Monday, August 22, 2011

BlueScope - The Day After?

BlueScopes announcement of 1,000 jobs to be shed may only be the start!
Here is a quick snapshot of the P/L figures released today in relation to Distriubution which has Lysaght in it's fold. Keeping in mind that the $1,000 million loss by the company is being solved by getting rid of it's export section?

Australian Distribution & Solutions
Now also in the report was a comment "Reduced volumes, particularly in BlueScope Lysaght, driven by weak market conditions and demand".
The loss of $218 million is nearly a quarter of the total BlueScope loss? Yet get rid of export. The sales revenue for distribution was down 5% yet the EBIT was down 1,917%. Work that one out? Also BlueScope has reported to have the following:
1. BSL has a syndicated loan with big 4 banks of $1.35B
2. $600M of this due in 2013
3. The balance due 2015
4. HRC price futures down at least until Dec 2011
5. $A stable at around $1.04 but may also rise.

Now without making profit - how is BlueScope going to overcome this?

ASX today BlueScope down to 74.5 cents
                           Hills  down to 99.0 cents
                     OneSteel down to $1.33
                    Fletchers steady at $6.06
Hills FY11 results out tomorrow?

What else can happen - maybe Tinman & Trevor can jump on a few of these boards & sort them out!


  1. can BlueScope be saved from here? or have they begun the slide into the precipice?

  2. Management needs servere cutting first - the maybe. To have known that these losses have been increasing steadily over the last three years is almost criminal in the eyes of investors.

  3. very sad p&l there, i cant see a way back for bluescope. I think the consumer (rollformers) have lost confidence in their product and the only hope would be some sort of hail mary. The government really needs to get the aussie dollar under control, asking china to float there dollar is pointless. controlled measures are the only way starting with dare i say it, the reserve bank increasing the cash rate

  4. Australia's biggest steel maker Bluescope Steel says it can become profitable again after announcing it will cut 1000 jobs in the worst day in the company's history.

    Shares in the steel maker plunged 5.7 per cent to their lowest-ever at 74.5 cents, after reporting more than a $1 billion loss.

    The company is now no longer an exporter of steel as a combination of record raw material costs, low steel prices, low domestic demand and a record high Australian dollar mean it can no longer compete.

    Bluescope will shut down its number six blast furnace at Port Kembla, in the Illawarra region south of Sydney - therefore exiting steel exporting - and close its Western Port hot strip mill in southern Victoria.

    The blast furnace closure will result in 800 job losses, while 200 jobs will be cut at Western Port.

    An estimated 400 contracted workers would also be affected, along with suppliers.

    "This is a once in a lifetime decision from my perspective, absolutely the biggest change in Bluescope's history," Bluescope's chief executive Paul O'Malley told reporters in a teleconference on Monday.

    "It's not one that's been easy but it's the right decision from a business perspective."

    The company has reported a $1.054 billion net loss for the year to June 30, which compares to a $126 million profit in the previous corresponding period.

    Macro-economic factors include global steel production being at an all-time high: 1.5 billion tonnes a year today, compared to 800 million tonnes in 2000 and China producing 700 million tonnes now, up from 100 million tonnes in 2000.

    Bluescope is also paying more than $300 a tonne for coking coal and close to $200 a tonne for iron ore, compared to $20 a tonne for iron ore and $25 a tonne for coking coal in 2000.

    "Steel is moving from being a developed world produced product, to a developing world produced product," Mr O'Malley said, while saying Australia needed to focus on cost reductions to compete in Asia.

    The job losses showed the "dark side" of the resource boom, said Australian Workers Union secretary Paul Howes, although no union action is planned.

    Mr O'Malley insisted the decisions would return the company to profitability.

    Bluescope would focus on supplying steel in Australia and making steel products in its overseas-based operations, including Colorbond steel and Zincalume steel.

    "It's a positive, because we continue to produce steel in Australia for Australian markets, we keep as many employees as possible in a job," Mr O'Malley said.

    He did not comment on whether he would consider a merger with OneSteel, Australia's second-biggest steelmaker.

    On Monday, OneSteel shored up its position in the booming iron ore industry by announcing an almost $600 million investment in iron ore, including buying new mines and expanding its export port facilities.

    Melbourne Business School economist Mark Crosby said the situation was so urgent for the manufacturing industry - a far bigger employer than mining - that it might be time for government action to stem more job losses.

    He said he thought the main problem forcing up the Australian currency was low interest rates in the United States.

    "I think we ought to at least think about whether there are steps we can take to reduce the level of the exchange rate," Associate Prof Crosby said.

    "Maybe some of the carry trade money - moving money from low interest rate to higher interest rate countries - can be discouraged."

  5. i would predict that hills p&l will be bad but nowhere near as horrific as bluescopes. I'd say there IT and solar side would have performed well with orrcon and korvest being the worst performers and to a lesser extent team poly and fielders

  6. Will have to have performed well after the 23rd February 2011 half year results. Orrcon definitely a problem, Team Poly (water tanks??), Fielders had bad 1st half - will doubt if a huge recovery occured.

    Watch tomorrow night here - for the rumours and analysis of their report.

    BlueScope is going to have a hard 6 months!

  7. bluescope and lysaght should have been seperated by the accc years ago... your right tinman there is little confidence in bluescope at the moment and rightly so, with miss management from the top down - i wonder who signed the guarantee for their massive loan! $1.3 bill wouldnt come without strings attached.
    the fielders result will be closely watched by all in the industry.
    being a sporting man i will give bluescope 100:1 to make the severe turnaround required to find the spare $600 mill by 2013.

  8. hills have announced a buy back for their shares - do the hills board know something we dont?

  9. hills p&l whilst not pretty could have been alot worse. If it wasnt for the disaster that was orrcon then they would have been looking O.K. They have even continued the employee share scheme when most businesses in the same position might have postponed for a year or two. I think overall, not a bad result in a difficult market/economy. Perpetual Trustess werent to dishearted by it either. Didnt go much into Fielders but sources tell me that there numbers were only slightly worse then the first half and turnover was up across the board but a significant margin drop in the industry was the biggest obstacle they faced.

  10. i think lysaght would have helped contribute to the margin drop - someone has lit a fire up under them at the moment with crazy prices offered to anyone with two legs...

  11. little birdie told me that nippon might be in for bluescope

  12. Vey Interesting Tinman?
    They already have serious shares in coal & iron ore processing as well as other manufacturing in Australia and offices in Sydney.

    This mix would suit well with them - certainly out of left field!

  13. am i correct in thinking that nippon are linked to baosteel the mining group? bhp had better watch their back....

  14. Nippon & Baosteel have been linked since early 2000's - then in bed with ArcelorMittal since 2003 - very powerful group - lines up with the following statement today in "Steel Guru"

    Japan's competition regulator has cleared a USD 5 billion hostile bid for Australia's Macarthur Coal by Peabody Energy and ArcelorMittal. Macarthur is resisting the AUD 15.66 a share offer, which includes Macarthur's final dividend.