Aided by Its North American Sheet Mill, BlueScope's Fortunes Rise in Fiscal 2016
08/22/2016 - Australia’s BlueScope Steel more than doubled its underlying net profits in fiscal 2016 due in part to higher sales and cost reductions as well as to having taken full ownership of its U.S. sheet mill.
For the year ending 30 June 2016, BlueScope reported underlying net profits of AU$293.1 million, up 119 percent from AU$134.1 million in fiscal 2015. The profits came on total revenue of AU$9.2 billion, up from AU$8.6 billion in the prior year, a 7 percent increase.
It’s a significant turnaround, considering that BlueScope last year had warned that its Port Kembla works, Australia’s largest steelmaking facility, might not have a future.
But demand in Australia improved, and the company cut AU$235 million in expenses.
“Our direct interventions in reducing costs have significantly lifted performance of our steelmaking operations in Australia and New Zealand despite continuing global overcapacity and production, which drove regional commodity steel spreads in the six months to 30 June 2016 to their lowest levels since BlueScope listed in 2002,” said BlueScope managing director and chief executive Paul O’Malley in a statement.
However, he warned that the facility will need to continue to contain costs in order for the company to commit to relining the No. 5 blast furnace in 10 to 15 years from now, a project that will require between AU$300 million and AU$400 million, according to The Sydney Morning Herald.
"It is a bullet decision in 10 years’ time whether we will make that investment. It is game on, not game over" following recent cost reductions, he said, according to The Morning Herald.
BlueScope’s results also were buoyed by results from North Star BlueScope Steel, over which BlueScope now has full control -- the company bought out former joint venture partner Cargill Inc. for US$720 million last fall. Cargill had held a 50 percent stake in the business.
The Australian Financial Review said the decision proved to be fortuitous, having come as the U.S. began clamping down on imports by imposing anti-dumping duties.
“We have anti-dumping in Australia, but the U.S. has anti-dumping on steroids," O'Malley said during a call to discuss the results, according to The Financial Review.
He said the anti-dumping measures effectively have closed off the domestic market to overseas producers, The Financial Review reported.
BlueScope said that since the acquisition, steel spreads have risen 60 percent. And at the same time, the facility has been running at 100 percent of capacity, owing to strength in the automotive and construction markets.
It’s a significant turnaround, considering that BlueScope last year had warned that its Port Kembla works, Australia’s largest steelmaking facility, might not have a future.
But demand in Australia improved, and the company cut AU$235 million in expenses.
“Our direct interventions in reducing costs have significantly lifted performance of our steelmaking operations in Australia and New Zealand despite continuing global overcapacity and production, which drove regional commodity steel spreads in the six months to 30 June 2016 to their lowest levels since BlueScope listed in 2002,” said BlueScope managing director and chief executive Paul O’Malley in a statement.
However, he warned that the facility will need to continue to contain costs in order for the company to commit to relining the No. 5 blast furnace in 10 to 15 years from now, a project that will require between AU$300 million and AU$400 million, according to The Sydney Morning Herald.
"It is a bullet decision in 10 years’ time whether we will make that investment. It is game on, not game over" following recent cost reductions, he said, according to The Morning Herald.
BlueScope’s results also were buoyed by results from North Star BlueScope Steel, over which BlueScope now has full control -- the company bought out former joint venture partner Cargill Inc. for US$720 million last fall. Cargill had held a 50 percent stake in the business.
The Australian Financial Review said the decision proved to be fortuitous, having come as the U.S. began clamping down on imports by imposing anti-dumping duties.
“We have anti-dumping in Australia, but the U.S. has anti-dumping on steroids," O'Malley said during a call to discuss the results, according to The Financial Review.
He said the anti-dumping measures effectively have closed off the domestic market to overseas producers, The Financial Review reported.
BlueScope said that since the acquisition, steel spreads have risen 60 percent. And at the same time, the facility has been running at 100 percent of capacity, owing to strength in the automotive and construction markets.
