Tata Steel Ltd posted a 69 per cent drop in quarterly profit as a raw material shortage curtailed domestic production and a flood of cheap imports hurt profitability in both its European and Indian operations.
A slowdown in China and a devaluation of the Russian rouble have led to a surge in cheaper steel products entering international markets, pressuring steel prices and squeezing Tata's margins in Europe, its biggest market as well asand India.
Consolidated net profit fell to Rs1,570 crore ($25 million) in the three months up to 31 December from Rs5,.30 crore a year earlier - the biggest slump since the second quarter of 2013, the Mumbai-based company said in a statement on Friday.
"European steel demand continued to recover in 2014 and should improve modestly again this year," Karl-Ulrich Köhler, Tata Steel Europe's chief executive, said in a statement.
However, he added margins would remain under pressure due to rising imports.
Lower steel prices also led to an 8.5 per cent drop in consolidated net sales to 333.24 billion rupees.
Tata Steel Europe, the continent's second-largest steelmaker by sales after ArcelorMittal, is looking to sell some loss-making operations and is shifting to higher-margin speciality steel to propel a turnaround, more than seven years after it entered the continent through the $13 billion acquisition of Corus.
It said due diligence was continuing on the potential sale of its long-products business in Europe to Klesch Group.
"The third quarter performance was affected by adverse macro headwinds in terms of declining commodity prices, increasing in Chinese exports and lower demand in the Indian market. The company also faced significant regulatory challenges in India which affected its raw material sourcing and put significant strain on its operations," Tata Steel's group executive director (finance and corporate) Koushik Chatterjee said.
"However, stronger performance in the European business, various cost savings measures across geographies and robust risk management of raw material security helped the company limit the impact on its profitability," he said.
A string of mining stoppages in recent months led to a number of Tata Steel's iron ore mines in India being shut during the quarter, causing its plants to operate below capacity.
The company, which mines its own iron ore, was forced this year to buy in the raw material for the first time in more than a century of existence.
Shares in Tata Steel, part of the $100 billion Tata conglomerate, have lost more than a fifth of their value in the past three months. They closed down 2.7 per cent ahead of the results in a Mumbai market that ended down 0.5 per cent.
December-quarter profit at most steelmakers in India have been hit by a surge of cheaper imports, mostly from China, causing companies like JSW Steel Ltd to urge the government to take action.