Tata Steel’s New Kalinganagar plant depresses Indian profits
It’s unusual to see Tata Steel’s European business report an increase in profits, while the India business reports a decline. In the September quarter, Europe’s profit rose by 20.8% sequentially while India’s profit fell by 10.6%. India’s profit declined over a year ago too. The commissioning of Tata Steel’s new Kalinganagar (Odisha) plant has meant output is higher but the start-up costs are affecting profits. Initially, the output is of lower grade while the cost of production is higher. Also, lower prices of long products were a reason for the poor performance. Overall, total sales rose by 4.5% sequentially and Ebitda (earnings before interest, taxes, depreciation, and amortization) declined by 8.4%, chiefly because raw material costs rose by 14.9% and other expenses rose by 5.9%. The Kalinganagar plant’s start has also meant higher interest and depreciation charges. That further whittled down its profit, and resulted in a sharp 75.6% decline in its profit before tax.
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