Thursday, May 21, 2015

News: Tata's turnaround at European operations

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Indian-owned Tata Steel has seen steady improvements in European performance over the year leading to a reported profit of £109.8m.

Reporting its financial results for the 2014-15 financial year, and the quarter which ended on ending March 31 2015, the group reported a £8.11 billion annual turnover for its European operations, 8.2% down on the previous year. However, the operation's profitability (EBIT / earnings before taxes) was reported at £109.8m, a turnaround from the £16m loss in the previous year.

Tata Steel Europe saw relatively stable levels of production and deliveries in the year but profits were boosted by differentiated products. An objective of supporting customer success in their own markets through product and service improvement is being pursued. This means introducing new products and in Rotherham and Stocksbridge, which make up an important production base for aerospace steels, sites have been benefiting from significant investment and a focus on a high-quality portfolio programme.

35 new products were added in the year taking the total to 113 now in the European portfolio. Sales of new products increased by 16% and more than a third of company's overall sales are now differentiated steels.

Profits for the last quarter of the financial year were £30.3m for the European operation, down on the previous quarter but up from the breakeven reported in the same quarter of the previous year.

Karl Koehler, chief executive of Tata Steel's European operations, said: "We continued to make steady progress on our strategic transformation to become a customer-orientated, financially sustainable company despite weakening market conditions in the last six months.

"Our financial performance improved due to our market differentiation strategy, as well as wider market spreads and continued cost control. We launched 35 new products for customers during the year, including a premium quality surface finish for car body panels, a lighter-weight construction steel and a new steel grade for tractor wheels.

"In the coming year we see opportunities to further improve sales through higher precision. EU demand is forecast to grow modestly again and the EU steel industry is in a stronger position to benefit than it was pre-crisis. But surging Chinese exports look set to remain a serious concern."

Tata said that EU steel demand is expected to grow by +1.8% in 2015 as market conditions improve. The depreciated euro is expected to boost competitiveness in the European mainland though UK manufacturers are facing "currency headwinds."

The declining steel demand and increased production in China is expected to result in continued high exports levels to Europe with knock-on margin pressure for European producers like Tata.

After the year end, Tata Steel reported a write down of £500m mainly relating to the Long Products UK business in Tata Steel Europe. The under performing arm is up for sale.

This week it was announced that Unite, the country's largest union, will ballot its 6,000 members at Tata Steel UK for industrial action over its proposal to close the British Steel pension scheme. Community, GMB, and UCATT gave official legal notice to Tata Steel UK Ltd about their intentions to ballot earlier in May.

As the first national industrial action in the industry for 30 years looms, Tata Steel said that it "remains open to unconditional talks with the unions to find resolutions to the challenges facing the pension scheme."

Tata Steel website

Images: Tata Steel

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