Are Tata Steel's Europe operations close to a turnaround?
Tata Steel Ltd will start generating operating profit from the latter half of this financial year, managing director T.V. Narendran said, once its blast furnaces are shut and the unit begins processing crude steel imported from India and the Netherlands. The company’s Dutch unit, also in the red in the March quarter, will turn an operating profit in the current quarter as full-scale production has resumed after lengthy maintenance work, Narendran said in an interview.
The two European units turning profitable will aid Tata Steel’s consolidated financials, after their losses dragged the company’s margins down in the March quarter despite robust performance in India. Ebitda, a measure of profitability, stands for earnings before interest, tax, depreciation and amortization. The two European units reported a combined Ebitda loss of almost ₹650 crore in the January-March period.
Narendran said that Tata Steel’s Dutch unit turning a loss last fiscal year was an exception on account of one of its two blast furnaces being shut for maintenance in the better part of the year. "Now that the second blast furnace is back since February, this quarter onwards, it will be Ebitda-positive," he said. Tata Steel's UK unit, which has been making losses due to high input costs inherent to the British market, is shutting its blast furnaces to make way for electric arc furnaces.
In the interim, the company will rely on imported crude steel from Tata Steel’s Indian and Dutch mills for three years to run its downstream processing units that make value-added steel. These operations will generate an operating profit, Narendran said. To be sure, the UK unit could slip into the red as it will be booking some expenses over the next two years due to
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