BlueScope (ASX:BSL) share price tumbles despite 'best half-year' ever

Here's why the producer of steel products' stock is sliding today.

| More on:
A steel worker peers out from under his protective headwear which is tipped back on his head as he stares solemnly straight ahead with steel production equipment in the background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The BlueScope share price opened 1.9% lower at $18.70 this morning after the release of the company's first half earnings
  • Over the 6 months ended 31 December, the company's profits, revenue, and earnings all saw notable increases
  • Its CEO and managing director said the result was "clearly the best half-year performance BlueScope has produced in its 20-year history as a listed company".

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.

Motley Fool contributor Brooke Cooper 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.

More on Earnings Results

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Earnings Results

ASX 200 stock jumps 10% on strong FY24 results

How did this KFC restaurant operator perform in FY 2024?

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just slashed its final dividend by 23%

This retailer had a tough time during the 12 months. Here's how it performed.

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »

increasing rural asx share price represented by happy looking sheep
Earnings Results

Why is this ASX All Ords stock staying strong as profits crash 76%

How is this company's share price marching higher after mowing down more than three-quarters of its profits compared to a…

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces as they react to the action in front of them in a home setting.
Earnings Results

Guess which ASX 200 stock is surging 11% on an 'outstanding' result

This ASX gaming giant just posted a 17% jump in profits, and its shareholders are basking in the glory.

Read more »