Tata Steel plunges into loss of Rs 2,238 cr in Q1
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Last Updated: Thursday, August 27, 2009, 23:21
Mumbai: Hit by a slump in demand due to global downturn, Tata Steel on Thursday plunged to a consolidated net loss of Rs 2,238.53 crore for the first quarter ended of this fiscal.

The company had posted a net profit of over Rs 3,900 crore in the same period in the previous fiscal.

Tata Steel, however, expressed guarded optimism that steel demand will rebound and prices improve in the European markets most of which are in recession. Tata Steel in 2007 had acquired for USD 12.2 billion Aglo-Dutch steel firm Corus, which utilises only 55 per cent of total installed capacity due to slump in demand.

"The results of Tata Steel Group for the quarter ended June reflects the impact of the global economic downturn, particularly in the developed markets," Tata Steel Managing Director B Muthuraman said in a statement here.

Tata Steel Europe's CEO Kirby Adams said the unexpected termination of the Teesside off-take agreement by a consortium of buyers cost Tata Steel Europe Rs 244 crore in EBIT and Rs 742 crore in operating cash flows.

Tata Steel's sales volume during the period under review dipped by 37 per cent to 5.443 million tonnes from 8.603 million tonnes, mainly due to 48 per cent decline in sales in its European operations. Sales in NatSteel and Tata Steel Thailand also fell. Sales in India went up by 22 per cent.

As a result, total income declined to Rs 23,292.31 crore for the quarter ended June 30, 2009 against Rs 43,496.17 crore in the same period last fiscal.

Tata Steel Chairman Ratan Tata, at the company's AGM said that there were signs of recovery in demand and firming up of prices in the European market.

"But, it would be too early to say that the worst is over," he said.

"It is difficult to say, when we will reach full capacity utilisation (at Corus). But, I hope, by the end of the current year, utilisation will be around 80 per cent and close to 100 per cent by the end of next year," Tata said responding to a query by a shareholder.

Tata Steel had to trim production at Corus due to demand contraction in the developed markets.

"We anticipated that the first two quarters of the current year would be difficult for European steelmakers, which is why we started taking action early this calendar year to allign our output and costs to the lower demand levels of Europe," Adams said.

Tata said that Tata Steel was trying to ensure 50 per cent of the raw material security at Corus from captive sources by 2015 against nil now. Coal and iron ore are the primary raw materials for making steel.

Tata Steel said its overall liquidity position at present is USD 3,638 million and the net debt of the group as on June 30, 2009 stood at USD 10,265 million. It does not have any "material payments" to make in the next 12 months.

The company said its recent GDR offering attracted demand from quality investors enabling it to increase the offering size from USD 400 million to USD 500 million.

The funds would be deployed in projects like ongoing expansion of Jamshedpur and overseas mining assets.

"This deployment strategy would be value accretive to the company's shareholders in the future," Tata Steel said.

Bureau Report

First Published: Thursday, August 27, 2009, 23:21

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