Tata Steel Q2 earnings preview: Loss likely amid pricing pressures, volatile steel prices 

Steel major Tata Steel will declare its financial results for the second quarter of the fiscal year 2025 (Q2FY25) on Wednesday, November 06, 2024. The stock of the Tata Group firm will be in focus today and on November 7. Brokerages expect Tata Steel to face a challenging second quarter for the fiscal year 2025 as global steel prices fluctuate and regional pricing pressures continue to affect the company's performance. 

Analysts are projecting a possible net loss of up to Rs 153 crore for Tata Steel in Q2. 
 
Last month, Tata Steel announced its Q2FY25 production and delivery volumes (provisional) figures. In Q2FY25, Tata Steel India sales volume stood at 5.1MT, up 6%/3% YoY/QoQ. Europe sales volume stood robust at 2.21 MT, up 12%/3% YoY/QoQ. Consolidated Sales volume grew by 8%/3% YoY/QoQ. Steel HRC prices (traders market ex-Mumbai) have declined by 8%/6% YoY/QoQ.

Here's a look at what brokerages said ahead of Q2 earnings of Tata Steel. 

Ventura Securities 

The brokerage said anticipated lower realisations are expected to influence Tata Steel's earnings, with projections for a quarterly EBITDA contraction due to reduced steel prices across markets. The company's profitability metrics are forecast to reflect the ongoing cost pressures, particularly within its European operations, where high operational expenses have compounded pricing struggles. 

This financial outlook may be a key consideration for investors, as Tata Steel's Q2 results could shape the sentiment of those looking to invest in stocks within the metals industry.

Phillip Capital 

The brokerage projected a consolidated adjusted net loss of Rs 133.6 crore year-on-year (Y-o-Y). Revenue is seen at Rs 55,863.6 crore, a 0.3 per cent Y-o-Y increase. EBITDA is likely at Rs 4,544.6 crore, up 6.5 per cent Y-o-Y. The anticipated volume stands at 7.6 million tonnes, up 7.4 per cent Y-o-Y.

Phillip Capital expects consolidated volumes to rise 3 per cent quarter-on-quarter (Q-o-Q). However, operating performance in both India and Europe is likely to be hit due to lower realisations.

Kotak Institutional Equities 

Standalone steel realisations are likely to fall 3.1 per cent quarter-on-quarter (Q-o-Q) and 8.8 per cent year-on-year (Y-o-Y) due to regional pricing pressures. Standalone volumes may rise 4 per cent Y-o-Y and 1.5 per cent Q-o-Q to 5 million tonne. EBITDA per tonne in India is expected to fall 12 per cent Q-o-Q (9.3 per cent Y-o-Y) to Rs 12,047 per tonne, led by lower realisations.
 
EBITDA loss of $74 per tonne is expectd in Europe against a loss of $28 per tonne in Q1FY25, on higher costs associated with UK end-of-life assets.

Net loss is likely at Rs 112.9 crore, with total revenue expected at Rs 53,380.9 crore, down 4.1 per cent Y-o-Y. EBITDA is projected at Rs 4,938.4 crore, signalling a 15.7 per cent Y-o-Y increase.

Elara Capital
 
Analysts see weak steel prices to pose major challenges for steel companies. They project a quarter-on-quarter (Q-o-Q) decline in blended realisations of Rs 2,700-3,100 per tonne for firms in their coverage universe for Q2FY25E. 

Axis Securities 

The brokerage in its earnings preview said consolidated revenue to decline by 5%/3% YoY/QoQ led by lower steel price realization in India and Europe, partially offset by higher steel sales volumes. EBITDA may rise YoY led by higher sales volumes and lower other expenses in Europe. On a QoQ basis, EBITDA is likely to decline due to lower sales realisation in India and Europe. India EBITDA/tonne to decline QoQ led by lower sales realisation, partially offset by lower coking coal consumption cost. EBITDA/tonne loss at Europe is expected to narrow down YoY but decline QoQ due to weak UK operations and sales volumes. Netherlands to post positive EBITDA vs. weakness in UK.