Tata Steel is aiming to triple profit margins at Corus over five years in spite of the battering its sector is suffering from the downturn in the global economy.

B. Muthuraman, chief executive of the world’s fifth-biggest steelmaker, said the target could be reached, partly by improving manufacturing procedures in its European plants. Tata bought these early last year in its $13bn acquisition of Anglo-Dutch Corus, the biggest overseas deal in India’s corporate history.
The profitability of the European operations could also be improved by Corusplans for Corus to open up its own sources of iron ore in North America and Africa.
Although he was reluctant to comment on the details of the changes in demand for steel in Europe - where Tata’s Corus subsidiary is cutting production by 30 per cent as a result of a sudden drop in orders – Mr. Muthuraman said the problems for the industry were temporary.
“Certainly we have a difficult situation in Europe
[in relation to steel demand]. But one thing I know for sure: human civilization cannot exist without steel,” Mr. Muthuraman said.
He ruled out substantial job cuts, at least in the short term, for its European plants.
Corus employs about 42,000 people, with 25,000 working in the UK, mainly at plants in Scunthorpe, Port Talbot and Teesside.
Under Mr. Muthuraman’s plans, earnings before interest, tax, depreciation and amortisation for Tata Steel as a whole will rise to 30 per cent of sales by 2013, up from what he is estimating will be about 14 per cent this year.
Currently, ebitda margins in Tata’s main India plant in Jamshedpur are 36 per cent, compared with 7 per cent in Europe - where the company has 80 per cent of its global output of an expected 26m tons this year. He hopes the ebitda margin in Europe will rise to 20-25 per cent.
Mr. Muthuraman’s calculations are based on a price of standard steel of about $500 a ton, which is about half the figure of a few months ago. Since then, average prices have fallen sharply in reaction to lower demand.
(Source: Financial Times)