Posted on 20 Sep 2024
British Steel’s losses increased drastically in 2022 despite revenue rising, Kallanish notes from its recent annual filings with Companies House.
It reports before tax loss of £408.4 million ($542m) in 2022, increasing from a £49.5m loss in 2021. This includes an impairment of £202.9m, reflecting a deteriorating outlook for the blast furnace operations at the Scunthorpe site. Losses continued in 2023 and 2024, the firm adds.
After tax and exceptional items, it reports a loss for 2022 of £367m, versus its 2021 loss of £50.8m, noting the long-term embedding of high energy prices.
Despite liquid steel production for the year dropping to 2 million tonnes, down from 2.6mt in 2021 following output management activities, revenue increased to £1.7 billion, up from £1.5 billion in 2021. Volume reductions were offset by higher steel prices, the filings show.
Of the £1.7 billion revenue, the UK continued to be the main market, with £927m sold into the home market versus £443m in Europe, and £363m for the rest of the world.
The company reports that the external trading environment remained highly volatile throughout 2022, characterised by significant fluctuations in both commodity and energy prices alongside variations in market demand levels.
A marked improvement was observed in the second quarter with profitable trading achieved due to a rise in steel prices and demand following the Ukraine war outbreak. This was coupled with moderation in energy prices throughout the spring.
However, further significant rises in energy prices, peaking in late summer, led to deteriorating margins and the difficult decision to manage production volumes to minimum practical levels in Q4.
It reported a loss before tax of £203/tonne in 2022 versus £19 in 2021.
The company notes economic conditions deteriorated in the second half of the year. Efficiency savings were identified across the business and additional spend control measures implemented.
It also says operational problems associated with the ageing Queen Victoria blast furnace limited steel output in 2023, albeit with softening wholesale energy prices providing benefit to operating costs. The unit was taken out of service in February 2024, with the newer Queen Bess blast furnace being brought into service to replace it.
The firm says in the filings that “risks remain of further volatility in the wholesale energy market and deterioration in the global steel market as conflict in the Ukraine continues and geopolitical uncertainty, high inflation and tightening monetary policy continues into 2024.”
In the event of continued losses, the company would require further funding support from the wider Jingye group. The filings show intercompany/related party loans were £630m in 2022 against £364m in 2021.
In 2022, British Steel benefited from access to an external asset-backed receivable lending facility of £50m supplied by Secure Trust Bank plc, while Jingye International (HK) Holdings Company Limited provided a further £220m committed lending facility to the ISUK Group, maturing in 2025.
Despite the operational losses, the company continued to invest in strategic projects as it seeks to improve the performance of the business, which it says will enable investments necessary to secure its long-term future.
Total capital expenditure for 2022 was at circa £143m, increasing from £81m in 2021, whilst growth-capex was £71m in 2023 and is forecast at £31m for 2024.
The investment programme in 2022 included a new billet caster, raw material unloading cranes, new steel plant charging crane, and new special profiles service centres at the Skinningrove site. This was combined with significant investment to support coke making and steel efficiency and reliability.
It also notes that discussions continue with the UK government to seek support for the transition to low-embodied carbon steelmaking which is a vital part of securing a long-term sustainable future for the business.
The company increased its CO2 intensity per tonne of liquid steel on a scope 1, 2 and 3 emissions basis to 2.246 tonnes CO2 per tonne in 2022, up from 2.086t Co2/t in 2021, filings show.
The company unveiled its decarbonisation plans in late 2023 to shift to electric arc furnace steelmaking via a £1.25 billion investment.
Source:Kallanish
