UPDATE 1-Tata Steel posts qtr loss, but sees profit turnaround

* Q2 consol net loss $585 million, 2nd straight qtrly loss

* Sees better H2 FY10 on demand from Brazil, China, India

* Seeing stability in Europe output, prices

* To cut gross debt of $12.9 bln by $2 bln in medium term

* Shares pare losses, end down 3.3 percent (Recasts; adds details, background, quotes)

By Narayanan Somasundaram

MUMBAI, Nov 26 (Reuters) - Tata Steel (TISC.BO) posted a second consecutive consolidated quarterly net loss, but the world's No. 8 steelmaker by output expects a sharp improvement in in the second half of the fiscal year to March on reviving demand.

Corus, Tata's European unit, has struggled as the global downturn has hit demand from key industries such as construction and automakers, but capacity utilisation has picked up as inventories have been run down around the world.

"It is in fact Brazil, India and China, not Russia -- so it's the BICs, not the BRICs -- that are now propelling growth in steel consumption around the world," said Kirby Adams, the company's head of European operations.

Capacity utilisation was at 75 percent in the September quarter, up from 53 percent in the June quarter, and was expected to be about 80 percent for the rest of the fiscal year to March 31, Tata Steel said.

Last month, the World Steel Association forecast steel demand would fall 8.6 percent this year, but that will be a much smaller fall than the 15 percent it predicted in April. [ID:nPEK171738]

"It's not going to be a 2008 scenario again. The worst is over for this company," said Deven Choksey, chief executive of K.R. Choksey Shares, who manages $215 million for his clients.

"Infrastructure development across the world will improve demand. The consumer is ready to buy," he said.

Tata Steel has been trying to cut costs by rationalising operations in Europe and also reworking interest costs. It took one-off charges, primarily related to restructuring in Europe, of 9.1 billion rupees in the second quarter.

Its Teesside plant in Britain hurt second-quarter earnings before interest, tax, depreciation and amortization (EBITDA) by about 8 billion rupees. Adams said Tata was prepared to mothball the plant if necessary.

Earlier this month, Tata Steel issued $546.9 million in new convertible bonds in exchange for $493 million of securities as part of a plan to reduce costs and ease repayment obligations. [ID:nBOM272015]

The company had gross debt of $12.9 billion at the end of September, which it aims to cut by $2 billion in the medium term, and had cash of $3.6 billion, CFO Koushik Chatterjee said. [ID:nBMA006484]

POSITIVE EBITDA

Shares in the company were down more than 4 percent before the results came out. They extended that fall to 5.9 percent, before paring losses to end down 3.3 percent at 543.45 rupees in a Mumbai market .BSESN that shed 2 percent.

EBITDA had turned positive in October, Tata Steel's Adams said, adding the company is seeing stability in prices.

The company said its consolidated July-September net loss was 27.07 billion rupees ($584.7 million), after minority interest and share of profit of associates, compared with a profit of 47.72 billion rupees a year earlier.

Consolidated net sales fell to 252.70 billion rupees from 441.99 billion rupees a year earlier.

Even though demand in Europe was reviving on the back of inventory rebuilding, it would take several years to return to previous capacity levels, Tata Steel has said.

"Manufacturing output in Europe is now stabilizing, thankfully, but at much lower levels than we have experienced over the last five years or so," Adams said.

Last month, the firm said its Indian operations' net profit fell 49.5 percent in the September quarter. [ID:nBOM516772]

In October, South Korea's POSCO (005490.KS), the world's No.4 steelmaker, reported a quarter-on-quarter improvement in its net profit and Japan's JFE Holdings (5411.T), which is No.6, returned to a quarterly profit after a loss in the previous quarter. [ID:nSEO240394] [ID:nT298932]. ($1=46.3 rupees) (Writing by Pratish Narayanan; Editing by John Mair) ((pratish.narayanan@thomsonreuters.com; +91 22 6636 9202; Reuters Messaging: pratish.narayanan.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com))