Indian steelmaker Tata Steel’s European division, Tata Steel Europe, has announced that it has outlined proposals for a transformation program in Europe on the back of negative market conditions and a sharp decrease in the company’s profitability, to ensure the sustainability of the business, as well as securing the investments required for innovation and eco-friendly steelmaking. The program might cause about 3,000 job cuts at the company’s European division. There have been rumors about possible lay-offs at the company before, as previously reported by SteelOrbis.
Under the proposed program, the company plans to increase sales of higher-value steels by improving product range and customer focus, while also lowering employment costs. Tata Steel Europe also aims to reduce procurement costs through improving sourcing and strengthening cooperation with companies within the Tata Steel group.
The company stated, “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 plans include a proposed new way of working to boost productivity and reduce bureaucracy, as well as a focus on increasing sales of higher-value steel products and solutions.”
With the proposed restructuring program, the company targets a positive cash flow and an EBITDA margin of around 10 percent, which would equate to about £750 million ($972.65 million) in EBITDA by the end of the financial year ending March 2021.
The company said in its statement that slackened EU steel demand and global overcapacity, with the trade conflicts that turned the European market into “a dumping ground for the world’s excess steel capacity” and the sharp increase in carbon dioxide costs, affected the company’s financial performance negatively. As a result, Tata Steel Europe’s EBITDA decreased by 90 percent to £31 million ($40.2 million) in the first half of the financial year started April 2019, while its revenue totaled £3.25 billion ($4.21 billion) for the period.