For Karl-Ulrich Kohler, chief executive and managing director of Tata Steel Europe, it?s still not time for celebrations, yet. After seeing a significant turnaround at the steel giant, the industry veteran, with a doctor?s degree in metallurgy to boot, is now pulling out all the stops to ensure the results of the ?weathering the storm? initiative are sustainable in the long run.
Kohler, who had to take up the challenging job at the helm just eight months after he was appointed COO of the company, told FE, ?We initiated the ?weathering the storm? programme, a basket of actions, where we had taken spontaneous measures to do whatever we can to survive, and we were successful. We now have to think what is our future plan and how we make it more sustainable and successful in our European business.?
Kohler prefers to refer to the company?s targets and strategy to achieve them as a journey ? a journey that should take the company to its desired profitability and cash position in a time frame of five years.
The latest turnaround saw Tata Steel, which reported a consolidated net loss of R2,009 crore for the year ended March 31, 2010, post a profit after tax of R8,983 crore for FY2011, on the back of higher sales and realisations, coupled with cost-cutting measures, initiated in the aftermath of the financial crisis. The idea now is to make this performance sustainable.
Targeting to achieve an Ebidta of $100 per tonne, Tata Steel Europe is also looking to close the gap between its competitors by organising itself in the market.
Tata Steel aims to be more of a solution provider to its partners rather than just be a steel supplier and hence, is focusing on technology leadership and operational excellence. To achieve this, it has already started taking measures by right positioning its cost. The company has recently announced its plan to turn around its long product business in the UK and said it will invest ?400 million in its long product division over a period of five years to move up the value chain, as Kohler does not see the demand for long product reviving to the 2007 levels in the near future. It also announced plans to further rationalise capacity in the UK by mothballing one blast furnace at Scunthrope, which produces long products.
According to Dipesh Dipu, director, consulting ? mining and metals ? Deloitte Touche Tohmatsu India, the?European economic scenario in general and the construction sector in particular seem largely dependent on the approach to resolve the crises facing several countries. ?Success of?investment strategy and capacity building in long products are, therefore, derivatives of the geo-political and economic directions European countries adopt for the short and medium term,? he says.
A recent report by JP Morgan believes that the recent restructuring move by Tata Steel in the UK is the step in the right direction given the weak demand scenario in long products and unlikely improvement in the near term. ?The recent restructure would likely reduce the capacity by further 1 mt and bring the total capacity to 17 mt from the acquisition capacity of 22 mt. (Teesside 4 mt capacity was sold earlier),? it says.
There are still more clouds in the horizon, including fears of a double-dip. But Kohler is prepared. ?We have to work more to drive efficiency in the UK, so that overall, the company has a concerted growth going ahead,? he said.