Tata Steel Europe needs to focus on cutting down cost by identifying and sourcing raw material at competitive prices to keep its operations profitable, said Ratan Tata, Chairman, Tata Steel.

Speaking at the company’s 105th Annual General Meeting, Tata said the steel industry in Europe, particularly the UK, has sought government help to meet new environment obligations. He hoped a favourable decision would be taken.

In his last speech as Chairman, Tata said steel has been referred to as both sunrise and sunset industry, but Tata Steel had the fortitude to see itself through.

Cyrus Mistry will take over as Chairman by the end of the year.

Tata said Asia would regain momentum, while China and India will continue to grow. India will re-establish its growth, he added.

While Tata Steel’s operations in India are expected to remain strong, its operations in Europe will continue to be under enormous stress for the next year or two until the Western European economy recovers, said Tata.

Fitch outlook negative

Fitch Ratings has revised the outlook on Tata Steel and Tata Steel UK Holdings to negative from stable. The outlook reflects Fitch's view that profitability pressures will remain on both companies given the challenging short-term outlook for the global steel market.

In FY12, the consolidated EBITDA margins fell to 9.3 per cent from 13.5 per cent recorded in the previous due to challenging operating environment.

Fitch expects steel demand in India to be impacted in the near term due to slowing demand growth in various user industries. Besides, Tata Steel is likely to drive only partial benefit from its additional 2.9 mt a year brownfield capacity during FY13, with full benefits expected to accrue next fiscal.

While Indian operations will continue to benefit from raw material integration, any significant and sustained drop in steel prices may have a negative impact on the performance of the consolidated entity, said Fitch.

> suresh.iyengar@thehindu.co.in

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