AMC Amcor PLC

Full-year net profits at Australia's largest steelmaker BlueScope Steel Ltd. (BSL.AU) will be hit by a roughly A$900 million writedown in the value of some of its assets as a result of the economic challenges facing the country, the company said Friday.

It was already expected to report a small net loss, and BlueScope said it had "performed in line with this guidance" in the year to June 30. Its shares fell 4.1% to A$0.94 early in Australian trading.

The news is a further sign of the stresses that Australia's two-speed economy is causing. A wave of resources investment set to hit the economy in the next two years, plus the country's image as a safe-haven in contrast to other struggling developed countries, has pushed up the Australian dollar and interest rates to 4.75%.

That has put pressure on other sectors of the economy, and BlueScope has reported moribund domestic demand for its products and difficult trading overseas, where the strong Australian dollar makes its product prices uncompetitive.

Australia's unemployment rate unexpectedly rose to 5.1% in July from 4.9% the previous month, the Australian Bureau of Statistics said Thursday, while the Reserve Bank of Australia cut its forecast for 2011 economic growth to 3.25% from 4.25% last week.

BlueScope said the carrying values of its Australian coated and industrial products division and its distribution business would be written down due to the strong Australian dollar, high raw materials costs and low product prices.

"Directors have decided to inform the market, given a material impairment is likely," the company said. It added that the writedowns were "accommodated within the company's financial covenants with its lenders."

The company also said it was "reviewing options to align BlueScope's domestic steelmaking capacity to Australian domestic market demand." Analysts in recent days have predicted that the company could close one of its two blast furnaces to save costs.

Each ton of steel requires around 1.5 tons of iron ore and 0.6 ton of coking coal. The prices of both materials have risen strongly in recent years on the back of strong demand from Asian steelmakers.

At half-year results in February, Chief Executive Paul O'Malley said that the cost of raw materials, which BlueScope largely buys from its former parent company BHP Billiton Ltd. (BHP), had risen to A$2.5 billion from A$400 million when it was spun out of BHP in 2002.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com

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