BlueScope profits fall but local demand for steel increases

DEMAND: Profits may be down at BlueScope due to COVID-19 but the pandemic also saw an increased domestic demand for steel compared to the same time last year. Picture: Sylvia Liber
DEMAND: Profits may be down at BlueScope due to COVID-19 but the pandemic also saw an increased domestic demand for steel compared to the same time last year. Picture: Sylvia Liber

BlueScope has recorded a profit lower than the 2015 return that led to the cost-cutting at Port Kembla.

But CEO Mark Vassella said the return was good given the current climate and included a reduction in value of the New Zealand business.

Mr Vassella on Monday reported after-tax profit this financial year of $96.5 million, 90 per cent down on last year's $1.015 billion.

It's also lower than $136.3 million made in 2015, just before the company embarked on a $300 million cost-cutting regime at Port Kembla.

The CEO pointed out Monday's $96 million included a $197 million non-cash write-down of the New Zealand business, where a "reconfiguration" is looming, which will see a "substantial" number of redundancies.

In a sign of good news for Port Kembla, the Australian Steel Products division was the company's biggest earner in the second half of this year.

While the sector saw pre-tax earnings drop 43 per cent on last year to $305.1 million, domestic sales were up 3 per cent, which Mr Vassella said was unexpected.

"In a second half where we might have expected volumes to drop off, the Australian sales increased year on year by a few percentage points," he said.

"If you had have said to me six months ago that I could finish the year slightly up in volume year on year, I'd have taken it without hesitation."

Overall Mr Vassella said it was a good result in very difficult times.

"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," Mr Vassella said.

The steelmaker did not have to close any sites due to an outbreak of COVID-19 so far this year, but Mr Vassella said the pandemic made it difficult to offer guidance for what profits would be in the coming months.

"There is a high level of uncertainty in the current environment given the risks of COVID-19 events which could disrupt demand, supply chains and operations, combined with broader macroeconomic weakness dampening demand, Mr Vassella said.

"An update on trading conditions will be provided at BlueScope's Annual General Meeting on November 19, 2020."

Throughout the pandemic, Mr Vassella said the company had managed to avoid having a single one of their more than 6000 Australian employees on JobKeeper benefits.

"We're pretty proud of that - but more importantly we're working hard to make sure that stays the case," Mr Vassella said.

This story BlueScope profits fall but local demand for steel increases first appeared on Illawarra Mercury.