Exceptional charges pull down Tata Steel's profit - Times of India

The author has posted comments on this article Reeba Zachariah, TNN | Aug 13, 2014, 10.19PM IST

MUMBAI: Tata Steel reported a worse-than-expected 70% drop in its first quarterly consolidated profit, hurt by exceptional charges due to write-down of certain investments. The steel producer posted profit of Rs 337 crore in the April-June quarter of fiscal 2015 compared to Rs 1,139 crore in the corresponding period last fiscal. Net sales rose 11% to Rs 36,143 crore from a year ago due to an increase in European demand. Sales at its European unit, Corus, increased from Rs 18,432 crore to Rs 20,741 crore during the period under review.

Exceptional charges represent the non-cash write-down of goodwill and other assets to the tune of Rs 1,577 crore related to its coal joint venture in Mozambique, said Tata Steel in a filing to the bourses.

Total expenses shot up from Rs 30,520 crore to Rs 33,704 crore during the period under review. Tax expenditure trebled to Rs 1,080 crore in the first quarter of 2014-15.

Had the company recognized changes in actuarial valuations of pension plans of Tata Steel Europe in the earnings statement, the consolidated net profit would have been lower by Rs 451 crore and the profit for the April-June quarter of fiscal 2014 would have been higher by Rs 855 crore, the Tata Steel statement said.

Exceptional items also include a profit of Rs 1,314 crore from the sale of its interest in non-core assets like the 50% stake in Dharma Port to Adani Group. Tata Steel said that its operating performance improved across all geographies as gross profit increased from Rs 3,755 crore to Rs 4,325 crore in the April-June quarter of fiscal 2015.

Its European unit has been restructuring operations to cut down costs and has been focusing on high-value products. "Our quarterly financial performance improved slightly, despite market spreads tightening compared to the previous year...We have launched ten new products and increased the proportion of differentiated sales by almost 20%," said Karl Ulrich Kohler, MD& CEO, Tata Steel Europe.

Tata Steel said that it was able to reduce its debt despite significant capex spend on its greenfield project in Odisha. However, during the quarter, mining operations in Odisha were suspended for a fortnight on interim orders by the Supreme Court leading to disruptions in ore availability to its flagship Jamshedpur facility, the statement said.