T V Narendran, CEO and managing director of Tata Steel Limited
T V Narendran, CEO and managing director of Tata Steel Limited

Domestic steel major Tata Steel on Thursday reported a consolidated net loss of Rs 4,648.13 crore for the quarter ended June, mainly on account of reduced income.

The company had posted a consolidated net profit of Rs 714.03 crore during the same period a year ago, Tata Steel said in a BSE filing.

Total income dropped to Rs 24,481.09 crore during the quarter under review, from Rs 36,198.21 crore earlier.

The company's expenses also reduced to Rs 27,892.09 crore from Rs 34,447.42 crore in the April-June period of the preceding fiscal.

However, on a standalone basis, the company managed to maintain profitability despite a significant reduction in income. According to the filing, Tata Steel posted a standalone net profit of Rs 1,193.27 crore in the quarter under review, down from Rs 1,538.99 crore last year.

Standalone income fell to Rs 9,459.93 crore from Rs 16,269.16 crore in April-June 2019.

In a separate statement, Tata Steel said its businesses were impacted due to the COVID-19 pandemic.

Tata Steel India and its key subsidiaries have successfully countered the closure of the domestic market during the lockdown period by leveraging its global network and exporting more than 1.46 million tonne during the quarter, it said.

Its operating level has recovered to 90 per cent by end-June 2020 and has since then increased further to 95 per cent, catering to both domestic and export customers.

With the improvement in the domestic market, Tata Steel has also been reducing its exports ratio.

The price outlook in both export and domestic markets continues to improve on a month-on-month basis and the current quarter demand has been much better than a typically slow monsoon quarter in the past, it said. In India, average steel realisations were lower due to the COVID-19 impact during the quarter and about Rs 2,000 crore of costs were under-absorbed due to the lower volumes and have been charged to the profit and loss account, the statement said.

Despite the drop in margins, there was a reduction in net debt of Rs 1,677 crore in India, including a reduction of Rs 577 crore and Rs 291 crore at Tata Steel BSL and Tata Steel Long Products, respectively.

The company further said the performance of Tata Steel Europe was affected with the overall weakness in economic activities in the region and sharp drop in spreads.

The company did receive short support from the UK and the Netherlands government, including cash flow deferrals of payables, it added. The company's CEO and MD T V Narendran said, "During the quarter, we recalibrated our operations and our sales across geographies in line with underlying regulatory and market conditions. While this had an adverse impact on our volumes and our margins, we were successful in mitigating the impact as we pivoted the business towards export markets and successfully generated free cash flows despite adverse market conditions." "The economic activity is gradually recovering. In India, the company has also ramped-up its capacity utilizations to 90 per cent levels. In Europe, spreads are at unsustainably low levels but are expected to improve going forward. We are also engaged with respective governments in the UK and Netherlands for their support.

"While the risk of further COVID-19 outbreaks remains, we are cautiously optimistic that the worst is behind us. We continued to remain extremely focused on cash flows and liquidity management through this crisis," he added. The company's Executive Director and CFO Koushik Chatterjee said during the quarter, the company raised Rs 5,935 crore of long-term debt and further extended its maturity profile.

Given the heightened economic uncertainty, Tata Steel ramped up its liquidity buffer to Rs 20,144 crore which "we will deploy to deleverage as business conditions normalise", he added.

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