Tata Steel Profit Drops on Absence of One-Time Gain, Europe Woes

Tata Steel Ltd. (TATA), India’s biggest producer of the alloy, reported a 89 percent slump in fiscal first-quarter profit after the previous year’s results were boosted by proceeds from a divestment and European demand waned.

Net income, including contributions from Tata Steel Europe, fell to 5.98 billion rupees ($108 million) in the three months through June from 53.5 billion rupees a year earlier, the company said today in a statement. That missed the 6.17 billion- rupee median estimate of 36 analysts surveyed by Bloomberg.

In the first quarter of fiscal 2012, Tata booked a one-time gain of 40.5 billion rupees from the sale of its stake in Australia’s Riversdale Mining Ltd. and proceeds from an arbitration settlement, Head of Investor Relations Praveen Sood said in a telephone interview.

Earnings also reflected falling steel consumption in Europe, as the region’s economic crisis eroded demand from the car, appliance and construction industries. Tata joins global rivals ArcelorMittal (MT) and Posco in reporting lower profit after average benchmark prices for hot-rolled coil fell 15 percent from a year earlier, Steel Business Briefing data show.

The persistance of Europe’s debt crisis prompted the International Monetary Fund to lower its 2013 global growth forecast to 3.9 percent on July 16. Standard & Poor’s cut Tata’s outlook to negative on July 26 and Moody’s Investors Service reduced Tata Steel U.K.’s rating to B3 from B2 on Aug. 8.

Shares Drop

Tata shares fell 1.2 percent to 395.45 rupees in Mumbai before the earnings were released. The benchmark Sensitive Index advanced 0.4 percent.

A decline in raw-material costs, rising demand in India and efforts to restructure Tata’s European operations helped to counter the slump in earnings, according to the Mumbai-based company.

Steel consumption in India, which accounted for 26 percent of Tata’s sales last fiscal year, rose 8.8 percent to 18.2 million metric tons last quarter, according to an initial report by a Steel Ministry committee. Demand may climb 8 percent this fiscal year, G.K. Basak, the committee’s former executive secretary, said April 13.

To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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