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Tata Steel said its profit during the July-September period fell to Rs 903 crore, against Rs 1,788 crore last year, as steady local demand from cars and consumer goods was offset by the 35 percent-fall in steel prices. The company's sales during the same period fell 16 percent to Rs 5,630 crore.
"It's unfair to compare the two quarters. Last year was a record year, an exception. So if you look at the two periods, the drop is sharp," the newly-appointed MD Hemant Nerurkar told ET in an interaction, immediately after the earnings announcement. "But you have to bear in mind that growth in the steel market has already started."
A two-year boom in commodities saw retail steel prices soar to as much as Rs 40,000 per tonne, before falling to the current levels of Rs 29,000, as the downturn deterred consumers in Europe and the US leading to closures of mills. The situation is currently improving in parts of Europe after the massive government-aided stimulus programme has spurred consumption of steel.
In Asia, demand for steel has been steady, with China and India, accounting for a large chunk of the demand and also fuelling the rush for raw material assets, said Mr Nerurkar.
According to the World Steel Association, globally, steel market is estimated to grow 9.2 percent next year, on demand from Asia. Explaining the dip in earnings, CFO Koushik Chatterjee said: "Prices account for Rs 1,500 crore of the drop in operating profit, while another Rs 500 crore came from the fall in prices of ferro alloys."
While Tata Steel's revenue from steel business fell to Rs 5,194 crore from Rs 5,882 crore last year, that from ferro alloys division was down sharply to Rs 434 crore, compared to Rs 926 crore in the previous year.
Tata Steel's performance is in line with global peers that have seen fall in earnings. US Steel posted a loss of $303 million, compared to a net profit of $919 million last year, while at AK Steel, profits plunged 97 percent. However, volume sales at Tata Steel were encouraging. In tonnage terms, sales rose 20 percent to 1.46 million tonnes in the second quarter.
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