SCUNTHORPE, England (Reuters) - British Steel has returned to profit in its first 100 days of trading after being spun off as a loss-making division in April by India’s Tata Steel (TISC.NS) after it decided to exit the troubled British steel sector.
Investment firm Greybull Capital LLP bought the steelworks, based in Scunthorpe, northern England for 1 pound, reviving the historic British Steel brand, saving some 4,000 UK steel jobs and up to four times that amount in sectors dependent on steel making.
“I am delighted to be able to announce that we have returned the business to profitability. We’ve been gaining market share and should come back to the position of being a (key) UK construction supplier, but we’re not there yet,” Executive Chairman Roland Junck told journalists at the plant on Thursday.
British Steel plans to inject 50 million pounds of capital in the current financial year, and Junck said it would need to do this several times over in the coming years.
Some 5,000 jobs have been axed in the British steel sector since last October, equal to about a fifth of the workforce, as it struggles to compete with cheap Chinese imports and some of the highest energy costs and green taxes in the world.
British Steel’s announcement that it has turned a profit making steel in Britain and expects to continue doing so in the year to end-March 2017 offers some hope for the sector, and for the community around Scunthorpe.
“We went through 14 months of hell, we thought we were going to shut down,” Paul McBean of the Community union said.
“I now bump into people who thank me for the work I’ve done - a shop owner who thought he was going out of business and is now in a position to open another shop.”
The Greybull deal with Tata Steel included a 400 million pound investment and financing package and the investment firm did not take on any pension liabilities.
Tata Steel, which wants to reduce its exposure to the European steel sector by merging its EU assets with Germany’s Thussenkrupp, said this month its net loss widened to $477 million in the quarter to end-June due to the sale of its Scunthorpe based business to Greybull.
British Steel employs 4,400 people in the UK and another 400 in France. It makes more than 2.8 million tonnes of steel a year and has a 4.5 million tonne capacity, enough for 615 Eiffel Towers.
The company is working with the British government to secure a level playing field for British steelmakers, which it says continue to face many challenges, including the uncertainty created by Britain’s vote to leave the European Union.
“There are differences which handicap the UK in terms of business rates, energy prices,” Junck said. “What we would like to see fundamentally, is what every country has, which is a long term industrial strategy.”
Reporting by Maytaal Angel; Editing by Adrian Croft and Susan Thomas