The UK finance boss of Liberty Steel has admitted that some of the group’s larger businesses are “challenged”, but insisted some of the smaller areas are profitable.
Anton Krull, chief financial officer at Liberty Steel UK, said that parts of the business are facing difficult times.
The company has faced questions over its future following the collapse of Greensill Capital, a major lender to the GFG Alliance, of which Liberty is a part. GFG is currently trying to refinance some of the loans it received.
“I would say probably the larger businesses are challenged, and some of the smaller businesses are operating reasonably profitably,” Mr Krull told MPs on the Business, Energy and Industrial Strategy Committee.
However, Mr Krull and Jon Bolton, a board member at GFG Global Advisory Board, said that issues facing Liberty are similar than those facing the entire industry.
Covid-19 has also led to challenges for steel.
Run by Sanjeev Gupta, GFG Alliance has ridden to the rescue of cash-strapped steel plants across the UK over the last decade.
But how Mr Gupta did so has come under scrutiny. In 2019 the businessman said that he used alternative sources of capital, including supply chain finance, to reboot cash-starved steel plants.
Instead of sending an invoice directly to their customers and waiting for weeks to be paid, GFG companies could send them to Greensill Capital, who settled the bill immediately.
When the customer finally paid their bill, Greensill then got paid back, and gained a small fee.
But when Greensill collapsed in March, it had around five billion dollars (£3.6 billion) of exposure to GFG.
The content of some of the invoices that GFG companies used to borrow from Greensill also raised questions.
The Financial Times revealed that some companies listed on invoices that were used to borrow from Greensill said they had never done any business with GFG.
Mr Gupta said that the lending was done on the basis of “future receivables”, where Greensill had identified customers with whom GFG “could potentially do business in the future”.
The Serious Fraud Office has since opened a probe into GFG and its financing arrangements with Greensill. The SFO did not say whether its investigation is focusing on future receivables or some other part of the companies’ relationship.
During his evidence Mr Krull – who joined the company in April – was forced to say that he was in fact the chief financial officer, despite not knowing the answers to many of the MPs’ questions.
In an awkward exchange peppered with pauses, the businessman said he was “feeling uncomfortable”.
During the hearing it emerged that neither he nor Mr Bolton thought they were best placed to speak about GFG’s finances, despite MPs saying that was what they had asked for.
Mr Bolton said that he was “at no point” aware that he was being put forward to comment on the financial aspects of the business, while Mr Krull said he had been “surprised that I was being asked to attend”.
Mr Krull also said he had not dealt with a small outfit called King & King, which has audited many of the GFG Alliance companies.
“I haven’t met King & King, I haven’t dealt with them,” Mr Krull said, saying that others at GFG deal with the auditors.
Asked if before joining Liberty Steel he thought that King & King might not have the capacity to carry out the audit for a billion-dollar enterprise, Mr Krull said: “It did occur to me.”
He added: “I think going forward my own view is that it’s critical that there’s a consolidated view of Liberty Steel UK that’s presented, and made clear and is credible, and certainly, I think it’s appropriate always for rotation of audit firms to occur.”