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Mumbai, June 25: The costs of restructuring its European steel operations gouged out Tata Steel’s net profits which tumbled almost 61 per cent to Rs 4,849.24 crore during the year to March 31, 2009. It had reported a net profit of Rs 12,321.76 crore in the previous year.
The steel maker’s balancesheet was bloodied by a one-time restructuring and impairment charge of Rs 4094.53 crore as it struggled to cope with the severe contraction in demand for steel in the US and the UK.
The company announced plans to cut around 2,045 jobs at Tata Steel Europe — the subsidiary created out of the $12-billion Corus acquisition in early 2007. Tata Steel said it would soon start consultations with the employee unions there.
Although Tata Steel did not provide the figures for the fourth quarter, a quick calculation based on the company’s performance for nine months ended December 31, 2008 showed that it had suffered a loss of over Rs 4,500 crore in the January-March quarter.
However, full-year net profits at its Indian operations rose almost 11 per cent to Rs 5,201.74 crore compared with Rs 4,687.03 crore the year before.
Tata Steel said the restructuring costs arose from the Fit for Future programme at Tata Steel Europe.
Under the programme, Tata Steel plans to sell its aluminium smelter operations in Germany and the Netherlands, reconfigure its strip products business in the UK, create a new business model for its engineering steels business, and streamline its downstream facilities in Europe.
Tata Steel managing director B. Muthuraman ruled out job cuts at its Indian operations.
During the year, consolidated net sales rose to Rs 145,686.32 crore, up from Rs 131,090.81 crore.
Muthuraman said steel production at the European facilities had been cut by 47 per cent to match the slump in demand. Steel production for the whole group, including Indian operations, had shrunk by 40 per cent. He added that India and China were the only two countries in the world where demand had grown marginally over last year.
“The sharp fall in world steel demand looks deeper than what we thought six months ago,” he added.
Although there were some positive features in the form of lower raw material prices, Muthuraman said the revival of the steel industry would depend on the stimulus packages drawn up by various nations.