Australia’s largest steelmaker, BlueScope, has matched a warning of lower earnings for the year to June with news yesterday that statutory earnings fell a massive 91%.
The fall came amid weak profits for steel products in Australia, Asia, the US and New Zealand.
Much of the slide was caused by a $197 million non-cash write-down of its New Zealand division which saw BlueScope match previous warnings of redundancies and cost-cutting across the Tasman.
BlueScope reported full-year revenue of $11.28 billion, down 10% on the prior year.
On an underlying basis, BlueScope reported a net profit of $353 million, which was in line with market forecasts.
Underlying EBIT (earnings before interest and tax) for the year was $564 million, down 58% on last year’s $1.35 billion result, but in line with BlueScope’s latest guidance released a month ago.
BlueScope CEO Mark Vassella said the $564 million of EBIT was a strong result in the context of the COVID-19 pandemic, which caused the shutdown of major US carmakers for two months, and the weaker steel market during the year.
“While no one knows how this pandemic will play out, BlueScope has shown once again the resilience in its earnings, the quality of its cash flow and the strength of the balance sheet,” he said.
“We believe we are well-positioned to address likely post-COVID emerging societal trends, such as a shift in preferences towards lower-density suburban and regional/rural residential housing demand, a rise in home improvements and extensions activity,” he said.
Given the great uncertainty created by COVID-19, the steelmaker said it would not provide EBIT guidance for the first half of the new financial year.
But the outlook mustn’t be all that weak because BlueScope will pay a final dividend – an unchanged 8 cents a share, making a total for the year of 14 cents a share.
The company also bought back $229 million of its shares in the year to June.
Those rewards for shareholders came during a few six months for the company and the nation as a whole. You could have thought that if BlueScope’s board had been really worried, it would have at least cut or held back dividends during the year to June.
The company has suspended the buyback – not because of the weakness in outlook in Australia, but to support its North Star steel plant in the US state of Ohio.
“A key element of BlueScope’s strategy is to maintain strong financial capacity in order to be able to robustly weather industry and economic cycles and deliver on value-creating investment opportunities. To this end, our priority focus is the North Star expansion – on which we expect to spend between US$375 million to US$450 million during FY2021.
Accordingly, BlueScope’s buy-back program will remain on hold until there is a demonstrable improvement in business conditions,” Mr. Vassella said.
But no support for the company’s NZ operations In fact BlueScope warned in the future it could be forced to cease steelmaking at its Glenbrook, New Zealand facility. News of the new lockdown in Auckland, NZ’s biggest market, won’t make staying in business any easier for operation.
BlueScope will restructure the business at a cost of $50 million and a lot of job losses.
That’s despite both NZ and the US have elections in the next couple of months.
The shares rose 2.3% to $12.35.
