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Tata Steel Q1 Net Triples, Misses Forecasts

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Tata Steel on Friday said its fiscal first-quarter net profit tripled, mainly due to one-time gains, but the steelmaker flagged high raw material costs and economic uncertainty as a cause for concern.

In a presentation to analysts, Tata Steel said uncertainty about the economy had risen following the downgrade of US debt and the European sovereign debt issue.

The world's No. 7 steelmaker also said growth sentiment in key emerging markets was expected to remain muted in the near term and that Europe was expected to face significant uncertainty in the next three to six months.

The company also said demand in India, which accounts for a quarter of its capacity, continued to be stable but prices were softening.

Excluding one-time gains, the world's No. 7 steelmaker reported a net profit of 13.4 billion rupees, below estimates of 15.7 billion rupees of analysts polled by Reuters.

"If you removed the one-time gain they are a little lower than we had expected," said Shraddha Shroff, analyst with Mumbai-based KR Choksey.

Shares in Tata Steel, valued at about $10 billion, fell more than 1 per cent to 479.45 rupees following the results.

The stock has fallen nearly 29 per cent so far in 2011, compared with a nearly 17-percent fall in India's benchmark index.

The $500 billion global steel industry has faced softer demand in the past few months, mainly from the construction and automobile sectors, and high coal and iron ore prices have further weighed on profitability.

The company earned 40 billion rupees in one-time gains in the fiscal first quarter, including 28.8 billion rupees ($634 million) from the sale of its stake in Australian coal miner Riversdale to Rio Tinto.

Including the one-time gains, the company reported a net profit of 53.5 billion rupees, compared with 18.2 billion rupees a year ago.

The company had total net debt of $9.1 billion at the end of June, much of it from its $13 billion acquisition of Anglo-Dutch steelmaker Corus in 2007.

Earlier this week, ratings agency Standard & Poor's raised its rating on Tata Steel to 'BB', citing its deleveraging measures this fiscal year and the likelihood of improved performance.

Last month, it reported sales volumes for the Indian operations rose 14 percent in the June quarter, to 1.59 million tonnes.

The company is scheduled to complete the planned expansion of its Indian capacity to 9.7 million tonnes by March next year, from 6.7 million tonnes now. Tata Steel also operates units in Thailand and Singapore.