Bluescope Steel Upgrades FY22 Earnings Guidance To Over $2 billion

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Bluescope Steel Upgrades FY22 Earnings Guidance To Over $2 billion

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  • FY22 earnings guidance upgraded to $2.1 - $2.3 billion range from $1.8 - $2 billion
  • FY21 Earnings Before Interest and Tax (EBIT) of $1.72 billion
  • FY21 Net Profit After Tax (NPAT) of $1.19 billion

A continuing rally on spot steel prices has seen Bluescope Steel Limited undeniably profitable for FY21. Yet it isn’t a business that’s content to simply reap the rewards of a presently favourable market. Instead, Bluescope Steel has recently sounded the call to advocate for industrial decarbonisation along its own long-term net zero target. While its resilience and forward-thinking have certainly seen it through the challenge of the ‘pandemic economy’, its latest guidance update may well provide insight as to how the rest of FY22 could pan out for the Australian steel producer.

Bluescope Steel announced an earnings upgrade this morning, increasing its earnings guidance for FY22 to the range of $2.1 - $2.3 billion. The company previously provided shareholders with a guidance of $1.8 - $2 billion, subject to market conditions, foreign exchange and spread. It attributes its improved outlook to a handful of key drivers, of which its Australian Steel Products business factors in. Commenting on the FY22 guidance update, Managing Director and Chief Executive Officer Mark Vassella notes how Bluescope Steel continues to benefit from favourable market conditions. Additionally, he credits the Bluescope Steel team for presenting an outstanding job to date, with its US businesses and Australian Steel Products division yielding increased volumes, and facing growing demand.

Considering that its North Star US mini-mill and North American coated products businesses are benefiting from strengthening demand and prices, this could largely be indicative of the steady industrial recovery that is anticipated of post-pandemic recovery in the US.

Strategically Setting the Foundations Ahead of Anticipated Decarbonisation

Bluescope Steel presented FY21 results with an underlying EBIT of $1.72 billion, and NPAT of $1.19 billion. Its performance for the year provides a stark upgrade from earlier provided guidance of $750 - $830 million. The company’s results for FY21 were similarly driven by strong sales within the US market, and increased volumes as Australian operations saw their way through rolling lockdowns across states.

Building off momentum from favourable FY21 results, Bluescope Steel could characteristically deliver its latest guidance update for FY22, especially with positive market activity prevailing in the US and Australia. However, increased productivity is hardly its only long-term focus, as meted out in its strategic update extolling its long-term drive towards a 2050 net zero greenhouse gas emissions goal. The company plans to lead the wider steel industry as an advocate for climate-friendly steel solutions. This push towards the decarbonisation of its business will begin with an initial five-year climate investment program of up to $150 million, with over $1.5 billion to be invested throughout the length of its effort towards its 2050 net zero goal.

Safe to say, Bluescope Steel retains a positive outlook for its FY22 performance. With its share price trading at 37.22 per cent higher compared to the previous year, it is prudent to consider how the company’s value is inextricably tied to fluctuations in the price of steel. However, a consideration of growing demand for steel products as markets emerge from pandemic conditions could safely place Bluescope Steel onto a steady growth trajectory, well into the end of 2022.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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