New Delhi, Jan 29: In view of the continuously slumping sales to half of quarterly profits of the Indian operations of Tata Steel, top officials said that a recovery was only expected in the second half of 2009.
Steelmakers have struggled to keep up the sales, as a global credit crisis has hit the demand of major steel-consuming industries producing automotives, consumer goods and construction material. Global steel production has tumbled by 24 percent in the last quarter of 2008.
In a bid to battle the downturn, Europe's second biggest steel maker Corus, is likely to cut jobs in Britain and worldwide. Referring to European sales at a news conference, Chief Executive of Tata Steel's Anglo-Dutch unit Corus, Philippe Varin said, "In this context, our order book is
down by more than 30 per cent which is not surprising and probably you would have seen the prices are now at 50 per cent of what they were in September 2008."
Net profit from the company's previous year's Indian operations account for about a fifth of its total output, and fell by 56.4 percent from 10.7 billion rupees to 4.66 billion rupees ($95.5 million), in its fiscal third quarter.
Managing Director B Muthuraman had expected better sales volume and stable prices in the March quarter. Revealing Tata Steel's current position, Muthuraman said that his company continues to be weak this year and is not as strong as it was three months, six months or even a year back. However, he saw a positive change since the Oct Nov-Dec quarter.
Muthuraman revealed that the company was badly affected by the high cost of coal. Tata Steel imports 40 percent of its requirements. Earlier this month, Tata Steel said that the December quarter steel sales from its Indian operations fell by 14 percent from a year earlier to 1.07 million tonnes.
1.27 billion rupees were hit in the December quarter earnings as per the notional foreign exchange losses with sharply higher raw material costs and slowing sales. Shares in Tata Steel, valued at about $2.6 billion, shed nearly half their value in the December quarter, compared with a 25 percent fall in the benchmark index.
On Tuesday, Jan 27 Steel Authority of India Ltd., India's largest domestic steel producer, also posted a 56 percent drop in quarterly profit.