Australian steel manufacturing giant BlueScope says the worst of recent hard times is over after the company unveiled a return to first half profit in 2013, albeit with no further improvement anticipated in the short term and with the company’s long-suffering shareholders still not set to receive any dividends.
Having previously lost $1.6 million on an underlying net loss after tax basis in the six months to December 2012, BlueScope revealed on Monday it had delivered an underlying net profit after tax of $49.1 million as performance lifted across most of its markets.
Taking into account ‘significant items’, meanwhile (e.g. costs associated with deferred tax asset impairments and the company’s steel transformation plan), BlueScope made a statutory after tax net profit of $3.7 million after having lost $23.8 million in the previous corresponding half.
Driving the latest results was a lift in performance across most of the company’s operating units amid improved building conditions in North America and a combination of better cost control and increased housing construction activity locally in Australia.
Earnings rose by 62 percent, for example, from the company’s share in its Asia and North American building product business joint venture with Nippon Steel Corporation.
Meanwhile, improved conditions and efficiency saw its coated and industrial products business in Australia turn a $10.6 million loss into a $26.7 million profit.
Managing Director and CEO Paul O’Malley welcomed the result, saying the worst of difficult conditions experienced in recent years was now behind the company.
“We have stabilised the business, laid the foundations for growth, made measured investments, and achieved this while maintaining a conservative balance sheet” O'Malley said, referring to a reduction in net debt from almost $500 million to $213.7 million after the company received $US540 million in cash from rolling its building products businesses in the North American and ASEAN regions into a joint venture with Japan’s Nippon Steel Corporation.
O’Malley says recently announced purchases of both the Orrcon and Fielders businesses from Hills Holdings and the OneSteel sheet and coil processing and distribution assets from Arrium would boost efficiency in the group’s domestic operations and would exceed the company’s hurdles for return on capital by the 2014/15 financial year, albeit with the latter acquisition remaining subject to regulatory approval.
A recently announced purchase of the downstream long-products rolling and marketing operations of Pacific Steel Group in New Zealand and associated upgrade of BlueScope’s Glenbrook steelworks plant in that country, meanwhile, would deliver pay-back within three years.
Going forward, the company says it expects similar earnings performance in the current six months compared with that just passed.
Moreover, suffering for the company’s long-standing shareholders continues as the company said it would not pay a dividend in respect of the latest half year.
Having been above $45 prior to the GFC, the company’s shares are now trading at around $6.46 - albeit with the price having lifted since the troughs experienced in 2011 and 2012.