Tata Steel Q1 net rises 3.4 per cent; revenues up 18 per cent

Tata Steel has announced first quarter results, which are in line with market expectations. The company managed excellent top line growth but, like in most other sectors, margins are under pressure. The company''s operating margins declined on lower unit realisations and rising input costs.

Consolidated net profits for the quarter ended 30th June 2006 increased modestly by 3.44 per cent to Rs1,019.18 crore from Rs985.32 crore for the same quarter of previous year. Consolidated sales revenues increased 17.99 per cent to Rs5,764.14 crore from Rs4,885.28 crore.

Operating profits for the quarter increased marginally by 3.4 per cent while operating margins declined considerably by 427 basis points. Operating margins as a percentage of net sales fell to 30.21 per cent from 34.48 per cent.

Margins were affected by a 33.28 per cent rise in cost of raw material and other inputs over the previous year quarter. Cost of power, freight and handling increased by 31.68 per cent during the quarter. Staff costs went up by 7.38 per cent and other operating expenses were higher by 16.62 crore.

Interest costs increased by 29.1 per cent while depreciation charges were higher by 25.19 per cent for the quarter. The bottom line was supported by a 154 per cent rise in other income to Rs79.14 crore from Rs31.17 crore for the prior year quarter.

Tata Steel, excluding subsidiaries and overseas associates, produced 1.11 million tonnes of steel during the quarter – an increase of 16.97 per cent. Steel sales increased an impressive 27.85 per cent for the quarter. Exports for the quarter went up by 11.97 per cent.

Among the business segments, steel sustained the performance while ferro alloys disappointed. Steel sales revenues increased 17.51 per cent while sales of ferro alloys declined 6.92 per cent. Profitability of the ferro alloys and minerals division also declined, though the contribution of the business to overall profits is low.

Consolidated results also include the financial performance of all the overseas subsidiaries of Tata Steel, including Natsteel. During the quarter, Millennium Steel of Thailand and its subsidiaries became subsidiaries of the company.