BlueScope posts record profit, boosts buyback

Given that BlueScope (ASX: BSL) raised its full-year profit forecast range by around 12% mid-May, on the back of strengthening margins in the US, news of a bumper full year FY22 profit, a major beat versus Blomberg estimates ($2.64bn), shouldn’t have surprised the market this morning.

Nevertheless, the Steelmaker was up 4% at the open after posting a record $2.81bn after tax profit for the 12 months ended June 30, 2022, up 135% from the previous year, after recording $18.9bn in revenue, up almost 50% on the previous year.

BlueScope maintained a final dividend of 25c a share (unfranked), payable 12 October and announced plans to extend its share buyback program by an additional $500m.

Management guided to underlying earnings (EBIT) in the first half of FY23 in the range of $800m to $900m.

Highlights within today’s result include:

• Record underlying earnings (EBIT) of $3.79bn

• Operating cash flow, after capex including on the North Star expansion, was $1.71bn

• Underlying pre-tax return on invested capital (ROIC), up 41.6%

• $1bn in shareholder returns

• Total investment in the US now around $5bn

Strong overall performance

The star performer within the company’s full year FY22 result, the North Star mill in Ohio, lifted earnings (EBIT) by 181% to $1.9bn.

Meantime, the Australian steel division increased earnings (EBIT) by 92% to $1.29bn, on the back of strong demand from the construction and manufacturing sectors for its painted steel products and flagship Colorbond roofing product.

Commenting on today’s result, arguably the best since BlueScope was demerged from BHP in 2002, managing director Mark Vasella notes all parts of the business performed strongly throughout the year.

“We saw continued strong demand for our steel products and solutions… We worked hard to improve our service levels which have been impacted by supply chain and pandemic related disruptions,” Vasella noted.

“I’m pleased to state the balance sheet still remains strong with $367 million net cash at 30 June 2022. Our working capital remains elevated in the context of strong demand and prices and ongoing supply chain disruptions,” Mr Vassella said

Looking forward

During the year investments of $1bn were made in the US where BlueScope acquired the MetalX ferrous recycling business and the Coil Coatings business, both of which will be instrumental in plans to continue growing the US market.

The steelmaker also plans to further expand its the North Star mill in Ohio, US, which makes steel for white goods manufacturers, the automotive industry and the agricultural sector.

Management advised investors that a potential debottlenecking project at North Star, could add an additional 500,000 tonnes of annual production to the recent $1bn-plus expansion - which added 850,000 tonnes of extra capacity.

“Over the next 18 months that $1 billion-plus expansion will go to a full run rate which will result in BlueScope producing about 5 per cent of flat steelmaking production in the United States,” management noted.

BlueScope expects to be able to begin franking dividends in FY23.

BlueScope Steel share price performance over one year.