Higher input cost and poor performance of European and Southeast Asian operations forced Tata Steel into first quarterly loss in more than two years.

The world’s seventh lar-gest steel manufacturing firm reported higher-than-expected consolidated net loss of Rs 602.67 crore compared with Rs 1,003 crore profit in the year-ago period, as demand for steel fell sharply in crisis-hit Europe.

Tata Steel Europe MD and CEO Karl-Ulrich Köhler said the December quarter marked the height of the cyclical cost-price squeeze. However, consolidated net sales of the firm grew 15 per cent year-on-year to Rs 32,964.15 crore.

“Tata Steel was one of the first steel companies in Europe last year to start adjusting its output and configuration to the slowdown in the recovery,” Köhler said in a media release. “We were expecting losses of Rs 314 crore, but the actual numbers were way beyond estimates. The company faced serious challenges in Europe, where austerity measures led to a slowdown in demand in countries that are in the grip of sovereign debt crisis,” said Abhisar Jain, a metal analyst with Centrum Broking. “The turnaround programme in our long products business is well on course for completion by the end of this financial year, as planned. Similar measures have been taken elsewhere in the company, most recently at some of our tubes operations in the Netherlands and the UK. Through our step up and save initiative, we are accelerating cash conservation in expectation of muted but stable demand in our core markets in 2012,” Kohler said.

An analyst with a local brokerage, who requested anonymity, said because of lower demand in Europe, steel prices came down sharply there. “We are expecting Ebitda loss of around $30-40 per tonne from European operations,” he said.

Tata Steel was hit by higher coking coal cost, a key input used for making steel, during the quarter, which stood at around $285 a tonne. On account of higher input costs, the company’s Ebitda margin fell to 5.2 per cent from 8.5 per cent in the July-September quarter, said Centrum’s Jain.

prasannadeshpande

@mydigitalfc.com