Ghost of Corus, Tata Steel UK, nearing self-sufficiency, says CEO TV Narendran

Tata Steel UK (TSUK), which struggled with high input costs, mounting losses and inability to service loans on its own, is likely to achieve financial self-sufficiency in the coming quarters. TV Narendran, managing director and CEO, Tata Steel said the Netherlands business is already self-sufficient and the U.K. business is pretty much close to it.

Tata Steel Europe (TSE), which includes the U.K. and Netherlands businesses, has posted positive earnings before interest, tax, depreciation and amortisation (EBITDA) of ₹3,340 crore in the second quarter ending September 2021. It had posted an EBITDA of ₹1,533 crore in the first quarter. It recorded an EBITDA per tonne of ₹15,609, compared to a negative EBITDA per tonne of ₹2,036 a year back.

The process of transforming European business has been continuing for quite some time, said Narendran. “We separated the U.K. and the Netherlands units and running them as two businesses for sharper focus. In fact, the challenges are different in the U.K. and Netherlands,” he said.

Tata Steel is making both the units self-sufficient so that they will not be dependent on India for financial support, he said. “The Netherlands business has always been self-sufficient and will continue to be so. The U.K. business is pretty much close to self-sufficiency. It is a great work of the team,” he added.

Tatas made all efforts to make European business work. It idled blast furnaces, cut jobs and sold assets in the past. In 2016, TSE sold off its Scunthorpe steel plant to Greybull Capital for one pound sterling. It represented roughly one-fourth of Tata Steel's UK business. Tata Steel UK was reportedly losing $1 million a day in 2016, and losses were accumulating faster than the profitable Indian operations could clear them.

TSE, formerly Corus Plc, made operational losses in most of the last 14 financial years since Tata Steel acquired it for $12 billion in 2007. It had been in discussions with Thyssenkrupp for a merger. But, the European Union's (EU) anti-trust authority blocked the merger, saying the deal would have pushed up prices and reduced competition. Later Tatas initiated talks with Sweden's SSAB to sell the IJmuiden steel plant, Netherlands, but it failed due to environmental concerns.

“A lot of efficiency measures have been taken to turn around the U.K. business. The U.K. numbers are a bit positive and hopefully by the end of the year, we’ll be cash positive,” said the CEO. It will help the business to stand on its own, he added.

The European steel prices continue to be resilient because of supply constraints. However, the high power and energy costs still remain major challenges in the U.K.