The company earns more than 70% from its European business, Corus, which it acquired in 2007 for $13 billion, and the remaining from India and other south-east Asian countries. Tata Steel's management attributed the improvement in earnings to a mix of volume and value growth and gains from part sale of its investment portfolio. Top company officials explained that while in India it sold more steel at lower prices, in Europe, it clocked lower volumes but at higher prices during the July to September period. Tata steel reported a consolidated loss of Rs 2,720 crore in the corresponding period of last fiscal.
The company's net sales grew 11% from Rs 25,276 crore to Rs 28,091 crore. Other income saw a significant increase to Rs 814 crore compared to Rs 18 crore in the September quarter of FY10. It divested its interest in Malaysia's Southern Steel for $72 million and sold some shares in a couple of Tata Group companies.
In a parallel development, Tata Steel on Friday said that it plans to raise up to Rs 7,000 crore to knock off some debt—mainly taken to purchase Corus—on its books and to fund steel projects. The largest company within the Tata Group said it plans to spend Rs 15,000 crore this year. Though the company didn't reveal the exact financial instrument it would opt for, but added that it is looking at an equity offering, including shares, with differential voting—it may be recalled that group company Tata Motors was among the first to go for such an issue— global depository receipts, debentures and foreign currency bonds. The company's overall debt at the end of the September quarter was Rs 48,096 crore ($10.7 billion). Its debt-equity ratio is currently at 1.5: 1, and the company's intention is bring it to 1:1. During the first half of FY11, it repaid $600 million of debt. Raw material accounted for 36% of total expenditure, with iron ore being the most volatile.
Tata Steel's MD HM Nerurkar said that the Indian steel market expects to see robust demand from construction, infrastructure and auto sectors in the coming quarters. To meet the higher demand, it is expanding its steel capacity by three million tonnes in Jamshedpur.
With regard to its European operations, Tata Steel Europe's MD Karl-Ulrich Kohler said the demand outlook in Europe is uncertain and it would continue to focus on controlling costs. Tata Steel announced the financial results after the close of market hours
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