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Tata Steel Nederland announces restructuring measures; aims to cut costs from FY26

We attended Tata Steel’s Investor call held on 9th Apr’25. Following are the key highlights from the discussion:

* Tata Steel Nederland (TSN) has adopted a comprehensive transformation program to maximize production efficiencies, reduce fixed costs, and optimize product mix and margins. As part of this initiative, the TSN will standardize the processes, increase automation, and eliminate duplication across its operations.

* Through this cost restructuring, the company aims to reduce costs by 15% in FY26 compared to FY25E. In value terms, management has guided for cost savings of EUR500m (incl. a part of employee-related savings) in FY26, primarily driven by cost reductions (ex-RM and energy cost).

* The restructuring will not involve discontinuation of any downstream operations in the region. TSN plans to reduce ~1,600 jobs from its total workforce of around 9,000 in Ijmuiden, Netherlands. Of the targeted EUR500m in cost savings, EUR120-160m is expected to come from employee-related expenses. FY27 could see incremental savings of EUR50- 60m.

* European steel spreads have declined significantly over the past few years, driven by geopolitical tensions, trade and supply chain disruptions, and escalating energy costs.

* TSN’s exposure to the US market is insignificant and is not expected to materially impact its volumes.

* The company has outlined a green steel transition plan and is currently in discussions with the Dutch government and the European Union regarding the necessary funding, capital outlay, capacity size, and policy support

Valuation and view: reiterate BUY

* The Netherlands business is one of the most efficient steel units of the company. The restructuring could reduce employee and other costs, leading to structural improvements in profitability. The company expects its UK business to achieve breakeven by 2QFY26.

* While near-term challenges persist due to global uncertainty around tariff escalations, the long-term outlook for TATA remains strong. The Indian business is expected to continue its strong performance, and an improvement in the European business performance is likely to support overall earnings.

* Escalating trade tensions are likely to pose near-term challenges for commodities like ferrous. Developments related to tariffs will remain a key monitorable in the near to medium term. TATA is trading at 5.6x EV/EBITDA and 1.6x FY27E P/B. We reiterate our Neutral rating with an SOTP-based TP of INR140.

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