Interview: Drug stocks
>> bluescope steel may decide in the next four months whether to invest in a partnership with indian tata. bluescope’s chief financial officer brian kruger told our correspondent that the steelmaker will charge customers more to cover rising expenses.
>> we saw significant increase in steel pricing, which contributed largely to the result, but as well as that we had an excel anti-operational performance across all of our businesses so those two things combined meant we delivered a record result for the first half% -of the year.%
>> what’s your outlook for the second half?
>> the outlook is that there will be offsetting factors. we think demand will continue to be strong for all of our products and businesses and we think prices will continue to be strong. there are offsetting factors -- continued high raw material costs in the second half of the year. there are other restructuring activities underway which may involve charges but all in all, we think the second half of this year will be very similar to the first half of this year.
>> what are you doing to absorb high raw material costs?
>> a range of factors. obviously, we are aiming to operate the plants as efficiently as we can. but at the end of the day, they are costs we are faced with. to some extent, they will be borne out in higher steel prices, and are one of the things driving higher steel prices around the globe at this point in time.
>> what’s bluescope’s forecast for hot rolled steel this year?
>> that’s one of the things we don’t comment on so there are obviously a range of forecasts out there but we typically don’t provide the market with forecasts for what we think our hot rolled prices will do.
>> what’s your outlook for margins for the rest of the year?%
>> i think there will be offsetting factors at the margins that will mean our margins in the second half of the year will be consistent with where they were in the first half.
>> china’s industrial production in january rose at the slowest pace in three years. what’s your outlook for china in 2005?
>> we’re quite optimistic about china. it’s coming off significant growth rates. our view is that provided in the medium to longer term that china continues to grow in the high single-digit type growth rates, we’d be very comfortable with that.%
>> the company is starting a joint venture in india. how is that doing and what form would that joint venture take?
>> the study is going well. we are investigating a joint venture with tata steel, one of india’s leading steel companies. we expect the study on the joint venture to be completed in the next three to four months. if we moved forward, we would look to build a metallic coating and painting line with tata in india. it’s a very―we’re very happy to have that opportunity to work with a steel company in india and it’s exciting for us.
>> what kind of investment would bluescope make in that joint venture?
>> that’s a good question. in total, we think the joint venture or the origininally planned investment for the joint venture would be in the region of 300 million australian dollars so our share of that on the basis of a 50-50 joint venture would be around 150 million australian.
>> how important would that market be for bluescope?
>> it could become very important. we hope this is the first step in further growth in india. india has very low levels of steel consumption per capita at the moment and we think india is really one of those regions in the globe where we may see steel consumption increase quite rapidly.
>> where else is bluescope planning on investing this year?
>> the majority of our investment will be in the asian region, including china. that’s why the recently announced growth projects have their focus. we’re also looking at growth projects here in australia. we’ve recently announced the new painted steel facility in western sydney and we’re excited about that opportunity.
>> with a record second half expected, what other capital management initiatives can the board consider?
>> i think that’s a matter for the board to consider in the second half of the year. what i can tell you is that we’re certainly very focused on capital management and making sure that our balance sheet is structure as best as it can be and that we continue to look at ways of returning funds tax effectively to our shareholders.
>> would that include a special dividend?
>> i think it could include a range of capital management initiatives and special dividends is one of those.
>> brian kruger, bluescope’s chief financial officer. we’ll talk to the chief executive of bluescope’s rival onesteel later this morning on “bloomberg now” at the times seen on your screen. onesteel says first-half profit rose 27%, raising pricesase construction boom in its home market boosts demand for steel. net income came in at 57.9 million australian dollars or $45.7 million u.s. sales rose 21%. that interview is coming up at about 10:00 local time in tokyo. still to come, is japan in recession? the latest g.d.p. figures say yes. but the country’s central bank says the economy is recovering. we’ll speak with a strategist at societe generale securities about whether the bank of japan is too optimistic.
