Lower average selling prices in Europe and higher raw material costs have led Tata Steel's consolidated net profits to dip 89 per cent to Rs 212 crore for the second quarter ending September 30, 2011.
Consolidated net sales in the quarter were up 16 per cent to Rs 32,507 crore.
“The global economic environment continues to remain uncertain and India is not insulated. The interest rate hike and fuel prices have added to this. Demand in auto and housing sectors is seeing a downturn,” Tata Steel's Managing Director, Mr H.M. Nerurkar, said.
In the quarter, the company has taken a hit of $28 per tonne on average selling prices, while the higher raw material price impact is of $25 per tonne (coking coal went up $21 a tonne in India).
“Our costs are under control and we've made significant savings. Prices are slightly sluggish, but we're maintaining our margins well. Our three million tonnes per annum domestic expansion plans are on stream, we will be a 10 mtpa steel company next quarter,” he added.
EBITDA in the quarter fell 34.5 per cent to Rs 2,943 crore. EBITDA margins in the quarter eroded to nine per cent from 15.7 per cent in the corresponding period last year, while expenses on raw material purchases for the steel maker went up 15 per cent to Rs 10,832 crore.
Deliveries in the first half of 2011-12 were up two per cent to 12.2 million tonnes, with the Indian division and Natsteel showing a growth and Thailand subsidiary posting a decline on the back of floods.
Europe uncertain
On the market situation in Europe, Dr Karl-Ulrich Kohler, Tata Steel Europe MD & CEO said, “The auto and mechanical sectors are okay, but Europe is sluggish in construction. Demand has gone up 7.5 per cent this year and a two per cent rise is expected next year. The sentiment is of uncertainty … it is affected by the Eurozone debt crisis, we hope for a positive outcome,”
With capital markets closed on Thursday, Tata Steel shares at the BSE were down 4.08 per cent to Rs 448.80 on Wednesday.