Competition from Chinese and Indonesian steel producers and a falling Chinese housing market have combined to push BlueScope Steel’s net profit down to $805.7 million (US$538.2 million) for the year to June 30, from $1 billion a year earlier.
However, the company announced today that shareholders will receive a fully franked dividend of 30 cents a share for the second half of the financial year. The board has a target of 60 cents per share per annum.
Managing Director and CEO Mark Vassella noted that Earnings Before Interest and Taxation were $1.34 billion, which, while also lower than 2023’s figure, “demonstrates BlueScope’s resilience, as strength in the U.S. steelmaking and global downstream operations offset the impacts of bottom-of-cycle Asian steel [prices] on our Australian and New Zealand steelmaking businesses.”
Chinese steelmakers had continued to run at “really high levels of production” despite weakness in domestic construction, Vassella said, meaning that the excess was flowing into Asian markets.
He said he believed some Chinese competitors were not operating sustainably.
“I think we’re now seeing steelmakers understand that the business model they have is not viable,” Vasella said.
“And I suspect those steel companies in China are at cash break-even or cash-loss positions, quite frankly.”
Softer demand from the Australian construction industry was also a contributor as housing approval numbers reduced and the backlog from the prior period was worked through. However, BlueScope predicts that underlying demand for housing will remain robust in the medium term.
“Inflationary pressures, including higher electricity costs, add to the challenges,” the company notes.
Despite remaining one of Australia’s largest emitters of greenhouse gases, the steel producer managed a 12.2 percent reduction in emissions intensity against its FY2018 baseline, and in line with its 2030 target level.
This was primarily driven by the ramp-up of the North Star expansion, along with operating and process efficiencies at Glenbrook and Port Kembla Steelworks.
The company said a range of projects continue to be worked on to unlock a low-carbon future for BlueScope, including collaboration with Rio Tinto and BHP and the Australian Direct Reduced Iron options study (Project IronFlame).
Its worldwide operations were a study in contrast, with its Asian operation up 13 percent to $159.6 million, while its New Zealand and Pacific division plummeted 66 percent to $43.7 million.
Earnings from its North American operation dipped just 3 percent, to $935.1 million.
All the above comparisons are to the FY2023 performance of the respective entities.
BlueScope has responded to these conditions by “increasing its usual focus on managing cost and revenue performance, and on the timing of capital expenditure.”
It says this is “particularly relevant for the Australian business” to ensure its ongoing resilience in an environment of “sustained low [prices] and cost escalations.”
BlueScope forecasts its first half-year earnings for FY2025 to be between $350 million and $420 million.
