Onesteel Tips First-half Bonanza Of $54m
Sydney Morning Herald
Friday January 24, 2003
The Australian steel sector rose yesterday after Whyalla-based OneSteel unveiled a profit upgrade which will see it make more in the December half-year than in all of 2001-02.
Directors reported that the company was now likely to report an interim profit of $54 million after tax.
This will be more than double the previous interim result of $19.7 million and will also eclipse the last full-year result of $47.1 million.
Investors responded by bidding up OneSteel shares by 8c to $1.81 only 2c short of the company's all-time high set in the first week of the year.
The latest earnings guidance from OneSteel directors supersedes the estimate of $39 million to $45 million that was given at last November's annual meeting.
Although the rise in profit reflects some internal OneSteel restructuring as well as the buoyant market conditions, the news lifted both the arch-rival Smorgon Steel Group and also flat-steel producer BHP Steel.
Smorgon, which competes directly with OneSteel in structural and reinforcing products, rose 2c to $1.15 by the close.
BHP Steel, a major supplier of flat steel to both OneSteel and Smorgon, shot up 12c to a record $3.56 by the end of trade.
OneSteel would reap the full benefits of restructuring work completed in the last financial year, spokesman Mark Gell said yesterday. The company closed the Brisbane rolling mill in 2001-02 and the full benefit of reduced costs will be felt in the next result.
In addition, the ramp-up of the billet caster transferred from Newcastle was completed at the end of the last financial year, allowing OneSteel to divert more steel into the domestic billet market and away from the less profitable export slab market.
Mr Gell said that improved trading had been achieved in the manufacturing operation, domestic distribution and international distribution. Manufacturing was helped by the unexpected strength through November and December of the residential building market which generates 13 per cent of revenues and the increases in non-residential and engineering construction, which each account for 21 per cent of turnover.
But OneSteel directors repeated their warnings about the second half of this financial year, which will be much stronger than the previous corresponding period but weaker than the December half just ended.
A number of factors will slow earnings, including the drop-off in residential construction, reduced demand from the drought-affected rural sector, higher scrap prices and higher hot-rolled coil steel prices.
© 2003 Sydney Morning Herald
Share This