Tata Steel, India’s top producer, posted its worst profit in seven quarters as rising imports from China pushed down prices and an iron ore mine shutdown increased costs.
Net income, including that of Tata Steel Europe, fell 69% to R157 crore in the three months ended December 31 from R503 crore a year earlier, the Mumbai-based company said on Friday in a statement. The profit beat the R114-crore median of 20 analyst estimates compiled by Bloomberg. Sales declined 8.5% to R 33,320 crore.
Tata Steel was adversely impacted as China, the world’s biggest producer, stepped up exports to a record of more than 28 million tonnes last quarter as demand at home weakened. Steel prices at the company’s key markets in India and Europe fell, while its iron ore costs in India surged as it imported more raw material to fill a gap created by the closing of one if its biggest mines.
Mining operations at the Joda East, Katamati, Bamebari and Joda West mines were suspended since November 15, 2014, due to the stoppage order issued by the Odisha government and restarted with effect from December 16, 2014, on the basis of the direction issued by Orissa High Court in this regard.
Koushik Chatterjee, group executive director (finance and corporate), said, “The third quarter performance was affected by adverse macro headwinds in terms of declining commodity prices, increasing Chinese exports and lower demand in the Indian market.”
“The company also faced significant regulatory challenges in India which affected its raw material sourcing and put significant strain on its operations. However, stronger performance in the European business, various cost saving measures across geographies and robust risk management of raw material security helped the company limit the impact on its profitability,” he added.
The company said its European business continued to improve its product mix with sales of differentiated products now more than a third of overall sales. This portfolio enhancement, together with lower input costs, contributed to the improved financial performance during the quarter. During the third quarter, the group sold its 5% stake in the Carborough Downs joint venture in Australia for A$6.9 million to Vale as part of its ongoing financial initiatives to strengthen the balance sheet.
(With inputs from Bloomberg)