The Hindu Business Line : Tata Steel net rises on volumes, value-added products

Tata Steel has attributed the 50 per cent growth in net profit for the second quarter of this year over the same period last year to higher volumes and sale of better value-added products. Steel production during the quarter under review was higher at 1.3 million tonnes (mt) against 1.2 mt earlier.

There was no question of a production cut, said Mr Hemant Nerurkar, Chief Operating Officer. In the second half of the year, production would go up to 6.8 mt with expansion coming on stream. However, he saw pressure on margins and steel prices likely to drop by Rs 3,000-4,000 in the third quarter.

EXCHANGE FLUCTUATION

The company incurred a foreign exchange loss of Rs 345.42 crore this quarter, against a gain of Rs 90.31 crore. This notional exchange loss includes an unrealised transaction loss of Rs 599.81 crore (Rs 345 crore for the quarter) on convertible alternate reference securities (CARS) issued in September 2007. CARS are convertible into equity shares between September 4, 2011 and August 6, 2012 and are redeemable in foreign currency in September 2012, if not converted into equity. The proceeds of CARS were utilised to fund the Corus acquisition, the earnings of which are in foreign currency and would consequently mitigate risks of exchange fluctuation.

As part of the restructuring of overseas holdings, the company has transferred its stake in Tata Steel (Thailand) to Tata Steel Global Holdings during the quarter. A profit of Rs 136.33 crore arising by the transfer has been included in other income.

The above results do not include Corus UK and the consolidated results for the quarter would be published by November end.

Mr Kaushik Chatterjee, CFO, said though production was up 4 per cent and sales almost flat, turnover rose due to higher tonnage in value added products such a cold rolled, hot rolled and galvanised products.

Referring to Corus, he said “About £300 million, amounting to 10 per cent of the term loan of Tata Steel UK have been prepaid from excess cash so that till December 2009 quarter there is no principal repayment obligation for Tata Steel. The Corus Pension Fund had a surplus of £690 million in June end and in September it could be about £700 million.”

On Friday, Tata Steel stock on BSE closed at Rs 178.30 down 14.46 per cent over previous close.