The market was left very much undecided about the 2008 result for steel major, BlueScope Steel and the outlook for 2009.
The result was lower, but management tried to spin the higher ‘underlying result’, but revealed their real view of the performance and the outlook with a mere one cent a share rise in the final dividend.
As well the guidance for the next year was enthusiastic, just like the commentary on what appeared to be good second half, but it was light on hard profit figures.2009 looks like being dividended into a good first half and an uncertain second as the company carries out the expensive reline of its main blast furnace at Port Kembla.
The shares jumped to a high of $9.43 after the figures were released, and then fell to end down 13 cents at $9.000. That was after the shares fell 11% last week in the lead-up to the result.
Reported net profit fell to $596 million in the year to June from from $686 million in 2007.
BlueScope tried to spin the market to what it termed its "Underlying profit" which it said rose 27% to $816 million, compared with $643 million in 2007.
But the real measure is the generosity with the dividend and the final was lifted just one cent to 27 cents.
That made a total for the year of 49 cents, up just 2 cents or 4%.
If that 27% lift in "underlying profit’ was realistic, you would have though the board would have been more generous. That’s a board in shutdown mode, giving shareholders the absolute minimum because it’s uncertain about the immediate future.
The company does have some large capex measures to get through in the next year: its going to reline its key Number 5 blast furnace at Port Kembla and refurbish the associated sintering plant. On current indications that won’t leave much change from $400 million. It will also impact second half earnings as the project will happen in that half and take an estimated 105 days.
The guidance given from the company for 2009 (when it will have to content with the impact of the furnace reline) was vague, despite claims by CEO, Paul O’Malley
He told an ASX corporatefile open briefing:
"We expect a strong first half for fiscal 2009, having already had a good start to fiscal 2009, mainly driven by continued strong global steel demand and prices. More recently we’ve also seen a relatively lower Australian dollar, down from its recent record highs.
“Our Asian businesses, particularly Thailand, where economic conditions continue to improve, are producing consistent results. Our North American Coated and Building Products businesses are performing at the solid levels at which they finished FY08, despite the uncertainty that currently exists within the US economy.
"We are excited by the opportunities in the North American market provided by our increasing capability and product offering resulting from the IMSA Steel Corp acquisition. We are now the leading global steel pre-engineered buildings manufacturer supplying predominantly to commercial and industrial markets.
"We will provide further guidance on the first half fiscal 2009 performance during the AGM in November. Obviously the biggest factor in the second half will be the scheduled blast furnace reline."
From figures provided by the company the second half result saw earnings up by around 60% thanks to higher product prices which ran ahead of higher raw material costs, which will have a greater impact in this half.
Even though BlueScope is confident about the coming year, the rapidly rising cost of steel is pumping inflationary pressures into a wide range of industries.
The company said yesterday that the cost of making steel will rise by about $210 a metric ton this financial year because of the higher raw materials costs.
"Strong demand for steel ultimately leads to strong demand for raw materials and given the strong demand I think we’re going to see continued high prices for raw materials,” Mr O’Malley said yesterday.
The reported result reflected the impact of $225 million of impairment charges booked in the first half of the year on its China and Vietnam coating facilities.
