£400 m to be invested in Tata Steel Europe this fiscal

Tata Steel is looking to invest £400 million in its European unit during the current financial year amid subdued demand in the European continent, a top company official said today.

“We will be investing £400 million in 2012-13. We plan to invest to improve performance of the operations in Europe and in areas which can provide quick returns,” Tata Steel’s Managing Director, H.M. Nerurkar, said on the sidelines of a CII conference.

He added that investments in Tata Steel Europe will be partly funded from internal resources, though added that it has not yet been finalised.

Revenues of Tata Steel Europe (formerly known as Corus), which was acquired in 2007, have been hit by financial crisis in the Eurozone economies, which has led to subdued demand for last several quarters.

In April-June quarter, Tata Steel Europe had reported a decline of over 67% in its core profits (earnings before interest, taxes, depreciation, and amortisation) to $111 million in as compared to $343 million a year ago. Besides, its total steel shipments had declined by 6.20% to 5.68 million tonnes in the June quarter.

Nerurkar, however, expressed hope that steps being taken by governments in Euro zone economies to mitigate the financial crisis may help in improving the demand in the near term.

The Tata Steel Managing Director also said that recent measures taken by the Indian government to push economic reforms will help the domestic industry.

“We welcome it. Hopefully, more reforms measures will be taken, particularly in infrastructure sector,” he said.

Tata Steel shares were being traded at Rs 410.10 a piece on the BSE at 2.10 p.m., up 1.76% from the previous close.

Meanwhile Tata Steel Europe may cut more jobs in future due to the global slowdown. This was stated by the Chief Executive Officer and Managing Director of Tata Steel Europe, Karl Ulrich Kohler, on the sidelines of the World Steel Conference.

He said job cuts will be a process that goes on. “You have definitely to expect further corrections,” Kohler said when asked about the company’s earlier announcement that it would cut 1,500 jobs in Europe.

Kohler said the company is looking for newer areas for exports, to make up for the subdued demand in Europe. “We will try to make Tata Steel Europe fit for a much worse condition, as I said for all-weather,” he added.

He said Tata Steel Europe is trying to export “a bit more” as demand has fallen in Europe.

“Everything that is coastal is of large interest to us, so we are looking at North African regions, we are looking at Mediterranean area, Africa. We are also trying to complement our offerings in India with some special products from Europe which we don’t have in India,” he added. H. M. Nerurkar, Tata Steel Managing Director, said it will be difficult to meet the country’s capacity target of 200 million in 2020. “Our policy on raw material, particularly on iron ore, is not clear. Unless this happens, it is not going to enhance capacity. That’s a major issue,” Nerurkar said. He added that the work of the Kalinga Nagar plant in Orissa is going on smoothly.

Short Range Outlook

The Short Range Outlook of the World Steel Association for 2012 and 2013 forecasts that global steel use will increase by 2.1%in 2012, which is much lower than the 6.2% growth achieved in 2011.

The SRO was released on the concluding day of the 46th annual World Steel Conference. The Chairman of the Worldsteel Economics Committee, Hans Jürgen Kerkhoff, said the economic situation, particularly in Europe, is likely to deteriorate further.

The report said due to both unfavourable domestic and external economic conditions, India’s steel demand growth is projected to slow down to 5.5% in 2012 and 5% in 2013. “Apparent steel use will reach 73.6 mt in 2012 and 77.3 mt in 2013,” it added.

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