Bluescope could shut steelmaking operations at Glenbrook plant amid the impact of the COVID-19 pandemic in addition to New Zealand’s strict emission policy. The company plans to reconfigure its New Zealand and Pacific Islands business by tweaking product mix in line with demand.
Weaker commodity steel spreads across business segments negatively impacted Bluescope’s FY2020 (July 2019 to June 2020) earnings. Bluescope’s reported a net profit after tax of $97mn and an underlying EBIT of $564mn for FY2020, a decline of 58pc from the prior year, which includes a $197mn write-down of the company’s New Zealand and Pacific Islands operations. The write-down is based on lower sustainable earnings estimate for the longer-term.
Bluescope’s reconfiguration plans for the New Zealand and Pacific Islands operations aims to achieve profitability and sustainability by changing product mix and cutting costs, which could include layoff cost of $30-50mn. If the business fails to achieve improvements, the focus could shift to external supplies and the primary steelmaking operations at Glenbrook may be shut, said Bluescope’s CEO Mark Vassella during the FY2020 earnings presentation.
For FY2020, the company’s New Zealand and Pacific Islands, business unit posted an underlying EBIT loss of $5.8mn compared to a profit of $71.9mn in FY2019. In H2, the business unit incurred an underlying EBIT loss of $18.7mn due to lower steel prices and high input costs amid the mandated COVID-19 closure from March-end to April-end. The six-week closure led to unrecovered fixed costs of $15mn, net of government support.
Domestic sales volume from New Zealand operations reduced to 179,000mt in H2 from 223,000mt in the H2 2019. The business unit is also challenged by elevated electricity cost, high coal and alloy costs. A slump in vanadium slag prices also lowered the contribution of this byproduct to New Zealand Steel by approximately $38mn.
Bluescope New Zealand produces hot-rolled and cold-rolled steel and steel products including pipes, hollow sections, steel frames, galvanized steel and coloured steel. The business segment includes the Glenbrook steelworks, Pacific Steel rolling mill and the Waikato North Head mine. The company is the only integrated steelmaker in New Zealand. The Glenbrook steelworks produces 650,000mt steel slab and billet, annually.