116th Annual General Meeting (AGM) Speech by Natarajan Chandrasekaran - Chairman, Tata Steel

Global Outlook

The year 2022-23 witnessed intense geo-political and economic volatility. The ongoing Russia-Ukraine conflict and geo-political tensions have disrupted the smooth functioning of global supply chains. There has been a surge in inflation, especially in the developed markets.
The global economic ou tlook for 2023 appears to have downside risk and the global GDP is expected to grow at ~2.9%.
The outlook for the Indian economy remains positive. The estimated GDP growth in India expected to be ~6.1% in 2023-34 and will remain one of the fastest growing economies.

Steel Industry

The steel industry was also impacted by the volatility in the global environment, which affected the steel demand-supply balance and resulted in volatility in steel prices.

However, India appears to be an exception in the global steel arena, primarily owing to robust government spending and vibrant consumption. India's steel consumption grew by over 10% Y-o-Y to 117 MnT in FY2022-23.

India will continue to remain a major consumer within the global steel industry owing to infrastructure development, rapid urbanisation, and supportive policy reforms. We expect the steel demand growth to keep pace with the GDP growth over the next decade.

Company Performance

Coming to the performance of your Company, the financial performance in FY2022-23 was impacted by higher cost structures due to elevated energy and emission related costs and raw material price volatility.

− During FY2022-23, the Company’s consolidated revenues stood at ₹2,43,353 crore, which was marginally lower compared to the previous year’s consolidated revenues of ₹2,43,959 crore. This was on account of decline in steel realisations across geographies except in European operations. This decline in steel realisations was due to decrease in demand and implementation of export duty on steel in India during the year.

− The consolidated EBITDA of the Company was ₹32,698 crore compared to ₹63,830 crore in the previous year, a decline of ₹31,132 crore or 49%. This decline was primarily due to increase in input cost mainly in coking coal along with lower steel realisations in India.

• Tata Steel India EBITDA declined by ₹23,281 crore due to increase in raw material cost, mainly coking coal and lower steel price realisation. The raw material per ton increased by 40%.
• Tata Steel Europe EBITDA declined by ₹7,532 crore, again driven by higher costs driven by coal prices.
  
  

− The consolidated Profit after Tax for FY 2022-23 stood at ₹8,075 crore compared to ₹41,749 crore in the previous year, a decline of ₹33,674 crore. This is in line with decline in EBITDA, along with higher one-off deferred tax charge of ₹3,848 crore in UK.

− The consolidated cash generated from operations during the year was ₹16,206 crore. The consolidated free cash flow from operations post capex was ₹3,166 crore. This included capex investments in Kalinganagar to complete the 5 mtpa expansion and sustenance capex.

From a standalone performance perspective, Tata Steel India delivered revenues of ₹1,29,007 crore, which was in line with the previous year revenues. The EBITDA was lower at ₹28,175 crore compared to ₹51,456 crore in the previous year, primarily due to increase in raw material cost and lower steel prices. The Profit after Tax for FY2022-23 was ₹15,495 crore.

In our UK operations, with regard to the GBP 6 Billion British Steel Pension Scheme, we have secured full insurance cover for the pension liabilities. This means that the cashflows for future pension pay-outs to pensioners are guaranteed by the insurer. This has been done at no cash cost to the company and eliminated any future risks to the company from asset-liability mismatches.

On the Corporate Social Responsibility front, the Company continues to engage with communities through its wide-ranging CSR programmes and spent ₹ 481 crores in FY2022-23. We expanded our focus areas to address post-COVID realities, promote climate convergence, enhance entitlements, and raise awareness among businesses. We scaled up our existing impact programs and strengthened our relationship with communities. We reached over 3.15 million lives. Your company’s efforts have been recognised by the Government of India, Ministry of Corporate Affairs, with the National Award for Excellence in CSR and the National Award for Contribution in Education.

For the Financial Year ended March 31, 2023, the Board of Directors has recommended a dividend of ₹3.60 per equity share.

Future Plans

The Company is focussed on its simplification journey to have a simpler governance structure. As you may be aware, the Board has approved the amalgamation of seven subsidiaries and one associate company into and with Tata Steel. These amalgamations are at different stages of regulatory approval. We will strive to complete this process at the earliest to avail the benefit of the synergies.

On the growth front, the Company continues to scale up its business in India by way of both organic capital expansion and inorganic acquisitions and is steadfast in its objective of achieving its 2030 target of an overall 40 MnTPA capacity in India.

