Tata Steel quarterly net profit plunges 90% as steep material costs eat into margin

"Concerns about slowdown in key economies, persisting geopolitical issues coupled with seasonal factors led to a volatile operating environment. Despite these headwinds, Tata Steel registered best ever domestic sales in India enabled by a strong product portfolio and an extensive distribution network which services end-to-end requirements in chosen segments," said TV Narendran, CEO and Managing Director, Tata Steel.

Tata Steel's material costs jumped almost 30 percent compared with the year-ago period.

Tata Steel's margin — or the degree to which a business makes money — slumped to 10.1 percent from 27.3 percent a year ago, as against the analysts' estimate of 11.8 percent.

"The margins should benefit across geographies from a gradual recovery in Indian markets and favourable movement in raw material prices, especially coking coal. Energy costs in Europe continue to remain a key watch point," said Koushik Chatterjee, CFO, Tata Steel.

Revenue from Tata Steel's Indian operations came declined 1.4 percent to Rs 32.245 crore whereas that from its European business rose 0.6 percent to Rs 21,558.8 crore.

Indian deliveries increased seven percent on a year-on-year basis driven by record domestic deliveries. Deliveries in Europe were partly affected by seasonal factors and subdued demand, according to a company statement.

The merger of seven group companies into Tata Steel, approved during the quarter, is value accretive with multiple benefits, the steelmaker said.

Tata Steel shares ended flat at Rs 101.6 apiece on BSE ahead of the earnings announcement. The stock has grown 2.3 percent value in the past one month, a period in which the Nifty50 benchmark has risen 5.4 percent.