lueScope Steel’s New Zealand business reported a 75 percent improvement in half-year operating earnings on the back of increased domestic sales, strong construction demand and a recovery in global steel prices.

Sales revenue for the business, which includes BlueScope’s Pacific Island operations, increased to A$463.5 million in the six months through December, 20 percent more than a year earlier. Earnings before interest and tax climbed 75 percent to A$71.9 million.

BlueScope said the company, which operates the Glenbrook mill, benefited from strong local demand, higher prices for steel and vanadium and foreign exchange gains. Those benefits were partly offset by higher coal and electricity costs in the latest period.

It cited “good momentum” in the commercial sector and on-going growth in new dwelling consents, and noted that export volume was reduced in favour of strong domestic demand.

“Construction sector activity remains solid, and the planned additional government investment will continue to support growth as the population continues to expand, albeit at a slower rate.”

Glenbrook is the country’s only producer of steel which it makes by smelting local iron sands with local and imported coal. It also operates the North Head iron sands mine, having sold the more southerly export-focused Taharoa mine in 2016 as part of a string of initiatives to keep the New Zealand business profitable.

BlueScope also operates the Pacific Steel reinforcing business it acquired from Fletcher Building in 2015. Last October it also acquired a 16 percent stake in listed distribution firm Steel & Tube to prevent a take-over by Fletcher.

Glenbrook is among the country’s biggest users of power, gas and coal and suffered last year as repair work at the Pohokura gas field reduced gas supplies and pushed up electricity prices – particularly in October and November.

An investor presentation today shows raw material costs at the New Zealand and Pacific business were about A$5.8 million higher than a year earlier and A$8.2 million more than the firm spent in the six months through June.

It was able to recover about A$5.3 million of that through lower conversion and other costs.

Higher export prices added A$9.8 million to earnings, while higher domestic prices delivered A$19.7 million more.

Total volumes were unchanged from a year earlier at 307,500 tonnes. Domestic sales were 4 percent higher at 238,800 tonnes with increased flat steel volumes more than offsetting a 5 percent decline in long products – which include reinforcing bar, wire and beams.

Export volumes fell 12 percent to 68,700 tonnes.

The divisional performance was a slight lift from the A$70.7 million it reported in the June half. BlueScope said it is expecting a weaker performance in the second-half, mostly due to lower benchmark selling prices, but also due to the timing of planned maintenance shuts. Vanadium returns are likely to be lower and it is expecting “no material relief” from high power prices.

The Melbourne-headquartered steelmaker has steel plants at Port Kembla in New South Wales, at Glenbrook south of Auckland and in Ohio. It operates more than 80 coating, roll-forming and painting plants in Australia, the US, Asia and the Pacific and includes Tata Steel, Nippon Steel and Sumitomo Metal Corp as joint venture partners in some geographies.

Australia’s biggest steel maker reported stronger than forecast first-half ebit of A$840 million, up 65 percent from the year before.

Sales from continuing operations were 17 percent higher at A$6.398 billion and net profit was A$624.3 million, up 42 percent from a year earlier.

BlueScope noted the weaker Australian dollar boosted earnings by about A$26.1 million. Price gains would have provided almost A$613 million of earnings but were offset by about A$279 million of increased raw material costs.

The company is expecting full-year underlying ebit about 10 percent higher than the A$1.269 billion reported last year. Second-half earnings are likely to be softer than those reported today, due to lower spreads and volumes in Australia, lower spreads at its North Star mill in the US, the weaker result expected in New Zealand and a similar result from its building products operations in Asia and North America.

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