Mumbai: Tata Steel Ltd posted a bigger net loss in the three months ended 31 December than a year ago due to weak global demand and lower prices. Tata Steel generates more than Rs.2 of every Rs.3 of its revenue outside the country.
Net loss widened to Rs.763.06 crore for the third quarter of the current fiscal year on a consolidated basis from a net loss of Rs.602.67 crore in the same period a year ago.
Consolidated income from operations dropped 3% to Rs.32,107.14 crore from Rs.33,103.07 crore. Net profit at the Indian operations plunged by a little over a fourth.
“Results are below expectations even on a stand-alone basis. We actually expected a net profit for the quarter,” said Bhavesh Chauhan, senior analyst at Angel Broking Ltd.
“The demand contraction in Europe has been pretty significant,” said Koushik Chatterjee, executive director and group chief financial officer, Tata Steel, in a conference call. “The December quarter is also the slowest due to seasonal reasons.”
The company, the world’s number 12 steel producer in 2011, according to World Steel Association data, said it will take advantage of the cyclical restocking that takes place at this time of the year and take steps to focus on smaller portfolios to tide over the slack period.
“We will have to ride out the short-term challenges to remain sustainable and robust,” Chatterjee said.
A Bloomberg poll of analysts had pegged net loss at Rs.189 crore on net sales of Rs.32,627.2 crore.
Tata Steel fell 2.18% to Rs.376.15 on the BSE on Wednesday. The benchmark Sensex closed at 19,608.08 points, up 0.24%.
The 1,567 million tonne (mt) global steel industry is seeing a slump in demand on account of a slowdown in China and weak demand in Europe, where Tata Steel, with its 28 mt capacity, has had to cut jobs and production to stem losses.
The world’s largest steel producer ArcelorMittal reported a net loss of $3.99 billion (around Rs.21,506 crore today) in the three months to 31 December, compared with a net loss of $1 billion the previous year, citing a difficult year, particularly in Europe.
Tata Steel’s stand-alone Indian operations reported a net profit of Rs.1,046.39 crore in the October-December quarter, down over 26%. Sales were at Rs.9,370.31 crore, up almost 12%.
Analysts expected a stand-alone net profit of Rs.1,365.9 crore on revenue of Rs.9,461.9 crore, the Bloomberg poll showed.
Chatterjee said the automobile sector had seen significantly lower demand, while the infrastructure sector remains bogged down by stalled projects.
While waiting for global conditions to improve, the company has shifted focus to its India operations, Chatterjee said in an October interview.
The company’s Kalinganagar project in Orissa is on track for completion and it is “mobilizing resources” and plans to ramp up operations ahead of the start of the monsoon this year. Tata Steel is also expanding capacity at the Jamshedpur plant by 3 mt.
“With Tata Steel commissioning new plants in India, and the demand for steel set to grow in India by 5%, we will see the volumes from Indian operations going up,” Angel Broking’s Chauhan said.
The outlook for the European operations remains grim for at least another year, he added.