Mumbai: Tata Steel Ltd, India’s largest steel manufacturer, posted its first quarterly loss in nine quarters, battered by unexpectedly high inventory write-downs, rising input costs and dwindling demand in European markets.

The earnings came in well below the estimate of Rs 257 crore profit in a poll of 28 analysts by Bloomberg. The last time the company reported a loss was in the July-September quarter of 2009, when it had posted consecutive losses for the two preceding quarters as well. The company has been profitable since then.

Net sales rose 15% to Rs 32,964.15 crore from Rs 28,606.15 crore.

While metal makers across the board—such as non-ferrous metal producer Hindalco Industries Ltd—have been hit by higher raw material prices, Tata Steel was dragged down by a Rs 741.7 crore write-down at its European subsidiary, formerly known as Corus.

“Value of inventories and finished goods at some of the subsidiary companies, especially in Tata Steel Europe, has been written down to recognize the fall in market price of these products,” said a company release late on Thursday evening.

Further clarity is expected to emerge after the company discusses its results in a conference call on Friday, said two sector analysts who did not want to be named.

“The primary drag on profits has been the inventory write-down. Due to accounting norms, the sale price of the unsold inventory in Corus at the prevailing price on 31 December 2011 would have been taken as lower than the production cost of inventory,” said a metal analyst with a domestic brokerage firm who didn’t want to be named, citing company policy.

Another analyst who tracks the company and is employed at a foreign bank, who also didn’t want to be named for the same reason, said that the inventory write-down is in line with expectations, but there were many unexplained details in the profit and loss account that will become clearer during the analyst conference call with the company scheduled for Friday morning.

A 22% rise in costs across categories added to the steel maker’s woes. Total costs rose to Rs 32,549.77 crore, while raw material expenses climbed 21% to Rs 2,618.69 crore in the quarter. Both revenue and profit were boosted in small measure by other income of Rs 138.30 crore.

Purchases of finished plus semi-finished steel spiralled to Rs 5,265.11 crore from Rs 3,769 crore. The catch-all category of “other expenditure” rose to Rs 6,608.53 crore from Rs 5,224.56 crore.

Global crude steel production hit a record high of 1.53 billion tonnes in 2011, but the pace of growth was sharply lower than the previous year as the sovereign debt crisis in Europe and slowing economic growth in top consumer China dented demand.

The debt crisis in Europe, which contributes to about two-thirds of Tata Steel’s production, has cut steel demand and prices. Global use of the alloy will rise 4.5% in 2012, the slowest in three years, according to the median estimate of 14 steel makers, analysts and traders surveyed by Bloomberg.

Tata Steel has consistently underperformed the broader market over the past year, as the European sovereign debt crisis has dealt a body blow to steel demand.

Over the past year, the steel maker’s stock has dropped 24.63% compared with a 1.35% gain in BSE’s benchmark Sensex index.

On Thursday, Tata Steel gained 0.1% to Rs 451.10, underperforming the Sensex’s 0.7% rise. The earnings were declared after the equity markets closed.

bhuma.s@livemint.com

Bloomberg and Reuters contributed to this story.