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25 Jan 2017

British Steel ends Q3 2016 in profit

British Steel is pleased to announce that it ended Q3 2016 in profit following its first seven months of independence, and starts the new year in a strong position to execute the next stage of its turnaround plan.

Business headlines:

  • Delivering positive financial results quarter-on-quarter and generating cash to sustain further development and investment
  • Planning to reinstate, in June 2017, the 3% salary sacrifice that was implemented (with employee agreement) in June 2016
  • Ongoing implementation of turnaround plan to deliver, at the end, upturn of 20-25% based on 15/16 actual turnover in constant market condition
  • Additional cost savings
  • Enhanced product quality and service offering
  • Regional, national and global development opportunities
  • Brand awareness further strengthening stakeholder relationships, supporting contract wins and driving recruitment

The company, launched on June 1, continues to make progress against its turnaround plan and remains on track to build a business capable of delivering sustainable growth.  With the continued implementation of its turnaround plan the business is on track to continue its growth in a competitive global market through a combination of both further cost efficiencies and continued investment.

Whilst the macroeconomic environment has been more challenging in recent months, largely driven by the rising price of raw materials, particularly increases to the price of coking coal, iron and scrap metal, and foreign exchange fluctuations, the business is well placed to manage these challenges and is pursuing a proactive and responsive pricing strategy.

The company has secured a series of significant contracts with long-term and new customers, including:

  • Infrarail – 16kt of rail for the M’Sila line and the North South Phosphate Mine line in Algeria
  • Rete Ferroviaria Italiana  (RFI) –  long-term contract with Italy’s national rail track company for track renewals

Today, the company reaffirms its commitment to significant capital expenditure as part of its plan to improve competitiveness across its five business units: Primary Products, Construction, Rail, Rods and Special Profiles. This investment in technology and infrastructure will further strengthen our capabilities and product offering. During the reporting period British Steel has committed £39m in capital expenditure and made several significant investments including £1.8m in scale removal at the Skinningrove site.

British Steel continues to invest in training a new-generation of highly-skilled steelworkers to reinforce its long-term capability. Almost 350 new employees have joined the company since its launch on 1 June last year. It continues to prove attractive with graduate and placement opportunities for 2017 generating interest from over 3,400 applicants. A total of 57 apprentices and 31 graduates will be taken on this year, while 26 people will join the business on placements of up to 12 months. The new people will be joining the 180 graduates, trainees and apprentices already employed by British Steel.

In addition, 20 people will be employed in sales and warehouse roles located at the company’s distribution sites in Wolverhampton, Brandon, Dartford and its new sales office in Newport.

British Steel’s Executive Chairman Roland Junck said: “I’m pleased to report that after our first seven months of trading, we are building on our promising start to life as British Steel.

“Having implemented the first stage of our turnaround plan, returning the business to profit and putting it on a sustainable footing, we are now well positioned to implement the next stage of the plan. This will be focused on ensuring tactical growth of both our business and brand which we see as crucial next steps in our strategy. We’re already making good progress with significant contract awards from both new and existing customers across the globe.

“A vital part of maintaining our momentum and building on our success to date is our investment for the future – in our people and our plant. We are totally committed to becoming more energy efficient and further improving the quality of our products to ensure they meet the exacting and changing demands of our customers.

“Domestically we are in a unique position to provide large quantities of steel for developments throughout the UK, whether that be major infrastructure projects such as HS2 and Heathrow or smaller projects, such as the building of new schools or hospitals. It is therefore heartening to see positive steps by the Government over public procurement and the steel pipeline, two policies which should lead to more British Steel products being used in even more projects throughout the UK.

“We remain in constant dialogue with both the UK and French Governments and I’m confident that with their support, we can improve the value of our product portfolio, and build a sustainable future for British Steel and the regions in which we operate.

“Our employees remain fundamental to our success. Last year, they agreed to a temporary three per cent salary sacrifice including a reduction in their pension contributions. This was implemented in June 2016 and is scheduled to be re-instated on June 1 this year.

 “We continue to enjoy incredible support from our employees and I’d like to thank them as without their skill, dedication and personal sacrifices we would not be where we stand today. The unions have remained steadfast.

"I would also like to re-iterate that we are grateful to Tata Steel for all they did to ensure we hit the ground running.  We have a constructive relationship with Tata Steel and we share a strong vested interest in the future of British steelmaking. Our turnaround plan was initiated under Tata Steel ownership who acted responsibly and bore major costs to transform the business thereby ensuring a profitable start and the potential of a stronger future.

“While we undoubtedly face several challenges, the pace at which we have evolved allows us to believe that we can continue to strengthen our long-term capability and build a sustainable future as an industry leader serving our employees, our customers and our local communities.”

British Steel Multi-union Chairman Paul McBean said: “It’s really encouraging to see the progress we’ve made as a business since becoming British Steel. Our employees have shown immense support to delivering our transformation plan over the last 18 months and I know we can continue to count on their support as we enter this next phase and look to grow the business further.

“Our industry continues to face many challenges – we still have a competitive disadvantage to many of our European and global competitors and we will continue to lobby the Government to ensure this changes. However we need to focus on what we can do from within, and to do that we need to use the positivity that has built up in the business since becoming British Steel to help us on our journey. We’ve shown we’re fighters, we’ve shown we’re survivors and now we’ve got to show that we can become industry and national champions.”