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may rise this week on expectations economic data may show german business confidence rising to an 11-month high. the u.k.’s top finance official visits china. gordon brown says china and the u.k. share the same economic agenda. there’s no sign microsoft will settle its european antitrust case. the judge overseeing the case says there’s no indication the e.u. will withdraw its case, including a near $650 million fine against the world’s largest software maker. insurance company promina group and game machine maker aristocat are among those companies that reported earnings this morning. we’ll go to stuart kelly for more from sydney. take us through the details there.
>> it’s all about profits this morning. let’s first talk about the two you’ve mentioned. aristocrat leisure, world’s second biggest maker of slot machine, said it turned to a full-year profit of $74 million australian dollars after surging sales of gaming machines in the u.s. it had a loss of 106 australian last year. the results beat the company’s own october forecast of between 150 and 170 million dollars. the company said it would return to shareholders the equivalent of 21 cents a share. that is subject to a tax ruling. also, australia’s second biggest auto and home insurer said full-year profit rose 54% to 458 million dollars after it sold more policies and stock markets boosted investment income, beating the 444 million dollars that analysts surveyed by bloomberg news were expecting. the company also said it would return as much as 250 million dollars back to shareholders in the first half. these capital returns have become something of a theme in the australian stock market the last couple of reporting seasons. it is also one of the reasons why the benchmark index is trading only about 20 points or so away from its record high. moving on, we’ve had reports this morning from a.p.n. news and media, saying profit rose 24% to 128 million, failing to match analysts forecasts of 129 million, but only marginally. also, onesteel today said first-half profit rose 27% to 57 million australian dollars. we’re expecting results today from investra, pacifica group and oil search. before i go, keep an eye out for macquarie bankshares, australia’s biggest-listed investment banker late yesterday said full-year profit will be at least 40% higher than the same period a year ago. those shares are already at a record but we could almost certainly expect them to rise somewhat higher again today. that’s all from me, catherine. i will see you later for an update.
>> thank you, stuart. breaking news out of south korea. the jobless rate for january is at 3.6%. seasonally adjusted. that is unchanged from december’s 3 1/2 year high. rising unemployment makes south koreans unwilling to spend. the government is trying to boost local consumption by cutting taxes and interest rates. finance minister said last month the government may not meet its 5% economic growth target this year unless domestic spending increases. philippine stocks fell the most in the world yesterday on expectations lawmakers may reject the plan to raise taxes. higher taxes are aimed at narrowing the government’s budget deficit which is 87% of economic output. our reporter, haslinda amin, in singapore, has more on the story. good morning. what are investors saying about the decline?
>> good morning. they say the decline shows investors want to see a cut in the philippine budget deficit. they also say there’s still a lot of work to do in the area of fiscal reform. the country needs to narrow its deficit to boost confidence in its ability to pay bonds and loans. moody’s investor service last week cut the philippine debt rating two levels to b-1, four notches below investment grade. an asian equity asset manager in hong kong says never underestimate the philippines’ capacity to disappoint. he says expectations lawmakers may reject tax raising plans highlights the difficulties of passing significant tax adjustments. now, the house of representatives last month approved a government proposal to raise the tax to 12% from 10%. that would increase collections by an estimateed 640 million dollars. early optimism the government was making progress on tax collection helped the confidence index rise 14% this year. the benchmark is the sixth best performer. cathy?
>> what are the analysts now saying about the outlook for the philippine peso?
>> some analysts say the currency’s decline may be limited as overseas investors will still keep putting money into the nation’s stocks. overseas investors were net buyers of philippine equities for the 10 days through february 18. some exchange figures show they bought a total net of $43 million. iron chung, head of asia’s sovereign and currency strategy at abn amro in singapore says we’ve seen strong inflow into most of the asian markets . she likes the thai and philippine markets which have seen robust consumption. she expects the peso to rise to 54.2 against the dollar at the end of march and 53.5 at the end of june. and, cathy, that is it for the moment. i’ll be back in an hour with cosco singapore’s fourth-quarter earnings.
>> thank you. the c.f.o. of australia’s largest steelmaker will share plans for expansion. learn how bluescope steel plans to attack the china market .
