BlueScope Steel is looking at a double hit to 2019-20 profit from the COVID-19 pandemic and a write-down of the value of its New Zealand Steel subsidiary.
The company told the market on Friday that it now expects underlying earnings before interest and tax (EBIT) for 2019-20 to end up around $560 million, well under half of the $1.35 billion it delivered in fiscal 2019.
The earnings will be heavily skewed to the December half, even though earnings for the six months plunged 70% to $302 million with the June half contribution expected to be around about $260 million.
BlueScope shares fell 1.3% on Friday to end at 411.24.
BlueScope had previously said it saw earnings for the six months ending June 30 coming in at $302.4 million.
The also warned of the impairment of the carrying value of its New Zealand and Pacific Steel division of about $200 million, given expectations of weaker earnings in the longer term.
The business was also impacted by the compulsory government shutdown of operations during March and April, amid ongoing cost pressures.
BlueScope is currently undertaking a strategic review of its New Zealand assets.
BlueScope CEO Mark Vassella said the company’s 14,000 staff based in 18 countries had delivered an outstanding effort in exceptionally challenging times
“The results show the strength of our business model and our financial disciplines. However, there is currently a high level of uncertainty in BlueScope’s key markets at the start of financial year 2021 due to the pandemic and weaker steel spreads,” he said in Friday’s statement.
“The objective of the review (of the NZ business) is to re-evaluate the footprint of the business to ensure its financial viability in a challenging operating environment, made more uncertain by public policy settings in carbon, trade, and energy,” BlueScope told the market on Friday morning.
The company says it will provide more on the review when it releases full-year results on August 17.
The company said that so far orders and despatches in Australia remain stable and North Star in the US state of Ohio is also dispatching near full capacity.
But it warned of a high level of uncertainty due to COVID-19, which could disrupt supply chains and operations and lower demand amid broader macroeconomic weakness.
