Tata's European business back in the black

The company is understood to be in talks with Germany steel giant ThyssenKrupp over a possible merger with its European arm, which includes its UK steelmaking plant at Port Talbot as well as Black Country operations in Wednesfield, Walsall, Brierley Hill and Wednesbury.

But in its latest report, for the first quarter of its financial year, the company says only that "Tata Steel Europe continues to be in discussion with industry players to explore options for a strategic collaboration through a potential joint venture".

Meanwhile it continues talks with the UK Government, unions and the British Steel Pension Scheme trustees over the future of its UK pension fund.

As a result, the company's 11,000 workers - 750 of them in the Black Country - face further uncertainty.

The Indian owned group has released its latest figures for the first three months of its current financial year, starting in April, showing steel production on a par with the previous quarter, at 2.7 million tones, but almost 16% lower than at the same point a year ago after it decided to reduce production in the UK and focus on more profitable products.

As a result turnover in the three months from April to the end of June was £1.44 billion, in line with the previous quarter but down 12% on the first quarter of last year.

Pre-tax earnings were up to £90 million, compared to the £64 million loss in the previous three months and the £34m it made in the first quarter of last year.

Tata said the improved earning were a result of the fall in sterling, short-term improvement in steel prices, the restructuring of its UK business and a stronger performance from its operations in the Netherlands.

In the UK it is in the process of seelling its speciality steels arm and pipe mills in Hartlepool while it has invested in its site in IJmuiden in Holland, including a new metals caster. In May it completed the sale of its long products business at Scunthorpe to Greybull Capital.

But a £438m loss on the sale of the Scunthorpe business has widened overall losses at the Indian parent Tata Steel group.

Hans Fischer, chief executive of Tata Steel's European operations, said: "We are making progress as a result of business improvement initiatives and the restructuring announced last year. Our differentiation strategy is also starting to create more robustness in terms of higher-value sales, and we sold our highest percentage of differentiated products in June. These factors, combined with more favourable market and currency tail winds, led to an improving quarterly EBITDA result.

"We remain committed to investing in our customers through new product development and enhancing our manufacturing capability. In July, we started construction of a new slab caster in IJmuiden which will enable us to make more higher-strength steels, particularly for car manufacturers.

"Modest forecasted growth in European steel demand this year is still being undermined by increased imports which is leading to continued declines in domestic deliveries. That's why it's vital we continue every effort to improve our competitiveness."

The Tata group's finance director, Koushik Chatterjee, added: "With the completion of the Long Products Europe divestment, Tata Steel Europe will focus on being a premium strip player and the management and employees of Tata Steel Europe continues to strive to structurally improve the business performance.

"The strategy for exploring further strategic consolidation in Europe is a step in that direction."