GFG issues operating update as work continues to stabilise and move the business forward

GFG Alliance > 5th August, 2021

GFG Alliance (GFG), owner of LIBERTY Steel Group, today reports further progress in its operational performance as well as the continued work by the specially appointed Restructuring and Transformation Committee at LIBERTY Steel to secure an environmentally and economically sustainable future for its businesses.

Bolstered by strong demand and record prices for steel, iron ore, and aluminium in global markets, alongside improvements in systems and operations, GFG notes strong performance for its core businesses.

Jeffrey S. Stein, Chief Restructuring Officer (CRO) said: “The RTC has been working closely with LIBERTY Steel Group and its stakeholders globally to develop new business plans and restructure the business. It is encouraging that discussions with creditors continue to progress well and our global restructuring plans continue to develop. In many cases, refinancing options have been oversubscribed. Our core markets in steel, aluminium, and iron ore are performing beyond expectations, bolstered by high demand and record prices. This in turn has led to our core assets achieving strong financial results. While there remains much to do, we are pleased with the progress made to date and confident in the resilience of the business going forwards. We will continue to publish regular updates on the restructuring and refinancing for the benefit of all of its employees and stakeholders.”

Actions taken
  • Activity is underway to complete LIBERTY Primary Metals Australia’s (LPMA) refinancing, as global refinancing efforts continue.
  • At ALVANCE, a strategic deal cementing a long-term commercial relationship with two of the largest trading houses in the world, has been agreed. The deal involves the supply of the raw material requirements of Dunkirk and Duffel, assistance in the marketing of products and provision of hedging facilities. Under the agreement ALVANCE’s debt will be refinanced allowing creditors to be repaid. GFG expects the agreement to be finalised shortly once the reservations of one of the businesses’ creditors over early repayment has been resolved.
  • GFG reached an agreement with Tata Steel, bringing to an end proceedings launched against LIBERTY Speciality Steels, LIBERTY House Group PTE, and Speciality Steel UK earlier this year.
  • GFG is now back in control of its 41% stake in sustainable energy generator SIMEC Atlantis Energy following the cessation of the receivers’ appointment over the shares of SIMEC UK Energy Holdings Limited in SIMEC Atlantis Energy and the resignation of the receivers as directors of SIMEC UK Energy.
  • GFG has settled a post completion dispute with Rio Tinto Group over the acquisition of the Dunkirk aluminium smelter in 2018.
Regional updates

United Kingdom
Following the introduction of the new LIBERTY Steel UK (LSUK) management team, led by Subhajit Roy Chowdhury, a new organisational structure has been developed. The new structure lays the foundation for developing LSUK into a competitive, two million tonnes per year GREENSTEEL business with clear centralised functions and operations-focused units. The new management composition will oversee the separation of the Stocksbridge, Brinsworth Narrow Strip, and Performance Steel assets.

New business plans are being developed for the LSUK businesses which would allow the LSUK to resume production in the short term and create a more sustainable future for the assets over the longer term. Plans are being shared with unions and creditors for their input, including working with a leading strategic consultancy to validate plans.

LIBERTY Steel’s Newport mill achieved its best-ever financial results in the first quarter, with the outlook looking even brighter for the second quarter. The business improved profitability last year despite challenging market conditions caused by covid-19 and significant health and safety improvements have been made under the stewardship of LIBERTY’s site management. The Newport plant recently welcomed MPs from the BEIS Select Committee, who witnessed the strength of operations first-hand.

GFG and LIBERTY Steel continue to engage with the BEIS Select Committee inquiry into ‘Liberty Steel & the future of steel industry in UK’. In addition to the positive site visit to Newport in July, GFG has submitted written evidence to the Committee, in which it articulated its vision for sustainable steel industry as a backbone of the UK’s economic infrastructure and the role that its GREENSTEEL strategy can play in achieving it. GFG has also responded in writing to detailed questions from the Committee.

The Secretary of State for Business, Energy and Industrial Strategy has publicly reiterated his readiness to enable GFG to take time to refinance key operations and repay creditors. In a separate statement, following a meeting of the UK Steel Council meeting, he also restated the UK Government’s ambition for an environmentally sustainable steel industry in the UK. This aligns with GFG’s CN30 goal and its GREENSTEEL plans for the UK. The vital role steel has to play in delivering a low carbon economy was recently highlighted when Orbital Marine Power’s O2, the world’s most powerful tidal turbine, commenced generating clean power on 28 July. LIBERTY Steel Dalzell provided the steel plate used for the O2 turbine’s body when it was manufactured in Dundee.

This week, LIBERTY Powder Metals marked a key milestone with the appointment of its first distributor for the UK and Ireland markets. The deal will act as a springboard for the growth of LIBERTY Powder Metals’ global distribution network and allow its customers to benefit from fast turnaround times. An initial 10 tonnes of powder metals across LIBERTY Powder Metals’ comprehensive portfolio of premium powders will be stocked by Righton & Blackburns Limited.

Europe
LIBERTY Ostrava, GFG’s business in the Czech Republic, has followed up its strong Q1 results with its best production quarter since 2017. For the quarter to 30 June 2021, it shipped more than 600,000 tonnes of steel products, with production for each month around 200,000 tonnes, the highest sustained monthly levels since 2008. Production for the quarter was almost 80% higher than the covid-19-affected Q2 2020.

