After being in the red in 2009-10 and two quarters last year, Tata Steel Europe, which managed to make a sizeable profit in 2010-11, will help Tata Steel Thailand to come back to profitability with its speciality steel.
Outlining the strategy, Tata Steel CFO Koushik Chatterjee said, "The turnaround strategy is to introduce new products in Thailand. We are bringing in speciality steel of Tata Steel Europe, which produces high-end auto steel, to Tata Steel Thailand."
Tata Steel in a statement said, "Projected growth for the key steel consuming sectors (in Thailand) are — construction: four per cent, automobile: 13 per cent and manufacturing: six per cent."
Tata Steel Europe had reported a net loss of $1,683 in 2009-10 and a loss of $192 million for two quarters the following financial year. It, however, ended the year with a $374 million profit. A major contributor to this turnaround was its effort to restructure product portfolio, combined with shutting of plants and resizing of manpower.
The company also sold a part of its Teesside Cast Products (TCP) plant to Sahaviriya Steel Industries (SSI), Thailand, for $469 million and shut down Living Solutions in Shotton, Wales. At present, Tata Steel Europe is restructuring its long steel business and has announced 1,500 more jobs cut at the Scunthorpe and TCP sites.
The company had 40,700 employees as on March 31, 2009, which as on March 31, 2011, was 32,900. On May 20, the company said it would restructure its long products business to target high-value markets and introduce greater flexibility into its costs and operations.
Chatterjee said Tata Steel Europe and Thailand have started working jointly on the project on one site where the company has 0.5-million tonnes capacity. "They are working together to reduce costs and increase productivity," he said.
Total steel production at Tata Steel Thailand is 1.2 million tonnes (mt) per year whereas the total capacity is 1.5 mt. Chatterjee said the company would now change the product mix and produce 0.5 mt of speciality steel, the technology and expertise of which is being provided by its European subsidiary. The company has set a 1.5-mt year target to turn around the company.
"The company has to start creating value in 18 months," he said. Tata Steel hasn't yet decided on the kinds of investments to be made in Thailand for the proposed strategy.
Tata Steel Thailand has been present in the long steel segment till now and has been producing re-bars and wire-rods. Close to one-third of its capacity will now be used in making specialty steel, which is a higher margin business.
The subsidiary has been making losses quarter after quarter and posted a net loss of Baht 976 million for the year ended March. The company, in 2009, reported a net loss of Baht 54 million in 2009-10. The slump in demand due to the unfavourable political conditions have been a cause of concern for Tata Steel. Managing Director Hemant Nerurkar admitted during the company's annual results on May 25 that the performance of its Southeast Asian company hasn't been good. He said one of the blast furnaces in Thailand had some issues in the first half of the year, which is now resolved and it is doing well.
