BlueScope Steel share price plummets 10% on $1b profit hit

Softening steel prices have taken their toll on BlueScope's earnings.

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Key points

  • The BlueScope share price is tumbling 10% to trade at $17.825 right now
  • It comes after the company dropped its first half earnings, detailing a 64% drop in profits 
  • The $1 billion dint in its profit come on the back of lower earnings amid softening steel prices

The BlueScope Steel Limited (ASX: BSL) share price is tumbling lower this morning after the company released its earnings for the first half of financial year 2023.

Shares in the S&P/ASX 200 Index (ASX: XJO) steelmaking company are currently down 10.07%, trading at $17.825 each.  

BlueScope Steel share price plunges as profit tumbles 64%

Here are the highlights of the company's half-year report:

  • $599 million of net profit after tax (NPAT) – down 64% on the prior comparable period's (pcp) $1.64 billion NPAT
  • $9.32 billion of sales revenue – a 1% drop
  • $851 million of underlying earnings before interest and tax (EBIT) – down 61%
  • Earnings per share (EPS) came to $1.282 – a 61% slump
  • 25 cent per share fully franked interim dividend declared – flat with the pcp's unfranked offering

The company's earnings were dinted amid lower steel prices last half.

It posted $751 million of operating cash flow after capital expenditure for the period. It also closed the first half with a $606 million net cash position.

Its latest dividend also marks its first franked offering since 2018. The company has now exhausted its Australian tax losses and restarted tax payments.

What else happened last half?

Staying at home, the company's Australian steel products business delivered underlying EBIT of $274 million – a 55% fall on the prior half. It noted dispatches softened as customers lowered inventories amid falling prices.

Its North Star business' underlying EBIT, meanwhile, tumbled 70% to $202 million, but its North American buildings and coated products leg saw underling EBIT jump 118% to $173 million.

BlueScope bought back $120 million of its own stock last half. Its board also approved the buyback's extension today, allowing up to another $380 million to be bought back in the coming year.

What did management say?  

BlueScope managing director and CEO Mark Vassella commented on the earnings driving the company's share price, saying:

This result demonstrates the resilience of our diversified business model, as the strength in many of our downstream businesses and operations partly offset the impact of steel spreads softening from record levels.

What's next?

Looking forward, BlueScope expects its underlying EBIT to come in between $480 million and $550 million in the second half as softer Asian and Midwest steel spreads take their toll, along with spread, foreign exchange, and market conditions.

That would see its full-year underlying EBIT come in at around $1.3 billion to $1.4 billion.

BlueScope Steel share price snapshot

While its earnings have been dinted in recent months, the BlueScope share price has been performing well.

The stock has gained 8% since the start of 2023. Though, it's currently 4.6% lower than it was this time last year.

Meanwhile, the ASX 200 has gained around 6% year to date and 1.6% over the last 12 months.

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 Scott Phillips.

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