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breaking news Lower Achievements, Higher Costs May Hit Financial Services


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Comments from management on the company’s debt reduction plans post-deal and a timeline on NINL’s relaunch will be one to watch.

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To buy to sell Tata Steel to share

India’s largest steel producer, Tata Steel Ltd. will publish its results after market hours on Monday, October 31. La Rue expects weak consolidated results, both sequentially and on an annual basis.

For the September quarter, the company’s revenue is expected to decline to mid-single digits, while net profit could experience a complete erosion compared to the same period last year.

EBITDA margin is also expected to decline by nearly 16 percentage points as changes to MMDR resulted in an additional royalty premium to be paid.

breaking news Lower Achievements, Higher Costs May Hit Financial Services

Part of the weak results is probably due to lower steel realizations. Indian steel prices could fall by nearly 13,000 rupees per ton from the June quarter due to lower contract and export prices.

Prices in Europe are expected to fall between $180 and $200 per tonne.

The overall gap is also expected to contract due to lower realizations coupled with higher input and energy costs. The benefits of lower prices come with a lag.

Indian business volumes improved sequentially as the June quarter results were impacted by the imposition of export duties. Business volumes in India are estimated at 4.6 million tons, a growth of 4% compared to last year and 18% compared to the June quarter.

Tata Steel’s EBITDA per ton is expected to fall to Rs 10,950 in the September quarter from Rs 30,739 in the same period last year.

Volumes from Tata Steel’s European business are expected to decline 12% both sequentially and year-on-year.

EBITDA per tonne for the European business is expected to halve to $110 from $211 last September.

The operating profit or EBITDA of the steel business is expected to be hit due to a sharp decline in steel prices in Europe, compounded by rising energy costs. The hit can be partially offset by longer contracts.

Key factors to follow

Among the key factors that will be tracked post-earnings are management’s comments on demand and pricing. Last week, rival JSW Steel reported a net loss for the September quarter due to falling steel prices.

A key thing to watch will be Tata Steel’s debt status following the acquisition of Neelachal Ispat Nigam or NINL, which was done through its declining subsidiary Tata Steel Long Products. The overall consideration for the deal was Rs 12,100 crore.

Comments from management on the company’s debt reduction plans post-deal and a timeline on NINL’s relaunch will be one to watch.

Comments on Tata Steel’s volatile European operations and the impact of the pound’s depreciation against the US dollar will be eagerly awaited. The management will also have to provide guidance on the transition to green steel in Europe.

Tata Steel announced in March this year that it would invest Rs 1 lakh crore to double its steel production capacity at its plants in Angul, Kalinganagar and Jamshedpur to meet the target of 40 million tonnes. The street will await comments on the commissioning of the expansion program.

Shares of Tata Steel are down 11.5% this year. The company recently completed a 10:1 stock split.


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