Mumbai: Tata Steel Ltd’s struggling UK unit is expected to start generating operating profit in the second half of this financial year, according to managing director T.V. Narendra. This will happen once the blast furnaces are shut down and the unit starts processing crude steel imported from India and the Netherlands.
In an interview, Narendran also mentioned that the company’s Dutch unit, which was also in the red in the March quarter, will turn an operating profit in the current quarter as full-scale production has resumed after maintenance work.
The profitability of these two European units will positively impact Tata Steel’s consolidated financials, after their losses affected margins in the March quarter despite strong performance in India.
Narendran explained that Tata Steel’s Dutch unit faced losses last fiscal year due to maintenance work on one of its blast furnaces. However, with the second furnace operational since February, it is expected to be Ebitda-positive moving forward.
The UK unit of Tata Steel, which has been facing losses due to high input costs in the British market, will be transitioning to electric arc furnaces by shutting down blast furnaces. In the meantime, the unit will rely on imported crude steel from India and the Netherlands to operate its downstream processing units, generating operating profit.
Additionally, Tata Steel secured approval to invest $2.11 billion in its Singapore unit to shift some debt from overseas subsidiaries to the Indian unit, benefiting from tax advantages as most profits are made in India.
Narendran also expressed concern about increasing steel imports into India, particularly from Vietnam, where Chinese mills might be routing products to avoid duties. Unfairly priced imports could negatively impact the industry, which has been investing heavily in creating new capacity.
