Tata Steel Ltd 144A

Ladies and gentlemen, good day and welcome to the Tata Steel analyst call. Please note that this meeting is being recorded. I would now like to hand over the conference to Ms. Samitha Shah to please take it forward. Over to you, ma'am.

Thank you, Kanchuk. Good morning and good afternoon to all our viewers. On behalf of Tata Steel, I'm delighted to welcome you to this call to discuss our results for Q1 FY24. We have with us our CEO and Managing Director, Mr. T.V. Narendran, and our EDN CFO, Mr. Kaushik Chatterjee. They will share their thoughts on the results and answer any questions you may have. Our presentation is uploaded on our website, and I hope you had a chance to go through it. As always, the safe harbor clause on page two of that presentation will guide the entire discussion today. With that, thank you, and over to you, Narek. You're on mute.

Good afternoon and good morning to everyone. I'll start with a few comments and then hand over to Kaushik. You know, the economic slowdown in key regions has obviously weighed on global commodity prices and steel in general. And the US and EU continue to face inflationary pressures and a tight monetary policy, while the Chinese recovery has been more muted than expected. One of the outcomes of this is higher steel exports from China, which has led to a moderation of global steel prices between May and June 2023. In fact, China was exporting about 8 million tons a month, which it had last done in 2016. While key steel making inputs, coking coal and iron ore prices did move lower, the steel spot spreads peaked in May before moderating for the rest of the quarter. In India, the economic activity continued to improve and the apparent steel consumption was up 10% year on year for the quarter. And despite good domestic demand, spot prices declined in line with international prices and sentiments with the market. And hot rod coil prices dropped by about 4000 rupees during the quarter in India. Moving to our performance, our crude steel production in India was around 5 million tons. Production was up 2% year on year, but marginally lower on quarter on quarter basis because of planned maintenance shutdowns. And India production now stands at about 70% of the overall portfolio and will continue to rise in the coming years. India deliveries grew 18% year on year, primarily driven by the rise in domestic deliveries to chosen segments, such as automotive and retail. And our well-established brands like Tata Tiscone and Tata Stelium had best of all first quarter sales. And net realizations improved by almost a thousand rupees per ton quarter on quarter, despite the market movement, primarily driven by contract sales of the product mix. And moving to Europe, our steel deliveries were around 2 million tons in the first quarter, Revenue per ton was up about 33 pounds per ton on a quarter-on-quarter basis. And as we had explained in the past, a contract and product mix ensure that our net realizations are different from the benchmark, which is a Northwest Europe HRD spot with a one-quarter lag. And in the previous quarter, the drop in NRs was 50% lower than the decline in the benchmark. And consequently, the improvement in this quarter is also correspondingly lower. Overall, the high revenue per ton was offset by elevated input costs, including energy and the ongoing relining of one of the two blast furnaces in Netherlands. And that we had kind of last quarter as well, that the blast furnace, one of the blast furnaces is done for relining. And that will obviously impact Q1 and Q2 for us. In terms of growth, multiple projects are underway across India, and we remain focused on leveraging the expected pan-India growth across deal and use segments. For instance, we have a leading market share in auto and the 5 million ton expansion and Kalinga Nagar will lead in consolidating our leadership position in auto and grow our presence in value-added segments such as oil and gas, solar, etc. Similarly, Nilachal and the upcoming electric car furnace in Punjab will drive our retail presence. And in terms of reach, we have more than 200 distributors now with over 20,000 dealers. And we continue to expand our virtual presence with the e-commerce platforms like Ashana, where our sales in the last 12 months has crossed 1600 crores. We are also looking to grow in downstream portfolio across wires, tubes, ductile iron pipes and tin plate, where we have a dominant market share. And tubes we have recently commissioned along with our partners to new mills, which will increase the capacity in tubes from 1 million tons to about 1.3 million tons. And our investments are strategically focused on business sustainability and growth. Tata Steel is committed to being net zero by 2045 and multiple initiatives are already underway calibrated to each operating location. In Netherlands, we are pursuing Roadmap Plus for the last few years to bring about significant reduction in emissions, dust, odour and noise. And we are also engaged in discussions with technology providers and the government as we make choices on the process route and the technology transition to green steel as we have promised to do over the next few years, greener steel over the next few years. In India, we've undertaken various trials including injecting hydrogen in the blast furnace to reduce emissions and have also initiated measures to replace around 379 megawatts of coal-based power with renewable energy. Looking ahead, in India, the domestic demand remains supported by government spending and improving consumption across India segments. However, the drop in international prices and seasonality have dampened prices and we expect a drop in realizations of over 3,100 rupees per tonne. uh from q uh in q2 compared to q1 in india but you will of course benefit from the drop in cooking coal consumption by about 57 per ton quarter on quarter in europe and at realizations are expected to drop by about 38 pounds per ton cooking coal consumption is expected to improve by about 46 dollars per ton and the ongoing relining as i mentioned earlier of one of the blast furnaces that i moved in is taking time and will obviously continue to impact costs in the second quarter as it did in the first quarter and separately the upgradation of the cold rolling mill where we had some issues post-upgradation is now getting resolved and we should be back to normal production there as well thank you