Tata Steel turns to loss on lower prices

Tata Steel turns to loss on lower prices

Mumbai: The country’s biggest producer, Tata Steel Ltd, turned to a bigger than expected second quarter loss because of lower prices and production at its European unit Corus Group Ltd. The shares declined.

The group’s net loss was Rs2,710 crore in the three months ended 30 September, compared with a profit of Rs4,770 crore a year earlier, the Mumbai-based company said on Thursday in a statement. Sales fell 43% to Rs25,270 crore.

Corus, which provides more than two-thirds of Tata Steel’s output, cut production from the year-earlier period after orders from global automobile makers and builders collapsed amid the global recession. Earnings are likely to revive in the second half on lower coking coal costs and an increase in production, Sundaram BNP Paribas analyst Bharath S. said.

“Tata Steel’s performance will improve as Europe may witness a recovery next year," Bharath said. Sundaram BNP Paribas mutual fund holds 517,585 Tata Steel shares as of 30 September, according to Bloomberg data.

Tata Steel shares, which more than doubled this year on optimism the government’s infrastructure spending will spur sales, fell 3.34% to Rs543.45 on Thursday. The benchmark Bombay Stock Exchange’s Sensex index fell 2%.

London-based Corus, which has an annual production capacity of 20 million tonnes, has its major plants located in the UK, the Netherlands, Germany, France and Belgium. Capacity use at the plants would be about 65% in the fiscal second quarter, then managing director B. Muthuraman said in August.

Corus raised prices in September, the first increase in more than a year, on higher demand. It will increase prices of engineering steel products from 1 October, the Tata Steel unit said in the same month.

Raw material costs fell 33% to Rs8,490 crore in the quarter after long-term coking coal prices dropped to about $128 a tonne since April from $305 a year earlier.

Tata Steel plans to increase production at Corus to full capacity by the end of this financial year, Muthuraman said on 4 November.

ArcelorMittal, the world’s largest steel maker, has restarted six furnaces in the US and four in Europe as it expects demand to increase 10% next year, Sudhir Maheshwari, a member of ArcelorMittal’s board, said earlier this month.

Tata Steel acquired Corus for $12.9 billion in 2007 to gain access to European and American markets.