Big emitter BlueScope Steel warns of headwinds from higher energy costs and weak housing activity but "no fear" for workers at its Port Kembla steelworks.
The steel producer on Monday reported a net profit of $805.7 million for the year to June 30, down from $1 billion on the previous year.
In Australia, underlying earnings fell 30 per cent to $376.9 million on softer building and construction activity and higher costs, as housing approvals contracted and a backlog of orders was worked through.
But it was not the "existential crisis" they tackled a few years ago, managing director Mark Vassella told a conference call, with BlueScope's size and strength ruling out anything like the recent redundancies at a rival's Whyalla steelworks.
He said at a recent quarterly business review at Port Kembla in NSW, there was "no fear in the eyes of those guys and girls" as they get on with ways to improve the plant's efficiency and productivity.
Energy costs were a big part of the conversion costs of the steelmaking business and a lot of effort was going into consuming less, given the $50 million annual impost, he said.
Chief financial officer David Fallu warned analysts that BlueScope was rolling onto new energy contracts at less and less competitive rates.
He said the Australian manufacturing environment of "high and increasing electricity, gas and labour costs" required further discipline on cost each and every year.
Shares in BlueScope fell 2.8 per cent to $19.55 in afternoon trade, with investors spooked by a warning that earnings in North America would halve in the six months to December.
Mr Vassella defended a forecast of steady sales volumes in Australia through to December, rather than a further decline.
"What gives me confidence about the Aussie market is, it's been a pretty tough six months, quite frankly, and we've seen the work-through of the bump in the supply chain post-COVID," he said.
"(Given) the housing crisis in this country, the shortage of housing, there's no way in the world this can last for too long," he said.
However, "the particularly crazy election cycle" in the United States was creating some uncertainty, along with a perplexing general softening in conditions in recent months, Mr Vassella said.
Overall, the company warned of a "convergence of macroeconomic challenges" and forecast underlying earnings in the first half of the 2025 financial year of $350 million to $420 million as costs escalate.
A range of green steel projects continue, including a collaboration with Rio Tinto and BHP, as well as the Australian direct reduced iron options study known as Project IronFlame.
"We're looking across the country at what the opportunities might be," Mr Vassella said, but added it was still "early days" on picking any particular location or resource.
BlueScope said it achieved a 12.2 per cent reduction in total steelmaking emissions intensity during the year, against a 2018 baseline, which kept it on track for 2030 targets.
This was driven by the ramp-up of the North Star expansion in the US Midwest, along with operating and process efficiencies at Glenbrook and Port Kembla.
