StoxBox: Views on Tata Steel Ltd Q4 Results

The results of one of the largest steel makers, Tata Steel, came out as a surprise in contrast to the market estimates. The prime reason is that domestic steel prices remain under pressure as India imports higher volumes of finished steel from top producers in China. Although the steelmaker reported a profit, it missed market estimates. The rising coking coal prices acted as a dampener to the company’s performance. The company’s growth in revenues was led by high volumes that can be attributed to an uptick in steel demand fuelled by heavy infrastructure spending, but higher coking coal costs and the loss at its foreign subsidiaries weighed on the gains. The company’s expansion is in line, and we believe that once the pain of its subsidiaries in the western part is accounted for, it will have a healthy financial performance in the long term. Additionally, the steel makers’ strategy of leveraging pan-India growth and branded presence will help them grow faster in the medium term in the high-margin business. With the Automotive, Infrastructure & Construction segments seeing continuous improvement, our outlook for the steelmaker remains positive.

Tata Steel Ltd. Q4FY24 Result First Cut – Misses Estimates Amid Lower Steel Prices

  • Consolidated Revenue from Operations stood at Rs. 58,687 crores in Q4FY24 (up 6.1% QoQ / down 6.8% YoY). This degrowth was due to lower realisations across geographies, partially offset by marginally higher volumes.
  • EBITDA stood at Rs. 6,601 crores in Q4FY24 (up 5.4% QoQ / down 8.6% YoY), while the EBITDA margin declined to 11.25% in Q4FY24 compared to 11.32% in Q3FY24 and 11.47% in Q4FY23.
  • EBITDA per ton stood at Rs. 8,735 in Q4FY24, compared to Rs. 8,035 in Q3FY24 and Rs. 9,289 in Q4FY23.
  • The steel maker reported a net profit of Rs. 555 crores in Q4FY24 compared to Rs. 522 crores in Q3FY24 and Rs. 1,566 crores in Q4FY23, missing market estimates of around Rs. 950 crores.
  • The company has spent Rs. 4,850 crores on capital expenditure during the quarter and Rs. 18,207 crores for FY24. The phased commissioning of the 5 MTPA expansion at Kalinganagar is progressing.
  • Tata Steel board approved the proposal to infuse funds up to $2.11 billion into a wholly-owned subsidiary T Steel Holdings (TSHP) Singapore to repay debt and restructuring costs at Tata Steel UK.
  • The company also incurred exceptional charges of Rs. 649 crores due to the closing of its Sukinda Chromite Block in Odisha and other expenses around its European operations.
  • Production rose to 7.92 mn ton in Q4FY24 compared to 7.58 mn ton in Q3FY24 and 7.80 mn ton in Q4FY23.
  • Deliveries stood at 7.98 mn ton in Q4FY24, compared to 7.15 mn ton in Q3FY24 and 7.78 mn ton in Q4FY23.
  • The company spent Rs. 4,715 crores on capital expenditure during Q3FY24 and Rs. 13,357 crores for the 9MFY24. The phased commissioning of the 5 MTPA expansion at Kalinganagar has commenced.
  • Following seven months of formal and informal national-level discussions with the UK trade unions, Tata Steel will commence the closure of heavy-end assets in June and proceed with its plan to invest in a state-of-the-art Electric Arc Furnace at Port Talbot.
  • The Board of Directors recommended a dividend of Rs. 3.60 per share.

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