Tata Steel sees rebound at home, growth in Europe after Q4 loss

By Zeba Siddiqui

MUMBAI (Reuters) - Tata Steel Ltd said it expected a rebound in steel demand in its home market and modest growth in Europe this year, after reporting a $889 million quarterly loss inflated by a hefty impairment on its UK business.

The consolidated fourth quarter loss from Tata Steel, Europe's second-largest steelmaker, compares with a net profit of 10.36 billion rupees ($163 million)a year earlier. Net sales dropped more than a fifth, hit by weak steel prices.

The combination of a slowdown in China and a devaluation of the Russian rouble have led to a surge in cheaper steel products on international markets over the past two quarters, pressuring steel prices and squeezing Tata Steel's margins in Europe and India, at a time when demand is also still lacklustre.

The company has been forced to slash costs and jobs following its ill-timed entry into Europe, where steel demand has languished after the financial crisis and clients have turned to cheap imports, which Tata said remained a worry.

"(European Union) demand is forecast to grow modestly again and the EU steel industry is in a stronger position to benefit than it was pre-crisis. But surging Chinese exports look set to remain a serious concern," Karl-Ulrich Köhler, chief executive of Tata Steel's European operations said.

Tata Steel last week said it would take a $785 million non-cash charge in the fourth quarter, mainly related to its loss-making European long products unit, which serves the construction and engineering industries and employs 6,500 people in Britain and elsewhere on the continent.

The company announced in October last year that it was in talks with Geneva-based Klesch Group to sell that unit, in order to focus on higher value products, like those for the auto industry.

Group Executive Director Koushik Chatterjee told a news conference in Mumbai on Wednesday that the discussions continued, and Tata Steel hoped to see a "final picture emerging in the next few months.

Tata Steel has been focusing on shifting to higher-margin speciality steel to propel a turnaround, more than seven years after it entered the continent through the $13 billion acquisition of Corus, formerly British Steel, in 2007.

In its home Indian market, Tata Steel is "hopeful" that steel demand will rebound this fiscal year on the back of higher investments across key industrial and infrastructure sectors, T.V. Narendran, chief of the company's Indian and Southeast Asian operations, said.

A string of mining stoppages in recent months led to a number of Tata Steel's iron ore mines in India being shut during the past year, causing its plants to operate below capacity.

($1 = 63.8406 rupees)

(Writing by Aman Shah and Devidutta Tripathy; Editing by Clara Ferreira Marques)