Mumbai: The country’s biggest producer of the steel, Tata Steel Ltd, reported its first quarterly profit increase this financial year on higher demand from auto makers and builders.
Third quarter net profit, excluding that of the UK unit Corus, more than doubled to Rs1,190 crore, or Rs13.24 a share, in the three months ended 31 December from Rs466 crore, or Rs5.67, a year earlier, the Mumbai-based company said in a statement. Profit beat the Rs980 crore median estimate of 20 analysts in a Bloomberg survey. Sales rose 33% to Rs6,307 crore.
Indian steel consumption jumped 7.7% in the April-December period, boosted by demand from car and construction companies and a Central plan to spend $8.95 billion (Rs41,438.5 crore) this fiscal year on roads, phone networks and power plants.
Beating estimates: Tata Steel’s cold rolling mill in Jamshedpur, Jharkhand. The company’s volume sales rose 49% in the third quarter.
Increased sales of high-end products and better realization helped Tata Steel report strong earnings, said Rakesh Arora, an analyst with Macquarie Group Ltd.
Price improvement in the current quarter will help the firm improve earnings in the next quarter, he said. Arora has an outperform rating for Tata Steel shares.
Raw material costs fell 12% to Rs1,420 crore in the third quarter, while income from sources other than the main business increased to Rs264 crore from Rs11.72 crore a year ago, the company said. Volume sales rose 49% to 1.6 million tonnes in the quarter ended 31 December from a year earlier, aided by demand for construction and automobile-grade steel, the company said on 5 January.
Meanwhile, Nippon Steel Corp., Japan’s largest producer, and Tata Steel agreed on Thursday to invest as much as 35 billion yen (Rs1,820 crore) to set up an automobile-steel venture in India. Tata Steel will hold 51% and Nippon Steel the remaining stake in the venture, which will be located in Tata’s Jamshedpur factory complex in Jharkhand, Nippon Steel said on its website.
Tata Steel shares rose 4.81% to Rs585.55 at close on the Bombay Stock Exchange. Nippon Steel, which on Thursday forecast its first full-year loss in seven years, fell 3.8% to 334 yen in Tokyo after the earnings announcement.
Corus Group, Tata Steel’s European unit that contributes at least two-thirds of its global output, raised prices of its long products by at least £60 (Rs4,500) a tonne, Tata Steel said in an emailed statement. Tata Steel plans to raise output in the October to March period, which would boost earnings in the second half, chief financial officer Koushik Chatterjee said on 26 November.
Corus had to cut production after orders from global automobile makers and construction companies collapsed amid the world’s worst global recession since World War II.
Tata Steel, the world’s eighth largest producer, acquired Corus for $12.9 billion in 2007 to gain access to European and the US markets.
The unit, which makes steel for cars, construction, packaging and engineering, operates in the UK and the Netherlands.
Corus, aiming to cut funding costs, received 56% acceptance for an $875 million bond exchange on debt raised to fund its purchase of Corus, according to data from Singapore Stock Exchange on 20 November.