02-Nov-2023
2 mins read
Tata Steel Ltd is in the spotlight as it reported a significant consolidated loss of Rs 6,511 crore for the September quarter, diverging from analyst estimates that predicted minimal losses. The root cause of this financial setback is an extraordinary loss of Rs 6,898 crore, a substantial portion of which arises from a Tata Steel UK-related impairment charge of Rs 2,631 crore. This impairment charge pertains to assets with a limited utilisation period.
Impact of the Company’s Performance in the Steel Sector
Tata Steel’s shares have experienced a notable decline of 9% over the past month, reflecting the unexpected financial results. The actual figures of Tata Steel’s performance have turned out to be the weakest in the steel industry due to lacklustre volumes and realisations in its European operations.
Decline in Consolidated Revenue
Tata Steel disclosed a 7% decrease in its consolidated revenue, which dropped to Rs 55,682 crore compared to Rs 59,878 crore in the same quarter the previous year.
Restructuring and Provisions
In addition to Tata Steel UK’s impairment charge, the company incurred a cost of Rs 3,612 crore for restructuring and other provisions. These financial adjustments were driven by the challenges and changes within the business landscape.
EAF-Based Decarbonisation Project and UK Restructuring
Tata Steel had previously announced its intention to invest in an Electric Arc Furnace (EAF) -based decarbonisation project in Port Talbot, UK, at a total cost of 1.25 billion pounds, with a government grant of 500 million pounds. This transition to EAF-based steelmaking is expected to reduce direct carbon emissions by 50 million tonnes over a decade.
Trade Union Involvement and Government Intervention
Tata Steel has initiated informal discussions with trade union representatives to elucidate the impact of the proposed restructuring. Trade union Unite has also urged the UK government to step in promptly to address the expected job cuts. The situation calls for close attention from stakeholders and policymakers.
Tata Steel’s Stock Decline and Continues Downward Trend
On Thursday, November 2, Tata Steel’s shares maintained their bearish trajectory, marking the fourth consecutive session of decline. The stock price of Tata Steel faced a notable dip, dropping by as much as Rs 2, equivalent to a 1.7% decrease, with each share trading at Rs 114.6 during the morning trading session on the NSE. At 9:32 am, Tata Steel shares were trading 0.6% lower at Rs 116 per share on the exchange, reflecting the prevailing market sentiment.