Australia’s largest steelmaker on Monday reported net profit for the six months ended December 31 had more than doubled to $200.1m, driven by earlier-than-expected cost reductions and an increased stake in its North American business.
Underlying earnings before interest and tax rose 35 per cent from a year ago to $230.1m, matching the upgraded guidance flagged by the company earlier in February.
The result is a sharp turnaround for the steelmaker, which just six months ago was poised to shut down operations at its flagship Port Kembla steelworks in NSW as steel prices slumped amid weaker demand and a supply glut in Asian export markets.
Since then, the company has cut jobs at the plant, frozen pay for the remaining workers and secured a three-year tax break from the NSW Government in order to keep the steelworks running and achieve its target of $200m in cost savings over two years.
“Our focus on costs and lifting the performance of steelmaking operations in Australia and New Zealand is paying off,” managing director Paul O’Malley said.
“Our relentless focus on cost reductions in Australia must continue and we are now targeting $270m in full year 2017,” he added.
Earlier in February, BlueScope said its results had been boosted by a write-up in the value of its US-based North Star Steel business, in which the company acquired the remaining 50 per cent stake from partner Cargill in October 2015 for $US720m.
The gains, however, were offset by an impairment charge of $570m against its Australia and New Zealand business, due to the sharp fall in iron ore and steel price forecasts.
The company is targeting cost cuts of between $110-$120m in Australia during the second half of the 2016 financial year, and another $NZ20m to $NZ25m ($A18.59m-$A23.24m) in New Zealand.
As a result, it expects underlying earnings in the second half to be up to 60 per cent higher from last year.
BlueScope reported underlying earnings of $131m in the second half last fiscal year.
The steelmaker is also looking to sell its loss-making Taharoa iron sands export business in New Zealand, against which its has already taken a full impairment of $163m.
“There are some natural owners who could extract more value from the business than we do,” O’Malley told reporters on Monday.
The steel producer will pay a fully franked interim dividend of three cents per share, unchanged from its previous first half distribution.
At 10.40am (AEDT), BlueScope shares were up seven cents or 1.3 per cent, at $5.55 each.
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