Tata Steel Q2 net drops 89% on rising costs; lags estimates

Tata Steel , the world’s seventh largest steelmaker, on Thursday reported a 89 percent fall in second-quarter consolidated net profit, lagging estimates, weighed down by rising raw material costs and weak prices in Europe.

Tata Steel reported profit of Rs 212 crore , compared with Rs 1,979 crore a year earlier. The steep fall in net profit is due to lower realization, lower income and a sharp rise in raw material and fuel costs, and, the absence of one-off gains that were seen in the year-ago period.

However, analyst SP Tulsian doesn’t expect the market to react too negatively to this result . “The profit number is not shocking because of the absence of the other income component this quarter,” he said in an interview with CNBC TV18.

A Reuters poll of 11 brokerages had forecast quarterly net profit of Rs 980 crore.

The $500 billion global steel industry is facing an uncertain outlook, with European firms announcing production cuts in the face of waning demand, while steelmakers in Asia have had to trim investment plans.

Shares in Tata Steel, valued at $9.2 billion, closed down 4.2 percent on Wednesday, ahead of the results. The stock has declined 34 percent so far in 2011, compared with the 15.3 percent fall in India’s benchmark index.

Watch video:Tata Steel has posted dismal numbers that are sure to send the stock into shock when market opens on Friday.

Agencies