Hit by the 40 per cent cut in production in Europe, Tata Steel has reported a 68 per cent drop in the consolidated net profit at Rs 732 crore (Rs 1,402 crore) for the third quarter of the financial year ended December 30, 2008. Sales rose 4 per cent to Rs 33,191 crore (Rs 31,899 crore) in the quarter under review.
The company has transferred the actuarial gain on funds for employee benefits of Rs 145 crore made last year to “reserves and surplus”.
“Had the company followed the previous practice of recognising changes in actuarial valuations of pension plans of Tata Steel Europe in the profit and loss account, the profit after tax for the current quarter would have been lower by Rs 4,256 crore and for the nine months ended December 31 it would have been down by Rs 8,635 crore,” the company said in a press release.
The company has given the pink slip to 2,500 employees in UK and 1,000 in other parts of Europe. The company will have a limited liability on pension for new employees to be recruited when the economy recovers.
“Most of the liabilities on pension fund have been taken care of and it will reduce in the coming months,” said Mr B. Muthuraman, Managing Director, Tata Steel.
The company has incurred a forex loss of Rs 201 crore in the third quarter as against a gain of Rs 45 crore in the same period last year.
The forex loss includes notional unrealised translation loss of Rs 753 crore (Rs 154 crore) on Convertible Alternate Reference Securities (CARS) issued in September 2007. CARS are convertible into equity shares only between September 4, 2011 and August 6, 2012 and are redeemable in foreign currency only in September 2012.
Profit after taking minority interest and share of profit of associate companies was Rs 814 crore (Rs 1,325 crore) in the third quarter, while it was Rs 9,486 crore (Rs 11,118 crore) in the nine months ended December 2009.
On a standalone bases, Tata Steel’s net profit in the third quarter was down 56 per cent at Rs 466 crore (Rs 1,068 crore), while net sales were down 3 per cent at Rs 4,802 crore (Rs 4,974 crore).
Value of inventories of raw materials and finished goods at some of the subsidiary companies has been written down by Rs 1,744 crore in the third quarter under review to recognise the fall in market prices of these products, the company said. Year-to-date write down amounted to Rs 2,188 crore.
Mr Muthuraman, said “We are optimistic that the steel demand in India is on a revival path. In the January-March quarter we expect our sales to grow 45 per cent to 1.6 million tonnes against 1.1 million tonnes logged in the October-December quarter.” The company has registered sales of 0.5 million tonnes in January and 5.90 lakh tonnes in February.
Tata Steel India produced 1.23 mt (1.25 mt) and sales of 1.07 mt (1.24 mt), Tata Steel Europe produced 3.31 million tonnes (4.89 mt) and sold 4.30 mt (5.60 mt), Nat Steel Asia produced 0.35 mt (0.42 mt) and sales were at 0.40 mt (0.70 mt) and Tata Steel Thailand registered a production of 0.19 mt (0.38 mt) and sales of 0.30 mt (0.40 mt).
The company has been renegotiating its contracts for coal procurement up to June 2009. The future contracts will be negotiated at $120-$130 a tonne, said Mr Muthuraman.
The company intends to prepay $50 million of high-cost debts in the next 12 months from the proceeds realised from sale of its assets. The company has repaid $500 million till the December quarter. In India, repayment of $795 million loan will start after 2009, the company said.
Tata Steel will be saving $ 16.4 million through spot buying of coal and exercise mutual options and save $4.4 million through postponement of spot buy of ferroalloys.
The company intends to save £600 million in the first half of FY’09 from its ‘weathering the storm” programme which includes aligning production with current market demand by shutting down three blast furnaces, adjustment of logistic and supply chain, reduction in use of third party services, flexible production to reduce energy cost, reduction in employment cost, general and administration cost saving programme and align hedging to new activity levels.
The company has a liquidity of $1.886 billion which included cash and cash equivalents of $1.134 billion.
Source: The Hindu Business Line
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