The Hindu Business Line : Tata Steel earnings growth flat on higher interest cost

Mumbai, Jan. 31 Hit by higher interest cost and a marginal fall in production, Tata Steel posted a flat growth in net profit at Rs 1,069 crore for the quarter ended December 31, 2007 compared with Rs 1,064 crore for the same period a year ago.

The result does not include that of the Anglo-Dutch Corus Group, which Tata Steel bought for $12.9 billion last year. Consolidated results with Corus would be furnished at a later date, said a senior company official.

Steel production for the quarter was down to 12,45,926 tonnes, against 12,89,822 tonnes logged during the year ago period. Sales for the quarter remained flat at 12,43,500 tonnes (12,34,404 tonnes).

Interest cost soared over 597 per cent to Rs 363 crore from Rs 52 crore.

Mr Ashish Poddar, research analyst, Almondz Global Securities, said, “Funding for Corus has pushed up interest cost. We expect it to continue for the next one or two quarters and after that reduce by Rs 150-200 crore.”

Total income was up 10.35 per cent to Rs 5,041 crore from Rs 4,568 crore. During the quarter, exports went up to Rs 596 crore ($150 million) against Rs 475 crore ($106 million).

Input costs rise

Total expenditure was up at Rs 3,087 crore (Rs 2,885 crore). Higher raw material cost of Rs 931 crore (Rs 831 crore) and power cost of Rs 239 crore (Rs 226 crore) impacted the bottom line.

“The company’s raw material cost has gone up significantly as it had to resort to import of coking coal at higher price in the December quarter as one of its production units had to be closed down for maintenance. Things will be much better next quarter on the raw material front,” Mr Poddar said.

Segmentwise steel business accounted for Rs 4,377 crore (Rs 3,979 crore), ferro alloys and minerals chipped in Rs 573 crore (Rs 416 crore) and others Rs 315 crore ( Rs 324 crore).

The company has recorded Rs 691.25 crore (Rs 47.92 crore) under exceptional items, due to the appreciation of the rupee against various foreign currencies during the period ended December 31, 2007.

The company has raised Rs 3,648 crore through rights issue and Rs 5,473 crore through cumulative compulsorily convertible preference shares in the quarter under review. On Thursday, the company’s stock on the BSE closed at Rs 733.50, up 1.38 per cent.

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