The quarter is likely to show contrasting trends across regions, steady improvement in the Indian business supported by softer raw material costs and higher volumes, offset by continued weakness in the European operations, especially the UK unit. Analysts say volume recovery in India and cost efficiency will be the key earnings drivers this time.
Kotak Equities expects standalone volumes to rise 9% year-on-year (and 17% sequentially) to 5.6 million tonnes, supported by a rebound in domestic demand after the monsoon-affected first quarter. However, steel realisations are estimated to fall by 4.5% quarter-on-quarter and 1.6% year-on-year, due to seasonal correction in prices.
Kotak pegs India EBITDA per tonne at Rs 14,407, down 3.6% sequentially but up 20% from a year ago, as lower realisations are partly offset by cheaper coking coal and other cost savings. “We expect Europe to report an EBITDA of around $6 per tonne, with improvement in the Netherlands operations offset by continuing losses in the UK,” the brokerage noted. Netherlands EBITDA is seen improving to $63 per tonne, while UK losses could widen to US$151 per tonne.
Nuvama estimates standalone EBITDA per tonne to decline by Rs 813 quarter-on-quarter to Rs 14,427, led by a Rs 2,000 per tonne fall in blended steel realisations. However, this will be partly cushioned by a $10 per tonne decline in coking coal costs. Sales volumes are likely to rise 16% sequentially to 5.52 million tonnes, aided by normalisation after maintenance shutdowns in Q1.
Nuvama expects Tata Steel Europe’s EBITDA per tonne to dip slightly to $7 from $8 in the previous quarter, with Netherlands profitability improving while the UK losses expand due to lower steel prices and higher fixed costs. The Netherlands unit’s EBITDA is estimated to rise to Rs 9,000 crore from Rs 6,100 crore in Q1.Motilal Oswal said that “better volumes will offset weak realisations,” though the decline in net sales realisation (NSR) is expected to erode margins sequentially. The brokerage expects the European division to remain EBITDA positive, but it noted that management commentary on European restructuring plans, steel prices, and capex outlook will be key monitorables for investors.Axis Securities forecasts a mild increase in consolidated sales volumes year-on-year, aided by higher dispatches from India. “Steel prices in the traders’ market (ex-Mumbai) were down 2.4% YoY and 4% QoQ, but consolidated revenue is likely to grow on higher sales volumes,” the brokerage said. It expects EBITDA to improve both year-on-year and sequentially, driven by lower coking coal costs across operations.
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In India, EBITDA per tonne is expected to rise slightly from the previous quarter, supported by cheaper coal and higher volumes, though this will be partly offset by weaker realisations. In Europe, Axis anticipates stable NSR and sequential margin improvement from lower raw material costs.
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