BlueScope Steel half year profit plunges 70pc as coronavirus hit

BlueScope says its Chinese operations are being hit by the coronavirus, as weaker steel prices helped cut profit by 70pc.

The BlueScope Steel works in Port Kembla. Picture: John Feder

BlueScope steel says its Chinese operations are being “heavily impacted” by the coronavirus and it expects the impact to last into March despite the fact its 2000 employees in China have returned to work.

The comments come as BlueScope said its half-year net profit fell by 70 per cent as its businesses in Australia, the US and New Zealand struggled with weaker steel prices and spreads amid the trade tensions that dented global economic growth.

BlueScope posted a $185.8m net profit in the six months through to December, down from $624.3m in the same period a year earlier.

Underlying earnings before interest and tax totalled $302.4m, down 64 per cent. It had total revenue of $5.7bn, down 8 per cent.

The company declared 6c a share interim dividend.

But BlueScope flagged ongoing problems at its Chinese operations due to the impact of the coronavirus.

BlueScope’s Chinese operations contributed just under 30 per cent of its $1.5bn in revenue from its Asian and North American building products division the first half of the financial year, at $435.7m, and delivered underlying earnings before interest and tax of $36.7m.

The company’s operations in China include a metallic coating and painting facility at Suzhou, seven building systems manufacturing facilities, 32 sales and marketing offices and about 2000 employees, the company says.

“Following the implementation of return to work safety guidelines across BlueScope China, the Group’s china businesses are all now operational, with the exception of our Hubei sales office. Most employees have now returned to work safely and no cases of COVID-19 have been reported within BlueScope China,” the company said on Monday.

“As our BlueScope China businesses and their customer/supplier operations gradually return to normal levels during February, it is expected that February and March business performance will be heavily impacted. The rate of recovery of the balance of the half year remains unclear at this point.”

BlueScope said it expected a weaker results from the Asian and North American building products division in the second half of the year, and “no contribution” from its Chinese operations.

Managing director Mark Vassella said underlying demand for BlueScope’s products were “generally stable” but the economic impact of the coronavirus has created uncertainty for both its Asian business and steel spreads in the region.

“We are aware of some impacts to our supply chains which, to date, have been mitigated; we continue to monitor the situation,” Mr Vassella said.

“On this basis the Company expects 2H FY2020 underlying EBIT similar to 1H FY2020 (which was $302.4 million). Expectations are subject to spread, foreign exchange and market conditions – including potential impacts fromCOVID-19.”