Tata Steel hits 18-month low on weak Q3 sales volume

Shares of Tata Steel hit an 18-month low of Rs 477, down 3 per cent on  BSE in the intra-day trade on Wednesday, after the company said lower production and adverse product mix in Europe will impact financial results.

The stock of Tata Group company was trading at its lowest level since June 15, 2017. In the past four months, Tata Steel underperformed the market by falling 23 per cent, as compared to 6 per cent decline in the S&P BSE Sensex.

The company reported lower sales volume in December quarter on a standalone basis due to seasonal headwinds, particularly in terms of softer automotive demand, and inventory replenishment.

Tata Steel Europe's year-on-year production was impacted by shutdowns for ongoing life extension upgradation program on one of Port Talbot's blast furnaces during Q3, because of which the furnace was out of operation for the entire quarter.

The performance was also impacted by operational issues in Q3 in both of its main steelmaking locations of IJmuiden and Port Talbot. Lower production volumes and adverse product mix will impact financial results, Tata Steel said press release.

Tata Steel South East Asia’s production and sales volume were lower due to continued sluggishness in Singapore and Thailand, it added.

Analysts at Kotak Securities estimate Tata Steel’s India steel realizations to decline by 2 per cent quarter-on-quarter (qoq) due to fal in global and domestic steel prices. The brokerage firm estimate India EBITDA/ton to decline by 17 per cent qoq to Rs 15,650/ton (+12 per cent yoy) due to lower realizations and an increase in coking coal costs. Europe EBITDA/ton to decline to US$50/ton (US$70/ton in 2QFY19) owing to lower steel spreads.

At 12:27 pm, Tata Steel was trading 2.4 per cent lower at Rs 479 on the BSE, as compared to 0.32 per cent rise in the S&P BSE Sensex. A combined 8.01 million equity shares changed hands on the counter on the BSE and NSE so far.

Besides Tata Steel, Jindal Steel & Power (JSPL), Steel Authority of India (SAIL) and JSW Steel from the metal index were down in the range of 2 per cent to 4 per cent.

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