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NZ Steel returns to profit in first half

NZ Newswire logoNZ Newswire 20/02/2017 Pattrick Smellie
Steel © Andrey Rudakov / Bloomberg Steel

A cost reduction drive, higher global steel prices, and synergies between recently acquired Pacific Steel and the New Zealand Steel plant at Glenbrook have seen a strong return to operating profit for Australian steelmaker Bluescope's New Zealand operations.

In the half-year to December 31, Bluescope's New Zealand operations showed earnings before interest, tax, depreciation and amortisation of A$59.4 million (NZ$63.4m), a turnaround of A$74.9m from the A$15.5m ebitda loss in the same period a year earlier.

The company said in statements released with the accounts that while the New Zealand steel-making business had achieved cost savings targets of A$45m in the last financial year and A$33m in the first-half of the current year, it was targeting A$70m in annual savings compared with the 2015 financial year cost base in this financial year.

There was "further work to be done to determine whether the Glenbrook operations can be internationally competitive and profitable through the cycle".

The result was achieved on lower revenue, at A$425.4m, than for the same half a year earlier, at A$451.1m, when the company also wrote down the value of its New Zealand assets by about half, reflecting the weakness in the global steel market and doubts about the Glenbrook plant's long-term future.

During the last year, the company has pushed the Ministry of Business, Innovation and Employment to conduct an investigation into the alleged dumping of Chinese steel in the New Zealand market and campaigned against changes to national grid charges, which it fears could add millions to its annual electricity costs.

The result was also achieved in spite of a 32.3 per cent fall in total steel despatches, at 276,400 tonnes, and a substantial fall in steel exports, mainly caused by Pacific Steel sourcing its flat steel products from NZ Steel and strong sales into the buoyant domestic construction sector.

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