Tata steel returns to profit in UK and Europe. Tata’s European steel business – which includes its sprawling Port Talbot site – is back in profit.
A combination of operational improvements, currency movements, lower energy costs and stronger steel prices helped the Indian-owned company’s European arm deliver £74m of earnings before interest, tax, depreciation and amortisation in the third quarter.
This compares with a £90m loss during the same period last year, when the steel industry was deep in crisis.
Turnover in the three months dipped by £100m to £1.5bn compared with last time round, while deliveries of steel fell 13pc to 2.4m tonnes.
The figures do not account for the sale of the company’s Scunthorpe-based long products business to turnaround fund Greybull last year for a token £1, with the business later renamed as British Steel.
Tata’s European business, which has about 23,000 staff of which 10,000 are in the UK, is looking at further disposals. It has signed a letter of intent to sell its South Yorkshire-based specialty steel business to industrialist Sanjeev Gupta’s fast-growing commodities and industrials group Liberty.
Talks first announced last summer about merging some of Tata’s operations with German peer ThyssenKrupp are still ongoing. However, the complexity of a deal with a close rival is understood to mean they are progressing slowly.
Hans Fischer, chief executive of Tata Steel Europe, said a focus on higher value products was partly behind the return to profit and that the company continues to focus on these as part of its ongoing strategy.
The massive £15bn pension scheme attached to Tata’s British business continues to be a burden, however. Last month the fund’s trustees warned members it could report a £1bn deficit at its valuation in March, which Tata would have to pay into to plug.
In a letter to the scheme’s 135,000 members the trustees said that Tata had “confirmed it cannot afford to make deficit recovery contributions and indicated that without action, the likely outcome is that it would become insolvent”.
Members are currently voting on whether to back a deal which would close the pension to future accruals and could start the process for it to be spun off, proposals which are backed by unions.
If the Tata Steel Europe were to collapse, as a result of not being able to manage payments to plug the deficit, the pension fund would be dropped into the pensions protection fund, the lifeboat for unfunded retirement schemes, with steelworkers taking an even bigger hit to their benefits.
Speaking as the quarterly results were announced, Koushik Chatterjee, Tata group executive director, said: “The strategic initiatives on the pension continue to be an important priority and we welcome the union’s support. This is part of the several steps being undertaken to make the UK business more sustainable in the future.”