Tata Steel’s European arm has warned that the coronavirus crisis could threaten its ability to carry on operating, after sinking deeper into the red even before the full impact of the viral outbreak.

Accounts for the continent’s third-largest steelmaker published at Companies House showed a pre-tax loss of £857m before one-off items in the 12 months ending on March 31, compared with a deficit of £146m the previous year.

The Indian-owned manufacturer’s annual report said it was confident it had access to adequate liquidity and resources to keep operating “for the foreseeable future”.

But it cautioned there was “material uncertainty” from the pandemic on its future funding requirements, which “may cast significant doubt” on its ability to continue as a going concern.

The stark message will fuel concern among the 20,000-strong workforce at Tata Steel Europe, which runs the UK’s biggest steelworks at Port Talbot and a handful of smaller factories across the country, as well as a large plant in the Netherlands. 

Rescue talks that may have led to British taxpayers owning stakes in both Tata’s UK steel operations, which have failed to break even for a decade, and its carmaking unit Jaguar Land Rover recently stalled. 

However, both businesses have remained in discussions over other potential forms of assistance.

Europe’s steel producers were already buckling under a market downturn before the arrival of coronavirus, which further sapped demand as car factories and building sites temporarily closed. 

Tata Steel said that its accounts were “signed by its directors and confirmed by its independent auditors, PWC”. 

It added: “In a statement sent to the Indian regulator, the directors and auditors acknowledged the economic uncertainty due to the Covid-19 global pandemic, but confirmed the company had undertaken cash conservation measures and had adequate resources to continue operations. 

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“The statement also confirmed that the company’s cash flow and liquidity position remains strong.”

TSE blamed its worsening performance on reduced steel margins, the difference between raw material costs and selling prices, as revenues dropped 12 per cent to £6.2bn. There was a £275m impairment charge from a writedown of assets mainly in the UK.

On a statutory basis, it reported a pre-tax profit of £1.1bn, driven by an exceptional gain after interest owed to its parent was waived. TSE’s balance sheet was strengthened as its Indian holding company cancelled £5.3bn in debt, waiving £1.9bn in obligations and converting a further £3.6bn into equity.

Via Financial Times