“Modest Recovery”: BlueScope Shares Higher Despite Steel Price Headwinds

By Glenn Dyer | More Articles by Glenn Dyer

Shares in BlueScope Steel rose yesterday when the company told the AGM that it was still expecting a sharp fall in first-half earnings.

The shares rose 2% to $14.25 after Australia’s biggest steelmaker confirmed the weak guidance issued with the annual results in August, would be met by the end of December.

“Turning now to financial performance, I confirm the guidance for the first half of FY2020, provided in August with the Company’s full-year results, of underlying earnings before interest and tax of around 45% lower than the second half FY2019 underlying EBIT of $499 million,‘ chairman John Bevan told the meeting.

“Conditions across the BlueScope portfolio remain largely in line with the expectations we advised in August.

“The 1H FY2020 outlook is softer than the prior half due to weaker commodity steel prices and spreads across our steelmaking businesses in the US, Australia, and New Zealand.

“However, demand in BlueScope’s major markets remains stable.

“North Star (in the US) is operating at full utilisation and there has been a modest recovery in Australian volumes, as foreshadowed,” he said.

First-half earnings before interest and tax will come in around $274.5 million, down 45% on the $499 million EBIT recorded in the six months to June 30.

But the more important comparison is with the same period of the previous financial year – in this case, the six months to December 2018 when EBIT totalled $849 million.

Therefore the EBIT figure for the six months to the end of December will be a more substantive 71% slump.

Mr. Bevan told the meeting that Bluescope was “now a very resilient global company with a strong balance sheet”.

“Financial year 2019 was our third year with back to back underlying earnings before interest and tax above $1.1 billion – a result achieved despite some softening in commodity steel spreads and volumes in the second half of the year and, of course, rising uncertainty in global markets caused by geopolitical factors and the US-China trade dispute,” Mr. Bevan said.

The sharp downgrade means the company has no hope of an EBIT $1.1 billion or more for a 4th financial year in a row.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →