Tata Steel Q2 profit may fall over 90% on lower commodity prices, auto slowdown


Tata Steel is expected to report more than a 90 percent decline in its Q2 FY20 consolidated profit due to lower steel prices and headwinds in the auto sector, brokerages feel.

The drop in growth is likely to be seen across parameters such as consolidated revenue, which could see a fall of around 20 percent as compared to the year-ago period.

The company’s domestic and European operations are expected to be impacted due to lower steel prices and the economic slowdown.

“Standalone EBITDA per tonne to be impacted by weak steel prices and higher share of exports. Volumes at Bhushan likely to improve but at the cost of realisation as the company resorted to higher exports (HRC),” said Edelweiss which sees 93 percent fall in profit, 22 percent decline in revenue and 56 percent degrowth in EBITDA.

EBITDA is earnings before interest, tax, depreciation and amortisation.

Kotak expects India’s steel realisations to decline sharply (down 6 percent QoQ, down 11 percent YoY) led by weak global prices and higher exports. It expects volumes to decline by 2 percent YoY (up 4 percent QoQ) at 3.1 million tonne due to weak domestic demand.

India EBITDA per tonne will decline by 25 percent QoQ to Rs 9,402 per tonne (down 50 percent YoY) with negative operating leverage and marginal decline in coal costs, said Kotak Institutional Equities, which also sees a similar kind of decline in earnings parameters in Q2 like Edelweiss.

According to Edelweiss, European operations are likely to slip in loss at EBITDA level as high cost iron ore inventory is likely to be consumed in this quarter.

Kotak estimates Europe EBITDA per tonne at $0 per tonne ($4 per tonne in Q1FY20) due to lower steel spreads.

News Source: Moneycontrol

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