Tata Steel Netherlands will become debt-free in next 12-18 months, focusing on decarbonization capex and avoiding significant spending on the legacy business, managing director TV Narendran said in a call with analysts.
Currently, Tata Steel UK and Tata Steel Netherlands each hold about GBP 600-800 million in debt, primarily for securitization and working capital requirement, Narendran said.
Tata Steel Netherlands was debt-free until about 12-15 months ago.
Narendran said historically, the Netherlands had no debt due to positive cash flows, but recent challenges, including the repair and modernisation of the blast furnace, has led to the debt burden. However, this is not expected to be a long-term concern, he clarified.
“We have around £200-300 million in old acquisition debt across the Netherlands, UK, and overseas acquisitions, excluding other bonds. The Netherlands is expected to use its cash flows to eliminate this debt within 12-18 months, as they won’t have significant capex on the legacy business, with decarbonization spending being separate” , TV Narendran said in the analyst concall.
For the UK, Narendran said Tata Steel aims for EBITDA profitability and debt reduction, and prepare for decarbonization. It has received £500 million in grants from the UK government to modernize the Port Talbot site.
On 31 July, Tata Steel reported a 51 percent jump in consolidated net profit at Rs 960 crore for the quarter ended June. Revenue from operations declined 8 percent YoY to Rs 54,771 crore in Q1FY25.
Tata Steel's European operations showed signs of recovery in the latest quarter, with the Netherlands' IJmuiden works benefiting from a new blast furnace. Despite overall weak demand in Europe, Tata Steel Netherlands' EBITDA turned positive at Rs 453 crore in June quarter.
The EBITDA rebound was due to improved liquid steel production and stabilized operations. After issues with blast furnace 6, EBITDA reached GBP 43 million in the first quarter, reversing a GBP 27 million loss in the previous quarter. EBITDA per tonne improved by GBP 48 quarter-on-quarter, driven by reduced material costs and lower conversion costs, despite higher raw material expenses.
However, the UK operations continued to struggle, posting a significant EBITDA loss of Rs 955 crore, with a higher loss per tonne compared to both the previous quarter and the same period last year. Increased inventory for downstream operations also impacted working capital, according to CFO Koushik Chatterjee.
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