Tata Steel posts 3Q loss

The Pak Banker - - COMPANIES/BOSS -

Tata Steel Ltd on Thurs­day posted a fis­cal third-quar­ter loss that was far wider than an­a­lysts' es­ti­mates as the coun­try's largest steel maker took one-time charges, mostly re­lated to its Euro­pean as­sets, and cheaper im­ports from China weighed on prof­its.

The steel maker swung to a loss of Rs.2,127 crore in the three months ended 31 De­cem­ber from a profit of Rs.157.11 crore re­ported in the year ear­lier. That com­pares with the av­er­age Rs.834.8 crore loss of 22 an­a­lysts es­ti­mates in a Bloomberg sur­vey.

Net sales fell 16% to Rs.28,039 crore from Rs.33,323.8 crore. An­a­lysts had es­ti­mated sales at Rs.28,338 crore. Steel ex­ports from China are flood­ing the In­dian and Euro­pean mar­kets, de­press­ing prices. The In­dian govern­ment is con­sid­er­ing steps to check dump­ing of steel in In­dia to pro­tect lo­cal steel mak­ers that are strug­gling to com­pete with cheaper im­ports.

"Things are un­likely to change un­til the pol­icy mea­sures that steel mak­ers are push­ing for both in In­dia and Europe to re­strict im­ports and its im­pact on busi­ness are ex­e­cuted," said an an­a­lyst with a for­eign bro­ker­age who is not au­tho­rized to com­ment on record on in­di­vid­ual com­pa­nies. "No sig­nif­i­cant im­prove­ment is likely to come in the March quar­ter."

Tata Steel's con­sol­i­dated fi­nan­cial per­for­mance took a hit of Rs.711.77 crore in the De­cem­ber quar­ter be­cause of one-time items in­clud­ing non­cash write downs of as­sets in Europe, charges taken for em­ployee sep­a­ra­tion scheme in In­dia and charges re­lated to re­struc­tur­ing and other pro­vi­sions re­lated to its Euro­pean op­er­a­tions. At a stand­alone level, profit fell 48.7% to Rs.452 crore in the De­cem­ber quar­ter from Rs. 880.64 crore a year ear­lier. The stand­alone num­bers re­flect the the steel­maker's In­dian op­er­a­tions.

Steel de­mand in In­dia con­tin­ues to grow, but most of the in­cre­men­tal de­mand is be­ing met with cheaper im­ports. In its state­ment to BSE, Tata Steel said In­dia's im­ports are now around 12 mil­lion tonnes per an­num, with China be­ing the largest ex­porter to In­dia. Europe's steel im­ports have in­creased to around 30 mil­lion tonnes per an­num, with ship­ments from China surg­ing by 57%, Tata Steel said.

Tepid de­mand in In­dia among steel con­sum­ing sec­tors has fur­ther ex­ac­er­bated the prob­lem, T.V. Naren­dran, man­ag­ing di­rec­tor, In­dia and South­east Asia, Tata Steel, said in a state­ment. "De­spite all th­ese chal­lenges, we con­tinue to op­er­ate at full ca­pac­ity and de­liv­ered 10.3% vol­ume growth over last year. How­ever, the quar­ter saw a sharp de­cline in steel prices which has im­pacted our mar­gins," he said. Last month, Tata Steel also an­nounced a fresh round of job cuts at its UK fa­cil­i­ties to fur­ther re­duce costs.

The com­pany re­ported an earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­za­tion loss of Rs.675 crore for its Europe busi­ness in the De­cem­ber quar­ter. "Grow­ing Euro­pean steel de­mand con­tin­ues to be un­der­mined by a flood of im­ports into the re­gion. Chi­nese steel ship­ments into Europe leapt more than 50% last year, while im­ports from Rus­sia and South Korea jumped 25% and 30%, re­spec­tively," said Kar­lUl­rich Köh­ler, man­ag­ing di­rec­tor and chief ex­ec­u­tive of­fi­cer of Tata Steel Europe, said in the state­ment.

For the Oc­to­ber-De­cem­ber pe­riod, Tata Steel saw a 13.15% in­crease in its saleable steel pro­duc­tion at 2.51 mil­lion tonnes. De­liv­er­ies for Europe busi­ness were flat at 3.35 mil­lion tonnes in the Oc­to­ber- De­cem­ber pe­riod. Shares of Tata Steel rose 0.96% to Rs.226.15 on the BSE on Thurs­day, while the bench­mark Sen­sex rose 0.48% to 24,338.43 points. The com­pany's re­sults were re­leased af­ter trad­ing hours.

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