Tata Steel profit down 44%,but beats estimates

TATA Steel managed to surprise the markets,which had been anticipating the steel major to post a loss in the October-December quarter of the current financial year....

Written by ENS Economic Bureau | Mumbai | Published:February 28, 2009 1:27 am

TATA Steel managed to surprise the markets,which had been anticipating the steel major to post a loss in the October-December quarter of the current financial year,by announcing a profit on Friday. The world’s sixth largest steel manufacturer has reported a consolidated net profit (including overseas subsidiaries like Corus,NatSteel and Tata Steel Thailand) of Rs 732.21 crore for the third quarter ended December 2008,down 44.18 per cent from Rs 1,311.76 crore in Q3 FY08.

“Tata Steel has shown that it is an extremely resilient company. Owing to our pre-emptive measures,the wide geographical spread of the company,the presence in a variety of segments and the ownership of raw materials we managed to tide over the downturn and slackening demand,” said Tata Steel managing director B Muthuraman.

The company’s consolidated net sales for October-December rose to Rs 33,191 crore from Rs 31,899 crore in the corresponding quarter of FY08. It said the net profit would have been lower by Rs 42.56 billion had it followed its earlier accounting practice instead of recording actuarial gains and losses on employee benefit funds in reserves and surplus.

The steel major had to cut its production in Corus by 40 per cent to manage inventory. “Production cuts will continue until the second quarter in Europe,where demand is down about 25 percent currently,” Corus CEO Philippe Varin said.

Demand will likely remain weak until June,he said. Varin said that though he does not envisage any spurt in demand in Europe in the next 6 months he doesn’t expect any further steps to cut production in the near term either. Corus had closed 3 blast furnaces in the quarter to manage inventory build-up.

Tata Steel has set a target to sell 1.6 million tonnes of products in the January- March quarter,compared to the 1.1 million tonnes it did in the previous three quarters,Muthuraman said. There is a slight revival in the market for our products as we already achieved to sell 0.5 MT in January and in February the sale has been around 0.6 MT,he said. Muthuraman said that the steel demand in the country would grow by 5 per cent in 2009.

“In India I do believe that all the government packages have stimulated demand upwards,and I do expect steel demand to grow positively,by maybe about 5 percent this year as against the original figure of 10-12 percent,” he said adding that the company would like to continue with all its expansion plans.

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