The BlueScope Steel Limited (ASX: BSL) share price has edged higher on Tuesday.
In early trade the steel producer's shares are up 3% to $11.46 following the release of a market update.
What was in the update?
This morning BlueScope announced that it now expects FY 2019 underlying earnings before interest and tax (EBIT) to be ~$1,350 million. This will be a year on year increase of approximately 6% and implies second half underlying EBIT of around $500 million.
This compares to its prior guidance of around 10% year on year growth in underlying EBIT this year.
A number of factors are behind the disappointing guidance downgrade. These include a sharper than anticipated decline in benchmark steel spreads, tough market conditions for its Building Products Asia and North America businesses, and lower volumes and margins for its Buildings North America business.
In respect to benchmark steel spreads, management anticipated a US$130 a tonne decline in the second half, but they are now expected to be down US$150 a tonne across the half year.
And while good progress is being made on the cost reduction and manufacturing improvement programs of its Building Products Asia and North America businesses, market conditions have been softer than anticipated.
The rest of the company's operations are performing generally in-line with the expectations set out in the February guidance.
Share buyback extension.
One positive today is news that the company has decided to extend its current on-market buy-back program.
The existing $250 million on-market buy-back program was nearing completion, but strong cash flow generation means the company has now decided to extend it by a further amount of up to $250 million. This news appears to have offset the guidance downgrade.
BlueScope's managing director and chief executive officer, Mark Vassella, said: "With the transformed business continuing to generate strong cash flow, we are able to pursue a mix of returns to shareholders and investing for future growth. We remain committed to our clearly stated financial principles and disciplined approach to capital allocation. Naturally we will always invest to maintain safe and reliable operations, and seek to retain strong credit metrics."
Elsewhere in the sector this morning, the shares of Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO) have edged lower after iron ore prices weakened amid demand concerns.
