Tata Steel posts third quarter consolidated profit; outlook improving

Tata Steel, the world's No 8 steelmaker, posted its first consolidated quarterly profit in four quarters and said reviving global demand would further boost earnings in the three months to March.                                           
 

Activity at Corus, Europe's second-largest steelmaker, which contributes two-thirds of Tata Steel's total capacity of 30 million tonnes, has started to pick up as inventories have been run down around the world after struggling in the wake of the global downturn.                                           

 "There have been no negative surprises. Going forward, the company should see benefits from its restructuring programs and higher steel prices," said Pawan Burde, vice president at PINC Research.                                            
 

"But we have to wait and watch how the Europe operations pan out," he said.                                           

Tata Steel has been trying to cut costs by rationalising operations in Europe and reworking interest costs.                                            

Capacity utilisation in Europe was at 83% in the December quarter, up from 74% in July-September, and is expected to be about 80% for the current quarter, excluding the firm's Teesside operations that will be mothballed by the end of this week.                                           

The Teesside plant in the UK had hurt the company's results by $222 million in the first nine months of the current financial year, Tata Steel said on Tuesday.                                            

As economies improve and steel stocks are run down, steel demand is forecast to rise about 10% this year. Global steel output had fallen 8% in 2009 as key industries such as automakers and construction slashed purchases.                                           

Earlier this month, ArcelorMittal, the world's top steelmaker, returned to a profit after three consecutive quarterly losses and said it expected higher shipments but lower prices in early 2010.                                             
 

Last month the world's No 2 producer, Nippon Steel, halved its full-year profit forecast, squeezed by weak demand and pricing for construction-use steel in Japan.                                           

"We are finally coming out of recession in Europe but growth rates are barely 1 to 2%," said Kirby Adams, Tata Steel's head of European operations.                                           
 

"We expect developing economies to grow strong, but in the developed world, growth is likely to be constrained," he added.                                           

The company said it had gross debt of $12.9 billion at the end of December, and cash of $1.8 billion with another $1 billion available through lines of credit.