Steelmaker OneSteel expects a better second half result following a $74 million interim net loss, and has flagged job cuts as well as a name change to reflect its increasing focus on mining.
OneSteel shares closed at a near four-week high, up nine cents, or 12.33 per cent, at 82 cents.
The loss for the six months to December 31 compared to a net profit of $116 million for the prior corresponding period.
The loss included a $130 million impairment charge related to the write-down of the discontinued assets of the LiteSteel Technologies steel businesses in the US and Australia, as announced in December.
Excluding the write-down, underlying net profit from continuing operations amounted to $78 million, beating the company’s guidance range announced in November of $55 million to $75 million.
IG Markets market strategist Stan Shamu said the underlying result and stronger outlook for the second half was cheered by the market.
However, chief executive Geoff Plummer said OneSteel’s overall performance was disappointing and was the result of a weak steel market.
The high Australian dollar and elevated raw materials prices for the manufacturing business also weighed heavily on the company.
Domestic demand for steel remained well below pre-global financial crisis levels during the first half, particularly in the construction sector, due to weak confidence domestically and tight credit markets, OneSteel said.
“There was no material improvement in activity levels across the market other than in the resources segment and government funded civil works where we are seeing increased activity,” the company said in a statement.
Despite the generally flat steel market, OneSteel’s volumes were expected to lift by about five per cent in the second half based on increased infrastructure and mining work.
Construction markets were at their cyclical low points, OneSteel said, but prices and margins would continue to be subject to significant volatility, in part due to the exchange rate.
OneSteel said it had made considerable progress in cutting costs and improving its steel operations, so it expected these businesses would perform significantly better in the six months to December 31.
As part of its cost cutting, the company plans to slash 430 jobs to save about $90 million, mainly from its manufacturing business.
It had in August flagged the potential for further job cuts after axing about 1,500 positions since the global financial crisis in 2008.
OneSteel did not on Tuesday indicate whether the jobs would be shed from its flagship steelworks at Whyalla, South Australia, which it has previously not ruled out closing.
Rival BlueScope last year sacked more than 1,000 workers as it shut down its export business.
OptionsXpress market analyst Ben Le Brun said OneSteel was a now more attractive investment proposition than BlueScope, which was almost exclusively a steel maker.
“BlueScope had their chance to jump into the mining space around the same time in 2005 as OneSteel did but they chose not to,” Mr Le Brun said.
“That may prove to be a fatal mistake for BlueScope.”
OneSteel is considering changing its name to reflect the importance of its mining and mining consumables business, which comprised about 40 per cent of total revenues in the first half.
It plans to increase iron ore production when the Peculiar Knob project, acquired last year from WPG Resources, begins exports in the December quarter.
OneSteel expects to sell about six million tonnes of iron ore this year, rising to about 11 million tonnes per annum when Peculiar Knob reaches full production.
The company declared an unfranked interim dividend of three cents per share, down from six cents for the previous first half.
