Tata Steel Q2 profit plunges 93 per cent on weak demand, high cost

Hit by higher raw material cost and lower average selling prices in its European operations, steel major Tata Steel on Friday reported a steep 93 per cent fall in net profit to Rs 139 crore for the quarter ended September 30.

The steelmaker had reported a profit of Rs 1,968.23 crore in the year-ago period.

"The margins have been impacted severely mainly due to the higher raw material cost and lower average selling prices in our Europe operations," Tata Steel Europe Managing Director and CEO Karl-Ulrich Kohler said.

However, Tata Steel Europe could maintain the delivery volumes achieved in the first quarter of the fiscal, he said.

SPECIAL: Tata Steel among 100-year-old firms in India

The increase in interest rates as well as raw material cost in the domestic market impacted the Q2 margins of the company, Tata Steel Managing Director HM Nerurkar said.

"Continuous increase in interest rates impacted demand for steel. Besides, higher raw material cost and adverse currency movements hit the margins in the second quarter.

Despite these conditions, we sequentially increased sales volumes due to enhanced market reach and customer focus," he said.

The company's net sales rose to Rs 32,507 crore during the July-September quarter, up 16 per cent compared to Rs 28,091 crore in the corresponding period last year.

The company is committed to commissioning of the 2.9 million tonnes per annum expansion in Jamshedpur in the last quarter of this fiscal year and we are making good progress on the greenfield project in Odisha, Nerurkar said.

"Efforts to reinvigorate the South East Asian operations are continuing through new product launches, branding initiatives, increased market access and improvements in operating parameters," he said.

The total expenditure of the company went up to Rs 31,157 crore during the quarter against Rs 26,052 crore in the year ago.

On the other hand, "other income" of the company was down to Rs 120 crore compared to Rs 814 crore in the July-September quarter of the fiscal, according to a company statement.