Bluescope Steel confirmed yesterday its lowered guidance for the December half and for 2019-20 while also warning that its China operations are likely to be “heavily impacted” by disruptions stemming from the coronavirus in February and March.
Despite the lower earnings and weak outlook, the company declared an unchanged unfranked interim dividend of six cents a share.
BlueScope has seven manufacturing facilities in China, with 32 sales and marketing offices and about 2,000 employees.
The company warned of an immediate significant impact from the virus.
“As our BlueScope China businesses and their customer-supplier operations gradually return to normal levels during February, it is expected that February and March business performance will be heavily impacted,” it said.
“Outside of China, we are aware of some impacts to our supply chains.”
Directors added that the rate of recovery across the rest of the year “remains unclear”.
The company has forecast that its second-half underlying EBIT (earnings before interest and tax) will be similar to the first half, which was $302.4 million.
“Underlying demand across our major markets is generally stable, however, the economic impact of COVID-19 has created uncertainty for our Asian businesses and Asian steel spreads in the near term,” Mr. Vassella said.
Bluescope’s reported net profit after tax tumbled 70% to $185.8 million, which the company attributed to lower prices for the steel it produces, combined with higher raw material costs.
That was down from $624.3 million for the December 2018 half year.
The company said lower steel prices hit underlying earnings before interest and tax at its North Star (US), Australian Steel Products and New Zealand and Pacific Steel businesses in the first half.
But underlying earnings were higher in the building products Asia and North America, and Buildings North America businesses.
“The $302 million underlying EBIT showcases yet again that BlueScope’s turnaround and transformation is real. The result is more than credible in light of the weaker cyclical spreads and is a tribute to our strong team of 14,000 employees across 18 countries,” Bluescope CEO Mark Vassella said in a statement to the ASX.
“Importantly, it confirms BlueScope is now a resilient, global company with a strong balance sheet and high-quality assets,” he said.
BlueScope shares sold off on the gloomy outlook, losing 7.8% to end a rough session at $12.63.
