Top Scunthorpe employer Tata dismisses claims of steelworks sell-off

TATA Steel has dismissed as speculation a report saying the European arm that runs the Scunthorpe steelworks is unprofitable and should be sold off.

A report compiled by Asian brokerage firm CLSA says Tata Steel Ltd may look at selling the European arm to boost its share price. It says it senses Tata is looking at getting rid of assets that are not making enough money.

But a spokesman for Tata Steel said: "The author of the report called it a theoretical exercise. There was no input from Tata Steel."

The CLSA report says: "We sense a change in Tata Steel's thought process in recent months and there is now a much stronger focus on asset sales than in the past."

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The brokerage firm – with its clients' interests in mind – says selling the European arm of what was Corus could "rid the portfolio of assets with a questionable outlook".

The broker has not revealed what its information is based on. But it concedes there are no moves afoot at the moment to sell Tata Steel Europe.

The report adds: "While it is difficult to predict the likelihood and timing of such a sale, the sheer possibility of this happening might provide a higher support to the stock price than otherwise in 2013."

However, Tata Steel Ltd's share price dropped to a one-year low in Indian markets after the report was released.

Steel analyst Peter Fish, managing director of Sheffield-based MEPS (International), said if the report was correct, it suggested shareholder value was being put above long-term planning.

"It looks as if they had a grand plan when they bought it to put themselves into the position of being a big company, but also well-qualified to supply industries like the automobile and energy sector," he said.

"I thought they were positioning themselves in that place, but in this document it seems they might be preparing to abandon that strategy in favour of shareholder value.

"It's the difference between a long-term concept and a short-term one.

"It's a balance-sheet building exercise."

However, he conceded there might be other factors at work in the release of the report.

"They might have clients with shares in Tata who are not doing very well," he said.

What do you think? viewpoint@scunthorpetelegraph.co.uk