Mumbai: India’s largest steel producer, Tata Steel Ltd, reported a 9% gain in fourth quarter profits, excluding contributions from Anglo-Dutch unit Corus Group Plc., aided by higher prices. Net income rose to Rs1,210 crore ($282 million) in the three months ended 31 March, from Rs1,100 crore a year earlier. The numbers were derived from full-year earnings announced by the Mumbai-based company on Thursday.
Five analysts in a Bloomberg poll had predicted a median profit of Rs1,230 crore. Sales gained 15%to Rs5,740 crore.
Productive alliance: (left) Philippe Varin, CEO of Corus Group, and B. Muthuraman, managing director of Tata Steel, at the announcement of Tata Steel’s annual financial results
Tata bought Corus in January last year for $13 billion to tap European steel demand.
A global shortage of steel helped Tata increase prices for builders and automobile companies, more than covering record raw material costs.
“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 earning statement. The BNP fund held about 700,000 Tata Steel shares as of 31 May.
Tata Steel rose 1.9% to Rs756.55 at the end of trading in Mumbai. The earnings were announced after the market closed. The stock is down 19% this year, compared with a 29% drop in the benchmark Sensex.
Tata and Corus sell more than two-thirds of their production in Europe. Tata imports one-third of the coal needed for its India mills and mines its own iron ore, while Corus buys both raw materials.
The group will reorganize in the next 6-12 months for planned growth in raw materials and expansion in new markets, managing director B. Muthuraman said.
Profit rose 11% to Rs4,690 crore in the year ended 31 March from Rs4,220 crore a year ago, the Mumbai-based company said in an emailed statement. Sales rose 12% to Rs19,690 crore. Consolidated net income, including Corus, rose to Rs12,320 crore from Rs4.170 crore.
While coking coal prices tripled and iron ore surged to a record this year, Tata Steel, South Korea’s Posco and rivals took advantage of demand to pass on the costs by lifting prices.
Nippon Steel Corp., which hasn’t increased prices enough to cover costs, said in April that full-year profit will fall 41%.
Steel prices in Europe will be 20% more than expected, Deutsche Bank AG had said on 18 June. The bank forecast hot- rolled coil prices at $930 per tonne in 2008, 40% more than last year.
Corus, which plans to raise prices of strip products and electrical sheets from 1 July, may ask customers to pay a raw material surcharge after iron ore and coal prices reached records, London-based spokeswoman Annanya Sarin said on 22 May.
Still, Tata Steel faces price limits domestically. The government asked steel makers to lower prices by as much as 10% last month to help contain inflation.
The producers agreed to maintain prices until the end of July.
“The only concern we have for Tata is when the government will allow steel makers to raise prices in India,” said Niraj Shah, an analyst at Centrum Broking Pvt. Ltd.
Tata Steel plans to increase its domestic production to 10 million tonnes by December 2010 from 7 million tonnes.