The resurrected British Steel has unveiled the biggest single investment in its manufacturing operations “for a decade”, after a technical problem at its production facilities weighed on profits last year. The company, which runs the large Scunthorpe steelworks in northern England, is to plough £50m into an upgrade of the site’s rod mill, which makes wire rod that goes into products from paper clips and screws to car springs. British Steel has been implementing a turnround plan since being formed two years ago, when the investment firm Greybull Capital paid £1 for Tata’s lossmaking European long products division and renamed it in homage to the former titan of UK industry. Earnings jumped 45 per cent to £68m before interest, tax, depreciation and amortisation in the 2018 financial year, while revenue increased 17 per cent to £1.4bn.
However, excluded from the ebitda figure was a one-off cost of £47m caused by a blast furnace chill, for which the company is pursuing an insurance claim. Even so, executive chairman Roland Junck said that a transformation was “firmly on track” and that without the incident, British Steel would have exceeded its “Year 2” target. During the first quarter of this year, ebitda hit £21m. “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,” Mr Junck added.
The apparent improvement in British Steel’s underlying financial performance will buoy hopes that the UK’s steel industry has turned a corner, after nearly collapsing in 2016 under the weight of plummeting prices for the metal and a wave of cheap imports into the EU. Britain’s largest steelmaker, Tata, is merging its wider European operations with those of ThyssenKrupp. In addition to its new wire rod line, which is scheduled to be commission in autumn 2019, British Steel said it had committed a further £40m to other capital expenditure this financial year. To help fund the investments, it has secured £90m of debt financing from White Oak Asset Finance, part of a US credit fund. Paul McBean, a trade union leader at Scunthorpe, 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.” The company’s growth ambitions have been underlined by the expansion of its workforce, with 1,000 new employees recruited over the past two years, taking the workforce to 5,000. Workers are receiving a staggered 4 per cent pay rise, added the company, which also operates manufacturing sites in France and the Netherlands.
Greybull previously owned the failed UK airline Monarch.