BlueScope delays US expansion, cancels share buyback

BlueScope has pushed back its $1bn US expansion, cut spending and cancelled a share buyback in response to the virus crisis.

A steelworker at the BlueScope Steelworks at Port Kembla. Picture: AAP

BlueScope Steel has pushed back its $1bn US expansion, slashed non-essential capital spending and cancelled its $100m share buyback in response to the coronavirus crisis, saying it will review its future plans when it has greater clarity on the length and depth of the global economic impact.

The Australian steel major told investors on Tuesday its decision was “pre-emptive”, designed to preserve its position until it had greater clarity on the global impact of the virus crisis, but it remained in a strong position despite the recent government-ordered closure of its New Zealand, Malaysian and Indian operations.

Chief executive Mark Vassella said in a statement the company’s March quarter performance was in line with expectations, but BlueScope had decided to cut non-essential operational spending, and defer the bulk of its spending on its $1bn US North Star expansion until it had greater clarity on the impact of the coronavirus on its core markets.

“Construction and installation programs are being rescheduled for the next six months to minimise cash spend whilst preserving flexibility to resume the full scope of project activities when conditions improve,” the company said.

“Second half (of the 2020 financial year) project spend is expected to be approximately $US90-100m. For 1H FY2021 spend is anticipated to be approximately $US180 million which is at the low end of the previously advised annualised range. Conditions will continue to be monitored and the date of expected commissioning will be advised in due course.”

Mr Vasella said BlueScope would also slash non-essential capital spending at its other operations, saying it had cut $40m worth of work from its budget in the current half of the financial year, and planned to cut spending in the 2021 financial year to $200 to $250m, about half of historical levels of about $400m, the company said.

BlueScope said it has also canned its $100m share buyback after dipping into the market for about $34.4m worth of its own shares so far under the program.

“Financially, we remain in a strong position to withstand these uncertain times. At December 31, 2019 net debt was $47m, or $354m net-cash excluding the impact of operating lease capitalisation, and available liquidity was $2.5bn,” Mr Vassella said.

BlueScope shares closed down 44c, or 4.3 per cent, to $9.92.