A record interim profit and higher dividend and a continuing buyback for shareholders in steelmaker BlueScope.
At the same time, the company said plans for expansion of its US steelmaking operations remains on track as strong demand for its steel products continued under the protection of higher tariffs on imports of steel products into America.
BlueScope reported a record $624.3 million net profit for the December half, up 42% and said it expected to report a 10% lift in earnings before interest at tax for the current year to $1.269 billion.
But the company warned that the “second half is expected to be softer than the first half of FY2019.”
Despite that warning, the shares rose 6% to $13.07.
Underlying earnings before interest and tax (EBIT) for the half was $849.6 million, up 62% or $325.4 million on the first half of 2017-18.
The company also announced an unchanged interim dividend of 6 cents a share and that the $250 million share buyback announced in December, would continue.
BlueScope chief executive Mark Vassella said the result was driven by strong demand, and profit margins in both the US and Australia along with a tailwind from foreign exchange rates.
“It’s an excellent result, our best half on record. It was driven by strong demand and steel spreads in our US and Australasian markets,” he said.
“We have delivered underlying EBIT of over $1.1 billion in each of the last two financial years. With this first half result, we expect an even stronger result for the third consecutive year.”
“The Company is working on appropriate growth opportunities that fit our strategy in our markets in India, ASEAN, North America, Australia, and New Zealand. And we are placing a strong emphasis on sustainability, innovation, and diversity in those investment plans,” he said.
Speaking of its plans to expand production at its US plant, Mr. Vassella said the company is embarking on a final feasibility review with around $50 million assigned to the project ahead of a final decision on the project during the first half of the 2020 financial year.
“The investment case is well developed, with the volume range refined to an additional 800,000 to 900,000 metric tonnes per annum of steelmaking capacity. Estimated cost is in the range of US$600 million to US$700 million.
“We believe the project has the potential to deliver compelling returns based on long-term historical spreads,” said Mr. Vassella.
He said the steelmaker doubled its cash position to $127.5 million for the December half and is progressing towards its target of $200 million to $400 million net cash.
“The balance sheet is robust, with great flexibility, and at present, we expect to be able to fund the growth initiatives we are considering while maintaining shareholder returns,” Mr. Vassella said.
