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BlueScope Steel Confirms Stronger Outlook in Second Half of 2008
05/12/2008 - BlueScope Steel confirms that it remains on target for a stronger second half, and advises the market of changes to its external reporting business segments.
BlueScope Steel has advised the market of changes to its external reporting business segments and confirmed that it “remains on target for a stronger second half underlying profit result”.
At a presentation to analysts, Paul O'Malley, Managing Director and CEO said: "Barring any unforeseen events, we're on track for a stronger second half. Unaudited underlying Net Profit After Tax (NPAT) for FY08–third quarter was $169 million. Our current expectation for NPAT for FY08–fourth quarter is for NPAT of a similar order of magnitude to the FY08–first half result of $305 million.
“The expected earnings improvement is largely due to continued strong demand and higher global steel prices,” continued O’Malley. “However, as expected, our coated businesses will be challenged by higher feed costs, particularly in the fourth quarter.
"Operationally and on safety measures, the performance across all our businesses continues to be outstanding. In addition, despite the IMSA Steel Corp. acquisition having taken our gearing to around 40% in February this year, we have a strong balance sheet and with stronger second-half results, we now expect to be within our optimal gearing range of between 30 to 35% by June 30, 08.
“In Asia, we are seeing improved earnings performance, particularly in Thailand, while in North America, our acquisition of IMSA, in particular the Steelscape business, is already exceeding expectations.
“The continued stronger Australia dollar is having a negative effect on earnings, and unfortunately this trend is likely to continue.
“Looking further out, assuming global steel prices hold, we expect a good start to FY09 notwithstanding the substantial increases in iron ore, coal and scrap prices, effective from July 1, 2008,” said O’Malley. “In the second half of FY09, the company will embark on the major Blast Furnace No 5 reline and sinter plant upgrade. These two major engineering projects will impact earnings in the second half, but thereafter should deliver additional longer-term cost and volume benefits.”
O'Malley also provided an update on the company's Blueprint strategy and advised that BlueScope Steel is ahead of schedule to deliver its targeted A$200 million working capital reduction (originally scheduled for June 30, 2009) with approximately half of that benefit expected to be realized by June 30, 08.
The company also announced changes to its external reporting segments as a result of the recent acquisitions and revised management structure announced in its Blueprint strategy released in November 2007. Given these changes, the company said it has elected to adopt the new AIFRS Accounting Standard (AASB 8 - Operating Segments) early. The Standard requires reporting segments to reflect the way the business is actually managed.
The company said it has also decided to include additional product information in future financial reports to assist the market in better understanding BlueScope Steel's Australian business. At the full-year results in August, the company will report under the new segments and include reconciliation to the current reporting segments.
BlueScope Steel is the leading steel company in Australia and New Zealand, supplying a large percentage of all flat steel products sold in these markets. Metallic coating and painting plants located in Australia, New Zealand, China, Thailand, Malaysia, Vietnam, and Indonesia, are complemented by a network of roll-forming facilities across the Asia Pacific region. The company supplies customers in Australia, New Zealand, Asia, the U.S., Europe, the Middle East, the Pacific and elsewhere.
