Despite a near four-fold rise in PAT, Tata Steel UK’s losses widened in Q2FY26. Koushik Chatterjee, executive director & CFO of Tata Steel, tells Sambit Saha of The Telegraph in an interview that the UK has become “an unfairly priced dumping ground for cheap imports”, as import quotas in many steel grades are higher than the total national consumption of those grades. Excerpts:
Tata Steel reported a fourfold jump in net profit despite softer steel prices in the domestic market. What led to this performance?
Contextually, there is significant geopolitical and geoeconomic uncertainty in the global economy, impacting industries like steel. In this context, we have been focusing on the controllable levers to enhance the profitability, pivoting on volume, cost transformation and product enrichment.
During the quarter, we pushed the levers on all the pivots, and you would have seen that our delivery volumes are up 11 per cent. We have taken out the costs of ₹2,561 crore, which in effect takes the half-year cost transformation programme to ₹5,450 crore. Compared with Q2FY25, consolidated EBIDTA margins have expanded by 400 basis points and by 46 per cent in absolute terms, which effectively resulted in a four times increase in underlying net profits that you are referring to.
Even sequentially, quarter on quarter, our EBIDTA margins have expanded by 200 basis points to 16 per cent, which demonstrates the resilience of the business even under challenging external market conditions.
What is the company’s guidance for Q3 and H2FY26?
The underlying trading conditions continue to be challenging in almost all geographies for different reasons. Indian prices are trending down currently, and in Europe we are entering the annual contracting season against the backdrop of the EU Steel Action Plan, which is under consultation with stakeholders. So, like in the previous quarter, we will essentially continue to focus on the internal levers and drive performance.
Tata Steel UK’s business suffered a heavy loss, and the management appealed to the UK to lower the steel import quota. What is the quota now, and where should it be?
First, to contextualise, the losses are significantly lower than what would have happened if the heavy end had not closed and the massive cost take-out had not happened. We have taken out £200 million of fixed costs last year and are on track to deliver another £200 million of cost transformation this year.
That’s almost 40 per cent of the fixed costs taken out on a FY24 base, and the costs are now getting to the bone. Our disappointment is with the fact that the UK market continues to be weak and the prices have been declining since January 2024 by almost £150/tonne. The UK as a country used to consume 5 million tonnes of flat product steel in 2018, and that has shrunk to 3.5 mt currently, while the import quotas in many steel grades are higher than the total national consumption of those grades.
This results in the UK being an unfairly priced dumping ground for cheap imports. We have, therefore, drawn the attention of the Trade Authorities in the UK as well as the UK government to the situation.
Does Tata Steel UK have a future without policy support from the government?
It need not be such a dramatic or binary question. Every government in today’s world is clearly looking to protect its own national interest with steps never seen before. Steel as a foundational industry has a huge direct and indirect multiplier effect on society, be it supply chain security, national security, employment or the government’s industrial strategy. Hence, a fair and balanced policy structure with adequate safeguards is essential for any nation. That’s what we are looking for, especially since the UK government is also a key stakeholder for Tata Steel UK as they are part-funding the decarbonisation project.
When do you expect to kickstart NINL expansion? But does the current market condition (tepid margin) in India justify further capex?
The preparation for the expansion project is under full swing on multiple fronts, be it regulatory clearances, engineering, equipment supplier negotiations, site planning, preparation of the investment case and others. So, we are working on getting to the final investment decision very soon. And there is nothing wrong with the demand conditions as such in India, which is growing at about 8-10 per cent per annum. The prices are at low mid-cycle levels, which will follow the cyclical trends. These are multi-year projects, so we don’t suffer any withdrawal symptoms based on current market conditions. In fact, finalising projects during a downturn is more prudent from many angles. We have a strong pipeline of growth beyond NINL, which we are also working on just now.
Tata Steel managed to bring down net debt to EBITDA under 3 in H1FY26. Do you expect it to slide further?
Our financial stewardship strategy is focused on managing and growing the business within a range of prudent bands of metrics. As a growing company with wide geographical exposure, our target leverage band of net debt to EBITDA is between 2.75x to 3.25x, especially in the current level of the cycle. Based on a strong underlying performance in the first half, we are just under 3x (on the last 12-month basis), and the effort will be to be around this range in the second half too. De-leveraging of the absolute debt also remains an enterprise strategy whenever there is an opportunity.
The GoI is yet to notify the safeguard duty. Is it a cause for concern?
Safeguards are now a very critical part of the industrial strategy of nations globally, and we see that very explicitly in the US and the EU. The safeguard at 12 per cent is moderate compared with the industry request of 25 per cent. I would take the renewal of the safeguard duty as an important signal to the steel industry to continue to make significant capital investments to expand capacity for India’s strategic interest and steel sovereignty. Therefore, I hope it happens soon.