BlueScope profits have taken a massive hit off the back of weaker steel prices, and warned that their China business will be “heavily impacted” by the coronavirus outbreak.
NPAT fell to $185.8 million from $624.3 in the prior first half – a drop of 70 per cent.
“Underlying EBIT for the half was $302.4 million, down on 1H FY2019, driven by the decline in commodity steel spreads which we flagged in August last year,” said managing director and CEO Mark Vassella.
“However, with improving conditions at the tail end of the half, we finished 1H FY2020 slightly stronger than our guidance.”
The company also remains positive about its cornerstone project to expand the North Star mini-mill in Delta, Ohio, by around 850,000 tonnes per annum.
“We are very pleased with progress,” Mr Vassella said.
“Work is on schedule, site works are progressing well and major OEM equipment orders have been placed.”
However, the outlook for BlueScope’s China business remains uncertain. While operational sites and sales offices outside of Hubei have reopened, staffing remains low due to a significant number of personnel remaining in self-quarantine following travel for the Lunar New Year. Many customers have also not resumed operations, and BlueScope expects that its February and March business performance will be “heavily impacted”.
“Underlying demand across our major markets is generally stable, however the economic impact of COVID-19 has created uncertainty for our Asian businesses and Asian steel spreads in the near term,” Mr Vassella said.
“The impact to US Midwest spreads, if any, is unclear. We are aware of some impacts to our supply chain which, to date, have been mitigated; we continue to monitor the situation.”
BlueScope’s board approved a six cents per share interim dividend and the extension of the on-market buyback, to buy up to $100 million.
“In the context of current macro-economic conditions, including uncertainty in key markets due to impacts of coronavirus, on COVID-19, we feel this reflects the right balance of returning funds to shareholders and investing for the future in key projects such as the North Star expansion,” BlueScope wrote.