Thursday, May 26, 2016

News: Tata reports on tumultuous year for UK steel

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Tata Steel has reported its financial results for the fourth quarter and full year ended March 31 2016, the period which included the shock announcement that it was putting its entire UK assets up for sale.

Tata Steel has for a long time been warning that continuing cheap imports risk undermining Europe's steel industry and that uncompetitive energy costs and the strength of sterling are hurting its UK operations.

At the end of March, the Indian-owned steelmaker concluded that it is exploring all options for portfolio restructuring including the potential sale of Tata Steel UK, in whole or in parts. The formal process began on April 11 with contact made with 190 potential financial and industrial investors worldwide.

Seven bids were immediately taken forward to the next stage of the sale process but the Tata board, which met in Mumbai yesterday remains tight-lipped on the next stage of the process.

Koushik Chatterjee, Group Executive Director (Finance and Corporate) at Tata Steel, said: "Apart from the sale of some of the portfolio holdings during the year, the company has been actively reshaping its European portfolio. In April 2016, the Company signed a conditional sale agreement with Greybull Capital for the Long Products business of Europe, the process of the sale is currently ongoing.. The Company through the Tata Steel Europe Board is also reviewing all options for the UK Strip supply chain including a potential sale process which is under active consideration."

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Turnover for the European operations for the fourth quarter of 2016 was down from the previous quarter and from the same quarter of the previous year.

EBITDA (Earnings before taxes), saw Tata's European operations post a loss of £37m for the last quarter, a slight improvement from the £68m loss in quarter three but still down on the £106m profit posted in the fourth quarter of 2014.

With turnover down to £6.8 billion, EBITDA for the whole financial year saw a loss of £70m, a big turnaround from the £434m profit in the 2015 financial year.

The report stated: "Tata Steel Europe saw stable operational performance and deliveries in Q4 increased by 6% compared to Q3. In response to the import and price pressure, a tactical decision was made to focus on higher-value sales in the UK, rather than volume."

Speciality Steels in Rotherham and Stocksbridge has a £275m of turnover and is Tata Steel Europe's only Electric Arc Furnace (EAF) based business, specialising in carbon, alloy and stainless steels for demanding applications like aerospace, motorsports and oil and gas. Until recently it employed over 2,000 people. It is not considered a downstream business linked to Port Talbot and Tata Steel's strip products.

Hans Fischer, MD & CEO of Tata Steel in Europe, said: "We continued to invest in our customers over the last year by developing our manufacturing capability and by launching more than 30 new products. Our portfolio of new products is now approaching 150.

"We made further strides to improve the efficiency of our operations resulting in record productivity in various plants. We also took action to focus on higher-value sales and sales of differentiated products, which are now above a third of our total sales.

"Growing European steel demand was undermined by continued surging imports in 2015 – imports into the EU rose so fast that domestic deliveries declined, and prices came under further pressure. That's why it is vital the European Commission and national governments continue to strengthen action against unfair trade."

Tata Steel Europe website

Images: Tata Steel

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