BlueScope profit plunges 91%, but housing trends to boost steelmaker

BlueScope boss Mark Vassella says the company will benefit from a range of trends strengthened by COVID-19 including more spending on home improvements and the rise of lower density housing after the steelmaker posted a 91 per cent fall in profit.

Mr Vassella said Australians were spending more on renovations during the pandemic, using money that otherwise would have been spent on travel and government cash to spend on homes. The spending was also being driven by the millions of Australians working from home, in response to lockdown restrictions.

Australia's biggest steelmaker, BlueScope, has reported a 91 per cent fall in net profit.Credit: Bloomberg

"These trends that we're now seeing in terms of working from home will actually just continue to support that space of residential construction, detached (housing), regional growth and people spending more money on their home," he said.

"They're sitting at home thinking about what they need to do to improve their properties and we've been the beneficiaries."

"Our products and our focus is really on detached housing, it's not on high-rise apartments," he told The Age and The Sydney Morning Herald.

The ASX-listed BlueScope reported a 91 per cent fall in statutory net profit to $96.5 million for 2019-20, due to a $197 million write-down of its New Zealand division, declining steel prices and the impact of COVID-19 on some markets.

In 2018-19 it had reported a bottom-line net profit just above $1 billion. But Mr Vassella said BlueScope was financially sound, resilient to the challenges of COVID-19 and had a strong future.

He also said the company would benefit from a swing away from public transport to cars by commuters because of the large amount of steel it supplied to the car industry, and forecast BlueScope would benefit from government infrastructure spending.

But BlueScope's New Zealand arm remains under pressure. The company flagged redundancies and cost-cutting in New Zealand and warned that it could be forced to cease steel making at its Glenbrook facility if it could not be made sufficiently profitable.

The plant, near Auckland, employs more than 1000 people and is the country's only steel mill.

BlueScope reported annual revenue of $11.28 billion, down 10 per cent. It reported an underlying net profit of $353 million, in line with consensus, and will pay an 8 cent unfranked final dividend on October 14.

Underlying EBIT (earnings before interest and tax) of $564 million was down 58 per cent, but in line with last month's update.

Mr Vassella said it was critical that businesses, governments and communities collaborate in the fight against COVID-19, and that as much of the economy was kept open as possible.

"I won't criticise the governments for their responses, though personally I worry about the deep, deep economic consequences of their decisions," he said.

Mr Vassella also said that Australian governments had done "a pretty remarkable job" responding to COVID-19.

"We get to see responses across the globe in terms of our footprint, and I think we would put our governments at the top of the list in terms of a coordinated approach to dealing with the challenges of this pandemic," he said.

BlueScope shares were up 1.6 per cent to $12.26 shortly before the market closed.