BlueScope fights back as sales in some key markets rebound

BlueScope shares have closed up 7.3 per cent at $6.30 – their highest level since mid-2011. Photo: Louie DouvisShares in BlueScope surged on the emerging turnaround at the steel maker due to firmer domestic demand, along with buoyancy in North America and selected Asian countries.

Its shares closed up 7.3 per cent at $6.30 – their highest level since mid-2011. Even with the improvement, the group was guarded in its forecast, pointing out the underlying net profit in the second half would be ”similar to” the first half.

The December-half net profit reached $3.7 million, a reversal from the loss of $23.8 million a year earlier. The underlying net profit stood at $49.1 million, up from the loss of $1.6 million a year earlier.

Higher volumes and improved margins underpinned the turnaround, it said, although planned blast furnace shutdowns would weigh on earnings.

”We’re certainly on the road to recovery,” BlueScope chief executive Paul O’Malley told analysts on Monday, pointing to a rise in domestic volumes and continued strength in the US.

China remains an area of caution, however, as growth slows. ”China is clearly going to be challenging over the next few years,” he said. ”China market activity has dropped pretty dramatically.

”We are seeing negative growth at the moment, as it moves from high growth to productivity [led] growth”, going on to point to a ”slowdown in building activity in China”.

Domestically, BlueScope said there had been a rebound in the residential construction sector, most notably in NSW and south-east Queensland, with industrial demand ”pretty flat”.

”We are actually seeing an improvement in domestic demand” for the first time in four years, Mr O’Malley said.

BlueScope said it supplied about 70,000 tonnes of steel annually to the Australian auto industry, which is at risk with the shutdown of the domestic industry.

Activity in North America and New Zealand remained strong, with BlueScope boosting output from its Taharoa iron sands unit, where it enjoys robust margins.

The Australian operations continue to drag on the group’s performance, with the domestic coated and industrial products division posting a net loss of $900,000, reversing the small $2.4 million profit recorded a year earlier. However, at the underlying level it posted a net profit of $26.9 million, rebounding from the year earlier loss of $10.6 million.

Similarly, the building products and steel distribution arm remained unprofitable, with a December-half net loss of $10.9 million, little changed from the $10.5 million loss a year earlier, while at the underlying level, it was also in the red with a net loss of $10.9 million, up from a loss of $7.1 million a year earlier.

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