Bluescope reports small profit following losses

Steel maker BlueScope has forecast little change in second half earnings aftter it reported profits little better than break even in the December half.

The December half net profit stood at $3.7 million, a reversal from the loss of $23.8 million a year earlier. Underlying net profit stood at $49.1 million, up from a loss of $1.6 million a year earlier.

BlueScope said the second half underlying net profit after tax "would be similar to the first half, taking into consideration the usual cyclicality of earnings, maintenance shutdowns and assuming the political crisis in Thailand does not materially impact on earnings there".

Australian operations continue to drag on the group's performance, with the domestic coated and industrial products division posting a net loss of $0.9 million, reversing the small $2.4 million profit recorded a year earlier.

At the underlying level it posted a net profit of $26.9 million, rebounding from the year earlier loss of $10.6 million.

Similarly, the building products and steel distribution arm remained unprofitable, with a December half net loss of $10.9 million, little changed from the $10.5 million loss a year earlier.

At the underlying level it was also in the red, with a net loss of $10.9 million, up from a loss of $7.1 million a year earlier.

Earnings were underpinned by a strong performance in both New Zealand and the US, BlueScope said.

BlueScope warned of continued weakness in Chinese demand as it transitions from high growth to productivity growth.

"We are seeing negative growth at the moment, as it moves from high growth to productivity growth," BlueScope chief executive Paul O'Malley told analysts this morning.

There is a "slowdown in building activity in China", he said.

At the same time, the cost-base of China's steel mills is "break even", Mr O'Malley said, since tight credit conditions have seen the mills unable to afford to produce steel at present margins.

SMH.COM.AU

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