 "Tata Steel's Europe business heads for rough weather")
Tata Steel's European business could face difficulty in the coming quarters with raw material prices rising and Chinese exports continuing to hurt markets globally.
Brokerage firms expect the operations to witness tonnage as well as price pressure, which could impact margins.
Iron ore prices had been volatile in the past few months and coking coal prices had surged almost 60 per cent since the beginning of August, Tata Steel said in its earnings statement last week.
"The gap between steel product prices and raw material prices is narrowing. Tata Steel's European operations may witness volatility in the coming quarters," said an analyst with a local brokerage firm.
Tata Steel's European business clocked earnings before interest, taxes, depreciation and amortisation (Ebitda) of Rs 856 crore, contributing 26 per cent to the company's consolidated earnings of Rs 3,270 crore in the quarter ended June.
"The UK has become competitive after the referendum. But painful restructuring will need to be done internally to be sustainable in this business climate," explained Koushik Chatterjee, group executive director, finance and corporate, Tata Steel. Tata Steel has undergone several rounds of job cuts in the UK in order to keep its business sustainable.
"Restructuring need not necessarily mean slashing jobs. Working on improving the product mix and doing away with market share in certain products are some of the steps that may be needed," Chatterjee added.
On a consolidated basis, however, Tata Steel's employee cost has barely moved. Tata Steel's employee cost peaked at Rs 21,407 crore in 2014-15 before the company took steps to lower it to Rs 19,966 crore in 2015-16. (see chart)
In March, Tata Steel announced plans to sell the UK operations. Though the company did manage to sell the loss-making long products division to Greybull Capital, the balance 5.5 million tonnes at Port Talbot and Rotterdam continue to be with the company.
Tata Steel has shortlisted two bidders for its speciality steel business and the pipe mills in Hartlepool and is expected to decide by the end of this month.
Brokerage firms expect the operations to witness tonnage as well as price pressure, which could impact margins.
Iron ore prices had been volatile in the past few months and coking coal prices had surged almost 60 per cent since the beginning of August, Tata Steel said in its earnings statement last week.
"The gap between steel product prices and raw material prices is narrowing. Tata Steel's European operations may witness volatility in the coming quarters," said an analyst with a local brokerage firm.
Tata Steel's European business clocked earnings before interest, taxes, depreciation and amortisation (Ebitda) of Rs 856 crore, contributing 26 per cent to the company's consolidated earnings of Rs 3,270 crore in the quarter ended June.
"The UK has become competitive after the referendum. But painful restructuring will need to be done internally to be sustainable in this business climate," explained Koushik Chatterjee, group executive director, finance and corporate, Tata Steel. Tata Steel has undergone several rounds of job cuts in the UK in order to keep its business sustainable.
"Restructuring need not necessarily mean slashing jobs. Working on improving the product mix and doing away with market share in certain products are some of the steps that may be needed," Chatterjee added.
On a consolidated basis, however, Tata Steel's employee cost has barely moved. Tata Steel's employee cost peaked at Rs 21,407 crore in 2014-15 before the company took steps to lower it to Rs 19,966 crore in 2015-16. (see chart)
In March, Tata Steel announced plans to sell the UK operations. Though the company did manage to sell the loss-making long products division to Greybull Capital, the balance 5.5 million tonnes at Port Talbot and Rotterdam continue to be with the company.
Tata Steel has shortlisted two bidders for its speciality steel business and the pipe mills in Hartlepool and is expected to decide by the end of this month.