Tata Steel conducted an investor conference call today for Q1FY21. The company has increased its capacity utilization rate to nearly 90-95% in Jun from a 50% output rate for Apr. Key highlights of the investor call are mentioned below:
1.Crude Steel production declined by 37% q-o-q – The company has produced 2.99 mn t of crude steel from Indian operations in Q1 FY ‘21, declining by 37% q-o-q from 4.73 mn t in Q4 of the previous fiscal. The capacity utilization was curtailed in Apr’20 due to the lock-down, before gradually ramping back from mid-May’20 onwards.
2. Steel deliveries decline by 27% q-o-q – Domestic sales have remained dull during the quarter, falling by 27% to 2.93 mn t in Q1 in contrast with 4.03 mn t in the preceding quarter. Complete lock-down announced in the country in Apr and May resulted in a significant drop in demand from India.
3. Deliveries rebound in Jun ’20- With relaxation in lock-down measures, domestic deliveries in Jun’20 stood at 1, 50,000 t, about 75% of FY ’20 average monthly domestic deliveries.Meanwhile, total deliveries, including exports, in June’20 increased to 115% of FY’20 average monthly overall deliveries.
4. Steel exports surged significantly in Q1- Company exported around 1.47 mn t in Q1 against 0.61 mn t in the preceding quarter. Tata Steel India and its key subsidiaries have successfully countered the closure of the domestic market during the lockdown period by leveraging its global network and exporting higher volumes in Q1.
Tata steel long products achieved record export sales volume of 64,000 t by creating a new customer base in freight friendly markets and significantly ramping up the supply chain capability.
“During the quarter, we re-calibrated our operations and our sales across geographies in line with underlying regulatory and market conditions. While this had an adverse impact on our volumes and our margins, we were successful in mitigating the impact as we pivoted the business towards export markets and successfully generated free cash flows despite adverse market conditions”, commented by Mr. T V Narendran, CEO & Managing Director
5. Company’s EBITDA declined in Q1- Company’s standalone EBITDA stood at INR 1,291 Cr in Q1FY21 against INR 3,661 Cr in the previous quarter. Meanwhile, last year’s EBITDA stood at INR 4,098 Cr .
7. The uptrend in prices- The price outlook in both export and the domestic market continues to improve on an m-o-m basis and the current quarter demand has been much better than a typically slow monsoon quarter in the past. Domestic HRC prices increased and are expected to find support with recovery in steel demand and on improving Asian steel prices. Also, buyers who were postponing their purchase in expectation of fall in price are now buying aggressively on a continuous increase in steel prices.
8. Improved demand in the domestic market- India steel demand is expected to improve further supported by government spending on infrastructure and stronger rural demand on the back of good monsoon. The auto sector is improving gradually. Sales of passenger vehicles, light vehicles, and motorcycles are improving. Oil and gas, solar panels, roofing sheet, and construction steel are picking up, however frequent announced lock-down in various states resulted in too few disruptions
9. Increase in raw material prices- Seaborne iron ore prices are expected to remain higher amid strong demand from China. Meanwhile, Coking coal prices are expected to gradually increase with recovery in global steel production, especially in India.
10. Asian steel prices surge significantly- In the last three months, steel prices to Asian market jumped by around $100/t and are expected to increase further amid robust steel demand, strong iron ore prices and lower exports from China.
*(correction) 11. Tata Steel BSL key updates- Started commercial production and sales of “Tata Shaktee” from Tata Steel BSL’s Khopoli plant. Meanwhile, increased share of business with automotive OEMs; secured orders from solar panel manufacturers; increased sales in Oil & gas segment with steel supply for LPG cylinders and X-70 API grade for gas pipelines.
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