News Room - Steel Industry

Posted on 20 Feb 2009

OneSteel's profit rises, warns of steel weakness

OneSteel has reported a share rise in first half profit and warns that the worsening global economic crisis will dampen demand for steel over the rest of the year.

 

The steel products group's net profit for the December half year rose to $228.3 million, from $63.6 million in the previous corresponding period.

 

The news propelled shares 5% higher in morning trade to $2.33 before easing back to close up 2 cents, or 0.9% at $2.24.

 

Operating net profit for the half year was $215 million, up 131%, excluding restructuring costs, impairment charges and the integrating of the Smorgon Steel business it bought in August 2007 and Australian Tube Mills.

 

"We saw a strong start to the first half of the year but it became increasingly apparent towards the end of the half that the impact of the global deterioration in financial and economic conditions on Australian demand was worse than anticipated," chief executive Geoff Plummer said in a statement on Monday.

 

"Both our manufacturing and distribution segments recorded strong results for the half, but the impact of the global financial crisis was felt hard in Australia particularly in November and December and our sales for these months were much weaker than anticipated."

 

Mr Plummer said the company's iron ore business had achieved its target for the half year, despite a slowdown in steel production in China and a general decline in demand for the commodity.

 

It expects the global crisis will continue to contribute to weak world steel markets in the months ahead.

 

''We expect global and regional steel markets to continue to be weak with prices and demand suppressed until signs of an international recovery are clearer,'' Mr Plummer said,

 

''However, in our more internationally exposed materials segment, there are encouraging signs that the market bottom has been passed, with prices for spot iron ore and scrap having moved off their recent lows.

 

''In our domestic markets, tight availability of credit and reduced confidence are key contributors to the lower activity levels.''

OneSteel currently expects its full year net operating profit to be higher, and between between $325 million and $375 million.

 

That would compare to a range in analysts earnings estimates of between $259 million and $448 million.

 

Its 2007/08 net operating profit was $315 million.

 

OneSteel declared an interim dividend of six cents, two cents less than the prior dividend.