We endeavour to attain leadership position in the long products segment. In this context, we acquired the Neelachal Ispat Nigam Limited(NINL). The ramping up of production at NINL to its rated capacity has augmented the capacity. Further, NINL being part of the Kalinganagar eco-system is well positioned to grow synergistically in the future.

We are also investing in circularity and deploying capital towards low-carbon steel making. Tata Steel has signed a Memorandum of Understanding with the Government of Punjab to establish a state-of-the-art scrap utilising electric arc furnace based long products steel plant in Ludhiana, with a capacity of 0.75 MnTPA. The plant is expected to be operational within two years.

Tata Steel Nederland and Tata Steel UK will continue to focus on expanding steel deliveries, improving yield performance, optimising the commercial mix, and reducing operating costs.

Tata Steel is committed to sustainability and is embedding sustainable business practices across its business operations. The Company has set a target of Net Zero emissions by 2045, as part of the group-wide Project Aalingana, an initiative which is focussed not just on the decarbonisation of businesses and value chains; but also on applying a systemic, circular economy approach to reduce resource use and waste; and preserving and restoring the natural environment.

The future holds many opportunities for Tata Steel, and the Company is well positioned to capitalise on them. As we embark on the journey, the Management team will continue to focus on customer centricity, technology, digital and sustainability initiatives to enhance the Company’s competitive position in the global steel industry. The Company will be financially prudent while executing its growth strategy so that it can generate sustainable free cash flows and create long-term stakeholder value.

I thank all of you for your continued trust in the Board and the Management and look forward to your continued support in our journey ahead

Disclaimer

Statements in this press release describing the Company’s performance may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results may differ materially from those directly or indirectly expressed, inferred or implied. Important factors that could make a difference to the Company’s operations include, among others, economic conditions affecting demand/ supply and price conditions in the domestic and overseas markets in which the Company operates, changes in or due to the environment, Government regulations, laws, statutes, judicial pronouncements and/ or other incidental factors.

For queries and information

Sarvesh Kumar,

Chief Corporate Communications - Tata Steel,

E-mail : sarvesh.kumar@tatasteel.com

About Tata Steel

• Tata Steel group is among the top global steel companies with an annual crude steel capacity of 35 million tonnes per annum.
• It is one of the world's most geographically diversified steel producers, with operations and commercial presence across the world.
• The group recorded a consolidated turnover of ~US$30.3 billion in the financial year ending March 31, 2023.
• A Great Place to Work-Certified^TM organisation, Tata Steel Limited, together with its subsidiaries, associates, and joint ventures, is spread across five continents with an employee base of over 77,000.
• Tata Steel has announced its major sustainability objectives including Net Zero Carbon by 2045, Net Zero Water consumption by 2030, improving Ambient Air Quality and No Net loss in Biodiversity by 2030.
• The Company has been on a multi-year digital-enabled business transformation journey intending to be the leader in ‘Digital Steel making by 2025’. The Company has received the World Economic Forum’s Global Lighthouse recognition for its Jamshedpur, Kalinganagar and IJmuiden Plants.
• Tata Steel aspires to have 25% diverse workforce by 2025. The Company has been recognised with the World Economic Forum’s Global Diversity Equity & Inclusion Lighthouse 2023.
• The Company has been a part of the DJSI Emerging Markets Index since 2012 and has been consistently ranked amongst top 10 steel companies in the DJSI Corporate Sustainability Assessment since 2016.
• Tata Steel’s Jamshedpur Plant is India’s first site to receive ResponsibleSteel^TM Certification.
• Received Prime Minister’s Trophy for the best performing integrated steel plant for 2016-17, 2023 Steel Sustainability Champion recognition from worldsteel for six years in a row, 2022 ‘Supplier Engagement Leader’ recognition by CDP, Top performer in Iron and Steel sector in Dun & Bradstreet's India's top 500 companies 2022, No. 1 brand in India in the Mining and Metals industry in Top 100 brand rankings for 2023 by Brand Finance, and ‘Most Ethical Company’ award 2021 from Ethisphere Institute.
• Received 2022 ERM Global Award of Distinction, ‘Masters of Risk’ - Metals & Mining Sector recognition at The India Risk Management Awards for the seventh consecutive year, and Award for Excellence in Financial Reporting FY20 from ICAI, among several others.

Photographs: Management and Plant facilities

Logos: Files and usage guidelines 

Website: www.tatasteel.com and www.wealsomaketomorrow.com

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