Tata Steel reports surprise loss on weak Europe performance

STEELMAKER Tata Steel reported an unexpected quarterly loss after a poor performance at its European units, even as production rose in its home country of India.

The group loss at the steel producer was 61.96 billion rupees (S$1.02 billion) for the three months to September, compared with a profit of 15.1 billion rupees a year earlier, the company said on Wednesday (Nov 1). Analysts had expected a profit of 5.69 billion rupees. Revenue fell 7 per cent from a year earlier.

Although European operations of the Mumbai-based company continued to put pressure on its earnings, a financial deal with the UK government to overhaul its British facility has been cheered by analysts and ratings agencies, including Moody’s Investors Service and Fitch Ratings. The aid, coupled with booming Indian consumption, is expected to benefit the mill in the longer term.

Tata has assessed the potential impact of the electric arc furnace-based decarbonisation project and restructuring in the UK and has taken an impairment charge of 27.46 billion rupees, it said. Additionally, the company saw a charge for restructuring and other provisions of 36.12 billion rupees, it said.

“Given our plans to change the processed route for steelmaking, the existing heavy end assets at Tata Steel UK will only be used for a defined period,” chief financial officer Koushik Chatterjee said.

Tata Steel’s production in Europe dropped 17 per cent in the July-September quarter from a year earlier, while deliveries fell 4.3 per cent. European sales dropped almost 13 per cent. However, crude steel output in India grew 4 per cent, but sales declined 1.8 per cent.

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Steel demand in the world’s fifth-biggest economy is expected to climb 7 per cent annually until 2030 on the back of large infrastructure investments and consumption from the auto sector, Moody’s said in September. That will be a key driver of Tata Steel’s credit profile, it added.

The company’s shares closed Wednesday down 1.8 per cent lower in Mumbai before the results were published. Analysts have 24 buy recommendations on the stock, five holds and two sells, according to data compiled by Bloomberg. BLOOMBERG