So how bad can it get when a good business meets bad management?...

So how bad can it get when a good business meets bad management? By keeping an eye on BlueScope Steel we may get to find out.

why direct criticism at the company's management?

With cyclical companies, the best ways to evaluate managers is to assess their actions during boom conditions.

This is the time for focusing on getting the best out of existing operations and returning boom-time profits to shareholders in a sensible way. whilst ensuring the financial health of the company. But BlueScope management team was doing the opposite.

Instead of concentrating on the existing businesses to ensure they are operating efficiently, BlueScope was on international expansion spree, worse still, paying top dollar for overseas acquisitions in US.


The next gripe relates to how the company has distributed surplus funds. If you owned shares, we would want bumper profits distributed through simple, fully franked special dividends. Instead, it has spent hundreds of millions of dollars buying back overpriced shares, both on market and using the off-market method, which eats into the company's franking account balance. As the stock price falls then this will prove to have been a very expensive price to pay to reduce the number of shares on issue.



1.Debt/Equity: How has management managed capital? 0/10


2.Cashflow: Track record of cash flow 1/10

BSL=Poor management.