In a bid to improve operating profit or earnings before interest, tax, depreciation and amortisation by ?130 million (around R1,014 crore) for fiscal 2012, Tata Steel Europe has decided to slash 14%of jobs.
The company will slash 933 jobs, pare down energy cost by investing in blast furnace and accessing cheaper coking coal from its mines in Mozambique, Tata Steel told analysts. A presentation to analysts was updated on the company website on Monday.
The company will reduce its workforce by half, from 11,600, by March 2012, in the construction steel division. It had already reduced its workforce in the construction steel division by 7% in 2011 and will continue in 2012.
?Manpower is to be further reduced to 5,750 by the end of March 2012 as the de-manning process progresses,? the company told analysts.
?The turnaround programme in our long products business is well on course for completion by the end of the financial year, as planned,? Tata Steel Europe?s managing director and chief executive officer Karl Ulrich Kohler had said after announcing the company?s fiscal third quarter result on February 9.
?We haven?t yet identified the plant locations for the job cuts and further announcements will be made at a later date,? a spokesperson for Tata Steel Europe told FE.
The European operation has been a drag on Tata Steel?s finance. Tata Steel Europe, which reported an operating loss of R732 crore for the third quarter of the financial year, dragged down the parent to a loss of R603 crore as demand from construction companies slowed down.
?The overall outlook for the construction sector in 2012-2013 remains rather fragile,? said Eurofer, a steel industry panel in Europe which represents steel producers in the EU.
?A key factor is the negative impact of austerity programmes on public construction investment in most EU countries,? the panel had said in its outlook released on February 3. “Particularly, the civil engineering will bear the brunt of national budget and deficit reduction plans.?
?In addition, the outlook for private investment in construction had deteriorated recently due to the uncertain economic outlook and more difficult access to project funding,? the report added. According to Eurofer, growth in long products consumption in Europe slowed down to 1% during the fiscal third quarter.
?Looking ahead to 2012, the situation in Europe continues to be a concern,? Lakshmi Mittal, chief executive officer of ArcelorMittal, had said on February 7 after announcing the company fiscal 2011 results.
Indian research analysts are more bullish on Tata Steel Europe.
?We believe the worst is over for Tata Steel Europe,? said Bikash Bhalotia, an analyst at PINC research, a domestic broker.
