BlueScope Steel posts best earnings in its history

Australian-based steelmaker BlueScope (ASX: BSL) has posted its best first half-year performance in its 20-year history. The earnings were bolstered by increased demand from building and construction in the US and Australia for steel, which has delivered significantly higher margins, reflecting the higher iron ore market. 

The Company booked a net profit after tax of $1.64b, a 398% increase year-on-year, while revenue rose 62% to $9.4b. This has allowed Bluescope to issue its largest unfranked interim dividend ever of 25c per share to shareholders, up from 6c last year. What’s more, with $285m worth of share buy-backs since August 2021, the Company plans to increase this to a further $700m over the next 12 months to boost its price. 

Confirming the record year, CEO Mark Vassella said, “Underlying EBIT for the half-year was $2.2b, clearly the best half-year performance BlueScope has produced.” 

Underlying earnings before interest and tax (EBIT) was a record $2.2b – up from $1.67b a year prior. Guidance for underlying EBIT in 2022 is expected to be between $1.2b and $1.35b, which would be their second most decisive half only to this half, though this guidance is perhaps disappointing compared to this half’s current performance. 

“Demand in key segments, especially in building and construction, has been strong, coupled with particularly robust margins driven by increased steel prices in Asia and the US,” added Vassella. 

The Company’s North Star steel mill in Ohio in the US boosted their earnings with an EBIT of $1.23b, which saw a 1,655% increase compared to first half 2021. There has also been news that the Group has been working to acquire MetalX, a US-based business for $324m (US$240m), who just happens to be a current provider of 20% of steel scrap feed to its North Star Ohio mill.

BlueScope also plans to reline its blast furnace in Port Kembla, with a cost of around $1b and hopes that the upgrade will be sufficient enough until green steel technologies have been developed and are viable. The blast furnace has a life of 20 years, which aligns perfectly with their decarbonisation strategy and a 2050 net-zero goal. If newer technologies are discovered, the reline won’t lock in BlueScope for the entire 20 years. 

BlueScope has been quite the performer since the crashes of the coronavirus in early 2020, gaining over 200% from $8.64 to $26.13 in August 2021. Since then however, shares have tracked back roughly 21% and currently sits flat at $18.69 at the time of writing.