To explore options for portfolio restructuring including divestment of Tata Steel UK
Tata Steel announced that the Board of Directors reviewed the recent performance of the European business of the Company, more specifically, of Tata Steel UK.It noted with deep concern the deteriorating financial performance of the UK subsidiary in the last twelve months. While the global steel demand, especially in developed markets like Europe has remained muted following the financial crisis of 2008, trading conditions in the UK and Europe have rapidly deteriorated more recently, due to structural factors including global oversupply of steel, significant increase in third country exports into Europe, high manufacturing costs, continued weakness in domestic market demand in steel and a volatile currency. These factors are likely to continue into the future and have significantly impacted the long term competitive position of the UK operations in spite of several initiatives undertaken by the management and the workers of the business in recent years. Even under the these adverse market conditions, the Tata Group has extended substantial financial support to the UK business and suffered asset impairment of more than 2 billion in the last 5 years.
The Tata Steel Board also reviewed the proposed restructuring and transformation plan for Strip Products UK, prepared by the European subsidiary. Based on the review conducted, Tata Steel Board came to the unanimous conclusion that the plan is unaffordable, requires funding support in the next two years in addition to significant capital commitments over the long term, the assumptions behind it are inherently very risky, and its likelihood of delivery is highly uncertain. Therefore, the Board concluded that it would not be able to support the investment necessary to proceed with the proposed Strip Products UK Transformation Plan.
Following the strategic view taken by the Tata Steel Board regarding the UK business, it has advised the Board of its European holding company i.e. Tata Steel Europe, to explore all options for portfolio restructuring including potential divestment of Tata Steel UK, in whole or parts.
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