Tata Steel has confirmed job cuts up to 3,000 jobs across its European operations which is a part of a restructuring and cost-cutting plan to counter stagnant steel demand in Europe and arrest the declining profitability for the company. It had plans to lower employment costs by reducing employee numbers. About two-thirds out of it are “white collar” jobs, the majority of which is based on Netherland units.
The company said its quest for improved earnings and cash flows would help make it a financially self-sustaining business able to invest in asset reliability and improvements while also servicing its financial obligations to its lenders and shareholders.
EU steel demand
“A transformation is needed to mitigate the current structural and cyclical headwinds and create the foundation for the company’s future success. Stagnant EU steel demand and global overcapacity have been compounded by trade conflicts which have turned the European market into a dumping ground for the world’s excess steel capacity,” the company said.
Tata Steel Europe said it is initially targeting a positive cash flow by the end of its financial year ending March 2021. It is also aiming for an EBITDA margin of around 10 percent throughout the market cycle.
“We intend to align on our approach and the process going forward and engage with various stakeholders to develop the proposed decisions and ensure compliance with all European and national obligations. Further details will be provided from this point forward and detailed proposals will be developed from here,” the company statement added.
“Today we are highlighting important proposals towards building a financially strong and sustainable European business,” said Henrik Adam, CEO of Tata Steel in Europe, in a statement on Monday.
“We plan to change how we work together to enable better cooperation and faster decision-making. This will help us become self-sustaining and cash positive in the face of unprecedented severe market conditions, enabling us to lead the way towards a carbon-neutral future,” he said.
The company is focussing on four areas to improve financial performance: increasing sales of higher-value steels by improving product mix; efficiency gains by optimizing production processes, supported by the application of big data and advanced analytics; lowering employment costs; and reducing procurement costs through smarter sourcing and strengthening cooperation with companies within the Tata Steel group.
According to the latest figures, in the first six months of its current financial year starting April 2019, Tata Steel Europe reported a drop of 90 percent in EBITDA to 31 million pounds and revenue stood at 3.25 billion pounds.
