Tata Steel's CFO Discusses Ongoing Cost Takeout Programme to Ensure Profitability

Tata Steel plans to persist with its cost reduction strategy throughout the current fiscal year to sustain profitability, according to Chief Financial Officer Koushik Chatterjee. The company recently reported a significant increase in its consolidated net profit, reaching Rs 2,007.36 crore for the June quarter, despite facing global economic challenges and uncertainties.

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The company's CEO and Managing Director, T V Narendran, attributed the strong quarterly performance to higher net steel realisations and strategic cost reductions. "The strong improvement in our Q1 performance on QoQ as well as YoY basis was driven by an increase in our net steel realisations and the planned cost takeouts," Narendran stated.

Cost Reduction Strategy

Cost takeout involves eliminating unnecessary expenses to boost profitability and efficiency. Tata Steel has managed to enhance its margins by approximately 200 basis points, despite facing difficult demand conditions and trade uncertainties. Chatterjee, who also serves as the Executive Director of Tata Steel, highlighted this achievement.

Looking ahead, Chatterjee mentioned that the company will continue focusing on cost reduction strategies for the rest of FY25. He expressed optimism about maintaining a favourable position unless unforeseen issues arise, particularly concerning European tariffs and trade dynamics.

Revenue and Volume Projections

For the upcoming quarters, Tata Steel anticipates continued improvement in consolidated revenues. However, it is too early to make predictions about the third and fourth quarters. Narendran noted that while volumes are expected to rise in India, revenue per tonne might decrease by around Rs 2,000 compared to Q1. In contrast, revenues per tonne in the Netherlands and the UK may see a slight increase without a drop in volumes.

The recent US tariff announcement does not significantly affect Tata Steel since it does not export from India to the US. "Tata Steel is not statistically impacted in any material way as it doesn't export to the US from India," Narendran explained. There might be minor indirect effects on some customers exporting steel to the US, but these are not substantial.

Expansion Plans

Tata Steel is expanding its operations within India while undergoing a transition phase in Europe. The company aims to achieve cost reductions of Rs 11,500 crore (approximately USD 1.3 billion) across various regions by concentrating on controllable costs.

In summary, Tata Steel remains committed to its cost reduction programme as a means to maintain profitability amidst global challenges. The company is optimistic about future revenue growth and volume increases while navigating potential trade issues in Europe.

With inputs from PTI