Global financial services
and rating firm Moody’s Investors Service has changed the outlook on steelmaker
Tata Steel to positive from stable. Tata Steel is a leading steel producer with
manufacturing facilities in India, the UK, the Netherlands, and Southeast Asia.
The company generated
consolidated revenues of $32.8 billion during the financial year that ended in
March 2022. “Today’s outlook change to positive reflects Tata Steel’s track
record of delivering a solid operating performance while maintaining conservative
financial policies; and the likelihood that upward rating pressure will build
over the next 12 months if recent performance and credit metrics improvements
are sustained,” said Kaustubh Chaubal, a Senior Vice President of the firm.
Tata Steel plans low CO2 steel-making technologies in UK,
Netherlands
The steel company is poised to reduce its debt by at least $1.0 billion in the
current financial year 2022-23, Moody’s said in a statement. The structural
improvement in Tata Steel’s capital structure during the last two financial
years has created a lasting buffer to the company’s key credit metrics and
liquidity, thus reducing the company’s overall credit risk.
“Tata Steel’s
well-laid-out capital allocation policy that prioritizes debt reduction over
capital expenditure and new investments underscores our positive outlook. The
substantial debt reduction achieved over the last two years, as well as the
reduction to come over the remainder of fiscal 2023, will greatly improve the
company’s financial flexibility and resilience and position it for an investment-grade
rating,” Chaubal added in the statement. On steel prices, it said that rising
global interest rates to curb rising inflation and an increase in export taxes
of steel in India have somewhat dampened its prices.
Tata Steel’s liquidity
position is “good”, it added. The company’s $3.1 billion in cash and liquid
investments at the end of March 2022 and estimated $6.5 billion-$7.0 billion in
operating cash flow over the next 18 months till September 2023 should be more
than sufficient to meet its $9.0 billion in capital expenditure, announced
acquisitions, modest dividends, and its scheduled debt repayments over the same
period, Moody’s said.