BlueScope Steel reports 250 per cent rise in H1 net; sees losses in second half

BlueScope Steel today reported 250 per cent rise in net profit after tax (NPAT) of A$407 million for first half of financial year against A$116 million in H1 FY08 and 57 per cent rise in underlying NPAT of A$479 million compared to H1 FY08.

The company, however, said it will end up in the red during the second half of the fiscal amidst the global economic downturn.

The result takes its earnings per share to 52.7 cents per share from 15.7 cents per share in the corresponding period last year, the company said in a release.

"This excellent first half result was driven predominantly by improved spread and the weaker Australian dollar in the first quarter which delivered an underlying Q1 NPAT of approximately $430M,'' said managing director and CEO Paul O'Malley.

"However, in the second quarter of the reporting period, export sales from Australia were materially curtailed by the economic downturn around the world and the substantially lower demand for steel globally and in Australia,'' he said, adding, ''We are also seeing lower international steel prices while still experiencing peak raw material costs."

"The outlook for the second half of FY09 is now weaker than anticipated. We had factored in lost production due to the scheduled blast furnace No 5 reline. However, should lower demand and prices, coupled with high raw material prices, continue we expect to see a negative underlying NPAT contribution for H2 FY2009, the extent of which is dependent upon demand and spread, O'Malley said.

"Government stimulus packages may translate into some improvement in economic activity later this calendar year, but it remains to be seen how it will affect steel demand,'' he added.

He said the company is focusing on four key areas: a robust balance sheet; strong liquidity position; disciplined capital expenditure management and an expected $150 million savings on existing and new cost management programmes.

"BlueScope Steel aims to emerge from the downturn with our position as a low cost, high quality steel manufacturer intact," he added.

The board has declared an interim dividend of 5 cents per share in the backdrop of the unforeseen changes in demand and prices, the release said.

O'Malley said the mounting pressure for trade protection measures in Australia would only harm the industry.  "Trade protectionism is counter productive and harmful to exporters like BlueScope Steel. Normally, half our Australian and New Zealand steel production is exported. Access to export markets is important to our business," he said.

He also sought government support for the `Carbon Pollution Reduction Scheme'.

"The proposed CPRS needs an effective transitional plan to minimise the financial impact in the early years and minimise competitive disadvantage to Australian industry until its major global competitors are carbon constrained. We are engaging constructively with the Federal Government with proposals that promote reductions in carbon emissions while protecting this vital manufacturing industry and Australian jobs," he said.