Tata Steel Q4 net slumps

The European operations of Tata Steel impacted the company severely during the fourth quarter of 2011-12 when it reported a consolidated net profit of Rs.433 crore, a 90 per cent drop from the year-ago quarter figure of Rs.4,176 crore.

Tata Steel reported a marginally higher consolidated turnover of Rs.33,999 crore (Rs.33,824 crore) and a 28 per cent drop in operating profit of Rs.3,419 crore.

The consolidated steel deliveries fell 6.5 per cent to 6.22 million tonnes.

Addressing the media here on Friday, Karl-Ulrich Kohler, MD & CEO, Tata Steel Europe, said, “the continuing eurozone crisis kept EU steel demand well below pre-crisis levels in the March quarter.” In addition, operational difficulties that affected strip product output caused the European operations to perform worse than in the year-earlier period. However, he said there was an improvement in the company's performance over the third quarter, when the cost-price squeeze, due to high raw materials volatility, was “at its most extreme”.

Tata Steel Europe reported a 7 per cent drop in turnover at Rs.19,923 crore (Rs.21,488 crore) and a 90 per cent drop in operating profit at Rs.146 crore (Rs.1,557 crore) during the quarter.

Tata Steel, in India, reported a 3.3 per cent drop in operating profit at Rs.2,975 crore on a 13.7 per cent higher sales of Rs.9,479 crore.

The board has recommended a dividend of Rs.12 per share for 2011-12.

For the whole of 2011-12, the company reported a 40 per cent drop in consolidated net profit at Rs.5,390 crore (Rs.8,983 crore) on a 12 per cent higher turnover of Rs.1.33 lakh crore. Its operating profit was 21 per cent lower at Rs.13,533 crore.

Tata Steel Europe reported an operating profit of Rs.1,777 crore (Rs.4,691 crore) on a turnover of Rs.82,153 crore (Rs.73,844 crore). Mr. Kohler said production in Europe was disappointing during the year. “There is no great outlook for the first two quarters. This is a transitional year for us and then we will run with the market. We are on a five-year transformational journey to overcome the deficits of the old Corus. The key piece this year will be the re-launch of our blast furnace at Port Talbot which will then have a life of 20 years.”

Tata Steel, in India, reported a 0.6 per cent lower operating profit of Rs.11,559 crore on a 15.4 per cent higher turnover of Rs.33,933 crore for the year.

H. M. Nerurkar, Managing Director, Tata Steel, said, “Our performance was much below our expectations and while we had expected the market to grow 8-10 per cent, it grew only 4 per cent during the year. There were issues relating to iron ore and mining throughout the year. Although there are more and more cost pressures, we have largely got captive iron ore but levies and freight are only going up. We plan to sell one million tonnes more steel this year.”

Koushik Chatterjee, Group CFO, said, the company had a capital expenditure plan of around $2.5 billion for the current year, adding that its debt-equity ratio was now 1:1, “in spite of spending $3.6 billion on our three million tonne Jamshedpur expansion. Going forward, the Orissa plant will incur around $5-8 billion and project finance work is on. There will be incremental jumps in debt but we will continue to chase a 1:1 ratio.” In terms of outlook for the current year, he said, “global consumption will increase but production may reduce. The Indian steel industry is expected to grow 6.9 per cent in 2012 while Europe could grow 1.2 per cent and stable raw material prices are expected.”