LIBERTY Galați, the largest integrated steel producer in Romania, has reported its strongest quarterly results since 2008, building on the production improvements made in 2020. The company reported turnover of EUR 359 million and EBITDA of EUR 52 million for the quarter ending 31 March 2021. This continued the positive progress from the second half of last year. The plant has now raised its production target for 2021 and is accelerating the planning for the strategic projects required to transform the plant to carbon neutrality by 2030.

During a visit to Romania last month, representatives of the RTC and Sanjeev Gupta took the opportunity to meet with creditors and potential new lenders to continue positive dialogue and deepen the understanding between parties.

On 22 July a Memorandum of Understanding (MOU) was signed to create a Technical and Research Collaboration Framework with the Romanian Energy Centre, the international engineering group MTAG as well as a Romanian research institute. The framework will promote, facilitate, and consolidate collective work in research, innovation and business development of novel energy production technologies and fuels, particularly hydrogen, which will be pivotal to LIBERTY’s GREENSTEEL plans in Romania.

LIBERTY Magona has now restarted production due to receiving Hot Rolled Coil (HRC) from LIBERTY Galati, which has now become primary supplier of HRC to our European downstream plants following the operational reorganisation announced at the end of June. LIBERTY expects the ramp up to full production at Magona to be completed in September and at LIBERTY Liege-Dudelange in October.

LIBERTY Steel Group has completed the sale of LIBERTY Ascoval and LIBERTY Rail Hayange to SHS – Stahl-Holding-Saar (SHS). Following on from the recent collaboration between the two groups to explore construction of an industrial scale hydrogen-based steel making project in France, Liberty believes SHS/Saarstahl has a strong industrial concept similar to LIBERTY’s GREENSTEEL model that will help secure the future of the businesses.

Australia
The Whyalla Steelworks team in South Australia has continued their site-wide continuous improvement programme, with 85 initiatives across the business now positively impacting bottom line performance through increased efficiency and value realisation.

SIMEC Mining’s Tahmoor Coking Coal Operation posted record annual production and output on the back of significant capital investment by GFG, new state-of-the-art equipment, strong market conditions, and continuous improvement initiatives. The Tahmoor South Project also received conditional approval earlier this year, facilitating a 10-year extension to the mine’s lifespan and the creation of an anticipated 170 jobs.

Governance

As a family-owned business that has grown rapidly worldwide to a total of 35,000 employees across 30 countries, GFG was in the process of evolving its governance structure and processes before the business was impacted by the collapse of Greensill Capital and the covid-19 pandemic. GFG recognises that this is a crucial process and is aware that stakeholders are looking for it to provide more transparency in the group’s corporate structures, reporting arrangements, and governance.

Since 2019, a workstream has been underway to evolve GFG’s governance and this has accelerated since the RTC was established on 5 May 2021 to restructure LIBERTY’s operations and support GFG’s progress on refinancing the group. Against a backdrop of seeking to secure the future of a number of challenged operations in the wake of the Greensill collapse, the RTC has supported and advanced this workstream. The work of the RTC includes installing external independent Directors, the Chief Governance Officer, and the Chief Financial Officer to individual operating companies to review operations and reporting arrangements for the future.

The purpose of the governance workstream, and of the Chief Governance Officer in particular, is to review company structures and advise on the best future structures – to serve the interests of shareholders and of stakeholders – for the group going forward post-refinancing.

GFG will continue to update on developments as they arise.

Outlook

In response to the progress achieved by the RTC, Sanjeev Gupta, Executive Chairman of GFG Alliance, commented: “The update of the RTC shows that, despite the challenges, our core businesses continue to perform very well, and we are taking advantage of the excellent market conditions we face. Much remains to be done, but we believe that we are now making rapid progress in building faith with our creditors and other stakeholders through our restructuring plan. We are moving with significant momentum towards a profitable, restructured and focused business capable of delivering our GREENSTEEL vision and strong returns”

Further information from:

Andrew Mitchell Head of Communications – UK, GFG Alliance+44 7516 029 522andrew.mitchell@gfgalliance.com
Patrick Toyne-Sewell Head of Communications – Europe, GFG Alliance+44 7767 498 195Patrick.toyne-sewell@gfgalliance.com
Rod Mapstone Manager External Affairs – Australia, GFG Alliance+61 438 294 377rod.mapstone@gfgalliance.com

Note to Editors
LIBERTY Steel Group, part of the GFG Alliance and a leading GREENSTEEL producer, is a global integrated steel business bringing together assets across the steel supply chain, from production of liquid steel from raw and recycled materials through to high value precision engineered steels. With a total rolling capacity of 20 million tonnes, 200+ manufacturing locations globally across 10 countries and employing more than 30,000 people, LIBERTY Steel’s furnaces, mills, services centres and distribution sites across the UK, continental Europe, Australia, the United States and China serve demanding sectors such as construction, energy, aerospace, automotive, and infrastructure. LIBERTY Steel is a leader in sustainable industry with a mission to become Carbon Neutral by 2030 (CN30).

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