Indian giant Tata Steel reported Wednesday that quarterly group net profit slid a bigger-than-expected 70 percent, hit by one-off charges, but added its European operations were picking up.
Despite a "healthy improvement across geographies", Tata Steel, India's biggest producer, said the performance was not enough to overcome one-time costs which pushed earnings sharply lower than financial market forecasts.
Net profit slid to 3.37 billion rupees ($55 million) in the first financial quarter to the end of June from 11.39 billion rupees a year earlier on sales that climbed 11 percent to 364.27 billion rupees.
The earnings undershot estimates by analysts who had forecast the steel-maker would post net profit of just over nine billion rupees.
"Operating performance improved across all geographies," said the company, part of the sprawling Tata tea-to-cars conglomerate, adding that in Europe it would keep concentrating on reducing expenses and improving operations.
But a steep fall in the cost of raw materials such as iron ore and coking coal and more stable steel prices failed to offset one-off costs of 2.62 billion rupees.
"European steel demand is moving in the right direction," said Karl-Ulrich Kohler, chief executive of Tata Steel in Europe, where the company ranks as number-two steel producer.
"Though demand remains well below levels we would regard as healthy, we can see greater stability emerging in the markets we serve," Kohler added.
Tata Steel paid $13 billion in 2007 to buy rival Anglo-Dutch steelmaker Corus, which has plants in Britain and continental Europe, vaulting from 56th-largest steel-maker in output globally to one of the world's largest producers.
Corus was later renamed Tata Steel Europe and now contributes over half of total revenues. Its acquisition came just before the onset of the global financial crisis, leaving Tata Steel grappling with excess capacity and falling prices.
In May 2007, Tata Steel took a $1.6-billion write-down, citing a weaker European market environment.
"Our (European) quarterly performance improved slightly," Kohler said, as the company shut units, slimmed its workforce and focused on manufacturing higher-value goods.
Last month Tata Steel announced the elimination of 400 jobs at its plant at Port Talbot in Wales, and Kohler said the company would keep trimming costs.
In India, with the new right-wing government elected in May announcing "measures to put the economy back on the growth track, business sentiment has improved," said Koushik Chatterjee, group executive finance director.
"However, we expect visible changes in the economy to flow through only on the back of higher government spending over the next few months," he added.
Tata Steel's earnings come as ArcelorMittal, the world's biggest steel-maker, said earlier this month that it had hiked US and European demand forecasts.