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Tata Steel in talks with SSAB to sell Dutch unit
This leaves the UK operations, headquartered in Port Talbot in southern Wales, at the mercy of a UK government bailout
Tata Steel is getting ready to split its European operations down the middle as it begins talks with Scandinavian steel sheet manufacturer SSAB Sweden to sell its profitable division in the Netherlands.
This leaves the UK operations, headquartered in Port Talbot in southern Wales, at the mercy of a UK government bailout. Tata Steel acquired both units when it bought out Anglo-Dutch steel Corus Group Plc in 2006 and has spent the next decade and half coping with slowing steel demand in Europe demand, increasing cost of operations and pension settlements with labour unions.
“The company has initiated discussions with SSAB Sweden based on interest received for the potential acquisition of Tata Steel’s Netherland business including Ijmuiden steelworks,” Tata Steel said in a press release. “The company has also commenced discussions with the supervisory board and board of management of Tata Steel Netherlands and the process will move to the next stage including due diligence and stakeholders’ consultations.
The company is committed to deploy proceeds of any strategic restructuring towards additional deleveraging of the balance sheet, it said.
“The company has also initiated the process to separate Tata Steel Netherlands and Tata Steel UK and will pursue separate strategic paths for the Netherlands and UK business in the future,” it added. “Tata Steel continues its dialogue with the UK government on potential measures to safeguard the long-term future of Tata Steel UK and is also reviewing all options to make the business self-sustaining without the need for any funding support from Tata Steel India in the future.”
SSAB Sweden also confirmed on Friday that it is interested in acquiring the IJmuiden steel mill and related downstream assets. Separately, European media has reported that SSAB Sweden is also in discussions to acquire Germany’s thyssenkrupp’s steel business, the second-biggest steel business in Europe by sales. A merger between Tata Steel Europe and thyssenkrupp had been blocked by the European Commission last year.
Tata Steel, the country’s largest private sector steelmaker, is also simplifying its corporate structure back in India.
The company said it is folding 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 be merged into Tata Steel Long products, a process that will take 6-9 months to conclude.
Tata Steel surprised stock markets on Friday when it reported a consolidated net profit of Rs 1635 crore in the September quarter, compared to Bloomberg analysts’ estimates of Rs 29.21 crore. Consolidated revenue stood at Rs 37,154 crore for the quarter, rising 7.44% from the Rs 34,579 crore it reported in the year-ago period.
The company produced 6.73 million tonnes of steel in the September quarter, bouncing back to nearly 100% capacity utilisation in the three-month period after covid-related lockdowns affected operations both in India and abroad in the April-June period.
Consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) surged 60% year-on-year to Rs 6,217 crore while Ebitda/tonne rose nearly 41% to Rs 8396 crore, compared to Rs 5963 crore in the year-ago quarter.
The company said its deleveraging plans are on track as it reduced net debt by $1 billion in the first half of the fiscal.
“Tata Steel has delivered strong results in India with broad-based, market-leading volume growth and strong cashflow generation. There has also been a significant improvement in product mix towards domestic sales and higher value-added products and a sharp reduction in costs,” TV Narendran, CEO and Managing Director, said.
“In Europe, though the overall environment remains challenging and recovery is more gradual, there has been an improvement in volumes and sales mix. We are continuing our discussions with the UK Government regarding the future strategy of our UK business”
