Despite the drop in Tata Steel’s first-quarter figures, the company’s revenue as well as net income still exceeded market expectations, staving off a decline in the share price.
Tata Steel shares recovered their first loss on July 25 as the company’s better-than-expected earnings for the April-June quarter supported sentiment.
The stock opened one percent lower, but quickly recouped its losses and rallied. As a result, at 09:31, shares of Tata Steel were trading about 1% higher at Rs 116.55 on the NSE. The stock hit an intraday low of Rs 114.35 earlier in the session. Consolidated net profit at steelmaker Tata Steel fell 93% year-on-year to Rs 525 crore in the first quarter. This drop was mainly due to its performance in Europe.
In comparison, the company’s net profit for the same quarter last year was much higher at Rs 7,714 crore and in the previous quarter (January-March 2023) it was at Rs 1,566 crore.
Current quarter profits were more affected by the non-cash deferred tax charge arising from the acquisition at the UK Steel Retirement Scheme. However, the completion of the UK Steel Pension Scheme insurance buyback was successful, effectively reducing risk for Tata Steel UK, as the company said. Additionally, the company’s revenue for the quarter also fell more than 6% year-on-year to Rs 59,490 crore from Rs 63,430 recorded a year ago. The company attributed the lower revenue to lower volumes, which was partially offset by higher execution across all geographies.
Despite the sharp drop in numbers, Tata Steel’s revenue and net profit still exceeded market expectations of Rs 56,337.80 crore and Rs 122.80 crore, respectively. In this way, better-than-expected earnings prevented the steelmaker’s share price from plummeting. For the first quarter, the steelmaker’s earnings before interest, taxes, depreciation and amortization (EBITDA) stood at Rs 6,122 crore. This represents a significant decrease from the EBITDA of Rs 15,047 crore reported in the same quarter of the previous year.
However, the company clarified that their adjusted EBITDA was at Rs 6,238 crore after accounting for changes related to foreign exchange fluctuations for intercompany debt, accounts receivable and the British Steel Pension Scheme (BSPS).
Brokerage firm Morgan Stanley also said the company’s EBITDA was higher than company estimates thanks to better recognition, but was still partially offset by higher operating costs. The company has an “equivalent weight” call to action with a price target of Rs 110.
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