BlueScope’s relentless cost cutting in response to a global oversupply for steel has paid off.
The company today announced a doubling of profit to $200.1 million for the first half of the year. The result includes impairment charges of $567.5 million and an accounting carrying value write-up of $702.9 million for North Star in the US.
Revenue was up 2% to $4.438 billion. Underlying profit for the December half was up 47% to $119 million compared to the same period last year and a 125% rise on the previous six months.
At the same time, the company’s sales in Asia have been improving, with the building products business posting a 37% rise in underlying EBIT of $65.4 million. All businesses except Thailand delivered stronger earnings.
“Our relentless focus on cost reductions in Australia must continue,” says CEO Paul O’Malley. Cuts of $270 million are planned for the second half.
He expects underlying EBIT in the second half to be up to 60% higher than the same period last year on the back of significant cost reductions and process improvements.
In October last year, Bluescope announced what it called a “game changer” agreement with its employees to cut 500 jobs and freeze wages for three years.
The agreement is a significant part of the company’s million cost cutting. And it keeps the Port Kembla steelworks south of Sydney from shutting.
The company also has a deal with the NSW government which will save it $60 million in payroll taxes.
Bluescope shares last traded at $5.48, up from a 12-month low of $2.70 in July last year.
A fully franked interim dividend of 3 cents a share was declared.