The BlueScope Steel Limited (ASX: BSL) share price will be on watch today after the steel producer released an update on its expectations for the first half of FY 2021.
How is BlueScope performing in FY 2021?
Today’s update reveals that BlueScope has started FY 2021 in a very positive fashion following a tough end to the previous financial year.
According to the release, the company expects its underlying earnings before interest and tax (EBIT) to be approximately $340 million in the first half. This represents a 30% increase on the second half of FY 2020 and a 12.4% lift on the prior corresponding period.
The company’s Managing Director and CEO, Mark Vassella, commented: “Despite the global disruption caused by COVID-19, we’ve had a solid performance from all of our operating segments for the three months to 30 September. This is a clear demonstration of the effectiveness of BlueScope’s strategy and the resilience of our asset portfolio.”
What is driving BlueScope’s growth?
Management notes that benchmark steel spreads have improved and demand in most markets is robust.
This is being underpinned by the current strength in alterations and additions activity, demand for detached housing, rapid growth in e-commerce and logistics, and the recovery of the US automotive industry.
Management also advised that its major investment project at North Star is on track, group cash flow remains robust, and its balance sheet is in excellent condition.
Though, it has warned that there remains a lot of uncertainty in the current environment.
It notes that potential second and third COVID-19 waves could disrupt demand, supply chains, and operations, and weigh on its performance in the future. In addition to this, it warned that broader macroeconomic weakness would have the potential to dampen demand for its products.
But as things stand, management appears confident that its first half profits will be up notably over the second half of FY 2020.