Pre-tax profits slumped to pounds 451m last year from from pounds 1.1bn in 1995/96 and analysts are pencilling in a further collapse in profits this year to between pounds 150m and pounds 200m.
Sir Brian Moffat, British Steel chairman, said that the group had already announced 2,000 job losses this year. Although he would not put a figure on redundancies for the full year, analysts believe it could be double the 1,500 shed in 1996.
At the same time, Sir Brian said British Steel was keen to expand production abroad. The company is carrying out feasibility studies into taking a majority stake in a $900m mini-mill in Indonesia and Sir Brian said the long-term aim was to increase overseas production to 25 per cent of total output.
The company has made a series of big investments in steelmaking capacity in North America in the last three years and is proceeding with investment in steel finishing facilities near Bombay in India. Sir Brian stressed that the company's overseas ambitions did not pose any threat in the medium term to its four integrated UK plants at Port Talbot and Llanwern in south Wales, and Teesside and Scunthorpe on the east coast.
But he said the efficiency drive would be stepped up to make up for the currency disadvantage and extra transport costs that British Steel suffered compared with European rivals.
He renewed his plea to the Chancellor, Gordon Brown, to raise taxes in the Budget rather than relying upon higher interest rates to quell inflation. British Steel is also looking to get better value out of its 2,000 suppliers and this year expects them to absorb inflation - meaning a price reduction in real terms.
Of the pounds 650m decline in British Steel's profits, pounds 400m was caused by weaker prices and the strength of sterling while the Avesta stainless steel business made a loss of pounds 7m compared with a profit of pounds 228m in 1995/96.
Despite an increase in British Steel's market share, both in the UK and in the rest of Europe, overall, revenues per tonne were down by 8 per cent due a combination of exchange rates and lower prices.
Investment column, page 24