Europe market a concern, India sales to grow: Tata Steel

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Europe market a concern, India sales to grow: Tata Steel

Tata Steel, the world’s seventh largest steel maker reported higher-than-expected consolidated net loss of Rs 602.67 crore for the December quarter compared with Rs 1,003 crore profit in the year-ago period, as demand for steel fell sharply in crisis-hit Europe.

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Demand for steel in Europe is unlikely to revive soon, cautioned Koushik Chatterjee, group CFO Tata Steel in an interview to CNBC-TV18. Tata Steel, the world's seventh largest steel maker reported higher-than-expected consolidated net loss of Rs 602.67 crore for the December quarter compared with Rs 1,003 crore profit in the year-ago period, as demand for steel fell sharply in crisis-hit Europe.

"We expect volumes from our Europe division to remain flattish going ahead, but the turnaround programme in the region is well on course for completion by the end of this fiscal," he said

He said Tata Steel was one of the first steel companies in Europe last year to start adjusting its output and configuration to the slowdown in the recovery. Similar measures have been taken elsewhere in the company, most recently at some of the company's tubes operations in the Netherlands and the UK, he added.

Meanwhile, Tata Steel Europe posted an EBITDA loss of Rs 781 crore in the December quarter, compared with a positive EBITDA of Rs 392 crore in the year-ago period.

Chatterjee, however said that the company's India operations delivered steady performance during the December quarter and he expects the trend to continue. He

Is hopeful that domestic demand for steel will pick once interest rates start cooling, and new projects get off the ground.

An improvement in operating performance, coupled with a number of cost cutting measures will lead to robust growth from India quarter-on quarter, he believes.

The company expects additional sales of one million tonnes in 2012-13 in India as it will complete a planned expansion of its facility in Jamshedpur to 9.7 million tonnes by March from 6.7 million tonnes now, Chatterjee said.

Here is a snapshot of brokerage calls on the stock after the latest quarterly numbers.

Motilal Oswal (Rating: neutral)
The recession in Europe and volatile steel prices will continue to adversely impact TSE. Though TSE has undertaken a number of restructuring initiatives from time to time, these appear insufficient in view of the considerable volatility in steel prices.

Goldman Sachs (Rating: buy)
We cut our FY12E-14E EPS by -1% to -11% on inventory write-down, and higher cost assumptions. But we believe the worst may be behind in both India and European profitability, and with the Jamshedpur expansion on track, the company is well positioned for a strong earnings recovery in FY13E.

Emkay Global (Rating: hold)
The stock has recently run- up very sharply factoring in improvement in steel prices and in anticipation of lower costs going forward. We feel it would be too early to predict that, as situation in Europe continues to remain uncertain, which can cause huge earning volatility. This along with lower domestic sales volume estimates we cut our FY12 and FY12 EPS to Rs 57 and Rs 69 respectively.

Read on for the full interview..