Tata Steel , the world's seventh largest steelmaker, has posted dismal numbers that are sure to send the stock into shock when market opens on Friday. Consolidated net profit for the second quarter has fallen a whopping 89% to Rs 212 crore despite a 16% surge in consolidated net sales. Last year same quarter, the company had posted a profit of Rs 197.9 crore.
The steep fall in net profit is due to lower realization, lower income and a sharp rise in raw material and fuel costs, and, the absence of one-off gains that were seen in the year-ago period.
However, analyst SP Tulsian doesn't expect the market to react too negatively to this result . “The profit number is not shocking because of the absence of the other income component this quarter,” he explains.
Q2 earnings were hit by high cost, Forex fluctuation and input costs in European operations, Tata Steel's group chief financial officer Koushik Chatterjee said. "Steel prices in Europe were down USD 30 per tonne on average in Q2 while iron ore and coal prices went up by USD 50 per tonne in the same quarter," he told the press.
On the road ahead for the steel major, Chatterjee said the company will start 2.9 mtpa unit at Jamshedpur by March. "We are making progress on Greenfield expansion in Orissa. Also, we are trying to revive Southeast Asia operations," he added. (Watch accompanying videos for a complete lowdown)
The USD 500 billion global steel industry is facing an uncertain outlook, with European firms announcing production cuts in the face of waning demand, while steelmakers in Asia have had to trim investment plans.
Source: www.moneycontrol.com
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