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Higher prices, cost control lift Tata Steel net 213%

Posted by Manish Agrawal on Wednesday, 3 December, 2008

MUMBAI: Tata Steel, India’s largest steelmaker, on Tuesday said firm prices, cost-control measures and an improved performance helped its July-September consolidated net profit soar 213%, bucking corporate trends that have seen lower margins due to demand contraction.
The growth in consolidated net profit is more than the 50% growth Tata Steel’s India operations saw in the same quarter, mainly due to the sharp price increase that Corus was able to effect. “Tata Steel as a group has had an outstanding period,” its managing director B Muthuraman said at a Mumbai press conference, which had to be rescheduled (from November 28) due to the terror attacks. “The terrific performance is mainly due to good prices, very good cost-control measures and good integration benefits,” he said. 

The consolidated net profit after minority interest totalled Rs 4,772 crore compared with Rs 1,524 crore last year. The revenue rose 36% to Rs 44,199 crore in the July-September period. Tata Steel’s consolidated net profit includes the European operations of Corus, the Anglo-Dutch steelmaker, which Tata Steel acquired in 2007 and which catapulted the Indian company to the world’s sixth-largest steel manufacturer slot. 

However, the second half of the fiscal 2008-09 is likely to be more challenging. Joining the Mumbai function via teleconferencing, Corus CEO Philippe Varin said that although the European operations have turned in good results, the outlook would be affected by the slowdown. 

Corus has already announced a 30% production cut and has cut 400 jobs at its distribution businesses in the UK and Ireland. It is also considering further cuts in the Netherlands where it is talking to the Dutch government to fund part of its manpower restructuring programme. 

Mr Varin listed measures to tide over the slowdown and has targeted to save £350 million in the second half of the financial year. Corus is Europe’s second-largest steel producer and produces about 20 million tonnes. The slow demand has forced most European mills to cut production. ArcelorMittal, the world’s largest steel maker, last week said it would cut 9,000 jobs worldwide and reduce output by at least a third. 

Referring to the downturn in the global economy, Mr Muthuraman said that though there is “a downturn, it’s not so much in India. We’ve weathered the storm well and have started measures (in India) that could likely save us about Rs 300 crore.” 

He clarified that Tata Steel would press ahead with the Rs 27,000-crore plan to expand capacity in Jamshedpur and building a new plant in Orissa. He had earlier told ET that the ongoing liquidity crisis has made the company reassess some of its capex plans. Tata Steel would push back the earlier plan to build greenfield plants in Jharkhand and Chhattisgarh, he had said. 

Tata Steel intends to ramp up its Jamshedpur capacity by 3 million tonnes to 10 million tonnes by 2010 at Rs 12,000 crore and also build a 3-mt plant at Kalinganagar in Orissa at Rs 15,000 crore

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