BlueScope (BSL) has again upgraded its underlying profit forecast – this time by almost 18% for the December 31 first half as buoyant conditions in the US and improvements in the Australian steel business continue to flow through.
BlueScope said it now expects underlying earnings before interest and tax for the six months ended December 31, 2016 to be around $600 million, compared with its previous guidance of at least $510 million.
The company said this figure comprises “preliminary unaudited segment results expected to be around: Australian Steel Products, $240 million; North Star BlueScope Steel, $210 million; Building Products ASEAN, North America and India, $110 million; BlueScope Buildings, $50 million; New Zealand and Pacific Steel, $40 million and, corporate and eliminations, $50 million loss.
"Finalisation of net realisable value adjustments based on steel and commodity prices immediately prior to our scheduled release of 1H FY2017 financial results on 20 February 2017 and finalisation of the accounts could give rise to changes to these estimates.
But as a result of the upgrade the shares leap 8% and ended up 8% at $11.22.
The new profit guidance represents growth of 160% in profits compared with the first half in the previous financial year and continues the strong turnaround in the company’s fortunes since 2015 when its workforce were forced to accept wages and conditions cuts, and the NSW government kicked in payroll tax help.
BlueScope said the improved performance in the past few weeks since the company’s last update at the AGM on November 10 was mainly the result of stronger steel prices and spreads across the business, but which had particularly benefited the Australian Steel Products unit and the New Zealand and Pacific Steel operations.
And the company’s building products business in North America has also been making strong gains – which continues to justify the decision to buy its partner, Cargill out of the North Star joint venture.
"In addition, compared to our outlook expectations for 1H FY2017 communicated in August 2016, our Building Products segment has had a strong half particularly in the North American business which benefitted from higher steel prices and margins. The India business also saw positive earnings growth with higher margins and volumes,“ the company said in yesterday’s statement.
BlueScope said its preliminary unaudited net debt at 31 December 2016 is expected to be around $530 million.
"In finalising its accounts for the half year, the Company is reviewing the carrying value of its assets and anticipates it will recognise an impairment charge of approximately $65 million in respect of its China Buildings business where manufacturing sites are being reconfigured or closed to further lower the cost base, whilst continuing to meet market demand; capital expenditure during the period at its Taharoa export iron sands business (in NZ); and restructuring of the India engineered buildings business.”
BlueScope’s financial results December 2016 half year will be released on February 20, at which time the Company will provide earnings guidance for the June half year.
