BlueScope has upgraded its steel earnings outlook after stripping costs out of Port Kembla

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Shares in BlueScope took off after it announced a deal with the NSW government which will save it $60 million in payroll taxes.

And the company upgraded its earnings outlook, after cost cuts and a deal to freeze the pay of its union work force means that steel making will continue at its Port Kembla works south of Sydney.

The company now expects about 40% growth in underlying EBIT (earnings before interest and taxes) in the first six months of 2016, about $50 million greater than its previous outlook.

The upgrade came after BlueScope achieved earlier than planned cost cuts, strength in domestic demand and benefits from a weaker Australian dollar.

Chairman Graham Kraehe says the board has made the decision to continue making steel at Port Kembla subject to formal ratification of new enterprise agreements with its work force.

BlueScope earlier this month reached agreement with unions and employees at Port Kembla for a three-year wage freeze and the shedding of 500 jobs, an essential step to achieving a $200 million cost cutting target.

“We applaud the contribution by our employees, site management and the combined unions in helping to secure $60 million per annum in labour cost savings,” he says.

“We also thank the NSW government for deferring $60 million of payroll tax payments over the next three years, as well as reductions in other charges.”

BlueScope shares are up more than 11% today to $4.52.

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