Rough times call for tough measures. Tata Steel is targeting £1 billion in cost savings at its UK subsidiary, Corus, during FY’10 in a bid to tide over the ongoing global recession. The company has already managed to achieve some £650 million in cost savings upto March 2009.
The Tata Steel group also plans to secure Corus’ raw material base by investing in development of three key properties in South Africa, Canada and Mozambique. "We do not see a recovery in steel demand in Europe, US, Japan and South Korea any time soon. We have taken very strong steps in response to the market in Europe. These include cost reduction and aligning the product mix to suit customer needs," Mr B Muthuraman, managing director of Tata Steel, said at a press meeting on Friday.
Elaborating further, Corus group director of strategy, Jean-Sebastien Jacques, said these savings are based on three cost brackets. These include lowering cost of employment, cutting down on third party sourcing, setting stretch targets across all its divisions to achieve cost reduction.
"Since we are producing at a lower level, we have also been able to reduce cost of employment, apart from reducing the number of contractors. We have also speeded up a planned stretch initiative labelled ‘Fit For Future’ because of the downturn," Jean-Sebastien Jacques added.
On the raw material side, Tata Steel is poised to invest in Sedibeng, an iron ore block in South Africa with estimated reserves of 50 million tonnes alongwith access to another 100 million tonne reserves through a Canadian mining company, New Millennuim Capital. It is already developing coking coal blocks in Mozambique. "We are focussing on projects where cash outflow is small but which can be quickly put to production," Mr Muthuraman said.
Tata Steel has also managed to complete Corus’ financing by converting a bridge loan facility taken to fund the acquistion into a long term loan. "We are comfortable with the cash flow position and will be able to service the loan. We do not have any debt repayment obligation till December 2009," Mr Muthuraman said.
Source: Economic Times
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