British Steel is today reporting a Q1 profit of £21m and announcing the biggest single investment in its manufacturing operations for a decade.
In its second annual trading update, British Steel said its turnaround remains firmly on track and reported a significant long-term investment plan to support the business for years to come. This will include a £50m investment in Scunthorpe Rod Mill, and a commitment to spend £40m to other capital expenditure in the next financial year to maintain and improve the existing asset base.
The company’s annual turnover was £1.4bn in FY18 versus £1.2bn in FY17.
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 Two 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.
“With the support of our employees we’ve achieved a great deal in a short space of time and while a lot of hard work lies ahead, we’ve made significant progress towards building a sustainable future.”
The £50 million wire rod investment will see a new modern wire rod line open at the company’s current Scunthorpe Rod Mill. It’s been designed by Primetals, which will also oversee its installation. Work is scheduled to start this summer and the new operation is set to be commissioned in autumn 2019.
Paul Martin, British Steel Deputy CEO, said: “This is a major investment in the future of our business, underpinning our commitment to providing customers with higher technical specifications of steel and a diverse, premium product range.
“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 Ltd.
Tom Otte, President of White Oak Asset Finance, said: “Our investment in British Steel speaks strongly to the company’s turnaround over the past few years. We are very optimistic on the company’s continued growth, and fully expect our capital to finance its organic expansion.”
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.
Union leader Paul McBean said: “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.”