NZ Steel has 37.8 p.c. fall

Press, 13 June 1986, Page 8

NZ Steel has 37.8 p.c. fall

PA Wellington The ailing New Zealand Steel, Ltd, which was being revived with Government help, reduced its profit by 37.8 per cent to $21,898,000 ($35,206,000) last year in the year to March 31. Turnover was $344 million (S3BOM), including exports of SIO4M ($110M). Tax was a credit of $2,505,000 (payment of $9,722,000, less a tax credit on mining investments of $8,250,000). Associates contributed $1,046,000 ($1,607,000). Final dividend will be 7.5 c a share (last year 10c) to be paid on August 8. Total dividend for the year was 13.5 c (last year 18c). The 291 M shares issued to the Government in March would not rank for the final dividend, and N.Z. Steel said the dividend payment was in line with the terms of the reconstruction agreement with the Government. Bonus shares in lieu of dividend would not be issued as the current share price was below par. N.Z. Steel said the result was very satisfactory in the light of the significant changes occuring in the domestic economy. Depreciation was $9,203,000 ($8,984,000). Following the record year to March, 1985, sales volumes declined in all product categories except for sales of iron sand concentrate which increased by 8.4 per cent, reflecting some resurgence in

the Japanese steel industry. The decline in sales from Glenbrook reflected a lower domestic demand for the company’s products and also the five week industrial dispute in the first half of the year. In general, export prices for the company’s products declined, principally as a result of the strength of the N.Z. dollar and weaker international markets. In view of the start-up of some of the new iron and steel-making facilities late in the year and the consequent availability of significant tax deductions in rest ect of depreciation, the directors decided it was no longer appropriate to make provisions for deferred tax, which would not be payable in the reasonably foreseeable future. The tax credit in the result was in respect of available tax credits for export market development and export performance.

The result for the year to March, 1985, was assisted by a one-time tax reduction of $8,250,000 in respect of further investment by the parent in mining activities associated with the development project. N.Z. Steel said significant progress had been achieved in recent months in the commissioning of Stage I of the development project. Of particular note had been the start-up of the first of the two iron melters which provided molten iron to the new oxygen steel-making plant. The new Iron and steel-

making plants were in production, albeit at modest output rates at this commissioning stage. It had been decided that although the second iron stream and slab caster should be cold commissioned, regular operations should be deferred in the meantime. This would produce cost savings and would accelerate the progress in bringing the first iron stream up to the required production levels. Full operation would resume as soon as costs and export revenue, currently adversely affected by the exchange rate, permitted. The progress of Stage II had improved significantly, however there had been further slippage. First production from the mills was now expected in the second half of 1987. Domestic demand for the company’s products was currently about 70 per cent of last year’s levels, due to both the depressed economy and import competition. The current volatility of exchange rates made predicting export prospects difficult. NZ Steel said the costs being incurred in the new plants during the commissioning stage, together with the significant higher energy and remuneration costs and the high value of the NZ dollar, did not allow cost recovery from export markets. “The company is reviewing its cost structures in a number of areas," it said.