News: Testing time for Tata Steel

High raw material costs and low selling prices have resulted in quarterly earnings decline at Tata Steel Europe.

In the latest financial results from the Indian-owned steelmaker, the European operations, which include sites in Rotherham, posted increased turnover and sales but a 42% decrease in earnings compared to the same quarter in the previous year.

Results for the first half and second quarter ending September 30 2011 had Q2 sales of US$4.32 billion that were 19.0% up from the US$3.63 billion for the same quarter in the previous year.

Turnover at Tata Steel's European operations of US$8.51 billion for the first half of this year was 19.7% up from the US$7.11 billion posted in the first half of last year.

However, EBITDA (earnings before tax) of US$103 million in the second quarter this year was 42.8% down from the US$180 million seen in the same quarter last year.

The $140m arbitration settlement between Tata and certain offtakers of the Teesside Cast Products business boosted the first half earnings.

Dr Karl-Ulrich Köhler, MD & CEO of Tata Steel Europe, said: "Higher raw material costs and lower average selling prices made the normally quiet summer quarter particularly testing. Despite these headwinds, Tata Steel in Europe succeeded in matching the delivery volumes achieved in Q1.

"The actions taken after 2008 to weather the financial crisis has strengthened the European operations' ability to cope with market disturbances. The restructuring and performance improvement initiatives that we launched in the first half will build on that progress and yield further competitive edge. Our focus on product and service innovation is also achieving breakthroughs in pursuit of our mission to be the long-term preferred partner of customers in our chosen markets."

Tata has recently mothballed plants in Scunthorpe and Teeside and announced that it will cease operations at its loss-making Construction Products business.

After major restructuring in 2009 where they announced that 1,100 jobs would be lost in Rotherham, the Speciality Steels business in South Yorkshire is benefiting from a new strategy that focuses on exceptional high-value products and sectors. Just last month, Tata announced that a further £4.5m is being investing in their South Yorkshire speciality steel plants.

Tata Steel Europe website

Images: tatasteeleurope.com