Tata Steel profit rises 11% on higher prices

Mumbai: Tata Steel Ltd., India's largest steelmaker, said full-year profit excluding contributions from Corus Group Plc rose 11 per cent, boosted by higher product prices.

Income rose to Rs46.87 billion ($1.1 billion) in the year ended March 31, compared with Rs42.22 billion a year ago, the Mumbai-based company said. Net sales rose 12 per cent to Rs196.9 billion from a year earlier.

A global shortage of steel helped Tata increase product prices for builders and auto companies, more than covering record raw material costs. Tata bought rival Corus last January for $13 billion to tap growing European steel demand.

"Tata will show strong earnings growth in the next few quarters as it will be able to pass on higher costs by increasing prices in the European market," Bharath S., an analyst at Sundaram BNP Paribas Mutual Fund, said in Chennai before the earnings statement. The BNP fund held about 700,000 Tata Steel shares as of May 31.

Stocks

Tata Steel rose 1.9 per cent to Rs756.55 in Mumbai trading. The stock is down 19 per cent this year compared with a 29 per cent drop in India's benchmark Sensitive Index.

The Indian steelmaker sells more than two-third of its output in Europe. Tata imports a third of the coal needed for its India mills and mines its own iron ore, while Corus buys both raw materials.

Tata Steel faces price limits domestically. The government asked Indian steelmakers to lower prices by as much as 10 per cent last month to help contain inflation.

The companies have agreed to maintain prices at current levels until the end of next month.

"The only concern we have for Tata is when the government will allow steelmakers to raise prices in India," said Niraj Shah, an analyst at Centrum Broking Pvt.

Tata Steel plans to increase its domestic production to 10 million metric tonnes by December 2010, from 7 million tonnes now.