Payment concerns as Sanjeev Gupta’s steel group loses $124m
Sanjeev Gupta’s Australian steel group slumped to a $124.6m loss last financial year.
Sanjeev Gupta’s Australian steel group slumped to a $124.6m loss last financial year, as South Australia’s Small Business Commissioner warned the state government not to commit cash to the British billionaire’s revitalisation of the Whyalla steelworks amid ongoing concerns over late payments to suppliers.
According to accounts filed by Liberty Primary Metals Australia, the entity that controls Mr Gupta’s Whyalla steelworks, the Tahmoor coking coal mine in NSW and associated companies, the group booked a $124.6m loss last financial year, as the metallurgical coal price plunged and Whyalla struggled to control its costs.
While Whyalla has been largely exempted from sweeping global cuts to spending, including savage job losses, the Liberty Metals accounts say the company wants to run Whylla as “leanly as possible for the next three years” while it carries out a $1bn proposal to reinvigorate the ageing facility as part of Mr Gupta’s global “green steel” ambitions.
But the funding structure for Whyalla’s revitalisation remains unclear, and South Australia’s Small Business Commissioner John Chapman again warned the state government on Friday it should not commit $50m promised to aid the transformation until companies under Mr Gupta’s global GFG Alliance group, including Liberty, committed to paying its suppliers within 30 days.
“Unfortunately, there remain ongoing payment issues with the GFG group of companies which own the Whyalla Steelworks and associated iron ore mines,” Mr Chapman said in his annual report to South Australia’s parliament.
“I continue to deal with complaints about non-payment of accounts from suppliers and contractors to the GFG companies on a regular basis.”
Mr Chapman said he had received assurances in May that Liberty had secured additional funding to ensure outstanding payments would be made, but had been unable to obtain a commitment that the group’s standard payment terms would be reduced from 62 days to 30 days.
Liberty’s accounts show the amount it owed to trade creditors blew out $54m in the year to June 30, from $351.2m at the end of the previous financial year to $405.5m, although the statements show that about $35.6m of this was due to a blowout in the amount owed to other members of the GFG group.
The financial statements also show Mr Gupta’s group has pumped in another $96m into Liberty through internal group loans since the beginning of 2020 to keep its steelmaking operations afloat.
A spokeswoman for GFG said a recent review of Whyalla’s operations and costs had led to an immediate uplift” in its financial performance. “GFG remains fully committed to Whyalla with a sustainable steel business supported by a vibrant community and we are working closely with various stakeholders to bring this to fruition. That commitment includes paying suppliers in full, and most are currently being paid within 30 days of the due date with a focus on paying small businesses,” she said.
“GFG continues to work hard to secure the future of Whyalla and following a three-month review we have implemented a comprehensive Transition Program that is resulting in an immediate uplift in the Whyalla Steelworks operating performance and its financial position. This program is designed to ensure the financial viability of its operations in the short to medium term, ahead of the Whyalla GREENSTEEL Transformation Program.”
Mr Gupta’s Australian businesses employ more than 6500 workers, including 4500 through InfraBuild and about 2000 at Whyalla, the group’s coal and iron ore mines and in its corporate back office.
And that is set to be extended when Mr Gupta closes the acquisition of South32’s Tasmanian manganese smelters, after offering a “nominal” sum in August to rescue the smelter from the threat of closure.
