Onesteel Earnings Upgrade Lifts Sector
The Age
Friday January 24, 2003
The Australian steel sector rose yesterday after Whyalla-based OneSteel announced a profit upgrade that will result in it making more in the December half year than in all of 2001-02.
Directors said the company was likely to post an interim profit of $54 million after tax - more than double the previous interim result of $19.7 million and bettering the previous full-year result of $47.1 million.
Investors responded by bidding up OneSteel shares eight cents to $1.81 - only two cents short of the company's all-time high in the first week of the year.
The latest earnings guidance from OneSteel directors supersedes the estimate of $39 million to $45 million given at the November annual meeting.
Although the rise in profit reflects some internal OneSteel restructuring as well as buoyant market conditions, the news lifted the rival Smorgon Steel Group and the flat-steel producer BHP Steel.
Smorgon, which competes with OneSteel in structural and reinforcing products, rose two cents to $1.15.
BHP Steel, which is a supplier of flat steel to OneSteel and Smorgon, shot up 12 cents to a record $3.56.
OneSteel would reap the full benefits of restructuring completed in the past financial year, spokesman Mark Gell said.
The company closed the Brisbane rolling mill in 2001-02 and the full benefit of reduced costs would be felt in the next result.
In addition, the ramping up of the billet caster transferred from Newcastle was completed at the end of the previous financial year, allowing OneSteel to divert more steel into the domestic billet market and away from the less profitable export market for slab steel.
Mr Gell said improved trading had been achieved in manufacturing and in domestic and international distribution.
Manufacturing was helped by the unexpected strength through November and December of the residential building market - which contributes 13 per cent of revenue - and the increases in non-residential and engineering construction, which account for 21 per cent each.
OneSteel directors repeated their warnings on the second half of the current financial year, which would be much stronger than the previous corresponding period, but weaker than the December half just ended.
A number of factors would influence earnings, including the drop-off in residential construction, reduced demand from the drought-affected agricultural sector, higher scrap prices and higher prices for hot-rolled coil steel.
© 2003 The Age
