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.
Deepening concerns about the economic slump are keeping consumers away from buying houses, cars and home appliances, lowering demand for steel worldwide. Posco, Asia’s third largest steel maker, has cut production for the first time in its 40-year history and ArcelorMittal, the world’s biggest producer, said in November it was lowering annual output by more than 30%.
Raising concern: Tata Steel managing director B. Muthuraman at a conference in Mumbai on Wednesday. Arko Datta / Reuters
“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.