BlueScope Steel Ltd expects to recover to a small full-year profit after reporting a small first-half loss.
The company said yesterday in its interim profit announcement that it lost $28 million for the six months to December 31 compared with a profit of $407 million in the prior corresponding period.
It was the second half year loss in a row after losing $473 million in the second half of 2009.
It was driven by a sharp, 33% slump in revenue to $4.1 billion in the December, 2009 half.
The company said it would not pay a first-half dividend, after paying five cents a share a year ago.
In the statement, CEO Paul O’Malley, said: "The first half result comprises an unaudited loss of $61 million in the September quarter followed by a $33 million profit in the December quarter."
"The business improvement and return to profitability in the December quarter is encouraging, although the gains were partially offset by the strong Australian dollar.
"Increased steel dispatches, generally increased prices, the depletion of higher priced inventory including raw materials and a sharp focus on cost savings contributed to the improvement."
"After a tough period across all our businesses, we are pleased to report a more positive trend in demand and pricing and expect a profit in the second half.
BlueScope reduced net debt by almost three quarters to $734 million from $2.64 billion the year before, thanks to a big issue to shareholders around a year ago.
Mr O’Malley said the second half will be influenced by key sensitivities including "steel prices, iron ore prices and the exchange rate."
The company said that in light of improved domestic and export demand, No.5 Blast Furnace at Port Kembla was restarted on 19 August, following its successful reline, and fully ramped up in October 2009.
Total slabmake from both blast furnaces was 83% of capacity for the half.
Mr O’Malley said that: "In Australia, domestic demand improved 51% in the first half compared to the previous six months (2H FY2009).
"This was particularly evident in the residential construction segment and in dispatches to pipe and tube and distribution channel customers.
“Non-residential construction sales remain soft. Domestic pricing, while constrained by the strong Australian dollar, improved into the September quarter, reflecting the lagged flow-through of regional spot prices in the first few months of the financial year."
"Export demand, particularly from external customers in Asia, and from the affiliates in Asia and North America improved. International prices improved through the September quarter, moderated late in the December quarter and are increasing again into the third quarter.
"New Zealand Steel’s domestic sales increased by 28% compared to the previous six months, with market share improving relative to imports.
"Pleasingly, in Asia profitability improved strongly to $50 million EBIT for the half," Mr O’Malley added.
"In China, our overall business continues to improve. China Coating business dispatches increased 21% in the first-half compared to the previous six months. Our Buildings business saw a 24% increase in dispatches, reflecting improvements in both our Lysaght and PEB business units.
"In North America, the non-residential construction segment of the US market remains weak, with no improvement in the immediate outlook.
"However, the NorthStar BlueScope Joint Venture has seen improved margins in the December quarter and continues to operate at higher than national average utilisation rates.
"Steelscape despatches rose by 57% compared to the previous six months, as a result of increased domestic demand and a decline in imports," Mr O’Malley said in the statement.
BlueScope shares eased 8 cents to $2.48, a fall of 3.1% on the day.
