(Bloomberg) -- India's top steelmaker, whose quarterly profit was lifted by a one-time tax gain, slashed its debt-reduction target by nearly half as the slowest economic growth in six years hit demand.
- Tata Steel Ltd.'s group net income rose to 41.4 billion rupees ($583 million) in the three months ended September from 35.8 billion a year earlier, it said Wednesday. Sales fell 15% to 345.8 billion rupees.
Key Insights
- Indian steel companies are grappling with declining margins, a sharp fall in product prices, weak demand and high inventories. That's pushing Tata Steel to cut its $1 billion debt-reduction target by almost half, the company said.
- “In a good year, a billion dollars is quite feasible,” Chief Financial Officer Koushik Chatterjee said at a post-earnings press conference. “In a year where there is an unprecedented reduction in market conditions, arithmetically we will not reach that target.”
- Tata said last month that sales volumes in India dropped 4.2% during the quarter as economic activity weakened further because of low investment and a demand slowdown, as seen in plummeting vehicle sales.
- Global business confidence remained subdued during the quarter and prolonged uncertainty over trade conflicts impacted investment decisions and trade flows.
- Companies globally have sounded alarm over falling demand, higher costs and slowing economic growth. Mills such as Posco, South Korea's biggest steelmaker, posted a 32% decline in quarterly profit, while in India JSW Steel Ltd. cut its capital expenditure for the year on slack demand.
- Shares of Tata, which have lost more than 20% of their value this year, closed little changed at 404.45 rupees in Mumbai on Wednesday.
- Analysts have 20 buy recommendations on the stock, 5 hold and 5 sell, according to data compiled by Bloomberg.
- The company reported a tax gain of 43.7 billion rupees compared with an expense of almost 5 billion rupees a year earlier
- “The market is really bad,” Chatterjee said. “This is my fourth downturn and it is clearly the most structurally impaired one because you don't see green shoots.”
- The company said it's in talks with Synergy Metals and Mining Fund to finalize a pact on the Indian mill's sale of a 70% stake in Tata Steel Thailand.
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To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net
To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Alpana Sarma, Liezel Hill
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