Posted on 25 Feb 2019
BlueScope Steel's New Zealand business reported a 75 per cent improvement in half-year operating earnings on the back of increased domestic sales, strong construction demand and a recovery in global steel prices.
Sales revenue for the business, which includes BlueScope's Pacific Island operations, increased to A$463.5 million in the six months through December, 20 per cent more than a year earlier. Earnings before interest and tax climbed 75 per cent to A$71.9 million.
BlueScope said the company, which operates the Glenbrook mill, benefited from strong local demand, higher prices for steel and vanadium and foreign exchange gains. Those benefits were partly offset by higher coal and electricity costs in the latest period.
It cited "good momentum" in the commercial sector and on-going growth in new dwelling consents, and noted that export volume was reduced in favour of strong domestic demand.
"Construction sector activity remains solid, and the planned additional government investment will continue to support growth as the population continues to expand, albeit at a slower rate."
Glenbrook is the country's only producer of steel which it makes by smelting local iron sands with local and imported coal. It also operates the North Head iron sands mine, having sold the more southerly export-focused Taharoa mine in 2016 as part of a string of initiatives to keep the New Zealand business profitable.
BlueScope also operates the Pacific Steel reinforcing business it acquired from Fletcher Building in 2015. Last October it also acquired a 16 per cent stake in listed distribution firm Steel & Tube to prevent a take-over by Fletcher.
Glenbrook is among the country's biggest users of power, gas and coal and suffered last year as repair work at the Pohokura gas field reduced gas supplies and pushed up electricity prices – particularly in October and November.
An investor presentation today shows raw material costs at the New Zealand and Pacific business were about A$5.8 million higher than a year earlier and A$8.2 million more than the firm spent in the six months through June.
It was able to recover about A$5.3 million of that through lower conversion and other costs.
