Tata Steel third quarter profit lags estimates

MUMBAI Tue Feb 11, 2014 10:43pm IST

An employee controls tools at the Tata Steel rails factory in Hayange, Eastern France, September 25, 2013. REUTERS/Vincent Kessler/Files

An employee controls tools at the Tata Steel rails factory in Hayange, Eastern France, September 25, 2013.

Credit: Reuters/Vincent Kessler/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - Tata Steel Ltd (TISC.NS) posted a smaller-than-expected third quarter profit on Tuesday partly due to high costs in its main European market which squeezed margins.

Europe is Tata Steel's biggest market and production centre, following its $13 billion acquisition of Britain's Corus in 2007 that gave it a foothold in the region. But the company has struggled to reap benefits from the deal because of Europe's weak economic conditions over the past six years.

Tata Steel Europe needs to import both iron ore and coking coal from outside and that plus continued high energy costs have hurt margins.

The steelmaker posted a net profit of 5 billion rupees for the December-ending quarter, compared to a net loss of 7.89 billion rupees a year ago. Net sales rose 14 percent to 364.1 billion rupees.

Analysts had expected a profit of 7.51 billion rupees on revenue of 336.52 billion rupees, according to data from Thomson Reuters StarMine.

Karl-Ulrich Köhler, MD & CEO of Tata Steel in Europe, said the company's focus on cost and cash flow continued, which had supported the year-on-year improvement in core profit, despite lower margins.

"With European economic indicators improving, our efforts will better enable us to benefit from any growth in European steel demand, which remains at historically low levels," Kohler said in a statement.

The world's largest steelmaker ArcelorMittal (ISPA.AS) last week forecast higher profits for this year and said steel demand in Europe was rising beyond just a restocking effect.

Tata is the second-largest steelmaker in Europe, which accounts for more than 60 percent of its total annual capacity of 29 million tonnes.

The company said European delivery volumes rose 6 percent from a year earlier to 3.19 million tonnes for the quarter and operating profit also improved, but the pace of improvement been slower than expected.

The European Union's apparent steel demand is expected to rise by 3 percent in 2014, regional steel association Eurofer has said. But Germany's steel association warned on Tuesday the expected recovery could get derailed by fierce competition and rising raw material and energy prices.

INDIA GROWTH HOLDS

Tata Steel, which recently expanded capacity at its Jamshedpur plant in Jharkhand to 10 million tonnes a year, said quarterly profit at the Indian business jumped 45 percent from a year ago to 15.19 billion rupees.

The company is bullish about the long-term growth prospects in the country, T.V. Narendran, its managing director for India and South East Asia, said in December. Tata Steel plans to commission the first phase of its 6 million plant in eastern Odisha state by the end of the next fiscal year.

Its Indian operations have traditionally been more profitable as it operates its own iron ore mines, the main raw material in steelmaking.

Ahead of the results, shares in Tata Steel closed 1.9 percent higher at 389.75 rupees in the Sensex that ended up 0.1 percent.

(Reporting by Prashant Mehra; Editing by Aradhana Aravindan and Jane Merriman)

FILED UNDER:

REUTERS EXCLUSIVE

Reuters Showcase

Documents' Leak

Documents' Leak

India widens oil leaks probe to defence ministry  Full Article 

Jim O’Neill Interview

Jim O’Neill Interview

'India can become world’s fifth-largest economy by decade’s end'  Full Article 

Food Security

Food Security

India will not cut multi-billion dollar food handout programme - PM  Full Article 

Ola's Expansion Drive

Ola's Expansion Drive

Taxi group Ola steps up expansion drive  Full Article 

Sahara Saga

Sahara Saga

Sahara's Grosvenor House hotel in London put up for sale   Full Article 

Suzlon Energy

Suzlon Energy

Suzlon expects to turn profitable in fiscal 2016: chairman   Full Article 

Eicher Motors Stake

Eicher Motors Stake

Volvo selling up to $300 mln worth of Eicher shares  Full Article 

Beef Trade

Beef Trade

Maharashtra clamps down on beef trade through new act  Full Article 

Budget 2015

Budget 2015

Budget announcements and reactions from the industry  Full Coverage 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage