BlueScope on track for stronger earnings

·3-min read

BlueScope Steel has confirmed its upgraded profit outlook as it continues to ride on amid favourable conditions in the building and construction sectors that have boosted steel prices and demand globally.

Australia's largest steel maker on Thursday said it expects underlying earnings before interest and tax (EBIT) the first six months of FY22 will be in the range of $2.1 billion to $2.3 billion, reiterating the guidance that it had upgraded in October.

The company had reported its biggest ever annual profit in August, posting a $1.9 billion profit for the 12 months to June 2021 and an underlying EBIT of $1.72 billion, allowing it to deliver a special dividend and a $500 million buyback.

BlueScope had a similarly encouraging outlook for shareholders at its annual general meeting on Thursday, saying the booming market would help it provide long term sustainable earnings and returns.

"Global steel prices, spreads and demand across key geographies have been strong, with favourable conditions in building and construction end use segments," Managing Director Mark Vassella said.

He expects a significantly better result in Australia compared to the second half of the last fiscal year given the strength in domestic volumes, particularly in higher value products for the building and construction sector.

He also flagged a much stronger result at BlueScope's North Star business in the US, driven by record steel pricing and spreads.

"The business continues to perform well and has been operating at full capacity as sales volumes to construction, manufacturing and automotive end use applications remain solid," Mr Vassella said.

The US market has been a key growth area for BlueScope, driven by buoyant construction and increased spending on infrastructure after US President Joe Biden signed a $US1 trillion infrastructure bill.

The company is expanding its North Star mill capacity by 850,000 tonnes per annum and is now assessing feasibility of a further de-bottlenecking project to lift hot strip mill capacity by 500,000 tonnes.

Earlier this month, BlueScope also agreed to pay $US240 million for a scrap steel recycling business that supplies feedstock to its steel mill in Ohio.

The company said it is seeing elevated margins in the North America coated products business and seasonally stronger earnings in China, while there has been some impact of COVID-related disruptions across Southeast Asia.

BlueScope is still forecasting gains in Asia and will benefit from a robust demand and pricing environment in New Zealand and the Pacific Islands.

Meanwhile the company, which recently set a goal of net zero greenhouse gas emissions by 2050, says it continues to assess re-lining its currently mothballed No.6 Blast Furnace at Port Kembla to include technologies that would help reduce emissions intensity and other environmental measures.

"The reline and upgrade program for the blast furnace is just part of a broader focus on using our financial strength to invest for sustainable earnings growth," Chairman John Bevan told shareholders.

"In fact, we have a program of up to $1.7 billion of investments planned over the next five years."

By 1330 AEDT, BlueScope Steel shares were down 1.4 per cent to $20.37 in a nearly flat Australian market.

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