Tata Steel will focus on making its operations self-sustaining in the UK post-Brexit, the company’s management reported, even as it is currently in negotiations with SSAB Sweden to wrap up the rest of its European business in the Netherlands. The company has said that it is in talks with the UK government to support loss-making operations at its 3 million tonnes per annum (mtpa) plant in Port Talbot, southern Wales.
Tata Steel reported a share price surge of 7 percent on the Q2 earnings. After a year-long slump in operational performance, Tata Steel’s quick bounce-back surprised investors last week by reporting a consolidated net profit of ₹1,635 crore in the September quarter, strongly backed by Indian demand for the metal. Consolidated revenue stood at ₹37,154 crore for the quarter, pacing up 7.4% year-on-year. Consolidated Ebitda (earnings before interest, tax, depreciation and amortization) soared up by 60% year-on-year to ₹6,217 crore while Ebitda/tonne rose nearly 41% to ₹8,396 from ₹5,963 in the year-ago quarter.
Tata Steel on Friday said it will split its subsidiary Tata Steel Europe in two so that it can put up its profitable division in the Netherlands to Scandinavian steel sheet maker SSAB Sweden for sale. The deal is expected to close in six-nine months. Tata Steel has about 7.5 mtpa of steel-making capacity at its IJmuiden Steelworks in the Netherlands. Tata Steel acquired both units in 2006 when it took control of Anglo-Dutch steelmaker Corus Group Plc.
Tata Steel’s shares have risen by 33.24 percent this year. Tata Steel is also simplifying its corporate structure in India, classifying listed and unlisted subsidiaries into four clusters—long products, downstream, mining and utilities and infrastructure. Towards this end, Tata Metaliks and Indian Steel and Wire Products will culminate together into Tata Steel Long Products, a process that will require six-nine months, depending on regulatory and shareholder consent and another six months before synergies from the new structure flow in.
Koushik Chatterjee, executive director and chief financial officer, Tata Steel, said that the sale to SSAB is expected to complete by end-December, after which the company will begin negotiations on the terms and commercial value of the transaction. While he declined to give a possible valuation for the acquisition, Narendran said all proceeds will be diverted towards repaying part of the 1.7 billion euros of long-term debt on Tata Steel Europe’s balance sheet.
