NEW DELHI -- Indian giant Tata Steel (IW 1000/183) reported Wednesday that quarterly group net profit slid a bigger-than-expected 70%, hit by one-off charges, but added that its European operations were picking up.
Despite a "healthy improvement across geographies," Tata Steel, India's biggest steel producer, said the performance was not enough to overcome one-time costs that pushed earnings sharply lower than financial market forecasts.
For the company's fiscal first quarter, which ended June 39, net profit slid to 3.37 billion rupees ($55 million), from 11.39 billion rupees a year earlier, on sales that climbed 11% to 364.27 billion rupees.
The earnings undershot estimates by analysts who had forecast the steelmaker would post net profit of just over 9 billion rupees.
"Operating performance improved across all geographies," said the company, part of the sprawling Tata tea-to-cars conglomerate, adding that in Europe it would keep concentrating on reducing expenses and improving operations.
But a steep fall in the cost of raw materials such as iron ore and coking coal and more stable steel prices failed to offset one-off costs of 2.62 billion rupees.
"European steel demand is moving in the right direction," said Karl-Ulrich Kohler, CEO of Tata Steel in Europe, where the company ranks as the No. 2 steel producer. "Though demand remains well below levels we would regard as healthy, we can see greater stability emerging in the markets we serve."
Tata Steel paid $13 billion in 2007 to buy rival Anglo-Dutch steelmaker Corus, which has plants in Britain and continental Europe, vaulting from the 56th-largest steelmaker in output globally to one of the world's largest producers.
Corus was later renamed Tata Steel Europe and now contributes over half of total revenues. Its acquisition came just before the onset of the global financial crisis, leaving Tata Steel grappling with excess capacity and falling prices.
In May 2007, Tata Steel took a $1.6 billion write-down, citing a weaker European market environment.
The company's European quarterly performance improved slightly as it company shut units, slimmed its workforce and focused on manufacturing higher-value goods, Kohler said.
Last month Tata Steel announced the elimination of 400 jobs at its plant at Port Talbot in Wales, and Kohler said the company would keep trimming costs.
In India, with the new right-wing government elected in May announcing measures to put the economy back on the growth track, the business outlook has brightened, said Koushik Chatterjee, group executive finance director.
"However," he added, "we expect visible changes in the economy to flow through only on the back of higher government spending over the next few months."
Tata Steel's earnings come as ArcelorMittal (IW 1000/43), the world's biggest steelmaker, said earlier this month that it had hiked U.S. and European demand forecasts.
By Penelope MacRae
Copyright Agence France-Presse, 2014