BlueScope Steel Ltd., Australia, has announced it is taking pre-emptive steps to bolster its financial strength amid the global economic uncertainty caused by the COVID-19 pandemic.
Among the steps the company is taking is rescheduling the expansion of its North Star steel operations in Delta, Ohio, BlueScope notes in a news release. The electric arc furnace (EAF) minimill is being expanded to produce an additional 850,000 metric tons of steel annually. The mill currently produces 2.1 million metric tons of steel per year.
BlueScope says construction and installation programs at North Star are being rescheduled for the next six months to minimize spending while preserving flexibility to resume the project when conditions improve. Project spending in the second half of BlueScope’s 2020 fiscal year is expected to be approximately $90 million to $100 million, while it is expecting to spend approximately $180 million in the first half of its 2021 fiscal year, which is at the low end of the previously advised annualized range. “Conditions will continue to be monitored and the date of expected commissioning will be advised in due course,” BlueScope says.
The other interventions BlueScope says it is taking to bolster its financial position as the economic effects of the virus emerge are reducing all nonessential capital expenditures, ceasing nonessential operational spending and canceling the on-market share buy-back program.
The company says it now expects total capital expenditure of approximately AU$200 million ($123.6 million) during the second half of its 2020 fiscal year, reflecting a reduction of AU$40 million ($24.7 million) compared with February 2020 guidance. At this stage, FY2021 capital expenditure is anticipated to be in the range of AU$200 million to AU$250 million ($154.5 million), which contrasts to typical historical spending of approximately AU$400 million ($247.2 million) annually. These numbers exclude the North Star expansion project, BlueScope says.
BlueScope has bought back AU$34.4 million ($21.3 million) in shares since Feb. 24 as part of the extension to the buy-back of up to AU$100 million ($61.8 million) during the second half of its 2020 fiscal year. The company says it has canceled the program and is unlikely to initiate further buy-backs until a demonstrable improvement in business conditions can be seen across its key markets.
BlueScope Managing Director and CEO Mark Vassella says, “We are drawing on all our resources, experience and expertise to keep our employees, customers and communities safe and to look after their health and wellbeing. We are also taking direct action to maintain the financial strength of our business.”
Vassella continues, “In most countries in which we operate, to date steelmaking, including its supply chain, has been viewed as an essential service and allowed to continue to operate safely. In line with advice from medical experts, we have implemented comprehensive hygiene measures at all operating sites, removal of all nonessential personnel, strict distancing protocols and regular health checks. BlueScope's sites have low employee density, with a high degree of automation enabling sites to be operated with minimum employees in attendance.
“However, in certain jurisdictions, our operations have temporarily closed in line with government decreed shutdowns,” he adds. “Operations in Malaysia and India have temporarily closed. As of Wednesday 25 March, our New Zealand Steel operations shut down for four weeks, adhering to government orders. Key equipment is being maintained to ensure longevity and safety.”
Vassella says the company’s China operations are ramping-up in accordance with the progressive resumption of business activity in that country.
“Financially, we remain in a strong position to withstand these uncertain times,” he says. “At 31 Dec. 2019, net debt was AU$47 million ($29 million), or AU$354 million ($218.7 million) net cash excluding the impact of operating lease capitalization, and available liquidity was AU$2.5 billion ($15.4 billion).
“Unaudited group performance in the March quarter was in line with our expectations,” Vassella adds. “However, no one yet knows the depth and duration of the impact of COVID-19, so BlueScope is adopting a prudent approach to the operational and financial settings that we can control.
“Our people have a great history and proven capability in managing through challenging conditions and will again through COVID-19,” he continues. “We are actively monitoring developments and will take further action as required to ensure a secure future for all of our stakeholders.”