A day after BlueScope produced reasonable 2007 figures and a solid outlook, the country's other steel group, OneSteel, revealed more modest returns from 2007 and a more cautious outlook.
OneSteel (OST) CEO, Geoff Plummer, said the company had achieved a net operating profit after tax of $197.5 million in the 12 months to June 2007.
That was a rise of 15.1% on the $171.6 million comparable profit of the 2006 year.
Earnings per share rose 13.8% increase to 34.5 cents from 30.3 cents.
He said a tax benefit of $9.5 million was booked on derecognition of deferred tax liabilities associated with the formation of the Australian Tube Mills joint venture between OneSteel and Smorgon Steel.
Statutory net profit after tax and minorities including this benefit was $207 million.
OST shares fell 7c to $5.97, after rising 46c Monday on the news of the settlement of the Smorgon merger and the commencement of trading in shares issued in that deal. That trading started yesterday and may have contributed to the weakness in the share price. The company also announced the acquisition of a large stainless steel distributor.
Perhaps it was also the tenor of the forward-looking comments from the CEO:
"We are pleased that the Smorgon transaction completed on 20 August.
"Trading conditions are broadly in line with our expectations. The mining and non-residential and engineering construction segments continue to be solid. There is continued weakness in residential construction activity.
"The manufacturing and automotive component segments remain soft, as are the drought-affected rural segments.
"Factors such as the higher exchange rate and imports are increasing competitive pressures in certain product lines.International prices for steel and key inputs such as hot rolled coil are expected to remain volatile while the medium-term outlook for iron ore prices continues to be positive.
"The underlying market for recycled products is expected to remain robust; however a range of factors continues to drive volatility.
"Management's priorities continue to be to further improve returns from current businesses, to complete Project Magnet, and to effectively integrate the acquired businesses of Smorgon Steel and to deliver the expected level of benefits and synergies, "Mr Plummer said.
Reading those you get the sense, as you did with BlueScope, that local demand is fair to middling but internationally, things are a bit harder to read.
OST does have one thing BSL doesn't and that is exposure to the booming international iron ore trade thanks to its Project Magnet.
"Project Magnet capital construction work was substantially completed in the 2006/07 financial year, with around $379 million spent as at 30 June 2007. The total cost of the project was previously forecast at $390 million, with the current estimate now $395 million," Mr Plummer said.
"During the period under review, export sales of iron ore lump and fines totalled more than 1.8 million tonnes, above the planned ramp-up in ore sales of 1.5 million tonnes that was announced in May 2005. These sales included six shipments of iron ore in Cape-size vessels during the second half from the port of Whyalla.
The company said there was a 6.1% increase in raw steel production to a record 1,733,406 tonnes.
"This coincided with record safety outcomes with our lowest ever lost time injury frequency rate and medical treatment injury frequency rate. The improvement in the sales margin and the return on equity are also pleasing.
"Management achieved cost reductions of approximately $40 million to help offset inflationary costs and price increases for raw material inputs, that took total cost increases to around $159 million. Management also achieved revenue enhancements of approximately $150 million.
"The result was achieved in a mixed domestic market with solid demand in the resources and infrastructure segments, but weakness in manufacturing, automotive and rural segments, and against a backdrop of volatile international pricing for steel and key inputs.
The OneSteel Board declared a final dividend of 10.5 cents per share fully franked, bringing total dividends for the year to 18.5 cents. This compares with a 17.0 cent fully franked dividend paid in the previous year. The DRP will operate for the final dividend.
