Net sales dropped to Rs 2,817 crore, compared with Rs 3,016.2 crore in 1997-98. The company has said that while production and sales were higher in volume terms, sales realisation per unit was lower, resulting in the 6.6 per cent drop in income from operations.

Tata Steel, which is in the process of downsizing its labour force from around 65,000 at present, has given out Rs 78.08 crore in the form of Employee Separation Compensation. This was substantially higher than Rs 47.96 crore paid out in the same period last year.

The company's total outgo on account of the voluntary retirement scheme (VRS) last year was Rs 112 crore and is thus expected to increase substantially this year.

The company has said that despite stiff competition from cheaper imports, it has managed to increase sales tonnage by 4per cent. Volume sales were up at 1.28 million tonnes against 1.23 million tonnes last year. Production also increased to 1.46 million tonnes, compared with 1.41 million tonnes in the corresponding period last year.

Interest burden was up marginally at Rs 146.14 crore against Rs 138.52 crore last fiscal. Depreciation moved up to Rs 184 crore from Rs 176 crore last year.

The company also announced that the main units of the phase IV expansion - doubling the hot strip mill capacity to two million units - have been successfully installed in the last month and are currently under trial runs. According to sources, the company's stock gained Re 1 on the kerb on better-than-expected results.

The steel industry has been demanding protection from cheaper imports that have been flowing in from Southeast Asia, the CIS countries and recently from Russia after it announced a devaluation of the rouble.

As the landed cost of the imported hot rolled coils range from around $25 to $50 per tonne, the domestic companieshave been forced to sell at lower prices, resulting in lower sales realisation.

Tata Steel has already begun work on the cold-rolling mill (CRM) project that will now come up in Jamshedpur instead of Gopalpur as had been earlier planned. The CRM project will cost the company around Rs 2,000 crore.

INSIGHT
Rising inventory evokes concern

Tisco, as expected, has reported a 45 per cent drop in its bottomline. What is creditable, however, is that operating margins have declined only marginally from 16.77 per cent to 16.28 per cent. This was mainly because of the ongoing employee separation scheme, the cost of which has increased from Rs 47.96 crore to Rs 78.08 crore in the first half of the current fiscal.

However, when comparing the results of the first and second quarter of the current fiscal, operating margins have showed a reduction from 16.9 per cent to 15.77 per cent. Further, sales in tonnage though higher in the second half as compared to the first are lower than those notched inthe second quarter last year.

Sales in tonnage of steel in the first half has increased by 47,433 tonnes while production has increased by 52,076 tonnes. This means that the inventory of the company has increased further. What the results point out is that the company is being affected on the inventory front and is selling in the market with little consideration to margins. The pathetic state of the economy is likely to continue in the second half, and could further impact the company's profitability.