Get it while you can. The global steel boom has helped steelmakers around the world to record results – as we pointed out late last month – is producing big rewards for shareholders who stuck with the companies through the lean years.
And as expected local producer, BlueScope Steel was one of those record smashers as it saw a surge in earnings in the year to June which enabled the country’s biggest steelmaker to more than triple its final dividend, on top of a special payout, and reveal a $500 million buy-back.
The reward for shareholders was similar to those from Rio Tinto, Commonwealth Bank, Suncorp and no doubt today from BHP – a lot of money.
BlueScope’s reported net profit after tax of $1.19 billion (it guided to a net result of around $1.2 billion) was a $1.1 billion increase on last year thanks to strong global steel prices and demand across the portfolio, partly offset by a stronger Australian dollar (which however eased towards the end of the financial year).
Underlying earnings before interest and Tax (EBIT) was also as forecast – $1.72 billion.
And there is a good chance the company and shareholders will see more rewards for the current first half of 2021-22.
BlueScope sees underlying EBIT for the December half topping the full year performance with a range of $1.8 billion to $2 billion forecast in yesterday’s announcement.
The company announced a final unfranked dividend of 25 cents a share, up from 8 cents a year ago, plus a special unfranked dividend of 19 cents a share. With the 6 cents a share interim, shareholders will receive a total payout of 50 cents a share.
It will also launch an on-market buy-back of up to $500 million of shares (just under 20 million at current prices) over the next 12 months year with the timing and value of shares purchased dependant on prevailing market conditions, share price and other factors.
“Today’s outstanding results are the product of our clear strategy and disciplined financial framework, and the operating leverage of our diverse portfolio,” CEO Mark Vassella said in Monday’s statement.
Mr Vassella said BlueScope would actively use the strength of its balance sheet and cash flow to build a growth pipeline, leveraging trends like growth in detached residential construction, e-commerce and logistics, and national infrastructure programs.
“BlueScope has identified over A$500 million of growth projects across its footprint, building on the strength of its portfolio of assets and leveraging key macro and sectoral trends, such as the improving industry conditions across China and the US, the supportive investment environment provided by low interest rates and government stimulus, shifts in preferences towards lower density regional housing and online shopping, and recognition of the critical nature of steel in underpinning the transition to a clean energy future,” the company said yesterday.
The company said order and despatch rates in key markets remained robust at the start of the new financial year.
Spot steel spreads in North America are materially higher than both the second half of 2020-21 and longer-term averages. That is advantaging the company’s North Star arc furnace operation in Ohio which is running flat out.
In light of these unusually strong conditions, the company expects underlying earnings in 1H FY2022 to be in the range of $1.8 billion to $2 billion.
“While in the medium term we see supportive industry and end-use demand trends, it is uncertain how long the current robust conditions will be sustained,” the company said.
