Conference Call with Tata Steel Management and Analysts on Q4FY20 and Full Year Earnings Performance and Outlook. Listen to the full earnings transcript.
Key Highlights from Management
COVID-19 outbreak and widespread mobility restrictions severely impacted economic activities across the world. Industries are estimated to have lost about 2-3 months output with disruption in global value chains.
Governments across the world have announced large stimulus to support economic activities. PMI data suggests a gradual recovery in economic activities; China appears to be recovering faster due to large infrastructure stimulus. World –ex China steel production declined amid weaker demand but Chinese steel production reached all-time high in May’20.
FY20 crude steel production for Tata Steel grew by 8%YoY with ramp up at TSBSL and acquisition of Usha Martin’s Steel business by TSLP; deliveries grew by 4%YoY to 16.97 mn tons. Tata Steel retained the position of largest steel company in India.
Imposition of nationwide lockdown in India severely impacted manufacturing activities and steel using industrial sectors, leading to an increase in steel mills’ inventory in Mar’20. Deliveries fell by 17%QoQ in 4QFY20, impacted by the nationwide lockdown in late Mar’20 amid COVID-19 outbreak.
In India, steel demand is recovering gradually with phased relaxations in mobility restrictions; normal monsoon and pent-up demand are positives; recent actions by government and the RBI are focussed on supply side reforms but recovery in demand is key and remains to be seen.
In Europe, steel demand has been adversely affected; while automotive sector continues to struggle, demand from packaging is strong. Share of steel imports to total consumption in EU remains elevated, and industry continues to press upon the European commission to take necessary action.
We optimized plant operations; curtailed utilization levels in April before ramping up from May.Ramped up mining operations to reduce iron ore buy, and also focused on exports to offset decline in domestic demand due to lockdowns.
Squeezed on spend and capex to conserve cash, and focused on aggressive liquidity management to ensure cash neutral operations.
Have ample liquidity of Rs.17,745 crores with over Rs.11,549 crores of cash and cash equivalents. US$249 million debt will mature within one year, and $244 million within the next two years.
Cash and cash equivalents increased by Rs.6,310 crores to ensure ample liquidity in current environment. Net debt is at Dec’19 level despite the addition of leases and adverse FX impact.
Lower costs across geographies driven by lower raw material prices.
Improvement in operational KPIs in FY20: a) 2%YoY reduction in fuel rate, b) 9%YoY reduction in specific power consumption rate and c) 2%YoY improvement in PCI rate