Tata Steel Q1 net dips 47 per cent

High raw material cost was main reason

B Muthuraman, MD Tata Steel, announcing thefirst quarter result in Mumbai. AFP

Total income of the largest private sector steel producer during the latest quarter plunged to Rs 5,661.89 crore from the comparable quarter in 2008-09 at Rs 6165.14 crore. This, however, does not include the consolidated financials of Tata Steel — including Tata Steel Europe (formerly Corus U.K.) – whose June quarter figures would be published by the end of August 2009.

Tata Steel’s Managing Director B Muthuraman in his press briefing here maintained that Europe operations (Corus) for the latest quarter was similar to the last quarter of FY’09 in terms of sales volume-wise or value-wise. 

Ascribing the reasons for decline in the net profit for the latest quarter, Muthuraman cited two reasons. One is the increase in the raw material price, especially coke, which accounted for 40 per cent rise in the incremental cost of raw materials, while other 60 per cent rise in the cost was due to rise in volumes of production.  

Explaining further, he pointed out, that the cost of coke during Q1 this fiscal was $300 per tonne versus Q1’09 at $75-80 per tonne, while the raise of raw material in the latest quarter went up by about Rs 2000 per tonne of steel.

However, with the merger of Hooghly Met Coke & Power Company Ltd (HMPCL), a wholly owned subsidiary of Tata Steel being merged with the latter – as approved by both entities at their respective board meetings on Wednesday  – with all assets and liabilities, Tata Steel would be able to make significant cost saving this fiscal with coke to be available in-house at par value.

 Muthuraman pointed out adding: “Profitability will improve as raw material prices are easing and the full impact of capacity additions will be seen in this fiscal.”

During the quarter under review, the company’s steel output rose 31 per cent to 15.42 lakh tonnes versus 11.86 tonnes in Q1’09, while exports value-wise slipped to Rs 334.95 crore in the first quarter of the current fiscal from Rs 868.13 crore in the same quarter of last fiscal.

On the demand situation in macro terms, Tata Steel MD maintained that global steel demand was down 30-35 per cent on YoY (year-on-year) basis, though India and China continued to remain positive stories.  Tata Steel, he continued, had gained in market share and that India saw a 6 per cent demand growth.

Tata Steel in its notes to accounts pointed out that an exchange gain of Rs 17.10 crore has been adjusted to the cost of capital assets during the current quarter and Rs 3.92 crore being amortization of cumulative net loss has been charged to Profit & loss account.  
Had the company followed the previous practice of recognizing the translation gain or loss in the P&L account, the net profit for the latest quarter would have been higher by        Rs 277.06 crore, it said.

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