BlueScope Steel’s (BSL) fabulous run continues. Hard on the heels of several earnings upgrades in the past few months, the company yesterday revealed what those higher forecasts were all about – a near 80% surge in first half profit, a forecast 50% improvement in second half profit a higher dividend and an on market share buyback.
The company revealed $150 million share buyback after firming up an outlook for the second half surge in full-year earnings as it continues to benefit from buoyant demand here, in Asia and the US, as well as firm steel prices, all of which has more than offset a jump in the cost of key inputs such as coal and iron ore.
Interim dividend was lifted a third – from 3 to 4 cents a share which is hardly startling news.
The shares rose 4% to $12.68 in yesterday’s weak market.
The steelmaker indicated it is on track for an underlying pretax profit to top $1.1 billion for the year to June. That was after directors said the second half underlying pre-tax profit would be about 50% higher than the $340 million earned in the second half a year ago. In the December half, the underlying pre-tax profit was $603.6 million.
December half, net profit jumped 79.5% to $359.1 million, as the underlying profit more than trebled to $360 million from $119 million.
"The strong growth was generated through delivery of productivity and cost improvements, sales growth, improved steel spreads and the benefit of the North Star acquisition," chief executive Paul O’Malley said, referring to the move to take full control of its key US steel plant. That deal was done in late 2015 and has proven to be a masterful stroke of good timing as it came at the start of a rapid upswing in demand for and prices of steel products in the US, Asia (including China) and even Europe.
"We are now seeing the benefits of our strategic initiatives flowing through to the bottom line. There are positive trading conditions across most of our businesses and BlueScope has been generating strong cash flow, Mr O’Malley said.”
In the half, earnings were boosted with the addition of full ownership of the North Star unit from October 1, higher spreads as steel prices rose faster than coal and iron ore prices, with earnings also benefiting from cost reductions along with higher production and sales volumes, it said.
The stand out performance in the half came from a return to profit in the Australia and also the New Zealand units following ongoing restructuring and cost reductions 500 jobs lost and a wage freeze at a cost of $200 million to employees at Port Kembla, who received a bonus last October), and $60 million (over three years) of government payroll tax assistance in NSW.
