Scunthorpe sale costs hit Tata Steel

Costs related to the sale of its Scunthorpe operations pushed Tata Steel into the red for its first quarter.

The Indian company lost 32.9bn rupees (£370m) when it sold its European long products division, based in North Lincolnshire, to Greybull Capital in April for a nominal sum.

Tata Steel made a net loss of 31.8bn rupees (£358m) for the three months to 30 June.

There was no update on the future of the company's Port Talbot plant.

Tata Steel's overall loss was 1.4bn rupees lower than the loss reported for the previous quarter, but analysts had expected a profit of almost 1.9bn rupees.

Koushik Chatterjee, group executive director, said the company's recent restructuring and cost-cutting in the UK, along with weaker sterling, had helped the business to report better performance for the quarter.

Following the sale of the long products business, Tata Steel Europe would focus on being a premium strip player and would also concentrate on improving its performance. "The strategy for exploring further strategic consolidation in Europe is a step in that direction," he said.

The company warned that the Brexit vote could affect economic growth in the UK, adding: "The weaker pound is expected to improve UK's short-term competitive position on exports, however it will add cost pressure due to higher cost of raw materials purchased in US dollars."

Greybull Capital has revived the British Steel brand

Tata still owns the Port Talbot steel works in Wales, which employs more than 4,000 workers, and some 2,000 more at other plants in Hartlepool, Rotherham and Stocksbridge.

After saying in March that it would sell some or all of its remaining UK business, Tata announced in July that it was putting that process on hold while it pursued a European tie-up.

One of the biggest stumbling blocks to the sale of the UK business has been the legacy of the British steel pension fund that Tata inherited when it bought the business in 2007. The fund has 130,000 members and a deficit of £700m.

Tata said on Monday that talks about the pension deficit were continuing with all relevant parties including the UK Government, trustees and unions.