Tata Steel posts consolidated loss on low prices, high costs

Consolidated net sales were Rs 33,867.32 cr for the given quarter as against Rs 32,507.45 cr last year

Due to lower steel prices and higher raw material costs, coupled with the poor performance of its Europe division, Tata Steel reported a consolidated (including Tata Steel Europe Ltd, formerly Corus) net loss of Rs 363.9 crore for the second quarter (July-September). The company had posted a net profit of Rs 212 crore for the corresponding period of last year.

The company reported consolidated net sales of Rs 33,867 crore for the second quarter, as against Rs 32,507 crore last year. Earnings before interest, tax, depreciation and amortisation (Ebitda) stood at Rs 2,452 crore versus Rs 3,021 crore. Ebitda margins were 7.2 per cent.

On a standalone basis, Tata Steel India’s net sales grew to Rs 9,034 crore for the second quarter versus Rs 8,142 crore in the year-ago period. Its standalone net profit fell to Rs 1,350.81 crore from Rs 1,495.22 crore, while Ebitda stood at Rs 2,669 crore.

The cost of raw materials went up to Rs 2,537.16 crore from Rs 1,889.04 crore last year, on account of higher coal prices. Steel prices over the second quarter fell by four-six per cent on falling international rates and lacklustre demand growth.

H M Nerurkar, managing director of Tata Steel, said, “The Indian operations continued their steady performance against a backdrop of lacklustre demand in the marketplace and increasing imports.”

Koushik Chatterjee, group CFO, Tata Steel, said, “We will be commissioning the coke oven battery in the current quarter and the cost impact will be in our favour from the fourth quarter.”

On the expansion plans at Tata Steel’s three-million tonne steel plant in Odisha, Nerurkar said the plant is progressing on schedule and should start by the middle of 2014-15. On the Rs 6,000 crore penalty imposed by Odisha government, he said, “We did mining as per the laws of the land and have given our replies to the government.”

Tata Steel Europe suffered from the market slowdown and lower steel prices in Europe. The company reported an Ebitda loss of Rs 40 crore in the quarter ended September. Karl Ulrich Kohler, managing director and CEO of Tata Steel Europe, said, “We are certainly not seeing major improvement in steel consumption this year in Europe.” The consumption is 25 per cent less than the pre-crisis levels, he said, quoting a report by the World Steel Organisation.

Kohler said the slow improvement would continue over the next couple of years and the company is consistent in its strategy of controlling costs where it can.

He said, “We have accelerated management actions in our lists of improvements.”

Tata Steel also reported Rs 42.68 crore on account of profit on sale of non current investments. Chatterjee said, “JVs (joint ventures) relating to scrap in The Netherlands and other small entities were disposed off in the quarter as per the company’s strategy.”

At the end of the second quarter, net debt for Tata Steel Group stood at Rs 55,167 crore, which went up from Rs 47, 657 crore at the end of March 2012.

The company repaid a debt of Rs 5,814 crore in the last quarter and raised Rs 8,985 crore. Chatterjee said, “We have met the 80 per cent of debt repayment obligation for the year already.”