BlueScope Steel admits its interest in the Whyalla Steelworks extends beyond the beleaguered group’s main South Australia facilities, but it will be disciplined as it explores a potential takeover.
Chairwoman Jane McAloon says BlueScope doesn’t expect an early resolution to the Whyalla saga and others would be interested in the ailing steelworks, which employs 1100 workers and supports more than 2000 people indirectly.
“What I can assure you is that we won’t do anything that is outside the interests of BlueScope,” Ms McAloon told the company’s annual general meeting from its base in the steel town of Wollongong on the NSW south coast on Tuesday.
The company has a financial framework that it formed coming out of its “darkest times” from 2013 to 2015 that forbids investments unless they meet a return on investor capital, she noted.
“That is a really important tenet for us,” she said.
“Because, as we’ve talked about before, when we’re at the bottom of the cycle, cash flow is the highest priority.”
Ms McAloon said that Whyalla is “not just steelworks.”
The facility – which dates back to 1941 and produces most of the structural steel used in Australia – also has iron ore mines, structural rail and “a whole bunch of things”.
BlueScope chief executive Mark Vassella added that Whyalla’s ore resource was “potentially interesting” in terms of future decarbonisation opportunities at BlueScope’s Port Kembla Steelworks or at Whyalla.
BlueScope in August submitted a non-binding expression of interest for the Whyalla assets as part of a consortium that included Japanese, Indian and Korean steelmakers: Nippon Steel Corporation, JSW Steel Limited and POSCO.
The SA Labor government in February placed the Whyalla steelworks into administration, taking it out of the hands of UK billionaire Sanjeev Gupta, after it failed to pay creditors for some time.
Administrator KordaMentha was appointed to seek a buyer and engaged BlueScope as technical advisors.
“We sent some of our absolutely very very best people down there to advise the administrators,” , Ms McAloon said.
“The administrators have said that the site has been kept operating through the technical guidance and assistance of our people.”
BlueScope also on Tuesday announced it now expects its first half earnings before interest and tax, due to be reported in February, to be at the bottom half of the $550 million to $620 million guidance range it provided in August.
BlueScope’s Australian business continues to face cost escalation pressures and has been hurt by softer realised pricing in both domestic and export markets.
BlueScope shares dropped more than two per cent to $22 on the news in afternoon trading.
Ms McAloon, Mr Vassella and CEO-elect Tania Archibald also paid respects to a contractor in his mid-20s killed by a falling steel beam at the Port Kembla Steelworks on Monday.
Mr Vassella said BlueScope was focused on supporting his family, colleagues and broader community through a terrible time.
“We are not satisfied with our performance, and as chief executive, I can assure you nothing is more important to me and to the management team,” he said.