Tata Steel Reports Second Quarterly Loss on Europe Writedown

  • Steelmaker looking to sell U.K. assets to reduce liabilities
  • Mills struggle with cheap supplies mainly from China

Tata Steel Ltd. posted a loss for the second straight quarter amid an oversupply in the global market and a writedown at its European business.

The net loss was 32.1 billion rupees ($477 million) in the three months to March 31, from a loss of 56.7 billion rupees a year earlier, the Mumbai-based company said in a statement Wednesday.

European mills are struggling to contend with a flood of cheap steel exports from China, which accounts for about half of global output, boosting competition and eroding profits worldwide. Tata Steel said in March that after years of losses it planned to sell its U.K. business, putting 15,000 jobs at risk and raising the alarm for British politicians.

The loss included an exceptional item of 28.6 billion rupees on account of non-cash writedown of fixed assets and restructuring linked to its European operations, the company said. Tata’s revenue totaled 295.1 billion rupees compared with 336.7 billion rupees a year earlier.

The company is in the process of evaluating bids for its U.K. assets, Chief Financial Officer Koushik Chatterjee said in Mumbai. The bidding process closed on Monday and the firm hasn’t shortlisted any bidder, he said.

U.K. Assets

Bidders for the U.K. units don’t want to be saddled with pension liabilities and Tata may move the pension assets to an insurance company, according to people with knowledge of the matter, who asked not to be identified. The pension plan has assets of about 15 billion pounds ($22 billion) and higher liabilities and Tata would pay as much as a billion pounds to the buyer, they said.

The U.K. government has offered “hundreds of millions of pounds” of financial support as an incentive to a potential buyers and the state would also consider taking a stake of as much as 25 percent.

Tata’s U.K. assets, once controlled by state-owned British Steel and bought for $12 billion a decade ago, include the giant Port Talbot works in South Wales. Greybull Capital LLP last month agreed to buy Tata Steel’s Scunthorpe steelworks in England as well as mills in Teesside and northern France. The Indian producer also signed a deal to sell its Clydebridge and Dalzell plants in Scotland to the Scottish government, which will then sell them on to Liberty House.

Tata’s plan to sell its U.K. steel business may allow it to focus on its home market, where its sales volume gained more than 10 percent over the past two quarters, according to Bloomberg Intelligence analyst Yi Zhu. Tata’s shares closed 2.2 percent higher in Mumbai before the earnings were announced. The stock has advanced 25 percent this year.

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