Tata Steel Q3 net profit down 56% on low volumes

>> Thursday, January 29, 2009

Tata Steel, India’s largest steel company, on Wednesday reported its first decline in quarterly profit in almost three years as slow demand saw the Tata group company report lower sales volumes for the first time in many years.

Tata Steel said standalone net profit, excluding its Anglo-Dutch subsidiary Corus, in the October-December period fell 56% to Rs 466.2 crore from Rs 1,068.6 crore in the same period last year, mirroring a trend seen in the third-quarter results of steel companies, including SAIL, the country’s second-largest steel maker.

Total revenue in the same period fell to Rs 4,735.7 crore compared with Rs 4,928.2 crore last year. Prospects for the next quarter does not appear to be bright either, its chief operating officer HM Nerurkar said.

“Compared to our peers, we have done well despite the fact that October steel was not moving at all. The next quarter looks equally bad. We will to improve our performance,” he said.

Tata Steel’s third-quarter earnings were eroded by a foreign exchange loss of Rs 126.80 crore and an 80% surge in raw material costs to Rs 1,611 crore. Steel sales dipped to 1.07 million tonne in the third quarter against 1.24 million tonne in the year-ago period.

Tata Steel is scheduled to announce consolidated results at the end of February, which would include Corus. The foreign subsidiary has already reported job losses due to a severe fall in demand in Europe. Corus has cut 3,500 jobs in Britain and has undertaken production cuts to trim costs, even as large steel users such as auto makers have reduced their purchases.

For the nine-month period, Tata Steel’s net profit rose 7% to Rs 3,742.4 crore while net sales grew 27% to Rs 17,595.4 crore. Globally, steel companies have seen a reversal in their fortunes, as demand from large steel users like car makers and the construction industry has fallen due to rising interest rates, ending an almost four-year long boom.

Steel prices have fallen sharply, prompting many companies to cut production and slash manpower. In India, however, demand for steel has held up relatively well with consumption still steady in the construction industry, though auto makers here also have been adversely affected. The Tata Steel stock gained 2.6% to close at Rs 176.85 in a strong Mumbai market on Wednesday - ET