BlueScope Steel Limited (ASX: BSL) shares have opened slightly higher today after updating the market on regulatory proceedings from the Australian Competition and Consumer Commission.
About BlueScope
BlueScope was born out of a 2002 demerger from BHP Billiton, now known as BHP Group Ltd (ASX: BHP). Initially BHP Steel, it was renamed BlueScope Steel in November 2003. The company is the third-largest manufacturer of painted and coated steel products globally.
Regulatory Proceedings
BlueScope Steel first informed the market on 30th August 2019 that the ACCC had commenced civil proceedings against BlueScope and a former employee, Mr Jason Ellis, alleging contraventions of the Australian competition law cartel provisions.
The allegations were that Mr Ellis had attempted to enter agreements with steel distributors and overseas manufacturers with fixed price provisions between September 2013 and June 2014.
At the time of the announcement, BlueScope Managing Director and CEO Mark Vassella said: “The alleged conduct does not represent the BlueScope way, or the values that we work hard to instil in our team. We take matters of competition law compliance and corporate governance extremely seriously.”
The update released to the market today states that the ACCC has informed BlueScope that the Commonwealth Director of Public Prosecutions (CDPP) has decided not to commence criminal cartel proceedings against BlueScope or Mr Ellis.
While there will be no criminal cartel proceedings, civil proceedings are ongoing, and Mr Ellis has been charged with criminal obstruction.
Is BlueScope A Buy?
BlueScope shares are down more than 27% year-to-date, affected by these ACCC proceedings, but more importantly a lacklustre FY19 report.
BlueScope reported a 35% decline in net profit after tax (NPAT) which saw the share price tumble on the day of the announcement. While BlueScope has plans to reduce net debt to zero and increase steel-making capacity, I still tend to avoid these kinds of price-taking commodity businesses because they have no control of the market prices.
I’d be much more comfortable investing in one of the proven businesses in the free report below.
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Disclosure: At the time of writing, Max does not have a financial interest in any of the companies mentioned.
