Tata Steel's Q4 loss at Rs 5,674 cr; to exit non-core assets

Tata Steel Wednesday reported a consolidated net loss of Rs 5,674.29 crore for the quarter ended March 31, 2015, mainly due to non-cash write downs and a "challenging" 2014-15 fiscal.

New Delhi: Tata Steel Wednesday reported a consolidated net loss of Rs 5,674.29 crore for the quarter ended March 31, 2015, mainly due to non-cash write downs and a "challenging" 2014-15 fiscal.

The domestic steel giant, counted among the top-ten steel companies globally, had posted a net profit of Rs 1,035.87 crore in the year-ago period, it said in a BSE filing.

Total consolidated income declined by 21 percent to Rs 33,666.18 crore in the last quarter of 2014-15, compared to Rs 42,428.05 crore in the same quarter of 2013-14.

For the 2014-15 fiscal, the firm posted a consolidated net loss of Rs 3,925.52 crore. It had reported a net profit of Rs 3,594.89 crore in 2013-14.

Consolidated total income declined to Rs 1,39,503.73 crore in 2014-15, from Rs 1,48,613.55 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) T V 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 tonne (MT) in January-March of 2014-15 against 7.62 MT in the year-ago period. For the entire 2014-15, its steel deliveries fell to 26.32 MT from 26.56 MT.

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."

Tata Steel's India performance this year was impacted by surging imports, declining commodity prices, muted demand and regulatory uncertainties in captive mining operation, he said.

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 percent to settle at Rs 361.35 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 Rs 4,951 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.

"Additionally, the firm undertook a non-cash impairment charge of Rs 1,577 crore in the first quarter of FY'15 related to its investment in Mozambique Coal Project. Total impairment charge for FY'15 is Rs 6,391 crore in consolidated financial results," it said.

The company's liquidity position and financial covenants are unaffected by the above non-cash write-down, it added.

On its Indian operations, it said the industry witnessed subdued demand across steel-consuming industries.

"There was a surge in low-priced imports especially from China, Japan and Korea, which led to a sharp correction in steel prices especially during the last few months of the year," it added.

Despite these challenges, the firm's Indian operations registered best ever production in Hot Metal, Crude Steel and Saleable Steel and successfully ramped up deliveries across its key business segments, it said.

Turnover from Indian operations in 2014-15 was Rs 41,785 crore against Rs 41,711 crore in 2013-14 as benefits of high volumes were offset by lower realisation and weak demand.

In the fourth quarter of 2014-15, turnover fell 13 percent to Rs 10,635 crore from Rs 12,191 crore in the year ago period.

Profit after tax in 2014-15 was flat at Rs 6,439 crore compared to Rs 6,412 crore in 2013-14.

In the fourth quarter of 2014-15 profit was Rs 814 crore compared to Rs 1,979 crore in January-March 2013-14.

Volume output in Europe was stable, despite demand and operational issues, Tata Steel said adding that lower turnover was due to reduced sales prices.

Strong progress was made in the market differentiation strategy in Europe. Differentiated products sales represented more than a third of overall sales for the year as a whole, it added.

Turnover from Europe in 2014-15 fell to Rs 79,878 crore from Rs 84,666 crore in the previous year. The turnover in the last quarter of 2014-15 was Rs 19,537 crore compared to Rs 24,376 crore in year-ago period.

The drop in turnover was driven by falling raw materials prices, which dampened realisations, it said.

South East Asian operations were affected by weak demand and a contraction in the rebar-scrap spread on the back of a significant increase in imports from China.

Deliveries increased at NatSteel's operations in Singapore though they declined in China. Tata Steel Thailand recorded an increase in sales, including value-added domestic rebar sales, during the fourth quarter.

On the road ahead, Chatterjee said, "Going forward, we expect the regulatory uncertainties on mining to be behind us, thus focusing on the phased commissioning of the greenfield steel plant in Kalinganagar.

The European business continued its improvement journey on the back of robust IJmuiden performance which has been significantly better than previous years, he added.

In the last year, the firm continued to actively pursue proactive risk management by focusing on group cashflow management, treasury and currency volatility management across geographies, diversification of funding sources and lengthening of its debt profile, Chatterjee said.

"We spent Rs 13,492 crore on capex during the year, with a large proportion deployed on the greenfield Kalinganagar project. Despite this significant spend, we were able to keep the gross debt level stable over the year, he added.

The company's liquidity remains strong at Rs 21,000 crore including undrawn lines, Chatterjee said.
On European business, Kohler said: "In the coming year we see opportunities to further improve sales through higher precision."

EU demand is forecast to grow modestly again and the EU steel industry is in a stronger position to benefit than it was pre-crisis. But surging Chinese exports look set to remain a serious concern, he added.

Narendran said in India, Tata Steel is focused on implementing its 3 million tonne per annum (mtpa) greenfield expansion at Kalinganagar (Odisha), which it expects to commission this year.

"In addition, the first phase of our Gopalpur ferrochrome plant will start operation by October-2015," he added.

The Board of Directors of the company has recommended a equity dividend of Rs 8 per share for 2014-15 fiscal.

Following notification of Mines and Minerals Development and Regulation (MMDR) Amendment Act 2015 on March 27, 2015, Tata Steel has been working with State Government of Jharkhand and Odisha on completing the necessary documentation for the extension of its mining leases as provided in Act.

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