Tata Steel inches up after unveiling cost-cutting plans for Europe biz

Tata Steel rose 0.59% to Rs 412.60 after the company outlined proposals for transformation programme to build a stronger and more sustainable business in Europe.

The scrip has traded in the range of Rs 411.75 and Rs 414.85 so far during the day.

Tata Steel outlined proposals for a transformation programme in Europe. The programme is needed to ensure the business can thrive despite severe market headwinds which have led to a sharp decline in profitability.

Tata Steel highlighted plans to urgently improve its financial performance to make sure the European business becomes self-sustaining and cash positive, while enabling investment to safeguard its long-term future.

The programme is focused on improving financial performance by increasing sales of higher-value steels, efficiency gains by optimising production processes, lowering employment costs, and reduction of procurement costs.

Through its proposed transformation programme, Tata Steel Europe 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% throughout the market cycle. Based on full year 2019 revenue figures, this would equate to 750 million in EBITDA.

In the first six months of its current financial year (starting April 2019), Tata Steel Europe reported a drop of 90% in EBITDA to 31 million. Revenue was 3.25 billion.

Tata Steel Group is among the top global steel companies with an annual crude steel capacity of 33 million tonnes per annum (MnTPA). It is one of the world's most geographically-diversified steel producers, with operations and commercial presence across the world.

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