Just months after securing a payroll tax holiday from the NSW government and sealing a deal to shed 500 workers, BlueScope Steel has upgraded its interim earnings expectations by $50 million to about $230 million.
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The steel maker said on Friday that stronger sales in Australia, early delivery of cost reductions and stronger margins had driven the earnings boost.
BlueScope is due to report earnings for the six months ended December 31 on February 22, meaning the unaudited $230 million earnings before interest and tax forecast is really a pre-release of the earnings number.
In a timely research note, UBS analyst Ramoun Lazar issued a research note on Friday upgrading BlueScope to a "buy" from "neutral" and speculating about a positive earnings surprise.
In October, the NSW government agreed to defer $60 million in state payroll taxes over three years in a bid to prevent BlueScope from shutting its remaining Port Kembla blast furnace.
BlueScope said in August that it needed to cut $200 million of costs from the plant, otherwise the No. 5 blast furnace would be mothballed, endangering 5000 direct and indirect jobs.
The company asked for enormous concessions from its workers and payroll tax relief to keep the fires burning at Port Kembla.
Port Kembla workers agreed to 500 job cuts, wage freeze, and workplace restructuring to help save the plant and the remaining 4500 jobs.
BlueScope said on Friday that it was reviewing the carrying value of its assets and anticipated it would increase the accounting value of half the North Star BlueScope Steel business by about $700 million. It bought the remaining 50 per cent from Cargill in October.
An impairment charge of $570 million, comprising $190 million in Australian Steel Products and $350 million in the New Zealand and Pacific Steel arm.
"This follows the review of external steel and iron ore price forecasts and discount rates in light of macroeconomic and global steel market changes," the company said.
Steel and iron ore prices have been severely depressed due to global oversupply and excess steel making capacity, coupled with a sharp slowdown in Chinese steel demand.
