Steelmaker, BlueScope Steel (BSL) is trying it on, threatening to close its Port Kembla steelworks and cut 5,000 jobs if unions don’t agree to $200 million in cost savings and the loss of around 500 jobs.
It’s a heavy handed threat the company trotted out a few years ago when it was demanding compensation and assistance from the carbon tax (it got around $100 million from the Federal Government).
The move got strong support from investors – in the big morning sell off, the shares were up 14% at one stage as some punters loved the gung-ho approach.
The shares eased to be up 8.6% at the close at $3.68.
The threat overshadowed the best result from the troubled steelmaker since the GFC as it benefited from the lower Australian dollar, which helped offset some of the very real damage done by surging exports of steel from China
BlueScope Steel said yesterday it earned a full-year statutory profit of $136.3 million, up from the $82.4 million loss in 2013-14. Revenue rose to $8.572 billion from $8.007 billion in financial 2014, thanks to higher exports and increased US domestic sales.
Underlying profit in the year ended June 30 increased to $134.1 million, up 8.6% from the year-earlier $123.5 million and BlueScope said it would pay a final, fully franked dividend of 3c cents a share on October 19.
That compares to no final for the previous financial year. With the 3 cents a share interim, BlueScope is making a full year payout of 6 cents a share, against nil for 2013-14
It’s a far better result than rival Arrrium which, apart from losses and impairment in its iron ore business, lost $8.7 million in the year to June.
Managing director Paul O’Malley said in this morning’s statement that all but one of the company’s divisions posted an increase:
“We have a strong competitive advantage in global markets – highlighted by our outstanding brands, technology, channels to market and manufacturing footprint,” he said in the statement.“We are the third largest manufacturer of painted and coated steel products globally, the number one in building and construction markets and the recognised quality leader in nine countries.”
Retiring company’s chairman Graham Kraehe described the turnaround from last year’s $83 million loss as the company’s "best performance since the impact of the GFC on the steel sector in 2009."
However, Mr Kraehe announced that the company would undertake a strategic review of steelmaking operations – to be completed by November’s Annual General Meeting – to decide whether the company would continue to operate its blast furnaces.
"We have to address the major challenge of losses in commodity steelmaking in Australia and New Zealand," Mr Kraehe said.
BlueScope has been under pressure as China has doubled its steel production to more than 100 million tonnes a year at time when Chinese demand for that output is falling.
This has caused steep decline in prices in the region from more than $US500 per tonne a year ago to less than $US350 per tonne.
But then Mr O’Malley issued an ultimatum to the Australian Workers Union saying the company will find the $200 million of “game-changing cost reductions” or close Port Kembla and lose 5000 direct and indirect jobs in the Wollongong region.
"The steelworks is on a knife edge…both options are very much on the table" he said. "The next six to eight weeks will really tell…In the next three months, we will know if we have the support to move the plan forward or we will have to move to plan B [shut the steelworks]."
BlueScope estimates that 500 jobs will be shed as part of the $200 million cost saving that will keep the plant open.
An estimated 95% or more of Port Kembla’s work force are members of the AWU and the union is set to meet with BlueScope on Thursday. The two parties are planning a mediation next week.
