SYDNEY (Thomson Financial) - BlueScope Steel Ltd., Australia's largest steel group, said on Monday its U.S. operations were not being affected by a slowdown in the U.S. economy despite concerns that the construction sector would be hurt.
'Notwithstanding all the concerns about a decline in the U.S. economy, what we're seeing at the moment is strong business performance,' Chief Executive Paul O'Malley said at a briefing following an update of the group's earnings.
'I think all of the chatter is that there will be a downturn in the U.S. At this stage we are not seeing that, what we're seeing is actually improved business performance,' O'Malley said.
Earlier Monday the group said it remains on target to report stronger earnings for the second half due to high steel prices and brisk demand.
BlueScope, whose fiscal year ends in June, said it expects to post underlying net profit of about A$474 million ($447 million) for the second half, up from the first half's A$305 million.
The company said its fiscal third-quarter underlying profit, which excludes one-off items, was A$169 million while the fourth quarter was likely to be about A$305 million.
The expected second-half result brings full-year net profit to about A$780 million which is above the market's consensus forecast.
But the news failed to boost the stock with BlueScope shares closing down 1.7 percent at A$10.81.
'I don't really know why BlueScope is down -- the guidance was above forecasts. Maybe it's because there's still concern about the U.S. operations that might be impacted even if they haven't been yet,' said Andrew Sekely, head of Australian equities at stockbroking firm Intersuisse.
In the United States, BlueScope has a 50 percent stake in a hot rolled coil joint venture, owns pre-engineered building manufacturer Butler Manufacturing and in December last year bought IMSA Steel Corp for $730 million.
O'Malley said BlueScope's Asian businesses, which mainly comprise coated steel product operations as well as the Butler business in China, were improving their performance.
'Collectively our Asian businesses are heading in the right direction with an improved performance and Thailand being a standout at the moment - there's been a lot more orders and work coming out of Thailand I think on improved stability post the recent election,' he said.
O'Malley said earnings were being driven by high steel prices and strong demand though higher input costs and strong Australian dollar were having a negative impact.
BlueScope expects steel prices to remain high underpinned by urbanization in powerhouse Asian economies, especially China and India.
'In China obviously as you go into urbanization and industrialization a lot of that goes into construction and also manufacturing. India has been an exporter of steel but we see that being much more in balance because of pure industrial growth and urbanization,' O'Malley said.
($1 = A$1.07)
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