* April-June net profit slumps 70 pct on impairment charge
* Net sales rise 11 pct to 361.43 billion rupees
* Minimal impact on steel deliveries from mining suspensions
(Adds business outlooks, management comments, details, share
By Aman Shah
MUMBAI, Aug 13 India's Tata Steel Ltd
looked to reviving European demand and infrastructure investment
by the Indian government to boost sales in coming quarters after
posting higher sales but a drop in net profit for April-June on
Net sales rose 11 percent to 361.43 billion rupees in the
quarter to end-June, helped by a surge in European demand. The
figure was in line with expectations for 361.16 billion rupees,
according to Thomson Reuters data.
Tata Steel's European business, the result of its $13
billion acquisition of Britain's Corus in 2007, contributed
roughly 57 percent to its total steel production of over 27
million tonnes in the last fiscal year to end-March.
"Though demand remains well below levels we would regard as
healthy, we can see greater stability emerging in the markets we
serve," Karl-Ulrich Kohler, chief executive of Tata Steel Europe
said, referring to the demand in the European region.
The management of Tata Steel, a unit of India's Tata
conglomerate, has been cutting costs and focussing on
high-margin products to boost sales in Europe to cope with
softness in the region's economy.
ArcelorMittal SA, the world's largest steelmaker,
also lifted its demand forecasts for Europe and for the United
States this month, highlighting strong automotive and machinery
Tata Steel's fiscal first-quarter profit fell by 70 percent
to 3.37 billion rupees ($55.0 million), hurt by a 15.7 billion
rupee impairment on its 35 percent stake in the Benga coal mines
Analysts on average had expected Tata Steel to post a profit
of 12.21 billion rupees, but the estimate did not account for
the one-time impairment charge.
The steel firm had to take the hit after Rio Tinto,
owner of the other 65 percent, agreed to sell it and other
projects in Mozambique's Tete province, which it had bought via
a $4 billion acquisition of Riversdale Mining in 2011, for just
Tata Steel, founded in 1907 and part of the Tata group that
also owns British luxury carmaker Jaguar Land Rover, has long
enjoyed strong margins in its Indian operations, because it
mines most of the iron ore and coal it needs as raw material.
Its domestic business has been hurt, however, by a clampdown
on iron ore mining and controversy surrounding allocation of
coal blocks to private companies. Tata sources iron ore for its
domestic operations from its captive mines.
The company said that while mining operations were suspended
for a fortnight during the quarter following a Supreme Court
order, there was minimal impact on deliveries of saleable steel
from its mines.
Tata Steel hopes to benefit from a pledge by newly elected
Prime Minister Narendra Modi-led government's pledge to revive
economic growth and boost infrastructure investments in Asia's
"The government's thrust on development of core industries
like housing and infrastructure should boost steel demand," TV
Narendran, managing director of Tata Steel India said in a
Tata Steel, which has a market value of about $8.5 billion,
ended down 1.4 percent at 534.50 rupees on Wednesday before the
results were announced. The stock has more than doubled in the
past year, helped by the revival of its European business.
(1 US$ = 61.2625 Indian rupee)
(Editing by Sumeet Chatterjee and Jane Baird)