A fair bit of news around the ASX on Wednesday, and here’s all the latest from steelmaker BlueScope, Kerry Stokes-controlled Boral and local automative retailer Eagers.
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Yet another earnings upgrade from BlueScope Steel (ASX: BSL), which has again lifted expectations for the year to June 30. As previously, the reason for the upgrade was the booming US appetite for steel, especially in the Midwest where BlueScope has its North Star electric arc operations and other facilities.
The Port Kembla based steelmaker said it now expects underlying earnings before interest and tax (EBIT) for the current June half year to be in the range of $1.375 billion to $1.475 billion.
This is above the previous guidance range of $1.2 billion to $1.35 billion, and is subject to spread, foreign exchange and market conditions.
This puts BlueScope on track to report a record EBIT of more than $3.6 billion, more than double the underlying EBIT reported for 2020-21 of $1.720 billion.
“The stronger outlook is driven by improved earnings expectations for North Star and the North America coated business due to better-than-expected realised steel prices and spreads in the United States,” BlueScope told the ASX in the update.
“Expectations for BlueScope’s other businesses remain broadly consistent with outlook comments provided in February.
“Australian Steel Products has seen softer than expected domestic despatch levels, due to a range of supply chain disruptions including recent East Coast flood events, rail outages and pandemic-related impacts.
“This has been offset by stronger realised steel spreads combined with better-than-expected contributions from the downstream businesses.
“With the ongoing strength in raw material prices combined with continued supply chain disruptions, BlueScope expects net working capital employed to remain elevated during the current half.”
CEO Mark Vassella said, “Throughout recent macroeconomic and geopolitical volatility, BlueScope has continued to demonstrate strength and resilience in its business performance. In the current strong demand environment, the entire BlueScope team is working as hard as they can to improve our service levels, which have been impacted by supply chain and pandemic-related disruptions.”
BlueScope’s financial results for the year ending 2021-22 will be released on August 15.
The shares ended up 1.5% at $18.20 but they traded as high as $19.24 earlier in the day.
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A different story entirely from Boral (ASX: BLD), 70% controlled by Stokes’ Seven Group Holdings.
It told the ASX in an update on Wednesday that its earnings have continued to be adversely impacted by extraordinary rainfall, particularly in New South Wales and Queensland, and further increases in energy prices since the trading update provided on in late March
In that update, on March 22, Boral said it expected “underlying earnings before interest and tax (EBIT) for its continuing operations (excluding Property) in FY2022 to be between $145 million and $155 million, assuming no further extraordinary rain events”.
“Taking into account trading for late March through mid-May, which has been impacted by continuing exceptional rainfall and inflationary cost pressures, the Company now expects additional adverse impacts to underlying earnings in FY2022 of ~$45 million.”
Boral said the fall was made up of an adverse impact of around $30 million from exceptional rainfall on its volumes and costs, “which has continued through to mid-May in NSW and Queensland, and assumes additional rain days through the balance of May and June” and a negative impact of around $15 million from higher energy costs, “which are assumed to continue to be elevated to 30 June and other cost inflation.”
Boral said that product price rises in January and February “are realising a positive impact, however they have been insufficient to offset the impact of more recent increases in energy prices.”
On top of this Boral now expects lower cost savings from its so-called “transformation program” – $45 to $50 million instead of the target range of $60 to $70 million
Boral CEO Zlatko Todorcevski, said in the update:
“Ongoing rainfall in many parts of the east coast, particularly in New South Wales and Queensland, has continued to significantly impact our sales volumes, while also resulting in additional costs.
“This has coincided with further sharp increases in energy prices, particularly in coal and electricity, impacting our production and logistics costs.
“We are responding to this challenging operating environment by implementing additional measures to mitigate the impact of transport and fuel inflation alongside the already announced out of cycle price increases, and accelerating our focus on costs.”
Yesterday’s announcement was the second downgrade this year from Boral.
The shares eased 3.1% to $3.11.
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While Eagers Automotive (ASX: APE) continues to be swamped with orders, its delivery situation has become so dire that it is going to cost the company millions of dollars in profits in the June half year.
The news, given at the company’s annual meeting yesterday, saw the shares slide more 9% to a low of $10.77. They recovered later in the session to end the day down 3.2% at $11.50.
Shareholders were told that the reason for the shortfall was the continuing shortage of computer chips and other components (such as wire harness assemblies) caused by the existing shortage of electronics and the impact of the latest Covid lockdowns in China and the Russian invasion of Ukraine.
As a result, Eagers now expects a reduction in the number of new vehicles delivered to customers in the first-half of 2022, which will take cut first-half earnings.
Underlying operating profit before tax is forecast to be in the range of $183 million to $189 million for the June 30 half year, down between 12% to nearly 15% compared to the first half of 2021.
“On a statutory basis we expect a first half result of between $225 million and $240 million, reflecting both the underlying performance and the expected successful completion of the Bill Buckle Auto Group divestment in June 2022,” shareholders at the meeting were told
Eagers said demand for new vehicles continues to materially exceed supply.
The company’s new car order book had grown more than 25% since the end of 2021, whilst new car margins have remained in-line with the “level strong levels of 2021.”
But the supply chain problems had hit hard so deliveries and order fulfilment has fallen short.
That saw shareholders cautioned that while the company remains confident, the supply problems and their impact may continue for longer.
“…the continued lack of transparency of new vehicle supply and disruption to labour, parts supply, logistics and transport, mean we remain cautious regarding the timing of when deliveries will occur,” the company said.
“In summary, our outlook for the second half of 2022 remains very strong with the addition of incremental contributions from the businesses acquired in Q4 2021 and the expected completion of the ACT acquisition in July 2022.”
The ACT deal will give Eagers 43% of the new car market in the ACT. The business is being purchased from Eagers biggest shareholder, Bill Politis’ WFM group. Eagers shareholders will meet in July to consider the deal and approve it. Mr Politis cannot vote.
