Tata Steel said to consider sale of some UK, Australia assets

  Tata Steel Ltd, India’s biggest producer, is considering selling some of its UK assets as a weakening economy erodes demand leaving factories underutilized, two people with knowledge of the matter said.

Selling the UK units, acquired as part of a $12 billion takeover of Corus Group Plc six years ago, would help Tata cut some of its debt, the people said, asking not to be identified as the information is private.It is also considering selling part of its Australian operations, another person said. The people didn’t specify which of the assets Tata Steel may sell.

Tata Steel has three major assets in the UK, with a capacity of 10.6 million tonnes annually, including a mill at Port Talbot steelworks in West Glamorgan in Wales and a plant at Scunthorpe steelworks, in South Humberside, England, according to its latest annual report.

Steelmakers in Europe, where Tata Steel generates two-thirds of its output, are grappling with excess capacity, falling prices and rising operating costs. The region has capacity to make about 210 million tonnes of steel a year, while demand in a normal market is 150 million to 160 million tonnes, according to industry lobby group Eurofer.

Charudatta Deshpande, a spokesman for Tata Steel, declined to comment on a potential sale of the steel assets in an e-mailed reply to questions. Tata Steel shares have dropped about 33% in the past year, leaving it with a market value of about $5.5 billion. The benchmark S&P BSE Sensex has gained about 7% in the same period.

Debt burden

Tata Steel needs to redeem a total of $5.5 billion in bonds and loans by November 2016, according to data compiled by Bloomberg. Most of the group’s net debt of $10.5 billion was taken to fund the Corus acquisition.

The alloy maker’s losses widened to Rs.763 crore in the three months ended 31 December from Rs.603 crore a year earlier, the company said on 13 February.

The company in November said it plans to restructure its UK business, cutting 900 jobs and closing 12 sites as the steel industry battles overcapacity and slumping demand. The cuts will include the loss of 580 jobs and the closure of its Tafarnaubach and Cross Keys plants in South Wales, the company said. Further jobs will go in England’s Yorkshire, West Midlands and Teesside regions.

Tata Steel in February 2011 sold its Teesside Cast Products unit in northeast England, part of Corus, to Thailand’s Sahaviriya Steel Industries Pcl for $469 million. The acquisition included coke ovens, power generation facilities and the Redcar Blast Furnace.

In December that year, the company said it mothballed the Llanwern hot strip mill in Newport, UK, cutting 115 jobs. The mill will remain shut until the UK economy and steel demand justify a restart, it said then. Last November, it announced measures to restart the mill.

The company closed its acquisition of Corus in April 2007, renaming the company Tata Steel Europe Ltd.

 

AMIT KUMAR SINGH 

PGDM -2ND SEM