Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Steel Ltd (STU:HWHG, Financial) reported a 5% year-on-year increase in crude steel production in India, reaching 5.3 million tonnes.
- The company witnessed a 20% year-on-year growth in its retail brand, Tata Tiscon, driven by enhanced reach and consumer connect programs.
- Tata Steel Ltd (STU:HWHG) successfully commissioned a 5 million tonne blast furnace at Kalinganagar, which is expected to boost production capabilities.
- The company has expanded its e-commerce portal, Aashiyana, and launched two new construction service centers, enhancing its B2B offerings.
- Tata Steel Ltd (STU:HWHG) received a GBP500 million grant from the UK government to support its green steelmaking project, preserving over 5,000 jobs in the UK.
Negative Points
- Global steel trade dynamics have been distorted by elevated steel exports from China, impacting regional prices.
- The company's UK operations reported an EBITDA loss, which widened from GBP91 million in the first quarter to GBP147 million in the second quarter.
- In the Netherlands, subdued demand and market conditions have led to a decline in EBITDA per tonne.
- Tata Steel Ltd (STU:HWHG) faces challenges in the European market due to regulatory costs and declining spreads.
- The company has experienced a significant buildup in net debt, increasing by almost INR10,000 crores over the last six months.
Q & A Highlights
Q: Can you provide clarity on the fixed cost reduction in the UK and the timeline for achieving breakeven EBITDA and cash flow?
A: Koushik Chatterjee, CFO, explained that they aim to reduce fixed costs by GBP100 per tonne over the next two quarters. The focus is on reducing maintenance, store repairs, and people costs. The goal is to achieve neutral to positive EBITDA and cash flow by June 2025, assuming market conditions do not worsen.
Q: What is the outlook for Tata Steel's net debt and working capital, considering recent increases?
A: Koushik Chatterjee noted that the working capital increase was not only in the UK but also in India due to inventory buildup. They expect stabilization as Kalinganagar ramps up. The Netherlands decarbonization CapEx is not expected in the next 12 months, and UK CapEx will be partly offset by government grants. The company aims to resume its $1 billion deleveraging target.
Q: How is the ramp-up of Kalinganagar Phase 2 progressing, and what are the expected volumes?
A: CEO T.V. Narendran stated that the blast furnace is operating at 7,500 tonnes per day, with plans to reach 15,000 tonnes by Q4. They expect an additional 1.1 million tonnes this year, 3.5 to 4 million tonnes next year, and full 5 million tonnes the year after. The ramp-up is on track, with bottlenecks being addressed.
Q: What is Tata Steel's strategy in the face of Chinese steel exports and current market conditions?
A: CEO T.V. Narendran highlighted that while demand in India remains strong, unfairly priced imports from China are a concern. The company is engaging with the government for action against these imports. They are optimistic about demand but cautious on pricing, with a focus on maintaining competitive costs.
Q: Can you elaborate on the cash flow situation in Europe, particularly regarding the UK restructuring?
A: Koushik Chatterjee mentioned that the UK restructuring costs, including redundancies, will be spread over the next three quarters. The Netherlands is expected to have neutral cash flow in the second half, with efforts to tighten working capital and benefit from lower raw material costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
