end-of-life assets and ongoing losses; management indicated decisive action in H2, which may involve significant cash costs.
RISK GONE
Working capital volatility and debt reduction risk
Working capital increased by ₹2,500 crore in Q1 due to price effects; achieving $1 billion debt reduction target may be challenged by capex and Europe cash needs.
RISK GONE
Energy hedge roll-off impact in Europe
Energy hedges taken at higher prices will continue to impact costs in Q2 before easing in H2; quantum of impact not quantified.
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Guidance and risk preview
Management guided a sequential improvement of INR 2,200 per ton in India net realizations in Q3 FY24, aided by resilient domestic demand.
Current spot spreads in Europe are low due to high coking coal prices and subdued demand, which could delay the turnaround in Netherlands and UK.
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