Global rating agency Moody's Investors Service on Wednesday downgraded its outlook for Tata Steel to negative from stable, citing challenges facing the company's UK unit Corus Group Plc. Tata Steel shares on Wednesday fell 12.04% to close at Rs 244.80 on the BSE. The company's second-quarter results are expected on Thursday. A Tata Steel representative declined to comment on the downgrade, saying, "The company is in a silent period now." In Mumbai, analysts said a possible downgrade had already been factored into market estimates, but that the downgrade would maintain a downward bias on the stock price.
In March, Moody's had raised the outlook on Tata Steel to stable from negative, after it repaid $3.1 billion in bridge loans used to help fund the $12.1-billion buyout of Corus in 2007, the biggest outbound international deal by an Indian company so far. "The change in outlook reflects the more challenging operating conditions now facing Tata Steel UK (Corus), as a result of the likely deterioration in demand in Europe and the UK in the next 18 months, with declining steel prices and reduced production volumes," said Ivan Palacios, lead Moody's analyst for Tata Steel. Moody's revision of Tata Steel's outlook on its Ba1 corporate family rating reflects the change in outlook for Tata Steel UK's rating, it said. For the quarter ended June 2008, Tata Steel reported a consolidated turnover of $10.147 billion with a net profit of $1.19 billion. Corus contributed more than two-thirds of the group's liquid steel output, generated 76% of its revenues and 49% of its Ebidta. Tata Steel is facing a global downturn for steel. Global crude steel production sank 3.2% in September to 108.4 million tonne, according to the World Steel Association data released on Wednesday. While emerging markets Russia and Brazil reported an increase of 7% and 5%, respectively, last month, production in the EU edged up less than 1% and North America was flat. Tata Steel's rating is, however, two notches higher than the rating of its UK subsidiary, reflecting its stronger business and financial risk profiles, primarily as a result of the sound profitability of its Indian operations. The rating outlook could return to stable in the event of a stabilisation of steel market conditions or a commensurate improvement in Tata Steel UK's outlook. According to Palacios, "Moody's considers the credit profiles of Tata Steel and Tata Steel UK to be strongly linked due to the increasing level of operational integration between the two entities and the fact that Tata Steel UK accounts for a substantial proportion of Tata Steel's operations." Tata Steel UK Ltd is a 100% subsidiary of Tata Steel Ltd, and is the holding company for the European steel operations, principally consisting of Corus Group. After the acquisition of Corus in 2007, Tata Steel became the world's sixth largest steelmaker with an annual production capacity of around 29.9 million tonne of crude steel. http://www.financialexpress.com:80/news/moodys-lowers-tata-steel-rating-on-uk-concerns/376772/ Fear is not the natural state of civilized people. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
