* Q3 profit 5 bln rupees vs 7.5 bln rupees estimate
* High costs, weak demand in Europe hurts margins
MUMBAI Feb 11 India's Tata Steel Ltd
posted a smaller-than-expected third quarter profit on Tuesday
partly due to high costs in its main European market which
Europe is Tata Steel's biggest market and production centre,
following its $13 billion acquisition of Britain's Corus in 2007
that gave it a foothold in the region. But the company has
struggled to reap benefits from the deal because of Europe's
weak economic conditions over the past six years.
Tata Steel Europe needs to import both iron ore and coking
coal from outside and that plus continued high energy costs have
The steelmaker posted a net profit of 5 billion rupees ($80
million) for the December-ending quarter, compared to a net loss
of 7.89 billion rupees a year ago. Net sales rose 14 percent to
364.1 billion rupees.
Analysts had expected a profit of 7.51 billion rupees on
revenue of 336.52 billion rupees, according to data from Thomson
Karl-Ulrich Köhler, MD & CEO of Tata Steel in Europe, said
the company's focus on cost and cash flow continued, which had
supported the year-on-year improvement in core profit, despite
"With European economic indicators improving, our efforts
will better enable us to benefit from any growth in European
steel demand, which remains at historically low levels," Kohler
said in a statement.
The world's largest steelmaker ArcelorMittal last
week forecast higher profits for this year and said steel demand
in Europe was rising beyond just a restocking
Tata is the second-largest steelmaker in Europe, which
accounts for more than 60 percent of its total annual capacity
of 29 million tonnes.
The company said European delivery volumes rose 6 percent
from a year earlier to 3.19 million tonnes for the quarter and
operating profit also improved, but the pace of improvement been
slower than expected.
The European Union's apparent steel demand is expected to
rise by 3 percent in 2014, regional steel association Eurofer
has said. But Germany's steel association warned on Tuesday the
expected recovery could get derailed by fierce competition and
rising raw material and energy prices.
INDIA GROWTH HOLDS
Tata Steel, which recently expanded capacity at its
Jamshedpur plant in eastern India to 10 million tonnes a year,
said quarterly profit at the Indian business jumped 45 percent
from a year ago to 15.19 billion rupees.
The company is bullish about the long-term growth prospects
in the country, T.V. Narendran, its managing director for India
and South East Asia, said in December. Tata Steel plans to
commission the first phase of its 6 million plant in eastern
Odisha state by the end of the next fiscal year.
Its Indian operations have traditionally been more
profitable as it operates its own iron ore mines, the main raw
material in steelmaking.
Ahead of the results, shares in Tata Steel closed 1.9
percent higher at 389.75 rupees in a Mumbai market that
ended up 0.1 percent.