Market slowdown forces Tata Steel to sell Long Products Europe business by March 2016.
New Delhi, India | Red Newswire | Sun, Nov 8, 2015 02:01 PM IST | Source: PTI.
Forced to go for more restructuring of its UK business due to a “challenging marketplace”, Tata Steel will sell its Long Products Europe business by the end of the current financial year.
The long products business in Europe manufactures plates, sections, wire rod and semi-finished steel for different markets, including construction, ship-building & engineering, energy and wire drawers. These products are made at its mills in Teesside and Scunthorpe in the UK.
When asked about the long products business, Tata Steel Europe Chief Executive Karl Koehler last week said: “Our stated strategy stays unchanged. Long products will not have a future within Tata Steel.
“And that means we will come to one of the possible options which I don’t need to spell out and decisions about that have to happen within the time-frame of this fiscal year, to say the very least.”
The steel maker, which reported Rs 16,948 crore turnover from Europe in September quarter, said a “sharp deterioration” in market conditions impacted performance in the UK with an EBITDA loss of Rs 238 crore.
On Europe, Koehler, in an analyst call, said operating result turned negative this year due to huge challenges that the global steel industry is facing. In the UK, the situation has exacerbated on account of unhelpful exchange rates and regulatory costs, which is destroying competitiveness.
Announcing the results for July-September quarter of 2015-16 fiscal, Tata Steel had said in a statement: “We are also continuing to assess all the strategic options for our Long Products business.”
In August, the Mumbai-based steel giant had said that talks with Switzerland-based Klesch Group for sale of its Long Products Europe business have been discontinued.
The firm had been in talks with Klesch following signing of a Memorandum of Understanding (MoU) in October 2014.
On the UK operations, Tata Steel said the region is facing a “structurally challenging environment” of weak domestic manufacturing demand, surging imports, a strong pound and steep regulatory and business costs.
This forced Tata Steel UK, an indirect subsidiary of Tata Steel, to take a non cash impairment charge of the Strip and other businesses in the UK of Rs 8,669 crore.
It has already made three restructuring announcements of its business in the UK since July this year.
European market conditions, particularly in the UK, worsened in the September quarter as the country continues to witness a surge in imports and declining competitiveness of the manufacturing sector, Tata Steel said.
“In response to the above market and business conditions in the UK, the company continues to restructure its UK business and has recently announced the closure of some of the sites in the UK,” it said in the statement.