Mumbai: Tata Steel posted a better-than- expected 72 per cent gain in fourth-quarter profit after selling a UK unit and forecast raw material costs will squeeze margins in the first half at its European operations.

Net income, including that of Tata Steel Europe, rose to $937 million (Dh3.4 billion) in the three months ended March 31 from $546 million a year earlier, Chief Financial Officer Koushik Chatterjee said. The average of 25 analyst estimates compiled by Bloomberg was Rs18.1 billion (Dh1.4 billion). Sales at India's biggest steelmaker rose 23 per cent to $7.59 billion.

Tata Steel Europe, accounting for more than two-thirds of group output, buys all its raw material from the market as it doesn't own any mines. Steelmakers paid 74 per cent more for coking coal last quarter after record rains slashed production in Australia's Queensland state. Cash iron ore prices at Tianjin port in China rose 36 per cent on average in the period.

"The pricing environment remains tough because raw material prices are moving far ahead of steel prices," said Rakesh Arora, head of research at the Indian unit of Macquarie Group in Mumbai. "While Tata Steel Europe is trying to get some raw material from its own sources in the fiscal year 2013, its impact will be visible in three to four years."

Tata Steel shares rose as much as 3.3 per cent, the most since March 14, to Rs579.90 and traded at Rs577.15 in Mumbai.

Tata Steel shares have declined 15 per cent this year, compared with a 12 per cent drop in the benchmark Sensitive Index of the Bombay Stock Exchange.

Tata Steel made a one-time gain of $561 million selling its Teesside Cast Products unit to Thailand's Sahaviriya Steel Industries Public at the end of March, Chatterjee said in Mumbai. Steelmakers are facing volatile prices after being forced to buy iron ore and coal for immediate delivery or in quarterly supply accords following the collapse of a decades-old annual pricing system.

Tata Steel Europe's first-half profit margins will be squeezed because of raw material costs, Chief Executive Officer Karl-Ulrich Kohler told. Prices, which were expected to decline, have remained at high levels, he said, without elaborating.

Tata Steel Europe plans to close part of a plant in Scunthorpe in northern England, threatening about 1,500 jobs, Tata Steel said last week. The unit has "no future" in its current form and needs to cut costs, Kohler said May 20.

Capacity use in Europe was 89 per cent in the quarter, he said.

Earnings will be shored up by Indian demand, which is expected to gain 10 per cent year-on-year, managing director H.M. Nerurkar said.

Profit in the quarter at the India unit fell to $383 million from $485 million a year earlier.

For the full year, Tata Steel swung to a group profit of Rs89.8 billion, compared with a loss of Rs20.1 billion a year earlier, the company said in a statement. Analysts had estimated a profit of Rs64 billion. Sales climbed to Rs1.17 trillion from Rs1.02 trillion.

Tata Motors earnings rise 18%

Company benefits from demand in luxury vehicles

Mumbai: Tata Motors, the owner of Jaguar Land Rover, posted an 18 per cent increase in fourth-quarter profit on rising demand for luxury vehicles in China and other emerging markets.

Net income rose to Rs26.3 billion in the three months ended March 31, from Rs22.3 billion a year earlier, according to quarterly figures derived from full-year numbers announced by the Mumbai-based automaker.

The average of 19 analyst estimates compiled by Bloomberg was for a profit of Rs26.9 billion. The company's chief financial officer Chandrasekaran Ramakrishnan declined to provide quarter figures.

Jaguar Land Rover is benefiting from a surge in global luxury vehicle demand that has led to waiting lists for models. Volkswagen AG's Audi unit is hiring more workers to expand production and meet demand for cars in China and the US.

In January, Tata Motors said Chinese sales of Jaguar cars gained almost 50 per cent last year, while sales of Land Rover automobiles more than doubled. The company sold more than 26,000 cars in the country, its third-biggest market. The automaker plans to have more than 100 dealerships in China by the end of this year, it said in an investor presentation on its website.

"Tata Motors' main focus is on their international business," said Walter Rossini, who manages an India equity fund at Aletti Gestielle SGR in Milan.