Steel and mining group Arrium has warned it will cut more jobs from its Australian steel division, after it pushed further into the red.
Arrium on Tuesday posted a $447.2 million net loss in the six months to December 31, following a $474 million writedown of its steel assets.
The result is down from the $70.7 million loss in the previous corresponding period.
The performance of the steel division – driven by its Whyalla Steelworks – was better, with manufacturing’s $27 million earnings before interest and tax loss an improvement on the $94 million loss of a year ago.
Arrium also posted a better than expected underlying profit in the six months to December of $51 million, down from $77 million.
The result was due solely to its better-performing mining consumables and iron ore mining businesses.
Steel producers including Arrium and BlueScope Steel – which also has cut thousands of jobs and stopped exporting – are being hurt by a high Australian dollar, low steel prices, the dumping of cheap steel imports and weak construction markets.
Arrium has already shed 2,000 jobs from its Australian steel division.
Chief executive Geoff Plummer, who is due to be replaced by newly anointed Andrew Roberts, said that job losses would continue.
“The nature of those businesses is such that we have to keep making them sharper and more cost efficient and there has got to be continuing improvement in those businesses in terms of cost base and operating performance,” he told a teleconference.
The steel division is Arrium’s biggest employer with 6,945 workers across steel manufacturing, distribution and recycling. It had 7,578 12 months ago.
Its mining division employs only 565, and consumables 1,994.
Mr Plummer said low residential and commercial construction activity would mean conditions remained difficult.
Arrium’s Australian Tube Mills unit was for sale after incurring much of the writedowns, and the company would pursue the sale of more “non-integrated businesses”, Mr Plummer said.
Meanwhile, Arrium’s mining consumables business – which supplies grinding balls to miners – posted EBIT growth of 23 per cent to $80 million.
Arrium expects compound annual growth of 11 per cent a year in South America and nine per cent in the US until 2016 in consumables, driven by copper and gold projects.
The South Australian iron ore division also is on track to double in size after the new Southern Iron mine came on line and the expansion of Whyalla Port.
Iron ore EBIT dropped 48 per cent in the first half to $88 million, but prices had since recovered and represented the most near-term earnings growth potential, Arrium said.
It said it not pay any mining tax.
The company forecast strong profit growth for the second half, thanks to expected higher iron ore prices, but gave no specific guidance.
Analysts applauded the underlying result, which was about 41 per cent above expectations in a difficult year of weak steel demand and falling iron ore prices.
Net debt is down four per cent to $2.16 billion, with gearing up two per cent to 35.4 per cent.
Arrium shares were 2.5 cents, or 1.98 per cent, weaker at $1.235 at 1520 AEDT.
The company declared an unfranked interim dividend of two cents per share.
