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Tata Steel Ltd. is anticipated to experience a decrease in net profit during the December 2023 quarter, primarily due to challenges faced in its European operations, according to analysts. The company is scheduled to release its earnings on January 24.
The consensus among seven analysts surveyed by Moneycontrol suggests a consolidated net profit of ₹702.70 crore, indicating a 16 per cent decline compared to the previous quarter. In the corresponding quarter of 2022, the company reported a loss of around ₹2384 crore.
For the quarter, consolidated revenue is estimated at ₹56,400.50 crore, showing a 1.3 per cent increase from the previous quarter. This rise is attributed to higher sales realisation in Indian operations and increased sales volume in India but is partly offset by lower sales volume and realisation in Europe. On a year-on-year basis, revenue is expected to decline by 1.2 per cent.
Analysts predict a 3.5 per cent quarter-on-quarter decline in EBITDA, driven by reduced EBITDA per tonne in India due to higher coking coal costs. Despite increased realisation and sales volume in India, this impact outweighs the gains. In Europe, a weaker EBITDA per tonne is expected due to lower sales volume and realisation, partially offset by reduced coking coal costs. Furthermore, analysts anticipate a sequential drop in EBITDA per tonne in Europe due to lower sales volume and operating leverage.
Standalone volumes for the third quarter are predicted to grow by 2 per cent, reaching 4.9 million metric tonnes, with an anticipated increase of around ₹1,200 per tonne in realisations. The standalone EBITDA per tonne is expected to rise by around 10 per cent to ₹14,700. However, higher costs are likely to partially offset the realised gains. Analysts note that Tata Steel, having captive iron ore, would not be affected by higher ore prices, leading to incremental margin expansion. Corus EBITDA per tonne is expected to be negative, at $177.
Tata Steel's Q3 provisional sales volume in India rises by 1.2 per cent quarter-on-quarter to 4.88 MT, driven by strong domestic demand. Steel production at 5.32 MT, up 6 per cent year-on-year, suggests inventory buildup. In Europe, provisional sales volume dropped by 2 per cent quarter-on-quarter to 1.92 MT. The Netherlands sees a 5 per cent quarter-on-quarter increase to 1.29 MT but declines by 8 per cent year-on-year due to blast furnace relining. UK sales volume at 0.63 MT is down by 5 per cent quarter-on-quarter and 14 per cent year-on-year, reflecting lower demand.
Analysts are closely watching Tata Steel's Q3 FY24 results for updates on how the company plans to address challenges in its European operations and the status of union talks. However, at the consolidated level, analysts expect margin expansion due to stable steel prices and a minor impact on the coking coal front, according to Yes Securities' latest note. Axis Capital predicts a marginal 2 per cent quarter-on-quarter decline in EBITDA per tonne at Indian operations to ₹14,705, attributed to increased coking coal consumption costs, despite higher realisations and sales volumes. In Europe, an anticipated EBITDA per tonne loss widens to $180 from $137 in Q2 FY24, driven by lower sales volume and realisation, partially offset by reduced coking coal consumption costs.
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