Mumbai: Tata Steel Ltd posted a bigger-than-expected drop in its consolidated quarterly profit, as weak prices, lower volumes and high raw material costs depressed margins in its main European market.
“The continuing euro zone crisis kept European steel demand well below pre-crisis levels. In addition, operational difficulties caused the European operations to perform worse,” Karl-Ulrich Kohler, head of its European operations, said in a statement.
The world’s No.7 steel maker, whose European operations account for two-thirds of its global capacity of about 28 million tonnes (mt), reported net profit after minority interest and share of associates, of Rs433 crore for its fiscal fourth quarter ended March.
A year earlier, it had posted profit of Rs4,176 crore, but this included a one-time gain of Rs2,280 crore due to sale of a plant in England.
A Reuters poll of brokerages had forecast quarterly net profit of Rs1,030 crore for the March quarter.
Net sales rose 1.2% to Rs33,860 crore.
Global crude output grew at a slower pace in 2011, and demand this year has been squeezed by the euro zone debt crisis and tight credit conditions in China, the world’s biggest steel consumer and producer.
Last week, ArcelorMittal, the world’s largest steel maker, said it saw strong demand from the US and said demand environment had improved since last November.
Earlier, world No. 3 Posco and Japan’s Nippon Steel both forecast an improvement in markets in the latter half of 2012, but warned of high raw material costs.
Sales at the company’s Indian operations, which account for a quarter of its global capacity, rose 13.8% to Rs9,375 crore.
It posted a 3.3% increase in Indian volume for the fourth quarter, helped by improved demand from the automobile and consumer goods sectors.
The company said its expansion of steel-making capacity in India to 9.7 mt from 6.7 mt is likely to boost performance in 2012-13. It has started trial production at the expanded facility.
Tata Steel managing director Hemant Madhusudan Nerurkar said the company is planning to produce and sell 1 mt more steel in this fiscal. “We are about to start coal exports from its Benga project in Mozambique from May-June this year, and will make a capital expenditure of $2.2-2.5 billion fiscal 2013,” he added.
The company held total net debt of $9.4 billion at end-March, much of it from its $13 billion acquisition of Anglo-Dutch steelmaker Corus in 2007. Its debt stood at $9.2 billion at the end of December.
Its consolidated operating margins for the quarter fell to 10.1% from 14.1% a year earlier, while steel deliveries fell to 6.22 mt from 6.65 mt a year earlier.
Tata Steel closed down 1.48% on the BSE ahead of the results. The benchmark Sensex rose 0.51% on Friday.
Mint’s Bhuma Shrivastava contributed to this story.