Ousted Tata Sons Chairman Cyrus Mistry has cautioned that a structural solution needs to be explored in the long term for the bleeding UK operations of group firm, Tata Chemicals.
In his representation to the shareholders ahead of an EGM on December 23 moved by Tata Sons to remove him as director of the firm, Mistry who is still the chairman of Tata Chemicals, said turnaround plans for the UK had necessitated a "large write off".
"The turnaround plan for the UK involved commissioning a steam turbine to reduce energy costs, closing the Winnington plant, refining the hedging policy and exploring sale of excess land assets," he wrote.
Mistry further said: "All of this also necessitated a large write off. In the long term, a structural solution needs to be explored."
Tata Chemicals had acquired European company Brunner Monde with plants in the UK as part of the Magadi acquisitions.
"However, these had high costs of production, particularly high energy costs and low productivity," he said.
According to the company's Annual Report for 2015-16, Tata Chemicals Europe had an overall turnover of GBP 166.82 million (Rs 1,647.21 crore) as against GBP 164.84 million (Rs 1,624.45 crore) in the previous year. It had a loss after tax of GBP 2.87 million (Rs 28.34 crore) against profit of GBP 0.21 million (Rs 2.07 crore) in the previous year.
Tata Chemicals had stated that its European operations face key risks related to volatility of exchange rates and energy costs, and increasingly stringent environmental EU norms.
Mistry also said that a number of decisions were taken in Tata Chemicals' new business areas that turned out to be challenged.
"...And we needed to confront reality. These included the biofuel operations, JOil in Singapore and Grown Energy Zambeze in Mozambique. In addition, the low cost water purifiers (Swachh) had been bleeding since inception," Mistry said.
Tata Chemicals is engaged in many businesses like soda ash, salt, fertilisers, pulses and spices.
