BlueScope Steel has achieved a half year profit for the first time in five years, but its Australian operations continue to lose money.
BlueScope turned last year’s first half loss of $24 million into a modest $3.7 million net profit in the six months to December 31.
The company was brought to its knees two years ago when it posted two $1 billion-plus annual losses in a row, cut more than 1000 Australian jobs and stopped exporting steel.
Chief executive Paul O’Malley said a long and painful journey of restructuring and tough decisions was now starting to pay dividends.
“We have stabilised the business, laid the foundations for growth, made measured investments and achieved this while maintaining a conservative balance sheet,” Mr O’Malley said.
“We can be a successful manufacturer in Australia.”
The company’s shares added 43 cents, or 7.3 per cent, to $6.30 on Monday.
Bluescope’s improved performance came from its Asia and North America operations, through its various industrial building and steel products, including its pre-painted Colorbond steel.
However the building components and distribution business in Australia reported a $10.9 million loss, a weaker result than in the same period a year earlier.
A combination of cheap imports, a high Australian dollar, weak building activity and a slowdown in mining sector investment all hurt the local operations.
Mr O’Malley said he was confident the Australian business was headed in the right direction, but said he was concerned about the economy and how it was being handled by the government.
“I think one of the challenges is increasing unemployment because that is going to affect confidence,” he said.
The unemployment rate hit 6.0 per cent in January, and thousands more manufacturing job losses are to come due partly to the death of the nation’s car industry.
Mr O’Malley urged governments to follow a US path of having an energy policy that ensured cheap gas for local manufacturers, plus more flexible employment policies.
“They have very much pro-business activities with the view that businesses employ people and give people jobs and are seeing tremendous economic growth,” he said.
Morningstar analyst Mathew Hodge doubts Bluescope’s ongoing ability to compete in a global steel industry dominated by over-supply from China.
He said the company was not generating free cashflow and would not be cashflow positive for the financial year, due to capital expenditure and the payment for four acquisitions in the second half.
“I struggle to see a rosy long term future for that business unless they have niche products,” he said.
“Colorbond is, but is buried in all the other stuff and capital and high costs tied up in Australia.”
