First BlueScope, now how soon before rival OneSteel will match the loss forecast from Australia’s biggest steelmaker?
Yesterday BlueScope had some good news (The relined Port Kembla blast furnace will restart next month because demand is lifting) and the bad news (sorry folks, but 2009 is a big wipeout. No profits, a loss).
The market liked the news and up went the shares 19 cents or 7.3% to $2.77.
Rival OneSteel, which has yet to update the market, saw its shares up 16 cents, or 6% to $2.82 at the close.
Both companies benefitted also from the news of the rise in Chinese economic growth in the June quarter.
The company’s estimation of a “small” loss after tax in the year ended June 30 was seemingly ignored as ‘old news’.
But the outlook for the current half isn’t all that flash, with words like "challenging" used in the update to describe market conditions.
But demand seems to be on the improve.
BlueScope said the loss in the second half will offset the profit it made in the first half, it said.
The company reported a profit of $406.9 million in the first-half to last December and earned $596.2 million for all of 2008.
So far from a small loss, the real story seems to be BlueScope survives rather large, $400 million-plus loss in second half.
No wonder it needed to raise capital twice in the June year and restructure and extend its debt.
"At the release of its half year results in February 2009 the Company advised that, should market conditions continue, it expected to report a negative net profit after tax in the six months to 30 June 2009," the company told the ASX in an update.
"Subsequently, specific additional adjustments to reported earnings in the form of an inventory post tax net realisable value adjustment in the range of $100m to $140m, and a post tax cash earnings impact of $10m to $15m as a result of the fire in the pickle line at Western Port, have also been communicated to the market.
"The net realisable value adjustment is expected to be towards the middle of the range previously communicated.
"The positive impacts of rising export prices and reduced inventory volumes have been offset by weaker domestic product pricing in Australia and North America at the commodity end of the market, the stronger AUD and higher scrap costs at NorthStar BlueScope Steel.
"The final net realisable value adjustment will be determined prior to releasing the annual results.
"In addition to the items above, the expected reported net loss after tax for the year ended 30 June 2009 is the result of continuing challenging market conditions, increased restructuring and redundancy costs and the stronger AUD."
Now the company reckons demand is on the improve so the relined No. 5 Blast Furnace at the Port Kembla Steelworks will be blown-in towards the end of August 2009.
"This decision has been made in light of the internationally competitive position of Port Kembla steelmaking and due to a combination of market factors, including an improvement in Australian domestic market volumes in May/June, de-stocking in global steel markets and a recent increase in international hot rolled coil prices.
"In addition, demand from external customers in Asia and from the Company’s offshore affiliates in Asia and North America, for supply in the period to 31 December 2009 has increased."
"BlueScope said it expects to have both Blast Furnaces operating at a combined annualised capacity of at least 75% of rated capacity (equivalent to approximately 4mtpa slab- make) from September 2009, and will ramp-up output beyond that level as demand dictates.
"The No.6 Blast Furnace has moved to operating at 100% of capacity and this will be maintained until the No.5 Blast Furnace is blown in.
"All major elements of the No. 5 Blast Furnace reline, other than hot commissioning, have been successfully completed. The capital cost estimate remains at $372m, including approximately $20m remaining to be spent to finalise works and restart the Furnace.
"The Sinter Plant Upgrade Project, which was being undertaken in conjunction with the No. 5 Blast Furnace Reline, is progressing well. Production recommenced at the end of June and the plant will be brought up to a rate consistent with the requirements for the Blast Furnace operations over the coming months.
"Whilst the Port Kembla Steelworks production ramp-up profile and market developments discussed above are encouraging, market conditions remain challenging.
"There is continued focus on significant cost saving initiatives. The Company will update the market on the outlook on 17 August 2009, in conjunction with the detailed release of its FY2009 results."
Toll roads operator Macquarie Infrastructure Group (MIG) was another delivering expected bad news to its investors yesterday by way of an update.
In terms of news, it was also a bit ‘old’: after all write-downs and losses at infrastructure groups, especially those in the Macquarie Group orbit, are a bit old hat these days because the model is broken and the losses are now being taken, especially by the suffering unitholders.
MIG said yesterday that according to its preliminary calculations, the group’s portfolio was valued at about $5.1 billion as at June 30, with net asset backing (NAB) estimated at about $2.54 per
