Plenty of news from the AGMs of steelmaker BlueScope (ASX: BSL) and pathology giant Sonic Healthcare (ASX: SHL), with guidance and trading updates provided at each. Here are the salient points.
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BlueScope Steel has reiterated its record first-half earnings guidance as steel prices and demand remain strong.
Australia’s largest steel maker says it expects underlying earnings before interest and tax (EBIT) will be in the range of $2.1 billion to $2.3 billion for the first six months of FY22, confirming the updated guidance from last month.
The company’s AGM on Thursday heard an upbeat outlook from CEO Mark Vassella who indicated the improved performance was company-wide – especially in the US and Australia.
“Global steel prices, spreads and demand across key geographies have been strong, with favourable conditions in building and construction end use segments,” he told Thursday’s AGM.
Though upbeat, the news saw the shares fall 2% to $20.23.
In his address, Mr Vasella said the company’s various businesses are doing very well in the current half:
“Australian Steel Products is expected to deliver a significantly better result than 2H FY21, with strength in domestic volumes, particularly in higher value products for the building and construction sector, and strong realised steel spreads. Margins and volumes in our downstream businesses are also benefitting from the robust demand environment. A stronger export coke contribution is expected with margins remaining robust.”
The US based North Star steel plant “is also expected to deliver a significantly stronger result than 2H FY21 driven by record steel pricing and spreads, modestly impacted by higher alloy and conversion costs, including labour.”
“More recently, benchmark Midwest hot rolled coil prices have begun to ease back from record high levels. The business continues to perform well and has been operating at full capacity as sales volumes to construction, manufacturing and automotive end use applications remain solid. Importantly, the major expansion of North Star is on track for commissioning in 2H FY22.”
The company’s building products businesses in Asia and North America are expected to deliver a stronger result compared to 2H FY21, with elevated margins in the North America coated products business and seasonally stronger earnings in China.
These stronger performances are being modestly offset by the impacts of COVID related disruptions across South East Asia – particularly in Malaysia, Vietnam and Indonesia.
The North America buildings business is expected to deliver a similar result overall to the June half year. “softer performance from the core Engineered Buildings Systems business on margin compression due to higher steel feed prices is expected to be offset by a stronger contribution from the Properties Group,” he said.
“And New Zealand and Pacific Islands is also expected to deliver a stronger result, on the robust demand and pricing environment across construction and infrastructure,” Mr Vassella said.
And he explained the recent announcement that the company is buying a US metal recycler called Metal X for $US240 million.
BlueScope will acquire MetalX’s two operating sites which are located in Indiana and in Ohio, immediately adjacent to the North Star facility.
“This acquisition adds to our extensive US asset footprint of over $A3.0 billion which spans steelmaking, steel coating and painting, engineered building systems and industrial property development. And expansion projects – both underway and planned – total up to an additional $A1.5 billion,” Mr Vassella said.
MetalX is the largest of North Star’s US scrap steel suppliers, currently supplying around 20% of the scrap used.
“The acquisition brings us a crucial presence and expertise in scrap processing to further secure our prime and obsolete scrap needs. Further, the MetalX ferrous acquisition will enable NorthStar to quickly improve the quality and quantity of obsolete scrap it uses and reduce the mix of prime scrap.
“As North Star is a steel-recycling electric arc furnace producer of hot rolled coil that uses low emissions electricity, it is highly carbon efficient. This acquisition further improves BlueScope’s sustainability profile by bringing in-house part of North Star’s scrap collection,” Mr Vassella added.
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The Covid pandemic’s high testing rates in NSW, Victoria and elsewhere since July 1 has seen been a big boon for pathology giant Sonic Healthcare.
It said in a trading update on Thursday ahead of the AGM that it has seen a 16% rise in earnings before interest, tax, depreciation and amortisation (EBITDA) to $991 million in the first four months of the 2022 financial year.
The jump reflects revenue growth of 5% over the four months compared to the same period a year ago to $3.087 billion.
The surprisingly good update saw the shares rise 3% to $39.75.
The bulk of the growth is still coming from COVID products, including PCR testing, whole genome sequencing and delivering vaccines.
Excluding Covid services, the company said its base business revenues, which include other medical testing, grew by 6% compared to the same time last year.
Despite this confident start to 2022 year, the company will still not give earnings guidance because of the uncertainties caused by the pandemic.
“Sonic has not provided earnings guidance for FY2022 due to COVID-19 related unpredictability,” the company told investors.
“The pandemic continues to cause fluctuations in both COVID-19 testing revenues and, to a lesser extent, the base business,” Sonic said on Thursday.
“Sonic’s base business has become increasingly resilient to impacts of pandemic waves and benefits from the essential nature of its services, as well as geographical and business diversification. The underlying growth drivers for healthcare services remain unchanged,” it added.
Those uncertainties are being underlined right now and we are seeing across Europe, with mask mandates, social distancing and partial lockdowns returning in Holland, Ireland, Germany and the Baltic states.
