Europe’s biggest stainless steel company, Outokumpu, affirmed its commitment to the UK following the vote to leave the EU, as the Finnish group confirmed it was on track for positive core earnings for the first time in eight years.
Outokumpu employs about 550 people at its site in Sheffield, once known as the UK’s “Steel City”, where this year it undertook redundancies and closed a pension scheme to avert the risk of closure.
The cutbacks came as Britain’s steel sector reeled from a global downturn because of oversupply, compounding high costs such as energy prices. While tariffs prevented stainless prices falling in the same way as those for basic steel, Outokumpu had warned its British workforce on its weak competitiveness.
But on Thursday, Roeland Baan, chief executive, said the Sheffield mills were an “integral part” of the company and that the result of the EU referendum would not affect the company’s investment calculations.
“You can never say ‘never’ [to cuts and closures] — if things go to pot you have to take a business decision. But from a strategy point of view and as part of our portfolio we are absolutely committed to our [UK] assets,” he said.
The affirmation will come as a relief to the industry. Uncertainty still hangs over the UK’s biggest steelworks in Port Talbot, whose owner Tata is in talks with German rival ThyssenKrupp over a possible European merger.
Sterling’s depreciation in the wake of the ballot had improved the “competitive position” of the Sheffield facilities, said Mr Baan, but a currency hedge taken out beforehand meant a boost to profits would only come through in 2017.
The comments came as Outokumpu reported underlying quarterly earnings before interest — the company’s preferred measure of profit — of €32m in the third quarter, the first positive result since the first quarter of last year. Revenue was €1.42bn, up 2.9 per cent on the same period last year, while net income swung into the black at €13m.
The company put the improvement down to cutting costs, increased production at its US arm and a rise in stainless steel prices, adding that it expected positive underlying earnings before interest and tax for the full year.
Seth Rosenfeld, analyst at Jefferies, said the quarterly results were “stronger than expected”.
Source:FT.Com