Back in the black: British Steel hits key targets in first 100 days
REASONS TO SMILE: British Steel has hit key targets in the first 100 days.
By Scunthorpe Telegraph | Posted: 29 Sep 2016
BRITISH Steel is on track to return to profit this financial year, with employees to be ‘rewarded’ with the scrapping of the 3 per cent salary sacrifice.
Highlights toasted by management in Scunthorpe included:
- Turnaround plan on track and business back in the black
- £50m of capital investment committed in annual plan
- Major support from customers and suppliers
- 270 new employees, including 48 apprentices
- Revenues improving month-on-month
- Engagement underway with Government to ensure a level playing field for UK steel industry
Launched on June 1 with an emotional renaming, executive chairman Roland Junck said British Steel is well on course to complete its return to sustainable growth, after successfully implementing the first stages of its turnaround plan.
He said: “I am delighted to be able to announce that we have hit our performance targets and returned the business to profitability in our first 100 days as an independent company.
“These results are testament to the hard work of our employees and their determination to implement the turnaround plan.
“I believe we are now better placed to capitalise on our strong heritage, vastly experienced and skilled workforce and world-class products. The transformation of our business will make sure we maintain the pace of growth and move forward as an outward-looking profit-making business. But while our future remains firmly in our hands, the UK steel industry still faces many challenges.
“That is why we are pleased to remain in constructive dialogue with the Government about the strategy needed to support British Steel and ensure that it is operating on a level playing field.
“It goes without saying that any such strategy must be long-term and cross all political divides if it is to achieve the goals we all share.”
BRIEFING: Executive chairman Roland Junck addresses the media and members of British Steel's management team.
Praising the passionate, motivated workforce, he outlined investments that make up the £50 million spend, claiming the previous owner had “lost interest” in the business.
Investment is focussed on several major projects to improve competitiveness and broaden the offering to customers, while also ensuring quality. These include:
- £7m investment in the replacement of gasholders
- £10m investment to improve efficiency and reliability of Appleby Coke Ovens and By-Products
- £4.2m investment in Scunthorpe’s Basic Oxygen Steelmaking Plant
- £1m investment in Hayange Plant’s New Main Drive Armature
But while the importance was underlined, Mr Junck spoke highly of the bolstered 4,400 strong team, the vast majority of whom are in Scunthorpe.
“You can have the best assets, anything you want, but people make a difference. They are proud of the history and heritage, they have a lot of experience of steelmaking in this world, but we also need to recruit to ensure a certain continuity.
“They are excited about the plans and our activities in the community,” Mr Junck said. “I was impressed with the passion and motivation of the people. There can be many reasons why we have made our way in the transformation since June 1, but what they have done in these 100 days is leading on the transformation of the company.”
Turning to the future, he told how it was transforming from a loss-making inward looking steel division to a profitable outward looking stand-alone business.
A 15 point difference in performance year on year was given, while actual figures were kept private.
“The company has come from several million pounds of losses a month to positive financial results month on month. There has been no negative months since starting our company and we are forecasting continuous improvement with the financial results through quarter three and quarter four.
“Accurately predicting a new business at the beginning is not necessarily the best bet but we are exactly on track so far and expect to achieve our financial targets at the end of the financial year.
“Last year was -10 this year should be +4 or +5.”
ALL EARS: Today's media conference at British Steel's Scunthorpe HQ covering the first 100 days.
He underlined the customer commitment to the new business, old and new, with names such as Caterpillar, Toyota, Network Rail, Cargill, William Hare, Apollo, Vesuvius and Elland Steel Structures highlighted.
“If I was a poet I would say we enable trains to travel, bulldozers to dig, build bridges for people to come together and help cars to drive safely, but I’m not a poet,” said Mr Junck.
“If we help our customers to be successful it will be mutually beneficial. If you help them and they are successful that is the chance you have of having a sustainable British Steel. If we protect and develop our people and communities, if we make our customers successful by delivering the right products in such a way, we have a sustainable future.
“Health and safety is our licence to operate and is also key to our success.”
A large focus was on "what being good looks like" and while costs were highlighted, Mr Junck suggested head count was not an immediate concern, evidenced by additions to the workforce. He told how the previous owners had appeared to lose sight of what competitors were doing, with little or no peer monitoring.
"Once we start to understand what good (business performance) looks like we will start to see the significance of differences in all costs," he said. "That is not necessarily in people, but in all aspects; it could be the amount of coal injected into a blast furnace, it is a question of reliability, a question of technical improvement, it is across all the statistics.
"I think the total workforce is 16 per cent of revenue, so you wouldn't win the battle even if you wanted to do that. What we do is make sure that through this productivity gains, though improvement in reliability, we can look at what good looks like in the industry."
Of the salary sacrifice, Paul Martin, human resources director at British Steel, said: “A lot of work went into the sacrifice, everyone took the chance for the future, and while we have six months of the year to go, our intention to is to reinstate that in June.”
Customers delight at 100 day 'report'
THE 100 day results have been welcomed by key recipients of British Steel.
With a core business covering rail, sections, wire rod and special profiles, the management team said it has put customer service and product innovation at its heart.
Network Rail is one of British Steel’s main partners, with 98 per cent of the rail it lays in the UK manufactured at the Scunthorpe plant.
