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01 Jun 2017

British Steel delivers £126 million turnaround in first year

British Steel today reported a £126 million turnaround in its first year as an independent business, providing a solid foundation for further growth.

The company made £47 million profit* (EBITDA) in the 12 months ending March 31, 2017 – its best performance for a decade.

Other highlights include:

  • Supplied all of the rail for the Crossrail project in London – 57km of track in total
  • 500 new employees joined since June 1 2016
  • 50 new people starting this month
  • New Chief Executive Officer appointed
  • £40m of capital investment pledged for 2017-18
  • Employees given 5% stake in business, 3% salary sacrifice concludes
  • Recently completed an ownership transfer securing a 50% stake in Redcar Bulk Terminal
  • 2nd year focus on increasing steel-making capability and market footprint, & improving product quality

On the first anniversary of its launch, since being acquired by family investment office Greybull Capital LLP, the company has reported a profit of £47 million (EBITDA) for the 12 months ending March 31 2017. The Long Products Europe business - formerly owned by Tata Steel and purchased on June 1 2016 – had recorded a £79 million loss in the previous financial year.

The company has significantly improved profitability despite a 44% increase in the cost of raw materials. Annual turnover was  £1.2 billion. The volume of steel produced was 2.7 million tonnes versus 2.9 million tonnes in 2015-16. Sales were 2.5 million tonnes versus 2.6 million tonnes for the previous year.

British Steel’s plan to build a sustainable future is firmly on track after cost-saving initiatives, product development and market growth secured consistent profit in each quarter. This turnaround has enabled the company to deliver planned capital investment, and it today announces plans to invest a further £40 million in 2017-18.

British Steel Executive Chairman Roland Junck said:

“The transformation in this business is remarkable and that is down to our remarkable people who have embraced, engineered and led change. They are the reason we can today reveal the best financial performance in the long products business since 2007 and they are the reason I have great optimism for the future of British Steel. I’m delighted to be able to confirm that our employees will return to full pay today having sacrificed 3% of their salary to make last year’s sale and the turnaround plan possible.

“In 12 months we have started transforming from an inward-looking production hub into a profitable, more agile business by controlling costs, improving our product range and quality, and through strategic investments. After significant capital investment, we have made a small net profit and although it hasn’t been easy an entrepreneurial spirit is starting to flow through British Steel  – it means we are fast becoming the efficient, customer-focused business we need to be.

“As we look to further grow the business it is important our employees, who have played such a vital role in the successful implementation of the turnaround plan, should share in our future success. I’m therefore delighted to set out the employee share scheme, an almost unique initiative in our industry to recognise their contribution.

 “We’ve worked closely with our shareholders, customers, suppliers and Government and I’d like to thank everyone for their support as we look to build a sustainable future.”

British Steel operates five independent business units, all launched in September 2016:

Primary Products (iron and steel making)£21m cost reduction delivered while maintaining a firm focus on supplying the quality and service required by customers

Rail - supplied all of the rail for the Crossrail project in London – 57km of track in total for the new tunnels and associated rail connections. Final delivery was made at the end of May and British Steel has been rated as one of Crossrail’s top-performing suppliers on a range of metrics including delivery and quality.

Construction – the business has an extensive UK distribution network aligned to its manufacturing units ensuring it continues to provide a comprehensive product range and unrivalled customer service to meet the needs of the construction market. The business is working with Government to lobby for council procurement policies to ensure all public construction projects have access to British steel.  It has supplied hundreds of tonnes of steel sections for Northern Ireland’s biggest hotel development - the stunning 23 storey, 300 bedroom Grand Central Hotel in Belfast - in partnership with Fabrite.

Wire Rod – has achieved the highest sales and manufacturing output for 6 years with continuing success in automotive sales growth. New bigger product size range launched and significant success in sales into the bright drawing markets.

Special Profiles – launched a local business transformation strategy to strengthen its competitive position through investment, growing sales and reducing costs. The plan includes a committed investment of £1.8 million to improve the surface quality of products, which is scheduled for completion in summer 2017. The business has also broadened its product portfolio and secured a significant supply position for its cutting edge products in the USA with Caterpillar.

British Steel CEO Peter Bernscher said:

“British Steel has achieved a remarkable turnaround but this is just the beginning.

“To guarantee our future as a sustainable business for decades to come we must now seize and capitalise on the opportunities that have been created.

“Maximising and growing our steelmaking capability will be key, but success will also depend upon increasing our footprint in new and current markets and products, continuing to improve on quality and optimising manufacturing routes, while developing our people, the power of our brand, and the strength of our supply chain.

“While the challenges the UK steel industry has faced over the last decade have not gone away, we continually respond to the market and stay flexible in an effort to overcome them. Therefore it is vital we continue to work with governments, our customers and suppliers to build our businesses and support the regions in which we operate as we look to become the global supplier of choice.”

Paul McBean, Scunthorpe Multi-Union Chairman, said:

“Exactly one year ago I hailed our employees for making the launch possible. Today I praise them in equal measure for giving us a fantastic platform upon which to build.

“It’s not been easy but Britain needs a thriving steel industry. That’s what we’re intent on delivering and that’s what the new Government must support because today’s news isn’t mission accomplished. The share scheme and re-instatement of employees’ full salaries are both deserved and welcomed. I’m also pleased to see British Steel is continuing to make the significant capital investments this business needs but people should be in no doubt, a lot of hard work lies ahead. However, I have great confidence in our employees and as we continue our growth they will ensure British Steel keeps flying the flag for manufacturing excellence at home and abroad.”

* Full year proforma results