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Tata’s profits plunge despite rising demand

Tata Steel Group’s European arm has seen a steep year-on-year drop in earnings in the first quarter of this financial year.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) plunged by 42% to Rs 5.7bn (£57.3m) in the three months to 30 June 2015 compared with the same period last year.

The company has attributed the decline largely to tough market conditions including the strength of sterling, uncompetitive energy costs and an “alarming” surge of imported steel.

Dr Karl-Ulrich Köhler, managing director and chief executive officer of Tata Steel in Europe, said: “European steel demand is increasing modestly. But imports have grown much faster in recent years and risk undermining Europe’s steel industry.

“Imports from China, in particular, have grown at an alarming rate – hot rolled coil shipments have been arriving at more than three times the volumes of 2013, adversely affecting international steel prices.

“Surging imports constitute a threat to European steelmaking. Uncompetitive energy costs and the strength of sterling are hurting our UK operations. These three factors caused our first quarter financial performance to deteriorate, despite our more stable production platform as seen in our improved operating performance.”

Overall, Tata Steel Group’s pre-tax profits fell to Rs12.5bn in the first quarter of 2015-16, from Rs14.4bn in the corresponding period last year. Turnover was down by Rs61.2bn.

The company is shifting its focus to developing differentiated steel products, and concentrating on value rather than volume, according to consolidated financial statements posted today.

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