Looking up: BlueScope's No 5 blast furnace at Port Kembla. BlueScope hopes to post a small profit.Picture: BEN RUSHTON
BLUESCOPE Steel expects to post a "small profit" in the second half of the financial year and says the company's mass retrenchments at Port Kembla were a crucial factor in the company's turnaround.
BlueScope Steel announced yesterday it was experiencing stronger demand in the US but weaker demand in China after flagging a break-even profit for the year to June.
In the second half, the company expects to post a "small profit" that is expected to offset the December half net loss of $12 million.
The manufacturer's loss in the six months to December 31 was an improvement from a $530 million loss in the same period in the previous year.
BlueScope shares jumped 58¢ to $4.35 yesterday.
"In the steel-making business, there has been a significant turnaround on previous years, off the back of some very strong cuts reduction," managing director Paul O'Malley said yesterday.
The results were a "compliment to the entire team in Australia who have really applied themselves to some very, very significant restructuring," he said.
"There were some tough decisions taken in the business a couple of years ago that, without, we might not have had a future."
Almost 1000 jobs were cut at the Port Kembla plant in 2011 as BlueScope halved production and left the export market.
About 400 steel production, mechanical and electrical positions went, plus an estimated 430 office-based workers.
Yesterday Mr O'Malley said the company was now in a profitable position.
"We expect to be profitable now ... we are not going to take our eye off the ball but we have no plans at this stage ... for any further significant restructures," he said.
"We've got to change focus to increase sales and grow the top line - quite frankly that's a much better focus than into major cost reduction, but we've got to continue to be cost effective."
Mr O'Malley said the company would not be resting on its laurels, "but we are not targeting job cuts".
"The major restructuring is done," he said and the company was seeing "better activity in the US ... but China is probably a little softer".
"There is a lot of growth in south-east Asia. We have to get our skates on to get that."
The previous corresponding period's loss was a result of massive restructuring in the business, including job cuts, aimed at overcoming the impact of the high Australian dollar and strong competition from overseas.
BlueScope's underlying net profit in the six months to December, which excludes one-off charges, was $10 million, up from a loss of $136 million in the previous corresponding period.
The company said it expected continued improvement in its underlying profit in the second half of the financial year, forecasting a small profit for the period.
And the company has just had its first order from Russia - for a prefabricated steel building, which it is to supply out of the US.
A revival of demand in China "will depend on credit easing, and I think that is on the cards", Mr O'Malley said.
After the closure of one of its steel blast furnaces at Port Kembla, along with cutting processing capacity at the steel works and also at Western Port in Victoria, BlueScope is hoping to return to the black.
"For the first time in four years we're looking at reporting a profit," Mr O'Malley said.
