Steel project cost up to $1528M

Press, 12 July 1985, Page 16

Steel project cost up to $1528M

The estimated cost of the New Zealand Steel development project has increased from $l4OO million a year ago to $1528M, according to the annual report of New Zealand Steel, Ltd. The over-all cost estimate of the project, at Glenbrook, near Auckland, includes S6SM because of industrial disputes, unsatisfactory workforce productivity, and other delays. The project is more than 85 per cent complete, and the increase in the total estimate includes devaluation of the dollar and higher inflation. Interest costs are excluded. “No significant cost increases because of changes in scope occurred during the year.”

Iron and steel production from the development project is now only months away. The first hot metal from the iron plant’s No. 1 melter — scheduled for late this year — will signal that the stage 1 expansion is nearing completion... The directors say that the first saleable products for sale in large quantities from the new facilities are now not expected until the first quarter of 1986. The report says that spending on the project during the year totalled SSOOM, including an unrealised exchange loss of SI96M because of devaluation. Improved management resulted in a distinct improvement in industrial relations. Of the total time available since construction began in October, 1981, time lost through unauthorised stoppages stands at 11 per cent, compared with 16

per cent a year ago. A smooth renegotiation of the wage agreement between unions and management in March helped construction during the last year, but progress was still not up to expectations. The managing director, Mr J. H. Ingram, says that the outstanding performances last year in proauction, sales, and exports, gives confideiice that the post-expansion targets can be achieved. As reported, the total group net profit rose 92.2 per cent to $35,206,000 in the year to March 31, compared with the same period last year. Equity earnings dropped 6.4 per cent to $1,607,000.

Sales rose 37.1 per cent to $380.6M, including exports 31.2 per cent up at $110.4M. The profit was after providing $5,083,000 more for tax at $9,722,000 and $926,000 more for depreciation at $8,984,000. A recommended final dividend of 10c a share gives a steady annual rate of 18c a share (18 per cent) on capital increased by the one-for-five bonus issue in July, 1984, and shares arising from the proposed one-for-three bonus issue qualify for the final payment. The dividend requirement is $8,931,000 and it is covered 3.9 times by the profit. Shareholders’ funds rose $26,389,000 to $169,017,000, including ordinary capital up $8,224,000 to $48,710,000 after the bonus issue and the completion of calls for 108,000 shares. Working capital improved $19,574,000 to $76,534,000 and the current ratio eased from 2.2:1 to 2.0:1.