February and August were always the busiest months in stockbroking. When I was working in the industry I remember that I rarely saw daylight, arriving at work just after dawn and leaving the office well after sunset.
Money doesn't sleep was the catchcry around the office, and some thought that perhaps we stockbrokers shouldn't either.
These two months, of course, were what we call the reporting season, when Australian companies listed on the Australian Stock Exchange announced their six-month and annual profit figures. Stockbrokers, of course, use these figures to create "stories" for their clients in trying to get them to trade.
Well, this month two of the biggest employers in the Illawarra region announced their half year results as part of the reporting season. I am talking about steelmaker BlueScope and mining company South 32.
Buried in the 95 pages of documents released by South 32 was one solitary page providing a peek into the health of the coal mining industry for the Illawarra region. That's the page that describes the fortunes of Illawarra Metallurgical Coal - which is 100% owned by South 32.
Similarly, buried in the 152 pages released by BlueScope were two pages providing a glimpse into the health of Illawarra steel industry - the pages that describes the Australian Steel Products Division.
So how did two of our biggest employers fare?
It was a mixed bag, unfortunately. But let's start with the good news - steel.
BlueScope described the Port Kembla site as the largest steel production facility in Australia, producing over three million tonnes of crude steel a year. Impressive. But that's not the best part. The Australian Steel Products Division produced 14 percent more steel, two percent more revenue and a staggering 100 percent more profit in the last six months. The report puts this down to greater output and lower costs of its raw materials, particularly iron ore.
The Australian Steel Products Division generated a cool quarter of a billion dollars in profit for the company - that's pushing up towards half of the profit generated by the whole company.
This month two of the biggest employers in the Illawarra region announced their half year results as part of the reporting season.
This half year, the Australian Steel Products Division has restored its position as the biggest contributor to BlueScope's coffers and the undisputed jewel in the company's crown. That's great news for Illawarra jobs and all the businesses relying on a strong steel industry. Sadly, it was not all good news for the Illawarra. Let's move to the bad news - coal.
In the last six months, the Illawarra Metallurgical Coal Division of South32 produced 11 percent more metallurgical coal but 22 percent less revenue and surprisingly - a $41 million loss. The cause - a stronger Australian dollar making the costs of production more expensive and lower coal prices. It's paradoxical that a strong Australian dollar means weaker profit - but that's the way it is.
The second half of last year generated the lowest global coal price that we have seen in around five years. The good news for the Illawarra coal industry is that the coal price over the last few months has almost doubled - and which will help restore Illawarra Metallurgical Coal to profitability.
And now for the shocking news about a company that until recently was headquartered in North Wollongong and listed on the Australian Stock Exchange.
I am talking here about Experience Company which operates tourist attractions including sky-diving all over the eastern seaboard of Australia. To say that like all tourism businesses, the company did not do so well over the last six months, is a massive understatement. Its revenue was down 67 percent and it generated a loss of around $200,000 over the last six months - that's in comparison to a profit figure of more than $7 million for the same period in the prior year.
Of course, because of COVID, tourism came to a standstill across the country. This included Experience Company's operations. The results reported by this company last week provide a real perspective on how badly affected the Australian tourism industry has been hurt by the pandemic. Perhaps the only glimmer of hope is that Experience Company announced that they have recommenced all their core operations - so the future is looking a little brighter.
So there you have it - straight from the listed company world and the reporting season. All in all its a mixed bag for the Illawarra region. The steel industry is going from strength to strength the coal industry is staggering but by no means hitting the canvas. But let's not talk about tourism.
- Alex Frino is Professor of Economics and Deputy Vice-Chancellor (Global Strategy) at the University of Wollongong.
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