Tata Steel, the world?s eighth largest steel manufacturer and India?s biggest producer, is now looking at reducing exposure to the slab market, after it decided that steel production at the Corus plant at Teesside will be stopped within a week, Kirby Adams, Corus chief executive and MD said in his third quarter results presentation.
The company has already taken an EBIT loss of $222 million until September 2009 for these operations and will be making about 1,600 redundancies.
?The expected costs involved are $80 million and we could see this provision being made in the fourth quarter,? said a recent report by Macquarie.
The group is focusing on reducing losses as it aims to reduce working capital and improve customer service. The Tata Steel board has approved $ 114 million expenditure for this supply chain transformation.
?The annual benefit is projected to be $ 100 million per annum with one-off cash benefits over $300 million,? Adams said. Tata Steel?s European unit has year to date (YTD) made savings of about $1.2 billion and is setting up a single global strategic marketing unit and developing an industry focused approach targeting eight key market sectors. ?The company?s Fit-for-Future headcount reduction will total around 5,600 by end of March this year,? said Kirby. He added, ?We are finally coming out of recession in Europe but growth rates are barely 1 to 2 %.?
Tata Steel shares on Wednesday were up 6.37% to close at Rs 584.90 on the Bombay Stock Exchange. Expectations of revival in global demand boosting earnings in the near future have helped the stock prices to surge.
With focus on reducing inventories at Tata Steel Europe, it expects EBITDA improvement trend to continue into Q4 and FY 11 as more cost reduction benefits are realised. Moreover, tight control of cash continues as a priority for the company. ?Industrial capacity utilisation has hit a low of just around 70% in the US and Europe. It is slowly coming out of that, however we have a lot of unutilised capacity in the manufacturing and steel sector in Europe that we are dealing with,? Kirby said.