Smorgon Sees Sharp Decline in Profits

Smorgon Steel Group Ltd. has reported net profit after tax for the 6 months ended Dec. 31, 2003 of $24.7 million, 16 percent less than the previous corresponding period. Net profit was $53.5 million, down 7.1 percent from figures the same time the previous year.

 “As foreshadowed at the company’s Annual General Meeting in October 2003, our results were adversely affected by a number of specific factors outside our direct control, such as the exchange rate and prices for scrap metal and hot rolled coil”, said Ray Horsburgh, managing director and CEO of Smorgon Steel.

The major negative influences which caused Smorgon Steel’s decline in profitability in the December half were heightened import competition, very high prices for both scrap metal and hot rolled coil – both of which are key inputs to Smorgon Steel’s production process – and a loss of productivity at the Laverton steel mill during due to an extended 227 day industrial dispute that ended this past October.

As for the surging scrap metal prices, Horsburgh noted, “Prices for both scrap metal and hot rolled coil are trading at record levels and, to date, show no sign of slowing down. Compared to the previous corresponding period, higher scrap prices cost Smorgon Steel $6.2 million of profit before tax, and higher hot rolled coil cost our tube making business alone another $6.8 million. The adverse impact from scrap prices would have been much greater had it not been for our presence as a major metal recycler.”