Tata Steel is planning to cut an estimated 3,000 jobs across its European operations as the sector wrestles with stagnant EU demand, global oversupply and high costs, the company said late Monday.
About two-thirds of the layoffs are expected to be office-based roles, according to the statement. The company is expected to maintain its commitment to its Port Talbot works in Wales.
Related story: Tata Steel Europe set for restructuring, set to keep Port Talbot
Tata Steel has outlined proposals for a program to build a more sustainable business in Europe, which it said is needed to ensure the business can thrive and improve its financial performance in order for the European business “to become self-sustaining and cash positive despite severe market headwinds which have led to a sharp decline in profitability.”
Through its proposed transformation program, 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 GBP750 million ($971 million) in EBITDA. With improved earnings and cash flows, Tata Steel Europe will be a financially self-sustaining business able to invest in asset reliability and improvements while also servicing its financial obligations to its lenders and shareholders.
In the first six months of its current financial year (starting April 2019), Tata Steel Europe reported a drop of 90% in EBITDA to GBP31 million. Revenue was GBP3.25 billion.
Like other European steel producers, Tata’s profits have been squeezed by higher raw material costs and lower steel prices amid weak demand, mainly from the main steel buying sectors such as automotive, while trade tensions between the US and China and pressure from imports added to the negative economic situation.
The news of the planned restructuring came two weeks after European steel producers’ association Eurofer forecast a 3.1% decline in European apparent steel consumption this year to 158 million mt, the biggest drop since 2012, with a modest upturn glimpsed only from the second quarter of 2020.
Tata Steel’s program is focused not only on cutting jobs but also on other areas to improve its financial performance: increasing sales of higher-value steels by improving its product mix, improving efficiency by optimising production processes, mainly with the application of big data and advanced analytics, and reducing procurement costs through cooperation with companies within the Tata Steel group.
Tata Steel Europe will engage with various stakeholders to ensure compliance with all European and national obligations.
— Annalisa Villa, firstname.lastname@example.org
— Edited by Jonathan Fox, email@example.com