No payment for B.H.P. from John Lysaght

Press, Volume CXVI, Issue 34131, 19 April 1976, Page 16

No payment for B.H.P. from John Lysaght

SYDNEY. The Broken Hill Proprietary, Ltd (8.H.P.), which is up for a $71.2m capital contribution this year on its 50 per cent equity in John Lysaght (Australia), Ltd, will receive no 1975 dividend from the sheet steel producer.

Lysaght has been forced to omit payment for the first! time since at least the depression years—after its 1975 net operating profit slumped a further 75 per cent to sl.Bm. An 11.9 per cent fall to $287.6m in net sales income means that Lysaght’s operating profit to sale ratio, which has been well over 4 per cent in the company’s better years, fell from 2.2 per cent to 0.6 per cent. The figures, contained in a one-page preliminary 1975 result, show that the import restrictions applying to hot and cold rolled steel sheet from January 1 of last year were too little and too for Lysaght. Half-way mark As Australia’s only sheet steel and coil producer, Lysaght bore the full brunt of last year’s depressed conditions in its three basic markets — building, automotive, and consumer durables. Its sheet steel and coil sales dropped by 32.5 per cent from 1.4 m tonnes to 770,000 tonnes, which is the lowest level for nine years. At the same time, the company was obviously in some difficulty from financing its Western Port hot strip mill, which still has a target commissioning date of late 1977 or early 1978. Construction of the mill has continued according to schedule, and in physical terms is now at about the half-way mark, said the report.

Calls of s7l.2ni Lysaght’s chairman (Mr E. B. Gosse) said in last year’s report that the basic sl2om cost of the mill would inevitably be exceeded by a substantial amount. Company sources confirmed that the cost was now more than slsom with about 20 months before completion. Capital expenditure jumped by $2.7m to $52.6m in 1975, and interest payments reflected a substantial increase in borrowings by rising $4.6m to $12.9m. As part of the financing plan for the Western Port Mill, B.H.P. is paying calls totalling $71.2m on its sl7m Lysaght contributing shares this year and, together with its joint partner — Guest, Keen and Nettlefolds — last year agreed to subscribe in equal proportions to another s2sm of equity capital. B.H.P. has already paid one

call of about ssom in February, and is understood to have since paid another slom leaving a balance of slom. Since dividend payments in the past have been on the basis of paid up capital, this year’s omission of dividend is relatively more serious to G.K.N., whose 50 per cent equity is fully paid up. However, the lack of a Lysaght payment will put added pressure on B.H.P.'s 1975-76 earnings, which are expected to provide only marginal cover for the 15.25 per cent annual dividend declared After paying 21.2 per cent out of its 1973 profit, Lysaght was forced to cut its 1974 payment to 13.5 per cent after its earnings dropped by 42 per cent. No forecast The 1975 net operating profit of sl.Bm gave an earning rate on s33m capital of 5.4 per cent compared with 21.8 per cent in 1974. The profit was after tax expense of sB.3m, sl.sm lower than for last year, and depreciation which rose $2.7m to $14.7m. In addition, there were unspecified extraordinary profits of sl.2m compared with $200,000 in 1974. The report said that a low level of demand for Lysaght’s sheet and coil products,

coupled with uneconomic export prices, was partly offset by satisfactory results in the company’s forward Integra tion in building products and steel storage equipment products. The report made no forecasts for 1976.