Tata Steel Q1 Net plunges 89% to Rs 598 crore
Mumbai: Tata Steel Monday reported a decline of nearly 89 percent in its consolidated net profit to Rs 597.88 crore for the quarter ended June 30, 2012 due to slackening metal demand and lower realisations in the European markets.
The Tata Group flagship firm had posted a net profit of Rs 5,346.55 crore in the corresponding quarter of the previous fiscal, which had included a one-off profit of Rs 3,362 crore on selling investments, it said in a filing to the BSE.
However, as compared to the last quarter of FY'12, Tata Steel fared better as it had reported a net profit of Rs 433.46 crore for the January-March period.
Net sales of the company, however, were up 1.89 percent to Rs 33,547.73 crore during the quarter vis-a-vis Rs 32,925.68 crore of the April-June quarter of 2011-12.
"European steel demand is lower than expected and prices have weakened. We continue to seek to mitigate the effects of this with tight cost control and emphasis on increased product differentiation," Tata Steel Europe Managing Director and & CEO Karl-Ulrich Kohler said in a statement.
Tata Steel Europe (formerly known as Corus) reported a decline of over 67 percent in its core profits (EBITDA) to USD 111 million in the April-June period as compared to USD 343 million a year ago.
However, on a Quarter-on-Quarter (QoQ) basis, its EBITDA improved as the steelmaker had earned USD 26 million in the fourth quarter of the previous fiscal.
Kohler added that the company's financial performance has been improving in the last few months as raw material cost pressures have eased and the cost cutting initiatives have yielded results.
However, company's auditors, Deloitee Haskins and Sells, have pointed out in their review report for the quarter that the company would have made a net loss of Rs 841.91 crore, had it recognised actuarial valuation changes.
The Tata group firm has recognised actuarial valuation change of Rs 1,439.69 crore, which is net of tax and made on the pension plans of Tata Steel Europe, into "reserves and surplus" segment, while citing accounting standards.
On a standalone basis, which is a reflection of Tata Steel's performance in India, the company reported a decline of nearly 30 percent in its net profit to Rs 1,356.56 crore, although its net sales were up over 13 percent to Rs 8,820.19 crore in the first quarter of the current fiscal.
"Indian operations posted robust performance against the backdrop of weakening demand and increased competition," Tata Steel's Managing Director H M Nerurkar said.
He added that "market challenges have made us focus on tightening of costs, improving product-mix and ensuring that the ramp up of our brownfield expansion takes place by the year-end. Downstream linkages of Indian operations are expected to provide the required depth to our business."
In line with the weak demand in European markets, the company's total steel shipments declined by 6.20 percent to 5.68 million tonnes (MT) in the quarter, while its Indian deliveries remained stable at 1.59 MT, it said.
Besides, its net debt rose to Rs 54,020 crore (USD 9.71 billion) in the April-June period from Rs 47,657 crore (USD 8.57 billion) reported at the end of March, 2012.
The company also said it raised Rs 1,500 crore in April by issuing non-convertible debentures of 10 years through a private placement mode.
Last month, the steel major has also agreed to its 50 percent stake in Dutch ferrous and non-ferrous metals recycler HKS Scrap Metals Co to Euro Scrap Alliance (ESA), a subsidiary of Germany's TSR.
Shares of Tata Steel closed today at Rs 395.65 apiece on the BSE, down 1.19 percent from the previous close.