Tata Steel posts Rs 687 cr loss in Q3

Tata Steel posted a net loss of Rs 687 crore on a consolidated basis for the third quarter ended December 31, as against a profit of Rs 949 crore in the same period last year. The last time company posted a loss, Rs 2,720 crore, was in the second quarter of FY10.

Consolidated net sales, however, rose 15 per cent to Rs 32,964 cr during Q3 of FY12, vis-a-vis Rs 28,606 cr of the October-December quarter of FY11, Tata Steel said in a filing to the Bombay Stock Exchange (BSE). Total expenditure grew to Rs 32,550 crore as against Rs 26,791 crore in the same period last year. The Ebitda margins shrunk to six per cent as against 12 per cent on an year-on-year basis.

Tata Steel Europe is seen as the major cause of this loss. The company said the rise in input costs for the European operations and weaning demand for the metal is the major cause of the result.

The shares closed the day at Rs 452, up 0.3 per cent, on the BSE. The earnings were announced after the market closed.

An analyst who tracks the company said, “The Street wasn’t expecting this dismal performance from the company. Tata Steel Europe was supposed to underperform but the loss is completely unexpected.”

The steel demand in Europe has been sluggish and prices have also been unsupportive. Prices have fallen by $50 per tonne (Rs 2,500 per tonne) since the beginning of the current financial year. The analyst said, “Tata Steel Europe has been hit because of the steel price crash and also due to slow demand.”

On January 25, Tata Steel Europe’s tubes business announced a recovery plan to match business operations to current and projected market demand in the foreseeable future.

The company said four of its tubes sites in the UK and the Netherlands will be affected. “There are anticipated to be 110 job losses at Corby in the UK and, in the Netherlands — 17 in Zwijndrecht, 28 in Maastricht and 45 in Oosterhout,” it had said.

The company said, "The value of inventories of raw materials and finished goods at some of the subsidiary companies, especially Tata Steel Europe, has been written down to recognise the fall in market price of these products. The write down for the quarter ended December 31, amounts to Rs 741.7 crore."

The company’s gains and losses in the pension funds for Tata Steel Europe has been accounted in the 'reserves and surplus' in the consolidated results. Had the company recognised changes in actuarial valuations of pension plans in the profit and loss account, the consolidated profit after tax, minority interest, and share of profit of associates would have been lowed by Rs 694 crore for the quarter.

Tata Steel India posted a net profit of Rs 1,421 crore, as against Rs 1,513 crore in the comparable quarter. Net sales, on a standalone basis, stood at Rs 8,304.6 crore, as against Rs 7,325 crore in the same quarter last year. Total expenditure of Tata Steel India grew to Rs 6,040 crore, up by Rs 1,177 crore.