MUMBAI (NewsRise) -- Tata Steel swung to a profit in the first quarter as a surge in domestic sales volume and improved operating performance at its European business aided India's second-largest steel maker.
The consolidated net profit in the first quarter ended June 30 stood at 9.21 billion rupees ($144 million), compared with a loss of 31.83 billion rupees a year earlier, the company said in a statement on Monday. Analysts were expecting a net income of 11.42 billion rupees.
The latest quarter included a 6.17 billion-rupee charge related to a provision for a mining-related litigation. Sales grew 19% to 309.73 billion rupees, driven by strong volume growth in India. Tata Steel said the year-ago quarter included a loss of 33.92 billion rupees from discontinued operations of its long products and specialty steels businesses.
The operating profit grew 50% on the back of higher volumes at home and improved operating performance in Europe as well as "favourable conditions" in overseas business, Koushik Chatterjee, group executive director for finance, said in a statement.
Indian steel companies such as Tata Steel are limping back to profitability after incurring losses for nearly two years due a sharp drop in prices amid a supply glut from China. Last year, India imposed several curbs on the import of cheap supplies to help domestic steel makers.
Tata Steel's deliveries grew 28% in India but declined 3% in Europe. Still, Europe's operating profit grew 63% to 152 million pound due to ongoing measures to improve competitiveness in the U.K. operations, the company said.
Tata Steel, Britain's largest steel maker, has just about completed a restructuring of its U.K. operations that had been grappling with losses.
The company, India's most indebted steel manufacturer, has been in talks with Germany's ThyssenKrupp for a potential sale of the European assets. Tata Steel has been selling parts of its U.K. operations to help conclude the deal.
Last month, Tata Steel said it agreed to sell its pipe mills in the north of England to U.K.-based metals and industrial group Liberty House for an undisclosed sum. In February, it agreed to sell its speciality steel business to Liberty House in a 100 million pound deal.
The company had previously sold its Scunthorpe steelworks in England, as well as mills in Teesside and France to Greybull Capital LLP.
In May, Tata Steel resolved the biggest stumbling block to the deal with Thyssenkrupp, when it agreed to cut benefits for its 15 billion-pound U.K. pension scheme.
The company is in advanced discussions with the trustees of the pension authority and the regulator, and is "hopeful of reaching a final agreement shortly," Chatterjee said.
According to a Reuters report late last month, Thyssenkrupp is now pushing for a deal to fold its steel operations into a joint venture with Tata Steel as early as September.
Ahead of the results, Tata Steel shares surged as much as 4.5% to touch their 52-week high of 601.50 rupees in Mumbai trading. The shares later pared their gains to close up 4.3%, while the benchmark S&P BSE Sensex lost 0.16%.
--Dhanya Ann Thoppil