BlueScope is being investigated, its CEO has resigned and shares are down 20%

Photo by Kevin Frayer/Getty Images

Shares in BlueScope Steel are now down more than 20% in today’s session, after the company reported its full-year results this morning.

The company reported an annual net profit after tax of $US715.9 million, slightly above market expectations and up 112% from the prior year.

CEO Paul O’Malley also announced that he would be stepping down after 10 years in the role, to be replaced by Mark Vasella effective from January 1, 2018.

The company also announced this morning that it was the subject of a regulatory investigation.

Here’s the text from BlueScope’s contingent liabilities note in its 2017 financial statements:

“Over the last financial year, the Australian Competition and Consumer Commission (ACCC) has been investigating potential cartel conduct by BlueScope relating to the supply of steel products in Australia, that involved a small number of BlueScope employees in the period from late 2013 to mid-2014. BlueScope has co-operated, and continues to co-operate, with the ACCC’s investigation.”

Despite a 17% increase in sales in the 2017 financial year to $10.627 billion, the company also issued a cautious forecast for the year ahead.

In its annual report, BlueScope said to “expect a lower result” in the first half of the 2018 financial year.

“As trade restrictions take hold in global markets, import product offerings are taking advantage of gaps in the Australian anti-dumping regime, which together with FX volatility, is leading to lower domestic steel margins,” BlueScope said.

The company also cited increased energy costs in assessing potential headwinds for the coming year.

Bluescope said that more baseload power was required following the closure of the Hazelwood power station. It said the Finkel review outlined a long-term solution, but it won’t fix the current supply crisis.

As a result, the company expects electricity costs to rise by 53% next year while gas costs will also increase.

BlueScope investor presentation

Although today’s report has given rise to a significnat amount of uncertainty, the company reported a steady increase in free operating cash flow:

BlueScope also reduced its net debt to $232.2 million in the 2017 financial year, down from $545.8 million in the prior year.

The company announced a half-year dividend of 5 cents per share, taking the full-year dividend to 9 cents.

BlueScope completed a stock buyback of $150 million in the 2017 financial year, and has flagged a further $150 million buyback in the first half of FY18.

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