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Tata Steel Q1 loss widens 10-fold to Rs 3,183 cr, EBITDA up 21%

Chillicious Bureau

Tata Steel started off the financial year 2016-17 on a weak note with the consolidated quarterly loss widening 10-fold to Rs 3,183 crore compared with Rs 317 crore in same period last fiscal, dented by discontinued operations.

“Loss from discontinued operations of Rs 3,296 crore recognised on account of divestment of Long Steel UK Limited. The sale was completed during the quarter,” Tata Steel said, adding pre-exceptional underlying profit before tax stood at Rs 1,080 crore against loss of Rs 234 crore in preceding quarter.

Revenue also missed analysts expectations, falling 5.8 percent to Rs 26,406 crore in the quarter ended June 2016 against Rs 28,025 crore in year-ago period.

Profit was expected at Rs 292 crore on revenue of Rs 29,110 crore for the quarter, according to average of estimates of analysts polled by CNBC-TV18.

However, operational performance was very strong, beating analysts’ expectations. Consolidated EBITDA (earnings before interest, tax, depreciation and amortisation) climbed 21.4 percent year-on-year to Rs 3,270 crore due to improved operating performance across India, Europe and South East Asia.

“EBITDA margin of 12.4 percent expanded by 520 basis points compared with 7.2 percent in Q4FY16 and 280 basis points compared with 9.6 percent in Q1FY16,” Tata Steel said.

A CNBC-TV18 poll had estimated EBITDA at Rs 2,940 crore and margin at 10.1 percent for the quarter.

Standalone (India business) profit shot up 35.3 percent to Rs 575.43 crore and revenue grew by 1.5 percent to Rs 10,323.5 crore on yearly basis.

Tata Steel said India EBITDA stood at Rs 2,236 crore, representing margin of 22 percent expanded by 250 basis points compared with Q4FY16 due to higher realisations and focus on value added products.

Europe business was strong at EBITDA level with operating profit at Rs 856 crore (against loss of Rs 578 crore in Q4FY16) on depreciation of pound, short term improvements in steel prices, impact of restructuring undertaken earlier in the UK and stronger performance in Netherlands.

India business EBITDA per tonne for the quarter was Rs 10,455, higher by 27 percent compared with preceding period and 19 percent higher over same quarter last year while Europe EBITDA per tonne stood at Rs 3,384 and South East Asia at Rs 2,872 crore (up 188 percent over Q4FY16 and 497 percent over Q1FY16).

On strategic developments in Europe business, the firm said, “Tata Steel UK is currently progressing with the divestment of the specialty steel business and the pipe mills in Hartlepool. Europe firm continues to be in discussion with industry players to explore options for a strategic collaboration through a potential joint venture.”

Euro steel production during the quarter declined 15.7 percent YoY to 2.68 million tonne (MT) while consolidated steel deliveries dropped at 5.41 MT compared with 6.37 MT on sequential basis.

Tata Steel said net debt stood at Rs 75,259 crore, higher by Rs 4,171 crore over Q4FY16 while there was strong liquidity position with cash & cash equivalents including drawn & undrawn bank lines of Rs 12,746 crore.