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Tata Steel UK Shutsdown – What Happened? – Impact on Steel Industry

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On March 29, Tata Steel announced that they would be looking to restructure its UK operations, with a view to sell of the Tata Steel UK division. The announcement was released post-market hours in India, which resulted in a massive 6.7% gain in the shares on March 30! the shares closed at Rs. 324.30, up 6.71% from the previous day’s close of Rs. 303.90. What’s Going on? In the note submitted to the exchanges in the late hours of March 29, Tata Steel explained (in not too great detail) the Board’s strategy regarding their UK operations. Here’s the gist of what they had to say: Financial performance of the UK subs (Tata Steel UK) has been deteriorating (more on this later); Structural factors including. global oversupply of steel (from China, Japan and Korea among others), significant increase in 3rd country exports into Europe, high manufacturing costs, domestic demand weakness in Steel, and a volatile currency; Asset impairment of GBP 2 bn over the last 5 years; Apart from this, Strip Products UK provided a restructuring and transformation plan; The proposed Plan in the eyes of the Board, is un-affordable, requires material funding support in next 2 years and significant capital commitments in the LT, and very risky; Therefore they had concluded not to support the necessary investment for the proposed Plan; Tata Steel has advised the Board of Tata Steel Europe to evaluate all possible options regarding Tata Steel UK. … (Read On…)

[via Capital Mind]

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