Yahoo Finance Tata chief moots sale of UK steel operations
Fears have been raised about Tata selling its loss-making UK steel division after the Indian conglomerate’s chairman was quizzed on the poor performance of the business centred around its Port Talbot plant in Wales.
Natarajan Chandrasekaran, chairman of Tata Sons, faced questions from investors about Tata Steel UK’s future at the parent company’s annual meeting, prompting him to warn the conglomerate could consider “alternative options”.
Last year Tata Steel UK reported a £371m pre-tax loss on revenues that were flat at £2.4bn. The previous year it posted a £222m loss.
Progress on talks with the Government about a potential bailout was also raised at the meeting, along with questions on Tata Steel UK’s ability to continue as a going concern and its liquidity levels.
The queries followed a Financial Times report on Monday that discussions about state support for Tata Steel UK had ended without an agreement, which the company strongly denied.
Tata Steel UK is a candidate for “Project Birch”, the UK programme to rescue companies seen as structurally important to the country’s economy but have been unable to obtain funding from other sources.
“Talks are not over,” Mr Chandrasekaran told investors, referring to discussions about state support, though he conceded the UK steel operation continues to “drag” the wider business.
“We are hoping to find a solution for the UK business this [financial year],” he said. “But if we are unsuccessful, then we will think about alternative options.”
One source described Mr Chandrasekaran’s comments as a “message” to the Government about the need to agree a deal to safeguard Tata Steel UK, which has been hit hard by the decline in demand for its products caused by the pandemic.
As well as a sale, the "alternative options" the chairman referred to are understood to include joint ventures and mergers.
Four years ago as the British steel industry was in crisis, Tata Steel UK was put up for sale as it buckled under a combination of falling sales a crippling pension legacy. The process was later abandoned and a deal to reduce the burden of the retirement scheme was thrashed out.
Last autumn, Tata announced a turnaround plan for its UK and European steel operations that included the loss of 3,000 jobs among the total workforce of 21,500. It has about 8,500 UK staff.
The scheme came after a merger with ThyssenKrupp was blocked by EU regulators.
