Tata Steel shares up despite surprising loss
Net sales for the October-December quartet rose 15% to Rs. 329.64bn versus Rs. 286.06bn in the October-December quarter of FY11, Tata Steel said.
Shares of Tata Steel spurted on Friday despite announcing an unexpected quarterly loss, its first in more than two years, as higher raw material costs and weak demand in Europe hurt margins.
Tata Steel reported a net loss of Rs. 6.87bn for its fiscal third quarter ended December, compared with a net profit of Rs. 9.49bn in the same period a year earlier. The last time company posted a loss, Rs. 27.20bn, was in the second quarter of FY10.
Net sales for the October-December quartet rose 15% to Rs. 329.64bn versus Rs. 286.06bn in the October-December quarter of FY11, Tata Steel said.
After minority interest and share of associates, it reported a net loss of Rs. 6.03bn.
Tata Steel said that consolidated margins for the quarter slumped to 5.9% from 11.6% a year earlier. EBITDA margins shrunk to 6% as against 12% on an year-on-year basis.
Tata Steel’s deliveries declined to 5.84mn tons from 5.9mn tons in the previous year.
Tata Steel India posted a net profit of Rs. 14.21bn as against Rs. 15.13bn in the comparable quarter a year earlier. Net sales, on a standalone basis, stood at Rs. 83.05bn versus Rs. 73.25bn in the same quarter last year.
Sales at its Indian operations, which account for a quarter of its global capacity, rose 16% to Rs. 244.5bn. It posted a 1.1% drop in volume because of slowing economic activity and weak demand from the construction and automobile sectors.
“We expect steel demand to improve on expectations of the Reserve Bank of India (RBI) relaxing monetary policy to aid growth and investment,” Tata Steel Managing Director Hemant Nerurkar said.
Tata Steel is expected to complete a planned expansion of its Indian capacity to 9.7mn tons by March 2012, from 6.7mn tons now.
The company said that it held total net debt of US$9.5bn at end-December, much of it from its US$13bn acquisition of Anglo-Dutch steelmaker Corus in 2007. Its debt stood at US$9.2bn at the end of September.
Tata Steel, which operates two-thirds of its global capacity of about 28mn tons in Europe, warned that it did not expect a significant revival in demand in its core markets in 2012.
“The December quarter marked the height of the cyclical cost-price squeeze,” said Karl-Ulrich Kohler, head of its European operations.
“We are accelerating cash conservation in expectation of muted but stable demand in our core markets in 2012,” he said.
