While BlueScope Steel (BSL) reported a strong, 62% jump in underlying half-year profit to $79.6 million and the return to paying dividends for the six months to December, 2014, the market was distinctly unimpressed yesterday.
The result was boosted by the lower Australian dollar and stronger steel profit margins and the normally reticent company felt confident enough to forecast a 20% improvement for the full year.
But the shares were sold off by more than 8%, to $5.10, in a market which was easier in early trading, but staged a solid rebound as the day went on and ended up over 0.6%.
In fact the shares were down more than 10% at one stage.
BSL 1Y – BlueScope shares punished, despite first dividend payout for four years
BlueScope’s sales rose 9% per cent to $4.35 billion for the six months ended December 31 due to contributions from acquisitions, stronger volumes in North America and the more favourable exchange rate against the US dollar.
The company reported a net profit, (which includes one-off items), of $92.7 million, up from $3.7 million a year ago.
BlueScope chairman Graham Kraehe said the result showed the group’s turnaround has been successful.
“Strategic investments in Australian and international growth markets are already translating into earnings performance," he said.
BlueScope says it expects full-year earnings before interest and tax to be up to 20% higher compared to its previous result.
BlueScope will pay a 3 cents a share interim dividend. It’s the first payout to shareholders since 2011.
The result is in share contrast to the weak underlying result from Arrium’s steel operations, which lost money in the December half year.
BlueScope has been operating on the edge for some years now and has not posted an annual profit after tax since the 2010 financial year, and reported more than $2 billion in losses in that time.
The strong dollar, high and variable input costs and weak demand contributed to the downturn, along with weak results in its US business.
But now conditions are improving and underlying earnings in its Australian steel products business jumped 365% in the December half, to $64.7 million.
And its US building business also performed strongly during the peak summer building season, with earnings growing by 42%.
BlueScope Steel chief executive Paul O’Malley said the company is "very well positioned to capture growth in the markets of each of its five segments".
But the market wasn’t impressed.
