Tata Steel Q3 Results Today: Potential Widening Losses in Europe, Anticipated Muted Sales

Prabhudas Lilladher Forecasts Tata Steel Q3 Profit at Rs 250 Crore, Expects Further Deterioration in TSE Contribution

Tata Steel is anticipated to announce subdued Q3 results, with potential widening losses at Tata Steel Europe due to adverse operating leverage at Tata Steel-UK and a decline in realizations.

Analysts expect either a thin profit or losses, attributed to a single-digit drop in sales. Despite this, Ebitda margin is projected to expand both sequentially and YoY. The company is expected to show a 2% growth in volume.

ICICI Securities Forecasts Widening Loss at Tata Steel Europe, Citing Adverse Operating Leverage at Tata Steel-UK and a Decline in Realization

According to PhillipCapital’s expectations for Tata Steel’s Q3 financial results:

1. Profit Outlook: The brokerage anticipates Tata Steel to report a profit of Rs 121.20 crore for the quarter. This is in comparison to a higher profit of Rs 702.70 crore in the preceding September quarter and a substantial loss of Rs 2,384.20 crore in the same quarter of the previous year.
2. Revenue Projection: Revenue is expected to decline, with a 5% year-on-year decrease and a 3% quarter-on-quarter decrease, reaching Rs 54,138.60 crore.
3. Ebitda Margin Improvement: The Ebitda (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin is anticipated to improve to 8.8%. This would be an improvement from 7.7% in the September quarter and 7.1% in the same quarter of the previous year. Ebitda margin is a measure of operating profitability.
4. Loss Estimate: Despite the expected profit, PhillipCapital suggests a potential loss of Rs 122.30 crore, indicating a certain level of uncertainty or variation in their projections.

The provided information indicates expectations for Tata Steel in the upcoming quarter:

1. Consolidated Volumes: Anticipation of a 2% Quarter-on-Quarter (QoQ) increase in consolidated volumes, indicating expected growth in overall production and sales.
2. Domestic Realisations: Expectations for a 2% QoQ rise in domestic realisations, suggesting an increase in the average selling price of Tata Steel’s products within the domestic market.
3. Standalone Ebitda Improvement: Projections indicate a 6% QoQ improvement in Standalone Ebitda (Earnings Before Interest, Taxes, Depreciation, and Amortization). This suggests an expected enhancement in the operating profitability of the company’s standalone operations.
4. Europe Operational Losses: The statement notes that losses at the operational level in Europe are expected to continue. This indicates challenges or ongoing difficulties in Tata Steel’s European operations.

ICICI Securities predicts a widening loss at Tata Steel Europe due to adverse operating leverage in Tata Steel-UK and a drop in realizations. The brokerage expects a 2% YoY (4.5% QoQ) rise in consolidated revenue to Rs 58,204 crore, projecting a loss of Rs 122.30 crore.

Anticipating stable Domestic Ebitda/te despite a sales volume decline. Projected increase in losses at TSE due to a GBP 35/te QoQ realisation drop and adverse operating leverage, especially in the UK.

Prabhudas Lilladher forecasts a profit of Rs 250 crore, highlighting an expected deterioration in Tata Steel Europe’s contribution. The decline is attributed to a GBP 30-35 QoQ drop in European prices and a 10% QoQ reduction in volumes at Tata Steel UK.

“Tata Steel UK is expected to significantly impact subsidiaries’ Ebitda loss QoQ, exceeding $180/t, leading to a 9% cut in FY24 Ebitda, primarily due to a weak contribution from Tata Steel Europe. Meanwhile, Axis Securities reported a 1.2% QoQ growth in India sales volume, driven by robust domestic demand. However, Europe sales volume declined 2% QoQ, with Netherlands up 5% QoQ but down 8% YoY, and UK sales volume at 0.63 mt, down 5% YoY and 14% QoQ due to lower demand.”

Consolidated sales volume experienced a marginal 0.2% QoQ decline. Steel HRC prices in the traders’ market (ex-Mumbai) increased by 2% QoQ in Q3FY24. The expectation is for consolidated revenue to grow by 3% QoQ, driven by higher sales realization in Indian operations and increased sales volume in India. This growth is partially offset by lower sales volume and realization in Europe.

Axis Securities anticipates a 3.5% QoQ de-growth in Ebitda, primarily attributed to lower Ebitda/tonnes in India due to increased coking coal consumption costs, offsetting gains from higher realization and sales volume in India. Weaker Ebitda/tonnes in Europe is expected due to lower sales volume and sales realization, partially offset by reduced coking coal consumption costs.”

Read more Business News