Tata Steel Shores Up Quarterly Profit Selling Land in Mumbai

Tata Steel Ltd., India’s biggest producer of the alloy, posted a better-than-expected 36 percent increase in quarterly profit after selling land in Mumbai.

Group net income, including that of unit Tata Steel Europe Ltd., increased to 12.5 billion rupees ($203 million) in the three months ended Sept. 30 from 9.17 billion rupees a year ago, the Mumbai-based company said today in a filing. That compared with the 7 billion-rupee median of 21 analyst estimates compiled by Bloomberg. Sales fell 2.4 percent to 355 billion rupees, while group earnings before interest, tax, depreciation and amortization dropped 1 percent to 37.5 billion rupees.

Without the one-time gain of 11.5 billion rupees from the sale of land, quarterly profit would have declined 89 percent to 1 billion rupees. Tata Steel agreed to sell a 25-acre (10.1-hectare) plot in the northern Mumbai suburb of Borivali to Oberoi Realty Ltd. Proceeds from the sale will fund new projects, Group Chief Financial Officer Koushik Chatterjee said.

The European unit, which constitutes about two-thirds of the company’s output, benefited from an 18 percent drop in contract coking coal prices and iron ore that touched the lowest levels in five years this week. The company buys almost all its ore and coal needs from outside suppliers.

Tata Steel fell 2.5 percent to 468.35 rupees at the close in Mumbai, paring the stock’s gain this year to 11 percent. The key S&P BSE Sensex, up 32 percent since January, rose 0.4 percent today. The earnings were released after trading ended.

Falling Ore

Iron ore at the Qingdao port in China averaged 32 percent lower in the last quarter from a year ago, according data compiled by Bloomberg.

The key steelmaking ingredient will plummet to less than $60 a metric ton next year as global supply increases and demand remains weak, according to Citigroup Inc., which slashed its quarterly forecasts for 2015 by as much as 23 percent. Ore will average $72 a ton in the first three months of 2015, down from an earlier forecast of $82, Hong Kong-based Citigroup analyst Ivan Szpakowski wrote in a report dated yesterday.

Profit at the company’s Indian operations rose 59 percent. Excluding the one-time gain, earnings declined almost 15 percent from a year ago. The local operations have been hampered by mine closures, pending permit renewals.

Mines Shut

Some iron ore mines in Jharkhand and Odisha remained closed, while the company’s chromite mine and its ferro-alloys operations in Odisha have been shut since the first week of August, it said in the statement. The company has imported 2.2 million tons of iron ore since April, T.V. Narendran, managing director for India and south-east Asia, said at a press conference in Mumbai.

The purchases from overseas contributed to an almost 13 percent jump in raw materials cost at the Indian unit. Ore imports will continue until regulatory hurdles are cleared, he said.

The company faced “significant headwinds” on steel prices globally, while cheaper exports from China affected margins at its operations globally, Narendran said.

Group steel deliveries during the quarter were little changed from a year ago at 6.5 million tons. Deliveries in India rose 3.4 percent to 2.11 million tons, while Europe sales declined 2.9 percent to 3.36 million tons.

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