Tata Steel turns to profit on higher demand

Tata Steel, the country’s largest steel producer, turned to first-quarter group profit after demand from automobile and construction companies rose both in India and Europe.

Net profit, including its UK unit Corus, was Rs 1,825 crore in the three months ended June 30, compared to a loss of Rs 2,208 crore in the year-ago period. Sales rose 16 per cent to Rs 27,010 crore.

“Automotive has done far better than we expected, most of us are feeling the supply constraint now,” said Tata Steel managing director H M Nerurkar while talking about the performance of its India unit. The company holds more than 40 per cent market share of India’s auto steel for which demand is growing.

Rising income levels lifted India’s car sales by more than 30 per cent each month in the April-to-June period, with the nation’s biggest car maker, Maruti Suzuki, recording a 38 per cent increase in demand from last year. The price of hot-rolled coils in India rose 29 per cent during the quarter, while average three-month Mediterranean steel future on the London Metal Exchange rose 42 per cent.

Talking about the outlook for the steel industry, the company said it expected modest recovery in steel pricing in end-2010 and into 2011, as Chinese demand was expected to improve following a reversal in policies and new investments made.

On the performance of the European unit, Kirby Adams, managing director and chief executive officer of Tata Steel Europe, said, “European demand has improved in sectors like automotive and aerospace. However, the long-term sustainability of the recovery is highly dependent on future growth in the European construction sector.”

During the June quarter, the recovery of the European operations continued. There was a $692-million turnaround in Corus’ year-on-year Ebitda performance. Ebitda stands for earnings before interest, tax, depreciation and ammortisation and it is the yardstick of the operational performance of a company. This was backed with significant improvements in revenue and capacity utilisation.