BlueScope profits plunge amid fresh virus warning

BlueScope Steel has reported a 70 per cent plunge in first-half net profit after falls in steel prices and warns the coronavirus outbreak will “heavily impact” its China business.

Feb 24, 2020, updated Feb 24, 2020
Port Kembla steelworks would receive a huge boost from extending the coal mine. (Photo: Dean Lewins/AAP PHOTOS)

Port Kembla steelworks would receive a huge boost from extending the coal mine. (Photo: Dean Lewins/AAP PHOTOS)

The rate of recovery for the rest of this half remains unclear at this point, BlueScope said as it released its first-half results this morning.

“As our BlueScope China businesses and their customer-supplier operations gradually return to normal levels during February, it is expected that February and March business performance will be heavily impacted,” it said.

“Outside of China, we are aware of some impacts to our supply chains.”

BlueScope posted a first-half net profit of $185.8 million, down from $624.3 million in the prior first half, because of lower steel prices.

Sales revenue from continuing operations was $5.86 billion down 8.0 per cent on the prior corresponding first half due mostly to lower steel and export coke selling prices, partly offset by weaker exchange rate.

Lower steel prices hit underlying earnings before interest and tax at its North Star, Australian Steel Products and New Zealand and Pacific Steel businesses in the first half.

But underlying earnings were higher in the building products Asia and North America, and Buildings North America businesses.

BlueScope chief executive Mark Vassella said the group’s EBIT for the first half was $302.4 million due to the drop in prices the company flagged in August 2019.

“However, with improving conditions at the tail-end of the half, we finished 1H FY2020 slightly stronger than our guidance,” Vassella said.

“Underlying demand across our major markets is generally stable. However, the economic impact of COVID-19 has created uncertainty for our Asian businesses and Asian steel spreads in the near term.

“The impact to US Midwest spreads, if any, is unclear. We are aware of some impacts to our supply chains which, to date, have been mitigated; we continue to monitor the situation,” he said.

BlueScope is forecasting the second half underlying earnings to be similar – about $302.4 million.

The board has approved a six cents per share interim dividend and the extension of the on-market buyback, to buy up to $100 million.


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