Tata Steel warns UK biz may cease to continue as going concern

Tata Steel has warned that its U.K. business is expected to be 'adversely impacted' towards meeting its liquidity requirements and with respect to its ability to 'continue as a going concern' amid challenging market conditions.

The dim outlook comes after Tata Steel Europe, a wholly-owned indirect subsidiary of India's second-largest steelmaker, assessed the potential impact of the economic downturn in Europe caused by external factors including higher inflation, higher interest rates and supply chain disruption due to the war in Ukraine on its future business outlook for U.K. and mainland Europe (MLE).

The company's board considered 'reasonably possible scenarios' to stress test the financial position of both the U.K. and MLE businesses, including the impact of lower steel margins against the annual plan and the mitigating actions the Tata group firm could take to limit any adverse consequences to liquidity in the annual impairment assessments.

Based on the assessment, the mainland Europe business is expected to have adequate liquidity under all the reasonably possible scenarios considered, the steelmaker said.

Tata Steel said its U.K. business continues to implement various measures aimed at improving its business performance and conserving cash including ensuring adequate liquidity, if required, through available financing options, management of working capital, implementation of cost reduction measures and discussions with the U.K. Government to seek adequate support for transition to Green Steel as part of its decarbonisation strategy.

"The progress of discussions with the UK government is also being monitored closely given that based on the initial and subsequent discussions it remains uncertain whether adequate support for the decarbonization strategy would be agreed. Given the risks and challenges associated with the underlying market and business conditions, the uncommitted nature of available financing options and the uncertainty with respect to whether adequate government support would be agreed, there exists a material uncertainty surrounding the impact of such adversities on the financial situation of TSUK," the company said.

Net profit of Tata Steel plunged 82% year-on-year to ₹1,705 crore for the quarter ended March compared with ₹9,756 crore in the corresponding quarter last year. The steelmaker's revenue from operations fell 9% to ₹62,962 crore. Tata Steel does not disclose the results of the Europe and U.K. businesses separately.

"FY2023 saw our India crude steel production growing to around 19.9 million tons, with a 65% share of our overall volumes. Deliveries were in line with production with domestic deliveries growing 11% YoY and driving product mix improvement. The quarter also saw strong momentum with deliveries growing by 9% QoQ to 5.15 million tons," said TV Narendran, chief executive officer and managing director, Tata Steel.

"We have multiple projects ongoing at various locations in India as we work towards 40 MTPA by 2030," he said.

Shares of Tata Steel opened lower at ₹109.80 apiece on Wednesday on the National Stock Exchange (NSE).