BlueScope Steel on track for record profit amid economic recovery
BlueScope says it’s set to post its best ever result as a stand-alone firm on the back of Australia’s rapid economic recovery.
BlueScope Steel says it is set to deliver its best ever set of results as a stand-alone company on the back of Australia’s rapid economic recovery from the initial hit of the pandemic.
The Australian steel major is likely to book underlying earnings before interest and tax of $1.72bn for the financial year, the company said on Tuesday, likely to be its best results since it was spun out of BHP in 2002.
The announcement sent BlueScope shares surging to their highest levels since October 2008, hitting an intraday high of $24.56 before softening slightly to close at $4.43, up 6.4 per cent for the day.
BlueScope released preliminary figures from its second-half financial results on Tuesday, saying it had sailed home with a flourish in the second half of the year and was likely to have booked underlying earnings of $1.19bn, beating its updated second-half earnings guidance – issued in April – of $1bn to $1.08bn.
Managing director Mark Vassella said the pandemic still posed risks to BlueScope’s outlook, but the company’s business had gone from strength to strength in the second half of the year.
“This is an outstanding result – our best underlying EBIT performance since demerger in 2002. The business has gone from strength to strength in the second half of FY2021 and all operating segments have delivered significantly better results than FY2020,” he said in a statement.
“The results reflect the positive macroeconomic environment with strong demand for our products, and the quality of our diverse portfolio.”
The results were underpinned by growing activity in Australia’s construction sector, with BlueScope’s Port Kembla mills selling 1.3 million tonnes of steel in the second half, the most since 2008.
Margins on those sales were up considerably from the first half of the financial year, BlueScope said, despite record iron ore prices in the period.
Earnings from its Australian steel unit were likely to be up more than 60 per cent on the $259.1m underlying EBIT from the first half, BlueScope said.
BlueScope delivered first half underlying earnings of $530.6m – which was up 75 per cent on the first half of the previous financial year, before the pandemic hit the Australian economy.
But while the strong performance of BlueScope’s Australian arm will boost the case for an upgrade of the company’s Port Kembla blast furnace, as the company considers an $800m relining of the blast furnace, the stellar performance of the US economy this year made BlueScope’s North American operations the shining star of the second half.
The strong economic recovery, along with big plans for infrastructure investment under the administration of President Joe Biden, helped propel BlueScope’s North Star operations to an underlying EBIT of about $600m, the company said, up from only $69.6m in the first half of the financial year.
BlueScope said its North Star steel mill was running at maximum capacity as steel prices rose across the US market.
It will deliver its full year financial results on August 16.
