Tata Steel Net Climbs as Share Sale Counters Price Pressure

  • Other income climbs more than ninefold in second quarter
  • Strip business of U.K. unit has taken impairment charge

Tata Steel Ltd.’s second-quarter profit rose 22 percent as India’s biggest producer gained from selling shares in group companies of its parent even as sales declined on weakening prices.

Net income was 15.3 billion rupees ($233 million) in the three months to Sept. 30, the Mumbai-based company said in a statement on Thursday. Sales were 293 billion rupees in the period, missing estimates.

“The company’s other income jumped mainly on account of its share sale in Tata Motors and Titan,” said Goutam Chakraborty, a Mumbai-based analyst at Emkay Global Financial Services Ltd. “The company’s Indian unit has performed better than expectations, and going forward this will continue to perform better than its European counterpart.”

The company sold a part of its stakes in Tata Motors Ltd. and Titan Co. for 24.98 billion rupees and 7 billion rupees respectively, it said in an earnings presentation posted on its website. The U.K.-based unit of Tata Steel has taken a “significant impairment charge” for its strip operations and is continuing to assess options for its long-products business, according to the statement.

Steelmakers worldwide are struggling with slumping prices as China’s slowdown spurs mills in the largest producer to boost exports, increasing competition in markets from India to Europe. Tata Steel, which last month cut jobs at plants in the U.K., is looking to reduce debt by selling assets. Steel prices will remain under pressure on the global surplus, India’s JSW Steel Ltd. warned last month.

‘Meaningful Uptick’

Domestic steel prices will remain under pressure until there’s a “meaningful uptick” in demand, said T.V. Narendran, managing director of the company’s India division.

Income from sources other than Tata Steel’s core business surged more than ninefold to 29.4 billion rupees in the quarter, according to the statement. Total costs fell to 288.5 billion rupees from 335.6 billion rupees a year earlier.

Group net debt at the steelmaker, part of India’s biggest business group, was 734.8 billion rupees as of Sept. 30, the company said in the presentation. The company had 72.9 billion rupees of cash and equivalent, it said. The company’s finance costs fell to 10.5 billion rupees from 12.3 billion rupees a year earlier.

Before it's here, it's on the Bloomberg Terminal.