Tata Steel shrugs off input costs, posts 11% rise in net

The rise in profits was despite the unprecedented increase in raw material costs amid government checks on steel prices.

A global shortage of steel helped Tata increase product prices for builders and auto companies, more than covering record raw material costs.

"However, there is need for increase in efficiency at various operational levels as raw material costs are still rising," Managing Director B Muthuraman said. Total revenues increased to Rs 20,028.28 crore form Rs 17,984.76 crore in FY07.

 

The company, which has a domestic production capacity of 6.8 million tonnes annually, plans to raise it to 10 million tonnes by December 2010. The company has been looking for iron ore and coal mines to help it tackle the rise in input costs and plans to secure at least 40-50 per cent of its raw material requirements in the next few years, the company said at the release of the results.

"The company will reorganise internally in the next six to twelve months to ensure steady growth in captive raw material assets," Chief Financial Officer Koushik Chatterjee said.

The company also intends to set up 1.5 million-tonne cold-roll steel capacity for an estimated investment of Rs 3,000 crore, said a senior executive on the sidelines of the conference.

On a consolidated basis, which included profits from Corus (the Anglo-Dutch company that it acquired in April 2007), the net profit rose nearly three-fold to Rs 12,350 crore.

The group's turnover grew by more than five times from the previous year to Rs 131,535 crore. During the year, Tata Steel's operating profit margin rose to 39.2 per cent from 37.5 per cent in the previous year.

"Tata will show strong earnings growth in the next few quarters as it will be able to pass on higher costs by increasing prices in the European market," Bharath S, an analyst at Sundaram BNP Paribas Mutual Fund, said in Chennai before the earnings statement. The BNP fund held about 700,000 Tata Steel shares as of May 31.

Tata Steel rose 1.9 per cent to Rs 757.10 on the BSE. The stock is down 19 per cent this year compared with a 29 per cent drop in India's benchmark Sensitive Index. The Indian steelmaker sells more than two-third of its output in Europe.