Monday May 12, 02:12 AM
Australia's BlueScope Steel expects stronger H2 on higher steel prices
SYDNEY (Thomson Financial) - Australia's largest steelmaker, BlueScope Steel Ltd (Berlin: BH5.BE - news) ., said on Monday it remains on target to report stronger earnings for the second half due to high steel prices and brisk demand.
BlueScope, whose fiscal year ends in June, said it expects to post underlying net profit of about A$474 million ($447 million) for the second half, up from the first half's A$305 million.
The company said its fiscal third-quarter underlying profit, which excludes one-off items, was A$169 million while the fourth quarter was likely to be about A$305 million.
The group, which has steel plants across Asia and in the United States as well as Australia and New Zealand, said all businesses were performing well though its coated steel businesses are being challenged by higher feed costs. A stronger Australian dollar is also having a negative impact on earnings.
BlueScope said its Asian operations were improving earnings in the second half, particularly in
Thailand, where it has a coated steel products plant.
The impact of the $730 million acquisition of U.S. group IMSA Steel Corp in December was also
exceeding expectations.
The acquisition took BlueScope's gearing level to 40 percent in February, but Chief Executive Paul O'Malley said the improved second-half earnings will allow the group to reduce gearing to within its optimal range of 30 percent to 35 percent by June 30.
O'Malley said the earnings momentum seen in the second half was likely to continue into the
fiscal year to June 2009.
'Assuming global steel prices hold, we expect a good start to FY09 notwithstanding the substantial increases in iron ore, coal and scrap prices, effective from July 1, 2008,' he said.
In the second half of fiscal 2009, a blast furnace reline and sinter plant upgrade at the group's main steelwork at Port Kembla, south of Sydney, will impact on earnings.
O'Malley said BlueScope is ahead of schedule to deliver its targeted A$200 million working capital reduction by June 2009 with about half the cut expected to be achieved by the end of next month.
At 10:50 a.m. (0050 GMT) BlueScope shares were down 1.3 percent at A$10.86.
($1 = A$1.06)
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