Sydney, Feb 25, 2008 (ABN Newswire) - In its half-year results released on Monday, steel producer BlueScope Steel (BSL) said its underlying profit has been negatively impacted by a strong Australian dollar; however it expects earnings to improve in the second half.

Australia's largest steel maker reported a net profit after tax of $116 million for the six months ending 31 December 2007, a fall of 70% compared to $388 million for the previous corresponding period.

Its underlying profit came in at $305 million, which is down 21% on the previous corresponding period of $384 million.

 "This reduction is primarily due to  a stronger Australian dollar, reduced spread for North Star BlueScope Steel, increased iron ore, steel feed and other operational costs, which were partly offset by higher global slab and HRC prices," managing director Paul O'Malley said.

On the other hand, the group's acquisition of Smorgon Steel's distribution business in August 2007 is starting to pay dividends.

Melbourne-based BlueScope said its half-year revenue from continuing operations increased $586.7 million to $4,732.4 million.

"The increase in sales revenue is primarily due to the acquisition of Smorgon Steel's distribution business, plus higher export volumes driven by improved production performances and higher export prices," BlueScope said.

Again, these were partly offset by a stronger AUD:USD exchange rate, lower volumes in the distribution sector driven by increased imports and an unfavourable domestic/export mix primarily due to clearance of high volumes of product imported during 2H 2007.

O'Malley said operating cashflows of $600m continue to highlight the quality of the assets, employees and improving relationships with customers.

BlueScope booked earnings before interest, tax, depreciation and amortisation (EBITDA) of $502 million for the half, down 37% from $794 million reported in first-half 2007.

O'Malley said the Asia group result 'continued to disappoint' and remains a key focus of management efforts.

Thailand is continuing to be affected by soft domestic demand, while Indonesian and Malaysian businesses continued to deliver stable financial performances.

The company expects an improvement in earnings in the second half.
"Directors are expecting an improvement in earnings largely driven by steel price increases based on strong steel demand," O'Malley said.

"The benefit to BlueScope will be more evident in the fourth quarter 2008 as sales prices for the third quarter are largely set," he added.

BlueScope increased the interim dividend from 21 cents to 22 cents, fully franked, payable on April 1 to shareholders registered March 5.

BlueScope has operations across Australia, New Zealand, the United States and Asia.

The market liked the results, and by 11.30AM AEST, BSL was trading at 66 cents or 5.8% up at $12.06.

Shares then ease to close at $11.70.

 


 

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