Friday August 07, 2009

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By Sam Devraj  ( Assistant Editor )

Ruing the loss: B Muthuraman, managing director of Tata Steel

TATA STEEL Ltd on Wednesday (August 5) missed forecasts with a 47 per cent fall in quarterly net profit from its Indian operations, and said it expects higher output from its global operations in the second half of the year.

Tata's European unit Corus has raised steel prices by about $40 (£24) a tonne, in line with international prices, and expects capacity utilisation in Europe to rise to 65 per cent next quarter from 53 per cent now, managing director B Muthuraman said.

European capacity utilisation is expected to be 70 per cent for the full year, he said.

In India, the company saw volume growth being driven by higher demand from the infrastructure sector.

"Our (India) sales volume has gone up 22 per cent in the quarter, largely from the long products due to demand from infrastructure sector. I expect this trend to continue this year," Muthuraman told a news conference.

Global steel production has tumbled this year, as demand in key steel consuming sectors such as construction and automotive shrank, forcing steelmakers worldwide to sharply reduce capacity.

Earlier on Wednesday, ArcelorMittal, the world's largest steelmaker, reported second quarter core profit slid 85 per cent to $1.22bn (£72m), and No. 2 Nippon Steel booked a second consecutive quarterly loss.

In April, the World Steel Association forecast steel demand would tumble 15 per cent in 2009, its steepest fall since World War II.  

Tata Steel said standalone net profit for its Indian operations fell to Rs7.90bn ($163m/£97m) for its fiscal first quarter ended June from Rs14.88bn ($310m/£187m) a year earlier, largely on lower prices and higher costs because of imported coal, Chief Financial Officer Koushik Chatterjee said.

"In the next quarter we expect volume to be better and lesser imported coal will be used, so costs will go down," he said.

Net sales fell to Rs55.5bn ($11.47bn/£6.85bn) from Rs61.70bn ($12.74bn/£7.6bn).

The Indian operations account for about a quarter of the group's total annual capacity of 30 million tonnes.

Last month, Tata Steel said weak European demand contributed to a 60 per cent drop in its consolidated 2008/09 profit.

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