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| Tata Steel's consolidated net profit dips 44% |
| BS Reporter / Mumbai Feb 28, 2009, 00:48 IST |
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Tata Steel, the world’s sixth largest steel maker, posted a 44 per cent fall in its net profit to Rs 732.21 crore on a consolidated basis for the quarter ended December 2008, owing to high raw material costs, inventory build-up and a foreign exchange loss of Rs 200 crore.
Net sales have risen 4.05 per cent to Rs 33,191 crore as steel prices were higher in the third quarter compared to the corresponding period last year.
Production cuts of up to 40 per cent at its Anglo-Dutch subsidiary Corus have also affected the revenue growth. Low demand for steel has led to an inventory build-up worth Rs 2,352 crore.
Tata Steel’s India business also saw a fall of 3.5 per cent in the quarter ended December because of the low demand and the subsequent fall in prices. "These are unprecedented times but still, we managed to register profits because of our geographical spread, product mix, synergies with international operations and also with ownership of raw materials. In the future, we are looking at lower raw material contract prices as the company is renegotiating with the suppliers," said B Muthuraman, managing director, Tata Steel.
Philippe Varin, chief executive of Corus, said, "Until June 2009, Corus will continue its production cut that began with the shutdown of three blast furnaces in Europe. The move is due to the continuing lower demand in the international market. Corus has sold off its aluminium as well as teesside cast businesses as part of cost cutting."
Steel makers around the world have seen sales and prices fall as the credit crisis and economic slump hit demand from major steel consuming sectors such as automotives, consumer goods and construction.
Tata Steel said the net profit would have been lower by Rs 4,256 crore had it followed its earlier accounting practice instead of recording actuarial gains and losses on employee benefit funds in reserves and surplus.
Tata Steel has repaid $500 million (Rs 2,500 crore) debt raised for the Corus acquisition in 2007. "The company has no repayment till December 2009. In 2010-11, we have to repay $798 million and $1.3 billion in 2011-12," said Koushik Chatterjee, group chief financial officer, Tata Steel.
Even as the steel major re-prioritised its capital expenditure for new projects in view of the global economic slowdown, it said the expansion of its Jamshedpur unit is on track. "The 3-million tonne expansion plan at Jamshedpur is on track and will be completed by 2010," Muthuraman said.
Tata Steel has undertaken brownfield expansion to enhance its production capacity to 10.5 million tonnes from the present 6.8 million tonnes.
In the April- December period, Tata Steel has registered a 45.3 per cent rise in net profit at Rs 11,469 crore, while net sales for the consolidated entity rose 26.63 per cent to Rs 1,20,914 crore.
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