Tata Steel reports loss on Europe weakness

NEW DELHI (Reuters) - Tata Steel Ltd, India's largest steelmaker by market value, swung to a loss in its fourth quarter, hit by weak demand in Europe, its top market and production region.

The company is under pressure from investors to cut costs and idle or sell factories, especially its older plants in Britain, to turn around its loss-making European operation.

Two thirds of Tata Steel's 27 million-tonne annual capacity is in Europe. However, demand there has fallen by almost a third since 2007, largely because of economic weakness in the region, forcing Tata Steel to write down goodwill and assets by $1.6 billion in the past financial year.

 

"Europe's economic deterioration last year reversed the modest recovery in European steel demand that had been going on since 2009 and our deliveries fell as a consequence," said Karl-Ulrich Koehler, chief executive of Tata Steel Europe.

The "severely depressed" conditions in Europe are expected to continue over the short to medium term, a company statement said.

The January-March net loss was 65.29 billion rupees, compared with a 4.33 billion rupee profit a year earlier. Net sales rose about 1 percent to 341.8 billion rupees.

Analysts had expected profit of 3.64 billion rupees on sales of 350.16 billion rupees, according Thomson Reuters I/B/E/S.

The company, like bigger rival ArcelorMittal SA, has cut jobs and production to cope with the sluggish market. ArcelorMittal this month posted a smaller than expected fall in core profit thanks to cost-saving measures.

Tata Steel, part of the salt-to-software Tata group, had reported negative core earnings in Europe for the past two quarters, prompting some investors to call for asset sales.

(Reporting by Krishna N Das; Editing by Daniel Magnowski and David Goodman)