Tata Steel Posts Biggest Quarterly Loss in More Than 3 Years

Tata Steel Ltd., India’s biggest producer, posted a third-quarter loss almost four times greater than analysts estimated as the economic slowdown in its biggest market spurred a decline in demand and prices.

The loss, including that of unit Tata Steel Europe Ltd., widened to 7.63 billion rupees ($142 million) in the three months ended Dec. 31 from 6.03 billion rupees a year earlier, the Mumbai-based company said today in a statement. The median loss estimate of 25 analysts in a Bloomberg survey was 1.99 billion rupees. Sales fell 3.5 percent to 318.2 billion rupees.

Steel-industry earnings have slumped as Europe’s economic crisis saps demand and slower Chinese growth weighs on commodity prices. Steelmakers in Europe, where Tata makes two-thirds of its production, are grappling with excess capacity, falling prices and rising operating costs. The region has a capacity to make about 210 million metric tons of steel a year, while demand in a “normal market” is 150 million to 160 million tons, according to industry lobby group Eurofer.

“Prices in Europe fell much more than the decrease in raw material prices,” group Chief Financial Officer Koushik Chatterjee told reporters on a conference call.

Tata Steel’s global depositary receipts in London fell as much as 6.7 percent to $6.795 and traded at $6.845 as of 12:16 p.m. local time. The Mumbai-traded shares closed down 2.3 percent to 376 rupees before the earnings were announced. The benchmark Sensitive Index gained 0.2 percent today.

Average Revenue

The company’s average revenue on steel sales was $1,000 a ton in the quarter, compared with $1,031 a ton a year ago, he said. Deliveries fell 4 percent from the three months ended Sept. 30, according to a company statement. Deliveries from the company’s Jamshedpur mill in India’s eastern Jharkhand state rose 17 percent.

Steel sales volume was little changed at 5.83 million tons in the quarter. Total costs were 313.3 billion rupees, compared with 323.5 billion rupees. Mumbai-based Tata Steel earned 558.6 million rupees from sources other than its main business, while finance expenses were little changed at 10.3 billion rupees.

Prices of the benchmark hot-rolled steel, used in making cars and electronic appliances, in the quarter declined more than 11 percent, according to The Steel Index Ltd. The losses at Tata Steel were limited by a drop in prices of coking coal and iron ore, key steelmaking ingredients, and higher earnings at its Indian operations.

Spot iron ore prices of the 62 percent metal content delivered at Tianjin port in China dropped 14 percent in the last quarter compared with a year ago, according to The Steel Index. Coking coal quarterly contract prices fell 40 percent in the same period. Tata depends on international suppliers to meet its raw material needs in Europe.

Rival ArcelorMittal, the world’s largest steel producer, reported on Feb. 6 fourth-quarter earnings before interest, tax, depreciation and amortization fell to $1.32 billion from $1.71 billion a year earlier. That beat the $1.25 billion median estimate of 18 analysts surveyed by Bloomberg.