Bluescope Strengthens Profit Forecast Again

Shares in steelmaker, BlueScope leapt by more than 7% yesterday after a second earnings upgrade in a month.

The update, released ahead of the company’s annual meeting, took investors by surprise coming so soon after the very positive lift in projected earnings in a month.

They chased the shares higher, and they jumped by 5.3% at the end, closing at $17.72.

During trading, they hit a 52 week high of $18.24. That was the highest the shares have been since 2008.

BlueScope lifted first-half earnings guidance by a very solid 39.7% to $475 million, citing stronger home building and alterations activity here and in the US, demand for large warehouse and logistics facilities, and a recovering US car industry (which was a factor in the previous update).

The increase also includes a contribution of about $40 million generated by the recent sale of an industrial warehouse complex in the US that was developed by the BlueScope Properties Group.

Less than a month BlueScope released new guidance for the first half, forecasting underlying EBIT (earnings before interest and tax) of about $340 million, which would have been an increase of about 30% on the reported EBIT result for the COVID-19 hit June half of 2019-20 financial year.

“All operating segments are performing well and momentum has continued to build as we approach the end of the first half.

“Residential alterations and additions activity, demand for detached new housing, and growth in demand for e-commerce warehouse and logistics facilities are all robust and US automotive industry demand is recovering strongly,” said BlueScope CEOMark Vassella.

“Demand strength, particularly in the Australian market, has continued to outpace our expectations. We now expect that Australian construction and manufacturing activity will remain strong,” he said.

He said that would see the Australian division deliver a substantially better result this half than for the last half of 2019-20.

The company said steel margins in the US Midwest and in East Asia were above long term averages, thanks to demand and more stable costs. BlueScope said its North Star mill was at operating at full capacity.

BlueScope said its building products business in Asia and North America is expected to deliver a significantly stronger performance in the current half than in the last half of 2019-20 as the disruptions caused by COVID-19 are overcome.

The company’s outlook for operations in the ASEAN region and India also improved, with BlueScope forecasting underlying EBIT in the ASEAN region to be at least double that of the last half.

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.

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