British Steel works has never made a profit for us, say Chinese owners

The Chinese owners of the British Steel works at Scunthorpe have revealed that they have not made a profit since the year they rescued the company.
As it catches up on its annual account filings following two separate rows with audit firms over fees for checking the financial health of the company, British Steel Ltd, owned since 2020 by Jingye, has reported that it made losses in 2022 of £408 million following a deficit of £50 million in 2021.
Jingye is going through the same process as Tata Steel at Port Talbot in south Wales in closing down its ageing, energy-intensive, high-emission blast furnaces to be replaced with cleaner, greener electric arc furnaces. At Port Talbot the process is costing 2,800 jobs. There are fears that without government support, thousands of jobs are also under threat at Scunthorpe.
In the 2022 accounts, belatedly filed this week, Xi Feng Han, the Jingye executive who is British Steel’s chief executive, conceded that trading had continued to “remain challenging … with losses continuing into 2023 and 2024.”
Jingye acquired British Steel out of the hands of the Official Receiver just as Covid-19 swept in. The UK steelmaker had previously been owned by the Meyohas brothers, financiers who trade as Greybull Capital and who acquired Scunthorpe off Tata Steel for a nominal £1.
Tata had divested Scunthorpe, which it had acquired as part of its takeover of Corus in 2007, believing it had no future. On the watch of the Meyohas brothers, the business went bust within four years.
In its first year of Jingye ownership, Scunthorpe, which had been renamed British Steel and includes the giant blast furnaces and a rolling mill in the town plus steel mills in the north east, brought in profits of £267 million.
British Steel’s 2022 performance was punctuated by falling demand, output went from 2.6 million tonnes to 2.0 million tonnes, not helped by soaring commodity prices and the spike in the energy price as a result of the war in Ukraine.
Higher customer prices meant that British Steel’s revenues went from £1.5 billion to £1.7 billion. However, with its soaring costs, the underlying operating margins went from about break even to -8.2 per cent — an £82 loss for every £1,000 of revenue. A £202 million write-off of asset values sent the bottom line losses to an eightfold increase of £408 million.
The company’s latest auditors, MHA, variously formerly known as Macintyre Hudson and Baker Tilly, said there was “material uncertainty” as to whether the business remains a going concern, indicating that its future was solely based on the continuation of Jingye’s support. They issued a qualified opinion on the accounts saying they could not verify the accuracy of various numbers after they took over from the previous auditors.
The previous auditor, Moore Kingston Smith, had resigned the British Steel audit after just a year because it said it was not “commercially possible” to conduct a satisfactory audit at the price that Jingye was prepared to pay. The previous year, Mazars had resigned the British Steel audit citing similar reasons.
British Steel filings show that audit fees have gone from £323,000 under Mazars in 2020, to £450,000 under Moore Kingston Smith, to £900,000 under MHA in 2022.