British Steel is cutting more than 2,000 jobs in the first stage of the cost reduction drive it announced earlier this year in response to the rise in the pound. The company, which Monday announced a 59 per cent fall in pretax profits to 451 million for the year to March, set aside 61 million for rationalisation.
The job reductions are in line with the companys decision to increase the rate of job cuts from about 1,000 a year. Last year, British Steel reduced its workforce by 3,600 to 50,400, including 2,100 through the sale of its forgings business. Sir Brian Moffat, chairman and chief executive, warned that profits could fall further in the current half-year which ends in September, because the full effect of sterlings 20 per cent appreciation since last summer had yet to show.
The probability is that the biggest effect will be in these six months, he said. Brian said that while he was
cautiously optimistic about the outlook for steel trading, given signs of recovery in demand in western Europe, he remained concerned about the pound.
The strength of sterling is a problem to British Steel and to many of its UK customers who are also significant exporters. Their order books are bound to be affected this year if sterling remains at its present levels.
The companys financial results were in line with City analysts forecasts and the shares closed 4 3 /4p down at 158 1 /2p.
The profits were earned on a turnover of 7.224 billion, 2 per cent higher than last year. The dividend was unchanged at 7p for the final payment and 10p altogether. The company also announced plans to take a majority stake in a steel mill in Indonesia, to be developed in partnership with P.T. Bakrie & Brothers, the Indonesian conglomerate. If the $600m to $900m project goes ahead, it could add about 1m tonnes of steel a year to British Steels current output of 15m. The company also has asked the European Commission to investigate reports that the Walloon regional government in Belgium is set to finance the rescue of the Forges de Clabecq steel group, which went bankrupt last year. Copyright Financial Times Limited 1997. All Rights Reserved.
