HM Nerurkar MD, Tata Steel
Tata Steels access to the major steel markets in the world makes it one of the familiar brand names globally. While its presence in Europe following the acquisition of Corus has added to its topline multi-fold besides taking it to the number five among the top steel makers, it is for the time being dragging its profit. This is expected to continue at least till the European region completely comes out of the woods.
But the poor show of its European operation is likely to be compensated by rising demand in India which contributes about 26% to the companys total sales. Tata Steel has more than doubled its consolidated net profit to Rs 1,003 crore for the quarter ending December 2010 in spite of lower deliveries of its European operation. The worlds fifth largest steel producers robust performance has come in the face of rising raw material cost which had significantly impacted the yield of some of its local peers.
For the first nine months of the current fiscal the group posted a net profit of Rs 4,807 crore compared to a loss of Rs 4,443 crore in the same period a year ago. Its total income during the period stood at Rs 84,929 crore, up 13% over Rs 74,889 crore in the corresponding period of 2009-10.
The performance of the Indian operations in the third quarter continued to be robust in spite of inflationary concerns on the back of improved product mix and efficiency enhancement measures. The expansion at Jamshedpur is expected to provide an impetus to future earnings, Tata Steel managing director HM Nerurkar said.
While Steel deliveries of the company fell 5.7% to 5.68 million tonne in the last quarter on lower demand in European markets, especially in the automobile and construction sectors, the company is expected to negate it with rising demand in India. The steel giant has an annual crude steel capacity of over 27 million tonne per annum (mtpa) spread across the geographies of the world.
While the steelmaker has operations in 26 countries mainly in Europe and India it has commercial presence in 50 countries. In the domestic market, Tata Steel is in the process of ramping up its production capacity to 10 million tonne from the existing 7 million tonne by March 2012. The company recently came out with the follow-on public offer which was subscribed six times, to raise Rs 3,477 crore by issuing 5.7 crore shares. It intends to use part of the proceeds to fund the expansion plan at its Jamshedpur unit with part of it going towards deleveraging its balance sheet by clearing debts to the extent of Rs 1,090 crore. The groups gross debt at the end of December 2010 stood at Rs 59,085 crore.
The steelmaker is in the process of developing an iron ore mine in Canada and a coking coal mine in Mozambique to ensure better raw material availability to its plants in Europe. The two projects are expected to be completed by the second quarter of 2011-12.
On other expansion front the company has decided to form a JV with Nippon Steel to set up Indias first Continuous Annealing and Processing Line for the production of 600,000 tonne per annum of automotive cold rolled steel at Jamshedpur with an estimated investment of Rs 2,300 crore.