Tata Steel posts 3Q loss
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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