BlueScope’s 102 per cent profit boost positions Port Kembla as “the jewel in the crown”, according to University of Wollongong economics professor Alex Frino.
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But he also said the robust profit results could be seen as an indicator the company “went too early” with its 2015 cost-cutting drive.
The steelmaker announced a 2016-17 profit of $716 million – which Prof Frino said was better than the company's predictions in February.
He suggested a decent chunk of that came from the division that includes the Port Kembla steelworks.
“The Australian Steel Products (ASP) division has generated roughly $500 million in revenue for the year and the Illawarra would account for about two-thirds of that. That’s a jewel in the crown for BlueScope steel in my opinion,” Prof Frino said.
However, he said there was a downside in that the earnings for the first few months of the new financial year are down on the same period 12 months ago.
“They’ve had a great 12 months but the first few months so far have not been great,” he said.
BlueScope was attributing that fall to escalating energy prices and strong competition from imports.
Prof Frino said the ongoing cost savings from the ASP division this year of $35-40 million were “quite small” when compared to the $459.4 million profit.
He said this could lead some to question, in hindsight, whether those cuts that started in 2015 were warranted.
“They went at a time when their earnings were under pressure and then 18-24 months later they announced their profits are booming,” he said.
“That must leave people asking, ‘well why do they need to get rid of all of those people if the profits are so sound?’.”
Glen Humphries
I'm an award-winning senior journalist with the Illawarra Mercury and have well over two decades' worth of experience in newspapers. I cover the three local councils in the Illawarra for the Mercury, state and federal politics, as well as writing for the TV guide. If I'm not writing, I'm reading.
I'm an award-winning senior journalist with the Illawarra Mercury and have well over two decades' worth of experience in newspapers. I cover the three local councils in the Illawarra for the Mercury, state and federal politics, as well as writing for the TV guide. If I'm not writing, I'm reading.
