News: Tata Steel returns to profit in Europe
Tata Steel Ltd reported its first profit in five quarters, largely driven by strong performance from Indian operations, but with the European operation back in profit.
The European operations posted £74m of earnings before tax (EBITDA) in the quarter ended December 31 2016. This compares with a £90m loss during the same period last year.
European EBITDA had turned around from negative 6% in the previous year to positive margin of 5% during this quarter. Tata said that the financial performance reflects strong underlying operating performance across the group inspite of a seasonally slow quarter in Europe.
Overall, Tata reported a consolidated net profit of £27.8m for the three months, an increase on the big losses of last year.
Spearheaded by a focus on high value sectors such as aerospace and oil & gas at the South Yorkshire specialist steel sites, the proportion of total sales from differentiated products in Europe has risen to over 35% and their value rising by almost 30% year on year.
Hans Fischer, MD & CEO of Tata Steel in Europe, said: "Our European strategy continues to be focused on developing differentiated products and services which improve our customers' competitiveness. Sales of differentiated products were +13% higher and their value-add almost 30% higher than a year ago, with stronger sales in the automotive and construction sectors.
"This helped us to achieve an EBITDA in the third quarter of Rs. 610 crore, though this was lower than the sequential quarter due to higher raw material and energy costs. Our third-quarter EBITDA result was significantly better than the loss recorded in the previous year partly due to better market conditions and the weakness of the pound relative to the Euro.
"We are continuing to focus on improving our competitive performance in the context of the global supply-demand imbalance which held deliveries steady from European mills in the nine months to September despite growth in EU demand."
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Last year, Tata Steel concluded that it was exploring all options for portfolio restructuring including the potential sale of Tata Steel UK, in whole or in parts. Following a board meeting in July, the steelmaker decided on a separate process for the potential sale of its Speciality Steels business, which until recently employed over 2,000 people at sites like Aldwarke in Rotherham and Stocksbridge in Sheffield.
Liberty House and Tata Steel announced in November that a letter of intent had been signed and that they expect the acquisition of the speciality steel business in its entirety, including the two businesses in Rotherham (at Aldwarke and Brinsworth Strip Mill), to complete early in the first quarter of 2017.
Tata Steel also reached an agreement with the trade unions to progress towards the closure of its defined benefit pension scheme to future accrual, seen as important step towards a more sustainable future. Ballot on the scheme is currently open with unions backing the proposals.
Koushik Chatterjee, group executive director (Finance and Corporate) at Tata Steel said: "The strategic initiatives in the UK on the pensions continue to be an important priority for the Company and we welcome the Unions recommendation to its members to support the ballot process that is currently on to close the BSPS to future accruals. This is part of the several steps being undertaken to make the UK business more sustainable in the future. We continue to be deeply engaged with the British Steel Pension Trustees and the Regulator towards developing a structural solution for the UK pensions in the coming months."
Tata Steel Europe website
Images: Tata Steel
The European operations posted £74m of earnings before tax (EBITDA) in the quarter ended December 31 2016. This compares with a £90m loss during the same period last year.
European EBITDA had turned around from negative 6% in the previous year to positive margin of 5% during this quarter. Tata said that the financial performance reflects strong underlying operating performance across the group inspite of a seasonally slow quarter in Europe.
Overall, Tata reported a consolidated net profit of £27.8m for the three months, an increase on the big losses of last year.
Spearheaded by a focus on high value sectors such as aerospace and oil & gas at the South Yorkshire specialist steel sites, the proportion of total sales from differentiated products in Europe has risen to over 35% and their value rising by almost 30% year on year.
Hans Fischer, MD & CEO of Tata Steel in Europe, said: "Our European strategy continues to be focused on developing differentiated products and services which improve our customers' competitiveness. Sales of differentiated products were +13% higher and their value-add almost 30% higher than a year ago, with stronger sales in the automotive and construction sectors.
"This helped us to achieve an EBITDA in the third quarter of Rs. 610 crore, though this was lower than the sequential quarter due to higher raw material and energy costs. Our third-quarter EBITDA result was significantly better than the loss recorded in the previous year partly due to better market conditions and the weakness of the pound relative to the Euro.
"We are continuing to focus on improving our competitive performance in the context of the global supply-demand imbalance which held deliveries steady from European mills in the nine months to September despite growth in EU demand."
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Last year, Tata Steel concluded that it was exploring all options for portfolio restructuring including the potential sale of Tata Steel UK, in whole or in parts. Following a board meeting in July, the steelmaker decided on a separate process for the potential sale of its Speciality Steels business, which until recently employed over 2,000 people at sites like Aldwarke in Rotherham and Stocksbridge in Sheffield.
Liberty House and Tata Steel announced in November that a letter of intent had been signed and that they expect the acquisition of the speciality steel business in its entirety, including the two businesses in Rotherham (at Aldwarke and Brinsworth Strip Mill), to complete early in the first quarter of 2017.
Tata Steel also reached an agreement with the trade unions to progress towards the closure of its defined benefit pension scheme to future accrual, seen as important step towards a more sustainable future. Ballot on the scheme is currently open with unions backing the proposals.
Koushik Chatterjee, group executive director (Finance and Corporate) at Tata Steel said: "The strategic initiatives in the UK on the pensions continue to be an important priority for the Company and we welcome the Unions recommendation to its members to support the ballot process that is currently on to close the BSPS to future accruals. This is part of the several steps being undertaken to make the UK business more sustainable in the future. We continue to be deeply engaged with the British Steel Pension Trustees and the Regulator towards developing a structural solution for the UK pensions in the coming months."
Tata Steel Europe website
Images: Tata Steel
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