Tata Steel witnessed an exceptional net loss of Rs5,674.29 crore for the quarter ended March 31, 2015, mainly due to non-cash write downs and a “challenging” FY15 fiscal.
Moreover, owing to a sluggish Chinese economy and more importantly due to an increase in cheaper steel products, the company’s margins were affected. The domestic steel giant, counted among the top-10 steel companies globally, had posted a net profit of Rs1,035.87 crore in the year-ago period, it said in a BSE filing.
Tata Steel Group Executive Director (Finance & Corporate) Koushik Chatterjee said, “The company also continues to pursue its strategy of exiting non-core assets and has initiated action on de-risking its exposure to the UK Pension scheme that would help the long term sustenance of the UK business amidst difficult business environment.”
He conceded that the company’s India performance this year was impacted by surging imports, declining commodity prices, muted demand and regulatory uncertainties in captive mining operation.
Total consolidated income declined by 21 per cent to Rs33,666.18 crore in the last quarter of 2014-15, compared to Rs42,428.05 crore in the same quarter of 2013-14. For the 2014-15 fiscal, the firm posted a consolidated net loss of Rs3,925.52 crore. It had reported a net profit of Rs3,594.89 crore in 2013-14.
Consolidated total income declined to Rs1,39,503.73 crore in 2014-15, from Rs1,48,613.55 crore during 2013-14. “It has been a very challenging year for the steel industry with several macro headwinds at play,” Tata Steel Managing Director (India and South East Asia) TV Narendran said.
Steel realisations fell sharply during the second half of the year due to the deluge of imports combined with sluggish domestic demand. In addition, the company’s performance was impacted by mining disruptions during the year, he added.
“We are hopeful that steel demand will rebound this fiscal year on the back of higher investments across key industrial and infrastructure sectors as the Government’s ‘Make-In-India’ campaign starts yielding results,” he said.
Despite this, Tata Steel continued to outperform the industry and registered growth in deliveries in a relatively flat steel market, Narendran said. “Our focus on our marketing franchise, strong customer relationships and various cost saving initiatives have helped us weather the weak business environment,” he added.
Tata Steels’ deliveries of the metal were lower at 7.06 million tonnes in January-March of 2014-15 against 7.62 million tonnes in the year-ago period. For the entire 2014-15, its steel deliveries fell to 26.32 million tonnes from 26.56 million tonnes.
Tata Steel Europe MD and CEO Karl-Ulrich Kohler said, “our European production and deliveries were stable, despite being constrained by reduced demand in the second half and operational issues such as a power blackout in the Netherlands in the fourth quarter.” Shares of Tata Steel today fell by 1.85 per cent to settle at Rs361.35 apiece at the BSE.
On the impairment charge, Tata Steel said, “the company recognised a non-cash write-down of goodwill and assets in the consolidated financial results in Q4 FY 2014-15 of Rs4,951 crore, mainly relating to the long Products UK business in Tata Steel Europe which is now fully impaired.”
The impairment included a write-down of investments in overseas raw materials projects in Mozambique and Ivory Coast and the Taconite project in Canada because the economic viability of these projects remains uncertain at the current level of commodity prices, it added.