As expected, steelmaker BlueScope has smashed its second half and June 30 full year earnings guidance thanks to the global boom in demand for steel – especially in the US.
While the rebound in Chinese demand and output and the impact in pushing iron ore exports and prices to record highs has grabbed all the attention (even though it has slowed in the past three months), the positive nature of the sector outside China has escaped attention.
Steel production outside China is now growing faster than in China and that’s being reflected in encouraging upgrades and outlooks from big non-Chinese global producers.
That saw BlueScope upgrade its second half guidance in April to record estimates and yesterday it effectively lifted it again.
That saw investors chase the shares higher to a new all-time high in trading of $24.27. The shares finished at $24.34, up 6.4% for the session.
Thanks to solid results in Australia and especially at its operation at North Star in Ohio in the US, BlueScope expects to report underlying earnings $1.19 billion for the June half year and $1.72 billion for 2020-21.
That will be the highest earnings yet recorded since it and the now Arrium were spun out of BHP back in 2002 as BHP Steel.
In April the company had previously guided for second-half underlying earnings of between $1 billion and $1.08 billion.
“This is an outstanding result – our best underlying EBIT (Earnings Before Interest and Tax) performance since demerger in 2002,” CEO Mark Vassella said in the release to the ASX
“The business has gone from strength to strength in the second half of FY2021 and all operating segments have delivered significantly better results than FY2020.”
“Since the company’s April 27 market update, the two most significant contributors to group performance have been an increase in US Midwest benchmark HRC steel prices – which surpassed prior expectations and favourably impacted realised spreads at North Star and the North America coated business – and stronger demand and realised spreads in Australia and New Zealand,” he said.
“While the COVID challenge remains, our performance is a great tribute to the professionalism and dedication of the entire BlueScope team who have operated with great resilience through the pandemic,” Mr Vassella said.
BlueScope’s financial results for the full year will be released on August 16.
The North Star operation recorded an underlying EBIT of “around $600 million” according to Tuesday’s release and the steel mill operated at 100% of capacity thanks to those solid and rising spreads on hot rolled coil (which is used by the US car, whitegoods and some parts of the housing and constriction sectors).
The company’s Australian Steel products business “delivered a substantially better preliminary result – up by around 60 per cent on 1H FY2021,” BlueScope said.
“The domestic construction, distribution and manufacturing segments’ demand continued to strengthen, particularly for coated and painted products – leading to domestic mill sales volumes of over 1.3 million tonnes, the highest since 2008.
“Further, realised steel spreads were considerably stronger than 1H FY2021. The contribution from export coke continued strongly, exceeding 1H FY2021,” the statement added.
“The Building Products Asia & North America segment delivered a preliminary result that was around 20 per cent higher than 1H FY2021, mainly due to expanding margins in the North America coated business driven by rapidly increasing steel prices. ASEAN performance was similar to 1H FY2021. China’s performance was weaker on typical seasonality.
BlueScope said its North American buildings segment delivered a lower result in 2H FY2021 – “as foreshadowed because of no contribution in the half from the BlueScope Properties Group. Demand conditions in the engineered building solutions business remained robust, however margins remained under pressure due to rapidly escalating steel input costs.”
And the New Zealand and Pacific Islands’ performance was around 25% higher than the June first half year “with strong domestic demand and higher realised steel pricing more than offsetting higher energy costs.”
