Vulcan Steel (ASX:VSL) share price surges 8% higher on guidance upgrade

Vulcan Steel has started FY 2022 very strongly…

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The Vulcan Steel Ltd (ASX: VSL) share price has started the week strongly.

At the time of writing, the steel producer’s shares are up 8% to $8.75.

Why is the Vulcan Steel share price storming higher?

Investors have been bidding the Vulcan Steel share price higher this morning following the release of a trading update.

Positively, that trading update reveals that the recently listed company is outperforming its prospectus forecasts in FY 2022.

According to the release, Vulcan’s overall revenue is up 35% year-on-year for the five months to 30 November. This has been driven by a 42% increase in Steel segment revenue and a 22% lift in Metals segment revenue.

And while management notes that there is volume uncertainty during the December and January holiday period, that isn’t stopping it from upgrading its earnings guidance.

What is the upgrade?

Vulcan now expects to deliver pro forma EBITDA in the range of NZ$174 million and NZ$184 million and net profit in the range of NZ$93 million to NZ$100 million.

This compares to its prospectus forecast of NZ$147 million and NZ$74 million, respectively. Which means an upgrade of 18% to 25% for its EBITDA and 26% to 35% for its net profit guidance.

Vulcan’s Managing Director and CEO, Rhys Jones, commented: “Trading has been stronger than anticipated and has been broad-based across all our Australasia business units, especially in October and November as Sydney and Melbourne emerged from COVID19 restrictions. As an industrial distributor and value-added processor, we remain confident of our ability to maintain our high service level and product availability to meet the needs of our growing and diverse customer base.”

The Vulcan Steel share price is now up 23% from its November IPO listing price of $7.10 per share.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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