Tata Steel sees rebound at home, another tough year in Europe
21 May 2015
Tata Steel Ltd said it expected a rebound in steel demand in its home market but another difficult year in Europe, after reporting a $889 million quarterly loss inflated by a hefty impairment on its UK business.
The consolidated fourth quarter loss from Tata Steel, Europe's second-largest steelmaker, compares with a net profit of 10.36 billion rupees ($163 million)a year earlier. Net sales dropped more than a fifth, hit by weak steel prices.
The combination of a slowdown in China and a devaluation of the Russian rouble has led to a surge in cheaper steel products on international markets over the past two quarters, pressuring steel prices and squeezing Tata Steel's margins in Europe and India, at a time when demand is also still lacklustre.
The company has been forced to slash costs and jobs following its ill-timed entry into Europe, where steel demand has languished after the financial crisis and clients have turned to cheap imports, which Tata said remained a worry.
"The fiscal (year) 2016 looks to be another tough year for European steel," Karl-Ulrich Köhler, chief executive of Tata Steel's European operations told reporters.
"Though demand is expected to resume a gross 1.8 pct this calendar year, we are expecting the situation in China to continue to lead to margin pressure on European producers," he said, referring to rising purchases from China.
Tata Steel last week said it would take a $785 million non-cash charge in the fourth quarter, mainly related to its loss-making European long products unit, which serves the construction and engineering industries and employs 6,500 people in Britain and elsewhere on the continent.
The company announced in October last year that it was in talks with Geneva-based Klesch Group to sell that unit, in order to focus on higher value products, like flat steel for the auto industry.
Group Executive Director Koushik Chatterjee said the discussions were ongoing, but quashed hopes of an imminent announcement: "We hope to look at a final picture of the transaction emerging over the next couple of months."
Tata Steel has been focusing on shifting to higher-margin speciality steel to propel a turnaround, more than seven years after it entered the continent through the $13 billion acquisition of Corus, formerly British Steel, in 2007.
In its home Indian market, Tata said it was "hopeful" that steel demand would rebound this year on the back of higher investments across key industrial and infrastructure sectors.
A string of mining stoppages have led to a number of Tata Steel's iron ore mines in India being shut during the past year.