Profits rise as British Steel continues turnaround

British Steel has reported a profit of £21m EBITDA in the first quarter of the current financial year and announced the biggest single investment in its manufacturing operations for a decade.

In its second annual trading update since buying the business, Scunthorpe-based British Steel said its turnaround remained firmly on track as its annual turnover rose to £1.4bn in FY18, a rise from £1.2bn in FY17.

EBITDA stood at £68m for FY18, up from £47m in FY17. British Steel said this year’s profits were impacted by a £47m one-off cost of a blast furnace chill for which the company is pursuing an insurance claim.

At the same time, it announced a £50m investment to upgrade the Scunthorpe Rod Mill and £40m capital expenditure in FY19 to maintain and improve its existing base. A further £500 million of projects are being pursued.

The £50m wire rod investment will see a new modern wire rod line open. Work is scheduled to start this summer and the new operation is set to be commissioned in autumn 2019.

Profits rose at FN Steel, the company’s first major acquisition in October 2017. A total of 1,000 people have joined the business since its launch in June 2016. Employees are now receiving a staggered 4% pay rise and have been allocated a further 1m company shares.

 

British Steel executive chairman, Roland Junck, said: “Our transformation remains firmly on track and continues apace with unprecedented levels of investment going into the business.

“Without the unique blast furnace chill last summer – the impact of which was widely reported by media – we’d have exceeded our year 2 target which demonstrates the growing strength of our business.

“This strength is why a number of leading financial institutions continue to provide us with additional financing to support our investment and growth plans. This is not only enabling us to improve our plant, products and services – as demonstrated with our rod mill investment – it’s allowing us to expand our portfolio by making strategic acquisitions such as FNsteel.

“Increased raw material costs and fluctuating steel prices continue to be a challenge. It’s important safeguarding action is taken to prevent the dumping of cheap steel into Europe following the imposition of steel tariffs by the US. However, we remain in positive talks with the Government, and our other stakeholders, and are confident about our future.

“Our order book is strong and we’ve the capacity and capability to play a significant role in major infrastructure projects such as HS2 and the Heathrow expansion. We continue to invest in our people and products, remain focused on reducing the cost of liquid steel and are growing into new markets across the globe.”

Paul Martin, British Steel Deputy CEO, added that the upcoming major investment in the future of the business underpinned its commitment to providing customers with higher technical specifications of steel.

Martin said: “Not only will this increase our ability to serve the domestic wire rod market, it will allow us to become a more competitive exporter and accelerate the growth of British Steel in line with our company strategy.

“By continuing to make investments like this our aim is to become the steel supplier of choice for more businesses across the world.”

To support its growth plans, British Steel has recently secured £90m of new financing from White Oak Asset Finance, an affiliate of White Oak Global Advisors, LLC. British Steel’s bank financing is provided by a syndicate led by PNC Financial Services UK.

Three significant appointments have been made to British Steel’s executive team – Gerald Reichmann has joined as Chief Financial Officer, Ron Deelen as Chief Marketing Officer and Ugur Yilmaz as Chief Operating Officer. The company now employs more than 5,000 people while FNsteel, which has more than 300 employees, is being integrated into the business.

 

Paul McBean, Scunthorpe Site Multi-union Chairman, said: “It wasn’t long ago that people were doubting if these works had a future but since the launch of British Steel the business has gone from strength-to-strength.

“The rod mill investment is a fantastic second birthday present for British Steel and the 5,000 employees contributing to our turnaround.

“While we still have a long way to go, investments of this scale – and the ongoing commitment to capital expenditure – demonstrate the great optimism flowing through this company.”

 

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