Steel manufacturer BlueScope has unveiled a full year net loss of $84 million as weak manufacturing and construction conditions in Australia and elsewhere continued to hamper operating performance.
But the company insists it is well positioned for a turnaround and has announced it will fork out $87.5 million to buy new pipe and tube manufacturing and building products businesses from investment company Hills Holdings Ltd.
In its latest profit announcement, BlueScope says it incurred a full year net loss after tax of $84 million in the year to June 30 2013 - a result which compares with a $1.044 billion loss in the previous year.
Underlying profit, however, came in at $30 million (against a $267 million underlying loss last year) whilst a $1.036 billion deal struck in August last year to sell the firm’s ASEAN and North American building products businesses into a joint venture with Japanese Nippon Steel & Sumitomo Metal Corporation saw BlueScope’s net debt fall from $584 million as at June 30 last year to $148 million.
BlueScope Chairman Graham Kraehe AO welcomed what he says is an improved operating performance.
“The steel industry has faced substantial challenges since 2008. Management initiatives and changes across the entire company, supported by the Board, have delivered a significant turnaround this year” Kraehe says.
Throughout the world, manufacturers of steel and other building products have been struggling as weak manufacturing and construction conditions have seen average steel prices plummet by around a quarter in the last two years.
Earlier this month, ArcelorMittal, the world’s largest steel manufacturer, reported a net loss of $1,125 billion for the first six months of the year.
In Australia, where the industry has had to cope with weak domestic demand and (until recently) a high Australian dollar, manufacturers such as BlueScope and Arrium (formerly OneSteel) have cut back capacity by around a third in the last two years.
Partly because of this, BlueScope Managing Director and Chief Executive Officer Paul O’Malley says the company is now well placed to benefit from any upturn in the Australian economy.
O’Malley says the deal with Nippon Steel has delivered a stronger balance sheet and provided the company’s Coated Products business with opportunities in overseas markets whilst the Coated & Industrial Products Australia business has turned a $150 million underlying loss into a $150 million underlying profit.
Going forward, whilst BlueScope says it expects to make a profit in the first half of financial year 2014, uncertainty in domestic demand means it is not confident of delivering any improvement on the second half of FY2013.
Meanwhile, BlueScope also says subject to regulatory approval, it has agreed to acquire pipe and tube manufacturing and distribution business Orrcon and building products business Fielders from Hills Holdings Ltd for $87.5 million.
O’Malley says both businesses fit well with BlueScope’s core operations and their successful integration will generate cost savings and efficiencies.