Bluescope well placed to ride sector dynamics

BlueScope Steel’s first-half earning was marginally ahead of its latest guidance, surging almost 80% compared to the prior corresponding period. The company increased its dividend, a fully franked AUD 0.04 per share, and announced an AUD 150 million share buyback. The company achieved earnings growth across all its operating regions, and generated strong cash flow, which enabled the company to reduce its debt substantially.     

The strong result was delivered on the back of production efficiencies, aggressive cost cutting, sales growth, higher steel prices and spread as well as the benefits of the North Star acquisition.

The company guided second half earnings of AUD 510 million, ahead of consensus of AUD 460 million and almost 50% higher compared to the same period last year. The company will also benefit from lower finance costs due to lower average net debt. 

We believe BlueScope Steel is attractively placed to take advantage of favourable dynamics in the global steel sector and has a strong balance sheet which suggests that there is potential for further capital management.

Contributed by Nikko Asset Management:  (VIEW LINK)