Mark Carne, chief executive of Network Rail, said: “Network Rail has great confidence in the UK steel industry and we’re very happy to be using rail made by highly-skilled workers at British Steel, which has made such a promising start to business. 96 per cent of our spend on steel rail is at the Scunthorpe plant. There are few other companies of our size who can show such a clear commitment to buying British and we’re proud that British Steel is helping us deliver our Railway Upgrade Plan.”
Caterpillar (CAT) and British Steel have adjoining operations at Skinningrove, Teesside, where products made by British Steel’s special profiles operation include steel track shoes. These are used on CAT’s renowned ‘Cat track’, which can be found on hydraulic excavators, track type loaders and track type tractors.
Neil Anderson, managing director of Caterpillar Skinningrove, said: “We are a long-standing customer of British Steel and we are delighted to be working with them on a number of significant projects. By working together as a team I am confident we can make both businesses more competitive in the future.”
Billington Structures is one of the UK’s leading structural steelwork contractors and predominantly uses British Steel sections, manufactured in Scunthorpe and Teesside, in many of its major projects, including RAF Brize Norton, Oxfordshire, One Bedford Avenue, London and Next Distribution Centre, Doncaster.
Mark Smith, Billington: We're thrilled the British Steel brand has re-emerged. It's encouraging to see the business is making great progress pic.twitter.com/h8ommWOPIR— British Steel (@BritishSteelUK) September 29, 2016
Mark Smith, Billington chief executive, said: “We are thrilled the British Steel brand has re-emerged as they have been our key partner for steel supply since 1993, providing over 375,000 tonnes. Working closely with British Steel allows us to supply our customers with the quality products and services they demand. It is hugely encouraging to see the new business making great progress.”
Six key asks of the new Government, and a call for action
WHILE being black in black is clearly a satisfying first milestone for British Steel’s management team, there is much more work ahead.
A focus on raising the quality of product is clear in certain sectors, ensuring the whole plant is fit and – crucially – ensuring Government support for the industry as a whole is vital.
Six key asks have been highlighted for support from Whitehall and the new Department for Energy and Industrial Strategy, led by Greg Clark.
- Business rates
- Energy prices
- Public sector procurement strategy
- Tackling unfair trade
- Long term investment support
- Long term industrial strategy
Underlining the challenges, executive chairman Roland Junck said: “If I had this plant in Germany I would have a much better position on the first two elements.
“We want to understand better public procurement, working as a local producer. We see it in France.”
Asked if he had faith in either Government or opposition to deliver on steel strategy, Mr Junck said: “People who have faith go to church. I have faith in what we are doing. I can tell you our intention.”
Slightly less diplomatic, Scunthorpe site multi-union chairman Paul McBean, said: “I don’t think they know what industrial strategy means. We have had MPs up here, they had their pictures taken, promised us the earth, and have gone back to Westminster and forgotten we existed. We will continue to travel to Parliament for these six asks, and at some point someone is going to have to deliver.”
What hasn’t helped is the Brexit vote and ensuing uncertainty, the triggered leadership contest and forming of a new government, all within the 100 days in focus.
In fact, Sajid Javid, who attended the poignant flag raising ceremony, is now Secretary of State for Communities and Local Government.
Paul Martin, human resources director at British Steel, said: “The pace of action is frustrates us. We spend a lot of time working with them. Action just takes and inordinate amount of time.”
Union backing for transformation plan and shareholders
MULTI-union chairman Paul McBean underlined the backing of management of British Steel and the shareholders at Greybull as he digested the first 100 days report.
Sat with media from the Financial Times, Reuters, The Guardian and your Scunthorpe Telegraph, Mr McBean told how “14 months of hell” now led to pats on the back as he walked down the street.
He was asked about confidence in the money men, on the back of perceived failures with a convenience grocery retail chain and the success of Monarch airline, this past week brought under scrutiny, but he backed them, and even highlighted the turn of fortunes for a company that clothes many a steelworker, Des Comerford’s Fallen Hero.
FOOTBALL AND THE COMMUNITY: Paul McBean, left, with Scunthorpe United chairman Peter Swann.
Mr McBean said: “I first met investors in October in a quiet meeting at a hotel and I was impressed with what they intended to do. I asked searching questions and they answered honestly. They came on board, and we have got to where we are.
“I cannot answer questions about other businesses, but do I have faith in the business? Yes I do. They would certainly get to know if I didn’t! I have every faith in Greybull going forward.”
Recalling the journey, he said: “We went through 14 months of sheer hell trying to get to where we are. During that it looked like we may shut down on March 31. There is pride and passion in the workforce, all I wanted to do was give them opportunity to show capability, and I think that has been proven. i am proud of what was done, of British Steel and of my town.
“I know walk down the high street and people pat me on the back for the work put in, which is nice. I know people who own shops who are now opening other shops, who are telling me that before June 1 they could have been going out of business. People weren’t spending. Then they saw our future, we got to June 1, and now they are in a position to open new shops.”
For Roland Junck, the reaction from people who are not aware of his role in the town, is a useful barometer of confidence.
“When I speak with taxi drivers, hoteliers, look at real estate prices in the region, when I hear about the football club, the motivation, it is inspiring. When it is something like this, so closely aligned to the community, if that goes badly everything is affected and it is no fun. If you feel there is some optimism and something is happening, you feel that also. I can only look at the different answers each time I ask someone who doesn’t know what I do. I feel what they think, and it has all been positive up to now!”
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