The BlueScope Steel Limited (ASX: BSL) share price is in the red after the company released its earnings for the first half of financial year 2022.
At the time of writing, the BlueScope share price is $18.74, 1.78% lower than its previous close.
Here are the highlights of the company's earnings results:
BlueScope Steel share price slips despite profits surging
- Net profits after tax (NPAT) of $1.64 billion – up from $1.31 billion in the prior comparable period
- Total revenue of around $9.4 billion – up from around $5.8 billion
- Underlying earnings before interest and tax (EBIT) came to $2.2 billion – $1.67 billion higher
- Underlying pre-tax EBIT return on invested capital of 43.7% – up from 11%
- Unfranked 25 cent interim dividend announced
- Ongoing share buyback increased by up to $700 million over the next 12 months
At the period's end, BlueScope had $696 million in net cash. It also ended the period with an operating cash flow of $688 million – up from $422 million
So far, the company's share buyback – originally worth up to $500 million – has seen $285 million of stock purchased.
Over the first half, BlueScope's North Star business brought in underlying EBIT of around $1.2 billion – 1,665% more than it did in the first half of financial year 2021.
Its Australian Steel Products segment saw $688 million of underlying EBIT, while its Building Products Asia and North America fetched $266 million. That represents increases of 165% and 77% respectively.
Meanwhile, the company's New Zealand and Pacific Islands segment saw underlying EBIT of $86 million – a 50% increase.
However, its Budlings North America and Corporate and Eliminations segments' underlying EBIT dropped 74% and 7% respectively – reaching $18 million and a loss of $82 million respectively.
What else happened in the first half?
During the first half, BlueScope announced collaborations with Rio Tinto Limited (ASX: RIO) and Shell to work towards net zero.
Its partnership with the former sees it working to create low emissions steel. With the latter, the company is exploring renewable hydrogen at Port Kembla.
Also at Port Kembla, BlueScope began a feasibility assessment to reline and upgrade the steelwork's No. 6 Blast Furnace last half.
The project will secure the company's domestic ironmaking needs from 2026 and is expected to cost around $1 billion.
It also acquired MetalX – a United States-based two site ferrous scrap steel recycling business – for US$240 million. The business supplies 20% of the scrap material used at BlueScope's North Star mini-mill.
The first half also saw the company continue its expansion of the North Star mini-mill. The project cost BlueScope $165 million over the 6 months ended 31 December.
Finally, the company announced its Port Kembla Steelworks and its steel processing sites have been given ResponsibleSteel site certification today.
The steelworks is the first site in the Asia Pacific and the fourth site in the world to be given the certification.
What did management say?
BlueScope managing director and CEO, Mark Vassella commented on the company's first-half results, saying:
Underlying EBIT for the half year was $2.20 billion, clearly the best half-year performance BlueScope has produced in its 20-year history as a listed company.
Demand in key segments, especially in building and construction, has been strong, coupled with particularly robust margins driven by increased steel prices in Asia and the US.
The balance sheet remains strong with $696 million net cash, which combined with our strong cash flow, gives us confidence to invest for the long-term growth and resilience of the group. BlueScope is well positioned for a low carbon future where it can continue to deliver strong returns to shareholders.
What's next?
Interested in the BlueScope share price? Here's what the company is expecting from its full-year results.
BlueScope expects to record between $1.2 billion and $1.35 billion of underlying EBIT for the second half of financial year 2022.
That would make the current half its second-best half-year performance.
However, that expectation is subject to spread, foreign exchange, and market conditions. There are also elevated risks brought about by the pandemic.
The company has noted COVID-19 could impact operations, supply chains, and demand.
Additionally, volatility in steel prices and spreads, as well as the current geopolitical environment could hamper its performance.
BlueScope share price snapshot
The BlueScope share price had a rough start to 2022. It has fallen 9% year to date.
However, it is still 10% higher than it was this time last year.
