BlueScope up after flagging best Australia steel sales in a decade
BlueScope Steel shares jumped on Friday as the company delivered its second earnings upgrade in two months.
BlueScope Steel shares jumped on Friday as the company delivered its second earnings upgrade in two months, flagging its best Australia steel sales in a decade as construction demand takes off.
BlueScope now expects to book a half year profit, before interest and tax of $530m – $55m ahead of updated forecasts provided in November, and almost $200m ahead of the $340m it tipped in October.
The company’s total underlying EBIT in the 2019-20 financial year was only $564m, as earnings crashed amid the coronavirus crisis.
BlueScope boss Mark Vassella said all of the company’s operating segments performed well across the half, with strong volumes and better margins in its Australian steel making business, as well as in the US and Asia.
“Domestic construction and distribution segment demand has been strong, particularly for coated and painted products – leading to the strongest domestic mill sales volumes in a decade, at about 1,175,000 tonnes,” he said.
Lockdowns and travel restrictions helped fuel a renovation mini-boom in the second half of 2020, with Suncorp Bank lending data from September suggesting a 20 per cent rise in borrowing for home renovations as families put discretionary income to use around the house rather than on travel.
BlueScope said earnings from its US North Star business, where the company is still building a $1bn expansion, were likely to have fallen slightly against the six months to the end of June 2020, with the rising Australian dollar a factor in the slippage.
But sales of building products in the Asian and North American markets also jumped amid the pandemic, with BlueScope tipping a doubling of the $13.5m earnings from the second half of last financial year – which would still be marginally above the $24.4m in the December half of that year.
And New Zealand’s sterling efforts in quelling the pandemic helped put BlueScope’s business there back in the black, with half year earnings rising to about $55m after it booked a full year loss, before interest and tax, of $5.8m last financial year.
Mr Vassella said BlueScope’s order and dispatch rates remained “robust” in 2021, with spot steel spreads in North America and Asia materially higher than long term averages. But he warned the pandemic meant market conditions remain volatile.
“It is uncertain whether these conditions will be sustained throughout the half due to volatile macroeconomic and market factors – including potential impacts from COVID-19 which could disrupt demand, supply chains and operation,” BlueScope said.
BlueScope shares were up by 6 per cent, to $17 at 2.30pm AEDT and closed on Friday 3.5 per cent higher at $16.59.