Tata Steel expects a sharp rebound in operating profit at its Netherlands business, chairman N. Chandrasekaran said on Thursday, as management sought to reassure shareholders over the performance of its European operations during the company’s annual general meeting.
The earnings before interest, taxes, depreciation and amortisation (EBITDA) could reach up to €400-500 million in FY27 from Tata Steel Netherlands, Chandrasekaran said, adding that the long-term target is to raise EBITDA to €800 million to €1 billion.
The Dutch operations reported an EBITDA of €267 million in FY26.
Pointing out that the Netherlands remained self-funded ever since Tata Steel acquired it in 2007, Chandrasekaran also informed that the Dutch business has so far handed out €1 billion in dividends.
Environmental norms
But he acknowledged that there is still work to be done. Observing that environmental regulations were a challenge, Chandrasekaran said, “The recent environmental regulations that have come up in the Netherlands far exceed the European Union (EU) standards.
“The emission norms have tightened to levels where some of the legacy assets of Tata Steel Netherlands will find it hard to meet the newly established regulatory norms in the accepted timelines.”
He informed shareholders that the company remains in dialogue with stakeholders and regulators to find a solution.
UK delay
Tata Steel expects the commissioning of the electric arc furnace to be deferred to 2029, a year later than originally envisaged, due to a delay in putting up new electrical infrastructure for the connectivity project with National Grid.
“It is continuing to delay, and that’s causing us anxiety,” Chandrasekaran said.
Closing down structurally loss-making blast furnace operations and migrating to scrap-based, electric powered furnace is Tata Steel’s response to make the UK operations profitable in the long run.
“At that time, the company should not be just EBIDTA-positive, but PAT (profit after tax)-positive. That is the target for UK operations,” Chandrasekaran added.
While transformation in EU is still work in progress, Tata Steel has doubled its capacity in India over the last 10 years, giving significant EBITDA. The chairman described it as the primary cash engine.
Chandrasekaran said that Tata Steel will go towards 40 million tonne (mt) capacity in the near term. “…at the same time (we are) looking at acquisition of lands and identifying new locations in India, to consider expansion beyond the 40 mt in the years to come.”