Posted on 23 Apr 2020
Tata Steel’s sales volume in India declined a sharp 15% year-on-year (yoy) to 4.03 million tonne as the lockdown led to logistic issues and lower demand, induced by the shutdown of customer operations in automotive, construction and other segments in March.
However, production volume grew 6% yoy to 4.74 million tonne. Tata Steel India also achieved 8% y-o-y production growth for full year FY20, along with the best-ever annual sales. This was supported by ramp up of Tata Steel BSL and acquisition of Usha Martin Steel business by Tata Steel Long Products. Tata Steel BSL also recorded its best-ever annual performance. The numbers are provisional as the company is yet to declare its fourth quarter and annual earnings numbers.
Tata Steel India witnessed highest-ever annual sales in branded products and in the retail segment with an increase of 8% over FY19. The company was successful in maintaining volumes for industrial products and projects segment with a strong increase in sale in oil & gas and the industrial pipe segment. It also sustained its focus on automotive and special products segments and increased the share of high-end sales in the segment volume from 19.5% in FY19 to 25% in FY20. Tata Steel Europe saw the sales volume decline nearly 8% on a yoy basis to 2.37 million tonne, while it remained flat sequentially.
Overall, European steel demand has declined compared to the normal conditions as many customers, including European car manufacturers, have currently paused production. The utilisation levels are currently around 70% and dispatches are continuing in both the UK and the Netherlands, the company said in a statement.
“While the company is focused on conserving cash and ensuring adequate liquidity, it continues to monitor the situation closely and has taken several initiatives to ensure that the operations are in a state of readiness to ramp back as the situation improves and normalcy is restored,” it said.
Last week, S&P Global Ratings downgraded Tata Steel Rating to ‘B+’ on expected rise in leverage and a negative outlook. The downgrade mainly reflected rating firm’s expectation that the improvement in Tata Steel’s earnings and financial profile, on which the ‘BB-’ rating was based, is unlikely to materialise in the next 12-18 months, mainly due to Covid-19 related disruptions.
Tata Steel’s leverage, measured by debt to ebitda, is expected to be in the 6-8x range in FY 2020 and FY2021. This is up from 3.3x as of March 2019 and the rating firm’s previous expectation of around 5x in FY 2020 and 4x in FY2021. Funds from operations (FFO) to debt will be around 5% in both FY2020 and FY2021 (previous expectation was around 10%).
Source:Financial Express
