Lower profit forecast

Press, 2 August 1985, Page 13

Lower profit forecast

PA Auckland New Zealand Steel, Ltd, forecasts that the first-half profit will be down on the corresponding period last year. Domestic demand was lower and export returns down because of the strengthening dollar, the chairman, Sir Alan Hellaby, told the annual meeting in Auckland yesterday. The company expected the first-half result to be more in line with last year’s secondhalf profit. He said N.Z. Steel was confident about the cost of coal and its availability to the expanded steel works at Glenbrook, “provided the mines are operated at levels of international efficiency and with a capital structure which is appropriate.” Until it was clear that the Ohinewai mine would go ahead on schedule in the mid-19905, the company would “view with concern any decision to proceed with a further thermal power station using coal from existing Huntly mines.” Sir Alan said that from September, N.Z. Steel would be divided into four distinct business units. The units would be primary steel production, coated steel production, pipe production, and mining. He took issue with the impression he said was created by a Treasury opinion that the Glenbrook expansion project would yield a return of less than 10 per cent.

This did not take into account many benefits the project would bring, he said. “For instance, New Zealand Steel will gross some $250 million a year in overseas funds and replace another $2OO million of imported steel a year.” Sir Alan told a reporter that the increase in nominal capital by 100 million 100 c shares, approved by shareholders at the meeting, would be used to increase equity when the time came to take over New Zealand Steel Development. Asked by a shareholder to give details, he replied: “This matter is complicated by current negotiations with the Government and I cannot give any definite answer.” Because of high financing costs, N.Z. Steel would continue to need financial assistance and protection “as set out in the formation agreement and planning memorandum entered into with the Government,” said Sir Alan. Shareholders unanimously approved changes to the company’s articles of association to enable themselves to receive bonus shares in lieu of dividends. N.Z. Steel’s tax experts had indicated that the shares could be received tax-free, said Sir Alan. In response to a shareholder’s question, he said the average interest paid on N.Z. Steel’s domestic and overseas loans was 9 per cent.