Thursday, November 20, 2008

Tata Steel to treble profit margins at Corus

World's sixth largest steel maker Tata Steel aims to treble profit margins at its European subsidiary Corus in over five years, notwithstanding the global economic downturn impacting the industry.

"Tata Steel is aiming to triple profit margins at Corus over five years...," the Financial Times reported on Wednesday.

Quoting Tata Steel Managing Director B Muthuraman, the daily said the target could be reached partly by improving manufacturing procedures at the Corus plants spread across Europe. The Indian conglomerate Tatas had acquired the Anglo-Dutch steel maker Corus for about USD 13 billion last year.

Under Muthuraman's plans, the report said, earnings before interest, tax, depreciation and amortisation for Tata Steel as a whole would rise to 30 per cent of sales by 2013, "up from what he is estimating will be about 14 per cent this year."

According to the Financial Times, currently, EBITDA margins in Tatas Jamshedpur plant are 36 per cent, compared with 7 per cent in Europe where the firm has 80 per cent of its worldwide output of an expected 26 million tonnes this year.

"He (Muthuraman) hopes the EBITDA margin in Europe will rise to 20-25 per cent," the report added.

The daily said that Muthuraman's calculations are based on the assumption that the price of standard steel is about USD 500 per tonne.

Till a few months ago, the rates were hovering as much as USD 1,250 a tonne.

Meanwhile, in view of slackening demand for the commodity from consuming sectors like automobile and construction, Corus recently announced cutting down production by 30 per cent till March next year.

Attributing to Muthuraman, the report said the problems for the industry were temporary.

"Certainly we have a difficult situation in Europe (in relation to steel demand). But one thing I know for sure: human civilisation cannot exist without steel," Muthuraman was quoted as saying.

The report also noted that Muthuraman has ruled out substantial job cuts at least in the short term for its European plants.

A few days back, however, Corus had said about 400 of its employees in distribution business would lose jobs due to the financial turmoil, which has led to a steep fall in demand.

Corus employees about 42,000 people across its plants in Europe. The distribution business employs about 2,600 people.

No comments: