One of India’s biggest steel conglomerates, Tata Steel, has posted a “higher than expected” consolidated net loss during the January-March 2020 quarter of approximately U.S. $163 million.
Compare this to its net profit of about U.S. $311 million reported during the same period last year and one can understand the enormity of the situation.
The company reported exceptional items losses of about U.S. $450 million, which was primarily due to an impairment of non-current assets, Livemint reported.
What’s more, the steel major expects challenges stemming out of the COVID-19 pandemic to remain in the first quarter of fiscal year 2021 and adversely impact operations, especially as global steel demand will continue to be low.
The pandemic also forced Tata Steel to curtail capital expenditure (CAPEX). The plans will now be revisited in the second half of the new fiscal year if business conditions normalize.
In the profit and loss column, the company said its operations were severely impacted due to lockdowns stemming from COVID-19. In view of such lockdowns, operations at the group’s steelmaking facilities in India have been scaled down from the end of March 2020.
The Financial Express quoted the chief executive of Tata Steel, T.V. Narendran, as saying fiscal year year 2019-2020 was “very challenging” because the Indian economy slowed down in the first half and key steel-consuming sectors, like automotive, contracted sharply.
While the economy began recovering in the second half, the outbreak of COVID-19 in late March led to unprecedented disruption and heightened economic uncertainty, he pointed out. The CEO said the company had “recalibrated operations” to align with the evolving business environment were focused on conserving cash while actively “derisking the business.”
As part of this effort, Tata Steel’s operations in Europe, Southeast Asia and Canada were scaled down over various periods. Lower costs and better operational performance at its European and domestic steel operations, however, led to decent earnings before, interest, taxes, depreciation and amortization. The company is operating at about 70-80% capacity and will reach full capacity in July.
In some other positive news, Tata Steel Mining Limited (TSML) has been awarded a 50-year mining lease for two mines: the Kamarda Chromite Mine and the Saruabil Chromite Mine in the Indian province of Odisha.
These mines were auctioned by the Government of Odisha, Update Odisha reported. TSML is a 100% subsidiary of Tata Steel Limited and works to develop commercial mining opportunities, in addition to ferro alloys business.