BlueScope to sell half its operations to Nippon

BLUESCOPE STEEL, Australia’s largest mill, agreed to sell half its coated steel operations in Southeast Asia and North America to Nippon Steel, pushing its stock to record gains even as the company posted a full-year loss.

The companies will form a joint venture called NS BlueScope Coated Products valued at $1.36 billion, Melbourne-based BlueScope said yesterday.

BlueScope will receive about $540 million in cash from the sale, which it will use to pay debt. It’s revamping itself in a bid to return to profit.

It said yesterday it posted a net loss of about A$1 billion ($1.06 billion) for the year ended June 30th due to one-time charges related to last years restructure of its Australian business.

The partnership with Nippon Steel “brings exposure to the growing home appliance end market, diversifying from current building and construction exposure,” Michael Slifirski and Sam Webb, analysts at Credit Suisse Group AG, said today in a note to clients.

“BlueScope will have near zero net debt post transaction, giving financial capacity to pursue highly accretive but deferred growth projects.”

BlueScope has stopped most exports, shut a mill and a furnace, and shed about 1,000 jobs over the past year to cut costs as domestic steelmakers battle a rising Australian dollar and lower domestic steel prices.

Net debt has fallen to A$384 million against an earlier estimate of A$650 million to A$750 million, the company said.

BlueScope shares climbed 35 per cent to 35 Australian cents in Sydney, its biggest gain since the shares started trading in July 2002.

The company is still trading 54 per cent below its level a year ago. Credit Suisse is BlueScope’s financial adviser in the proposed joint venture with Nippon Steel.

The venture will exclude BlueScope’s building products units in China, India and Australia, and its Global Building Solutions business that operates across the world. BlueScope’s building products business makes metallic coated and painted products under the brands Colorbond and Zincalume that are used in roofs and walls for residential and commercial buildings. – (Bloomberg)