http://www.news.com.au/adelaidenow/story/0,22606,22274555-5006368,00.html
BlueScope Steel doubles profit
By Isabelle Oderberg
August 20, 2007 11:04am
BLUESCOPE Steel has doubled annual earnings and says it has started the new year well due to ongoing strong demand in the global steel market. Australia's biggest steelmaker made a fiscal 2007 net profit of $686 million, up 103 per cent from $338 million in the prevous year.
Revenue jumped 11 per cent from $8.031 billion to $8.913 billion, on the back of higher prices, a better product mix in exports and higher sales at home and in Asia and the US.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 67 per cent to $1.423 billion.
Outgoing chief executive Kirby Adams said the outlook for fiscal 2008 was positive.
"This year, the global steel market was very strong with the forecast for global steel demand remaining positive," he said.
"China, the USA and Europe are driving this healthy outlook.
"Asia now produces more than half of all the crude steel produced in the world, and China is the largest single market for steel and has the strongest demand growth of any country."
Mr Adams said while the Chinese Government had been working to eliminate inefficient mills and reduce exports, it had not significantly slowed production.
In Australia, BlueScope had started fiscal 2008 well with a stronger Australian dollar, a stable global steel price environment and high metal coating costs.
"Asian markets and opportunities are slightly improved, and the operational ramp-up of new sites is growing revenue while coated product margins continue to be under pressure, particularly in China," he said.
"We will continue to aggressively manage those factors over which we have control, including focusing on safety and environment, containing costs, improving our processes, achieving volume and production efficiencies, and optimising mix and margins.
"Clearly, our global footprint and the diversity of our product lines will be of benefit going forward."
Earlier this mont, BlueScope announced that Mr Adams will be succeeded by chief financial officer Paul O'Malley in November.
Mr Adams said his last annual result as chief executive was pleasing with "excellent" operational performances across all businesses, including production records.
"All business reporting segments were profitable, with Port Kembla Steelworks continuing to be the profit and cash flow engine of the company," he said.
"Pleasingly, our Asian portfolio exhibited substantial volume growth as new operations in China, Vietnam, Thailand and India were commissioned and ramped up.
"Margin compression in our mid-stream metallic coating and painting businesses prevailed through most of the year, as these businesses confronted huge increases in zinc costs and growing exports from expanding north Asian production."
BlueScope also revealed that a 19.9 per cent stake in Smorgon Steel Group, which it bought in August 2006, to block the smaller group's takeover by rival OneSteel, had cost it $319 million.
A gain of around $128 million will be recognised in its 2008 earnings on the sale of the shares back to OneSteel.
The share purchase helped BlueScope forge its involvement in the sector's consolidation, winning Smorgon's distribution business for around $700 million and leaving the rest of the company to OneSteel.
Mr Adams said global consolidation in the steel industry will continue, following Mittal's acquisition of Arcelor, Tata's purchase of Corus and more recently, Ternium's acquisition of Grupo IMSA.
"One of the principal benefits of this consolidation is better matching of production to demand as well as global economies of scale and marketing," Mr Adams said.
"I expect this consolidation process to continue its momentum over the next couple of years."
BlueScope also said it balance sheet gearing had dropped to 28 per cent, from 38 per cent, giving it a "very strong financial platform" for continuing growth.
Bluescope, which was spun out of BHP Billiton Ltd five years ago, declared a final dividend of 26 cents for the year ended June 30.
The total dividend for the year was 47 cents, up seven per cent on fiscal 2006.