Tata Steel Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Tata Steel Ltd (TATASTEEL) Q1 FY23 Earnings Concall

Q&A Highlights:

• Satyadeep Jain from AMBIT Capital asked about the energy cost inflation in Netherlands and UK over the next few quarters. TV Narendran CEO said that the overall energy inflation is a concern. TATASTEEL has been insulated from the volatility as it hedge 75% of its exposure. Going forward, TATASTEEL expects things to settle a bit.

• Satyadeep Jain from AMBIT Capital enquired about where Tata Steel Europe stand on the European cost curve now vs. a few years ago. TV Narendran CEO replied that on cost position, the company would separate out The Netherlands and the UK. There is product enrichment also going on to supplement competitive cost position in Europe.

• Vishal Chandak of Motilal Oswal asked about contract repricing, and the sustainable number for TATASTEEL Europe. TV Narendran CEO replied The Netherlands business has always been EBITDA positive. The UK business was fragile, which is now only 10% of operations from 40% sometime back. Going forward, TATASTEEL expects to see better performance than in the past.

• Anuj Singla with Bank of America enquired about TATASTEEL’s energy security in the 2H and if the company has visibility that it will be able to operate U.K. and Netherlands at optimal utilization levels. TV Narendran CEO replied that in UK, the issue is not that much. TATASTEEL Netherlands has done its planning, so there is no impact on operations.

• Anuj Singla with Bank of America asked about India steel pricing outlook. TV Narendran CEO replied that it’s close to the bottom and the company is seeing things changing.

• Pinakin Parekh from JPMorgan asked about the expected steel price and coking coal changes in the second quarter in India and Europe. TV Narendran CEO answered that on steel price, it will be lower. In India coal will a $40 reduction in consumption cost. In Europe, TATASTEEL won’t see a reduction in coal cost.  There will be margin compression in 2Q. But there will be volume expansion.

• Ashish Kejriwal with Centrum asked about the realization increase of INR8,500 per tonne, if it includes auto contracts also in India. TV Narendran CEO clarified that not all the benefit has come through because the contracts are still not fully concluded because TATASTEEL is discussing Q1 and Q2.

• Ashish Kejriwal with Centrum also asked about the June exit price vs. 1Q average for India. TV Narendran CEO answered that June exit price is about INR15,000 below the April 1 price. That’s been the swing in the domestic market during the quarter.

• Ritesh Shah of Investec asked about the BSPS scheme and the impact of it on the cash flows. Samita Shah VP said there’s really no cash impact because the insurer has taken over the assets as well as the liabilities, that portion of the assets in the liability. It’s more of managing the fund and managing the risk of the fund.