BlueScope Steel shares rose nicely yesterday after the company revealed a 23% rise in first-half net profit to $441.2 million, helped by the restatement of deferred tax liabilities after January’s cut in US corporate tax rates (in its North Star steel business in the US).
The shares rose on raised guidance for the full year and a higher interim dividend and buyback.
Underlying earnings before interest and tax of $516.8 million was ahead of its guidance for $460 million, but still 11% lower from a year ago because of lower margins.
The company now expects underlying earnings in the second half to be 25% higher than the first-half,
The shares closed up 2.2% at $15.84 after hitting a day’s high of $16.45 the highest level since January 2010.
BlueScope said it will pay a partially franked interim dividend of 6.0 cents per share, up 50% from the fully franked four cents a year ago. Directors said the company will extend the existing share buyback by a further $150 million.
The steel maker said sales revenue for the six months to December 31 jumped 7% to $5.48 billion, mainly due to higher steel prices across all segments. But margins at the North Star business in the US came under pressure, despite lower energy costs.
New managing director Mark Vassella said the result shows that BlueScope’s earnings momentum has continued for another half and the company sees it continuing for this half.
“We think we have re-based the earnings to make them more consistent,” he told investors on a conference call. “We are working very hard to reduce the volatility."
BlueScope says it expects margins to recover in the second half, after raw material and energy costs hurt the first-half results (especially at Port Kembla and other Australian plants).
Earnings at its main Australian operations rose 8% despite the rise in energy costs.
"It is not as disastrous as we thought six months ago, but energy costs have still gone from $50 million to $100 million, which is unacceptable," Mr Vassella said.
North Star earnings dipped as profit margins fell, while softer demand in southeast Asia also led to selling prices lagging cost increases.
