Australia's second-largest steel (from: http://www.industry-raw-materials.com/buy-steel_/ )company, more than doubled its second-half operating profit and sharply increased its forecast for iron ore sales, sending its shares up 7 percent.
OneSteel, which makes long steel products such as bars, pipes and rails for the construction sector, beat its own forecast for iron ore sales in the year to end-June, shifting 4.4 million tonnes, and predicted sales would increase to 6 million tonnes a year from 2010.
"Investors are looking at the upgraded iron ore targets," said analyst Peter Kormendy at fund manager Karara Capital, adding that despite surging scrap metal and coking coal costs, OneSteel was able to improve its margins in the second half.
"In manufacturing, they actually were successful in passing on their price increases to a greater degree than they were in the first half," Kormendy said.
Second-half profit after tax and before one-off restructuring costs rose to A$210.6 million ($181 million) from A$99.3 million a year ago.
Full-year profit rose 59 percent to A$315 million ($273 million), before one-offs relating to the acquisition last year of Smorgon Steel and an upgrade at its Whyalla steelworks in south Australia.
OneSteel said profit was boosted by strong demand and higher prices, and said it expects prices to remain high.
OneSteel has benefited from surging demand for steel in major infrastructure and building projects, as well as improving its operations and supply (from: http://www.industry-raw-materials.com )chain to help boost iron ore sales.
CEO Geoff Plummer said OneSteel faced a time lag between the higher costs and being able to pass on higher prices to customers, with price rises of 60 percent for its products in the second half. "We've recovered a significant proportion (of the costs), but we're still playing catch-up," he told Reuters.
Plummer said he expects steel prices to remain high, sustained by strong demand from fast-developing economies such as China and India, and that talk about the end of the commodities (from: http://www.industry-raw-materials.com/buy-commodity/ )boom was premature.
OneSteel shares closed up 7.2 percent at A$6.21, against a broader market <.AXJO> that fell 2.4 percent.
On Monday, rival BlueScope Steel Ltd
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