BackTata Steel profit drops on falling demand, rising costs
Tata Steel profit drops on falling demand, rising costs
PremiumRaising concern: Tata Steel managing director B. Muthuraman at a conference in Mumbai on Wednesday. Arko Datta / Reuters
Mumbai: India’s largest steel producer, Tata Steel Ltd reported a drop in quarterly profit for the first time in almost three years as slowing economic growth and the credit crunch prompted makers of cars and appliances to slash orders.
Third-quarter net income, excluding unit Corus, fell to Rs466 crore, or Rs5.57 a share, from Rs1,070 crore, or Rs13.86, a year ago, Tata Steel said on Wednesday. Profit fell short of the Rs936 crore median estimate of five analysts compiled by Bloomberg. Sales fell 5% to Rs4,4740 crore.
“The scenario is unlikely to improve this quarter with prices showing no signs of improvement," said Chirag Shah, an analyst at Mumbai-based stock brokerage IDFC-SSKI Securities Ltd.
Earnings were eroded by a foreign-exchange loss of Rs127 crore and raw material costs that surged 79% to Rs1,611 crore, the company said in a statement. Tata Steel mines its own iron ore and buys onethird of its coking coal needs. Long-term coking coal prices surged to $300 (Rs14,670) a tonne, while iron-ore prices almost doubled in the fiscal. Tata Steel’s European unit Corus imports its entire coking coal and iron-ore requirement.
Rival Steel Authority of India Ltd on Tuesday said profit more than halved, while Tata Steel (Thailand) Pcl., a unit of the world’s sixth largest steel maker, reported the biggest quarterly loss in at least six years in the three months ended 31 December.
Tata Steel shares gained 3% to Rs177.1 at the Bombay Stock Exchange, on a day its Sensex index climbed 2.8%.
The stock touched Rs137.5 on 24 November, the lowest in at least five years, on concern earnings will be muted in its European operations.
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