A surge in Australian demand and sales, aided by solid sales into the US residential construction sector saw BlueScope’s highest Australian steel dispatches in a decade and a 78% jump in first-half profit.
And, despite holding interest dividend at the year ago level of 6 cents a share, the company expects second half earnings before interest and tax to jump sharply to as much more than $800 million.
BlueScope revealed a $330.3 million profit for the six months to December 31 thanks to strong volumes and improving steel spreads in its largest steelmaking business, in Australia.
The company meet the updated guidance issued at the end of January for underlying earnings before interest and of around $530 million ($530.6 million) for the half year.
That was up 75% on the second (depressed half) of 2019-20.
According to Monday’s statement, BlueScope is looking at underlying EBIT in 2H FY2021 to be in the range of $750 million to $830 million. That’s potentially a total of more than $1.2 billion.
The ‘culprit’ was an outstanding half for the company’s Australian Steel Products business which delivered an underlying EBIT of $259.1 million, up 103% on a year ago.
The company said this came from increased demand from the domestic construction and distribution segment.
It said demand had been so strong, particularly for coated and painted products – that the company saw strongest domestic volumes since the second half of 2010.
But despite the boom, interim dividend is unchanged at 6 cents a share, suggesting that unlike RWC (see separate story), the company is not quite convinced about the outlook. But the forecast for second half EBIT indicates otherwise.
Chief executive Mark Vassella said a balance sheet of $305.2 million net cash gave him “real confidence” to pursue a strategy of transformation and growth.
“The results demonstrate our strategy at work with the strength and quality of our diverse portfolio,” Mr Vasella said in Monday’s statement.
“This performance, and the healthy condition of the Group at the start of 2H FY2021, are a tribute to the efforts of our 14,000 people across all 18 countries.
Across the portfolio from India, ASEAN, China, the US and NZ & Pacific Islands, BlueScope’s businesses recorded strong earnings growth.
The company said its share buyback remains on hold with the company’s near-term focus on the completion of the $1 billion North Star steel mill expansion in Ohio.
The company has also announced the establishment of a new executive leadership position, appointing Gretta Stephens as chief executive of climate change.
“Gretta will now drive the work already underway, including our decarbonisation pathway and our long-term carbon reduction aspirations,” the company told investors.
“Gretta’s new team will explore a range of technologies to understand the scale of emissions reduction they might deliver, potential costs and timeframes, and the barriers and enablers to implementation.”
She and the company are already looking at the new blast furnace reline at the end of the decade that will cost the best part of $A800 million or more.
BlueScope shares rose 2.25% to $17.67.