Tata Steel posted a second consecutive consolidated quarterly net loss, but the world's No 8 steelmaker by output expects a sharp improvement in the second half of the fiscal year to March on reviving demand.
Corus, Tata's European unit, has struggled as the global downturn has hit demand from key industries such as construction and automakers, but capacity utilisation has picked up as inventories have been run down around the world.
"It is in fact Brazil, India and China, not Russia - so it's the BICs, not the BRICs - that are now propelling growth in steel consumption around the world," said Kirby Adams, the company's head of European operations.
Capacity utilisation was at 75 percent in the September quarter, up from 53 percent in the June quarter, and was expected to be about 80 percent for the rest of the fiscal year to March 31, Tata Steel said.
Last month, the World Steel Association forecast steel demand would fall 8.6 percent this year, but that will be a much smaller fall than the 15 percent it predicted in April. "It's not going to be a 2008 scenario again. The worst is over for this company," said Deven Choksey, chief executive of K.R. Choksey Shares, who manages $215 million for his clients.
"Infrastructure development across the world will improve demand. The consumer is ready to buy," he said. Tata Steel has been trying to cut costs by rationalising operations in Europe and also reworking interest costs. It took one-off charges, primarily related to restructuring in Europe, of 9.1 billion rupees in the second quarter.
Its Teesside plant in Britain hurt second-quarter earnings before interest, tax, depreciation and amortization (EBITDA) by about 8 billion rupees. Adams said Tata was prepared to mothball the plant if necessary.
Earlier this month, Tata Steel issued $546.9 million in new convertible bonds in exchange for $493 million of securities as part of a plan to reduce costs and ease repayment obligations.
The company had gross debt of $12.9 billion at the end of September, which it aims to cut by $2 billion in the medium term, and had cash of $3.6 billion, CFO Koushik Chatterjee said.