Tata Steel posts negative Q3 results

29 January 2009

India's largest private steel firm, Tata Steel Ltd, has always had its captive iron ore and coal mines to bank on to control costs. This is again reflected in the results for the quarter ended Dec 2008, but its realisations have taken an unexpectedly severe beating which has come as a surprise to analysts.

Realisations have fallen 20.5 per cent compared to the previous quarter. These are lower than SAIL's realizations which fell 18-20 per cent on a quarter-on-quarter basis.

Tata Steel has traditionally enjoyed higher realisations than the public sector steel units thanks to a higher proportion of value- added products and lower spot sales.

With its medium-to long-term contracts with customers, the company should have been in a position to better insulate itself from impact of the free fall in steel prices, according to analysts.

The fall in price realisations which comes on top of a 7-per cent slump in production has resulted in an erosion of as much as 54 per cent in operating profit on a sequential basis, they add.

According to analysts, the operating profit is as much as 35 per cent lower than expected. However this did not dampen investor interest as Tata Steel shares rose 3 per cent after results were announced.