BlueScope Steel CEO, Paul O’Malley is going out in style after announcing an expected surge in earnings for the year to June 30. O’Malley says he will retire at December 31 and will be replaced internally by the company’s Australia and NZ CEO, Mark Vassella. The company has issued several upgrades during the year and Monday morning revealed a $715.9 million net profit after tax for the year to June 30, up 102% on 2015-16.
Underlying after tax profit of $650.8 million was 112% higher than in 2016, while underlying Earnings Before interest and Tax was $1.105 billion.
“The 89% growth in underlying EBIT over FY2016 was generated through delivery of productivity and cost improvements, sales growth, improved steel spreads and the full year benefit of the North Star acquisition. Underlying EBIT in 2H FY2017 was $527.3 million,” the company reported this morning.
After a 4 cents a share interim dividend and the $150 million buyback during the year, directors said this morning there would be a 5 cents a share final dividend and a further 4150 million buyback in early 2018.
"The Board believes that, together with paying consistent dividends, share buy-backs achieve an appropriate balance between retaining strong credit metrics, continuing to fund our growth opportunities and returning cash to shareholders. Share buy-backs will be funded from free cash flow and the Board is targeting returns to shareholders, including capital management, of 30-50 per cent of free cash flow,” BlueScope told the ASX this morning.
In a separate statement to the ASX, the company said Mr Vassella joined BlueScope in 2007, and is currently Chief Executive BlueScope Australia and New Zealand. He started in the steel industry as a cadet at BHP Newcastle in NSW, in the early 80s, and has worked through the ranks, in a range of general management and leadership roles in Australia, the UK and the US.
Announcing the new CEO, Chairman John Bevan said in the statement that “The Company is noted for the strength of its management team and after a rigorous international and domestic selection process, the Board was very pleased to be able to select Mark from a very strong internal pool.
“BlueScope is delivering well on its strategy, with strong momentum throughout the Company, and a clear focus on improving returns and driving growth. Mark will lead from the front, and his priority now is to keep delivering on the strategy, and to build on our recent performance and successes,” Mr Bevan said.
“Mark has been a key part of the development of our strategy, and in Australia and New Zealand has led our 8,000 strong workforce in manufacturing and distribution through a major restructure of the business. He has overseen the return of the Australian business to profitability, and was instrumental in the 2015 decision to continue operations at Port Kembla in Australia, and at Glenbrook in New Zealand.
“He has run all BlueScope’s buildings businesses in North America, leading the integration of our acquisitions and sat on the Board of North Star (the leading mini-mill in North America). He has delivered outstanding performance and will make a significant contribution as global leader of this great Company.”
Update
Bluescope Steel warned shareholder on Monday that earnings are set to fall in the current half, hit by import competition and soaring power and gas prices locally as well as weaker margins in the United States, its profit powerhouse in the year to June.
But the blow will be softened for shareholders somewhat by news of another $150 million share buyback, for the second year in a row.
At the same time, the country’s biggest steel maker said CEO, Paul O’Malley, would retire in December. He will be replaced by the head of the company’s Australian arm, Mark Vassella.
Bluescope said underlying earnings were set to drop 20% in the current half from the second half of the 2017 financial year to around $422 million, implying a 30% fall from 2016-17.
“Productivity improvements … are not yet fully offsetting the scale of energy cost escalation in FY2018,” the company said in the results release for 2016-17.
Underlying profit rose 112% to $650.8 million, based mainly on cost-cutting. However, the result was below market forecasts around $682 million. The company revealed a $715.9 million net profit after tax for the year to June 30, up 102% on 2015-16.
Underlying Earnings Before interest and Tax was $1.105 billion.
“The 89% growth in underlying EBIT over FY2016 was generated through delivery of productivity and cost improvements, sales growth, improved steel spreads and the full year benefit of the North Star acquisition. Underlying EBIT in 2H FY2017 was $527.3 million,” the company reported yesterday.
After a 4 cents a share interim dividend and the $150 million buyback during the year, directors said there would be a five cents a share final dividend and a further $150 million buyback in early 2018.
“The Board believes that, together with paying consistent dividends, share buy-backs achieve an appropriate balance between retaining strong credit metrics, continuing to fund our growth opportunities and returning cash to shareholders.
Share buy-backs will be funded from free cash flow and the Board is targeting returns to shareholders, including capital management, of 30-50 per cent of free cash flow,” BlueScope told the ASX.
