Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Steel
Scunthorpe Restructuring: A
Move Toward a Leaner and
Stronger Tata Europe
Quick Comment: We remain OW on Tata Steel as
we believe: 1) the Street is unfairly bearish on Tata’s
ability to implement technological and operational
interventions to improve its European operations; 2) the
45% capacity increase at its Indian operations that is
likely in F2H12 is yet to be reflected in the stock price;
and 3) steel prices in F2H12 should turn out to be better
than general expectations.
What's new: Tata Steel has proposed a restructuring
mainly at its Scunthorpe plant to introduce greater
flexibility into its costs and operations. As per the
company’s press release, as a part of the restructuring,
Tata is proposing (in Scunthorpe): 1) to close the Bloom
and Billet Mill and associated steel caster. 2) To
mothball the Queen Bess blast furnace, which will be
kept in readiness for a market upturn. 3) To review the
operations of the Billet Caster. As per the company,
about 1,500 jobs (about 4.5% of Tata Europe’s
headcount) may become redundant post this exercise.
Impact: Scunthorpe is a 4.5mt long product plant with
low profitability. We feel the low profitability has mainly
been due to poor demand from the construction sector
and inefficient and old operations at Scunthorpe.
1) As this blast furnace has been out of operation since
last year, the production impact should be minimal.
2) While the redundancies are unfortunate, probably for
the long-term viability of Scunthorpe plant, Tata and the
unions are looking to execute the above changes. Given
the wage bill of about US$ 2.9bn for Tata Europe, the
annual saving could be ~US$125mn, i.e., about
US$8-9/t (more than 15% of Tata Europe’s F3Q11
EBITDA), we estimate.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Steel
Scunthorpe Restructuring: A
Move Toward a Leaner and
Stronger Tata Europe
Quick Comment: We remain OW on Tata Steel as
we believe: 1) the Street is unfairly bearish on Tata’s
ability to implement technological and operational
interventions to improve its European operations; 2) the
45% capacity increase at its Indian operations that is
likely in F2H12 is yet to be reflected in the stock price;
and 3) steel prices in F2H12 should turn out to be better
than general expectations.
What's new: Tata Steel has proposed a restructuring
mainly at its Scunthorpe plant to introduce greater
flexibility into its costs and operations. As per the
company’s press release, as a part of the restructuring,
Tata is proposing (in Scunthorpe): 1) to close the Bloom
and Billet Mill and associated steel caster. 2) To
mothball the Queen Bess blast furnace, which will be
kept in readiness for a market upturn. 3) To review the
operations of the Billet Caster. As per the company,
about 1,500 jobs (about 4.5% of Tata Europe’s
headcount) may become redundant post this exercise.
Impact: Scunthorpe is a 4.5mt long product plant with
low profitability. We feel the low profitability has mainly
been due to poor demand from the construction sector
and inefficient and old operations at Scunthorpe.
1) As this blast furnace has been out of operation since
last year, the production impact should be minimal.
2) While the redundancies are unfortunate, probably for
the long-term viability of Scunthorpe plant, Tata and the
unions are looking to execute the above changes. Given
the wage bill of about US$ 2.9bn for Tata Europe, the
annual saving could be ~US$125mn, i.e., about
US$8-9/t (more than 15% of Tata Europe’s F3Q11
EBITDA), we estimate.
No comments:
Post a Comment