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Tata Steel Swings to Profit on Higher Demand, Tax Benefit

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Nov. 14 (Bloomberg) -- Tata Steel Ltd., India’s biggest producer of the alloy, returned to profit and reported earnings that were almost triple analysts’ estimates because of higher demand and a deferred-tax benefit.

Group net income, including unit Tata Steel Europe Ltd., was 9.17 billion rupees ($145 million) in the three months ended Sept. 30, compared with a 3.64-billion-rupee loss a year ago, according to an exchange filing late yesterday. The result beat the median 3.3-billion-rupee profit estimate of 25 analysts compiled by Bloomberg. Net sales rose 7.4 percent to 363.7 billion rupees at Mumbai-based Tata Steel, which had a 3.9-billion-rupee gain on deferred taxes.

“The worst and difficult times are behind us in Europe,” Tata Steel Europe Chief Executive Officer Karl Koehler told reporters yesterday at a media conference in Mumbai. Steel demand in Europe, which accounts for two-thirds of Tata Steel’s output, is likely to pick up in the current quarter, Group Executive Director Koushik Chatterjee said at the conference.

Consumption improved in Europe, while higher production in India helped boost sales. Tata Steel sold 2.04 million metric tons of the alloy, or 18 percent more, from its Indian operations in the quarter, while sales in Europe rose 1 percent to 3.46 million tons. Group shipments rose 6.7 percent to 6.48 million tons from a year earlier and gained 10 percent over the previous quarter.

Tata Steel shares, which have slumped 17 percent this year, rose 1.5 percent to 357.75 rupees in Mumbai yesterday. The earnings were released after trading closed.

European Rebound

ArcelorMittal, the world’s biggest steelmaker, said Oct. 18 it expects a rebound in European auto production next year as the continent’s consumers buy more family cars. European monthly car sales rose the most in more than two years in September as the end of a recession in the region and price cuts helped boost purchases.

The European PMI survey crossed a level of 50 in July for the first time in two years. That signifies an expansion of manufacturing compared with the previous month.

Total expenses at Tata Steel rose 3.7 percent to 343.8 billion rupees in the quarter, while raw material expenses climbed almost 10 percent to 115.7 billion rupees.

Per ton group earnings before interest, tax, depreciation and amortization in the quarter was 5,837 rupees, compared with 4,043 rupees a year earlier, Chatterjee said.

The rupee’s decline helped in maintaining prices, he said. The currency has fallen 13 percent against the dollar this year.

Net debt rose by 14 billion rupees to 628.3 billion rupees, while gross debt stood at 771.13 billion rupees as of Sept. 30, Chatterjee said. Tata Steel repaid 140 billion rupees of debt in the first half, he said.

The company will cut 500 jobs in the next 12 months, Koehler said today. Tata Steel said on Oct. 29 it will cut mainly management and administrative jobs in the U.K. to lower costs. Jobs will go in Scunthorpe, Teesside and Workington, the company had said in a statement.

To contact the reporters on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net; Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net; Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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