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Himangshu Watts
Calcutta, July 13: A recovery in global steel prices and lower costs will boost India's Tata Iron and Steel Company's (TISCO) earnings in the first quarter, ending three years of plunging margins, analysts said on Tuesday.
"I think 500 million Rupees ($11.6 million) is a good estimate," said Ajay Kejriwal, Chief analyst at Jet Age Securities in Calcutta, referring to the earnings for the first quarter of 1999/2000 (April-March).
TISCO, India's largest private steel maker, reveals the results on Thursday.
A Reuters poll of securities firms in June projected its net profit to rise 85 percent to 502.0 million Rupees in the quarter ended June 30 from 270.9 million in the same period a year ago.
Sales were projected to rise by an average of 5.2 percent to 14.23 billion Rupees from 13.53 billion.
Analysts said TISCO will benefit from rising global prices.
"The pressure from imports is not there any longer," said Mayank Khemka, head of research at Calcutta-based brokerage C Mackertich.
He said domesticsteel prices were stronger in the first quarter.
A TISCO official said last week it had raised prices by 200 to 500 Rupees a tonne effective July 1.
The firm's efforts to cut production costs and its recent decision to amortise the cost of trimming its workforce in 10 years instead of five years will also beef up its first-quarter performance, analysts said.
The longer amortisation period helped lower the expenditure on employee separation to 1.15 billion Rupees in 1998/99 after it leapt to 1.23 billion in the first nine months.
The company said the change pushed up profits by 766.9 million Rupees in 1998/99.
"The change in amortisation period will reduce expenditure on employee separation in the first quarter," Khemka said.
TISCO's Managing Director J.J. Irani said in April that the firm saved 120 million Rupees in 1998/99 by cutting costs, and expects to save another 2.2 billion Rupees by 2000/01.
Its net profit in 1998/99 fell to 2.82 billion Rupees from 3.22 billion Rupees a year ago butsales were only marginally lower at 62.75 billion Rupees against 64.33 billion Rupees.
The profit in the first quarter of 1998/99 was barely 10 percent of its full-year earnings, analysts said.
"A different skewing this year can change the picture completely," an analyst with a Hong Kong-based brokerage said.
TISCO's profits have fallen steadily since 1995/96 while its other income, mainly from sale of assets or from investments, has risen sharply.
Shares of TISCO were trading 4.30 Rupees lower at 168.60 on Tuesday afternoon at the Bombay exchange. It had hit a low of 74.50 on April 28.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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