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BlueScope Steel Ltd FY19 Results – Weak Result

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

BlueScope Steel Ltd. (ASX: BSL) is a flat product steel producer. BlueScope was de-merged from BHP Billiton on 22 July 2002 as BHP Steel was renamed BlueScope Steel on 17 November 2003. BlueScope has a moderate global presence with more than 100 facilities in 18 countries, employing around 14,000 people serving thousands of customers. BlueScope has a market capitalisation of $6.3 billion.

bluescope ltd

What are the results from BlueScope FY19?

Today (Monday 19 August 2019) BlueScope released its FY19 annual results. The main points are as follows:

  • Sales revenue from continuing operations for FY19 is $12,532.8 million, up 9 per cent from FY18.
  • Underlying NPAT for FY19 is $1,016 million, up 17 per cent from FY18.
  • Underlying EBITDA for FY19 is $1,761.4 million, up 7 per cent from FY18.
  • Final ordinary dividend for FY19 is 8.0 cents, same as FY18.
  • Underlying earnings per share for FY19 is 180.6 cents, up 22 per cent from FY18.
  • Continuation of buy-back of up to $250 million during 1H FY2020.

Specific results on company operations are as follows:

  • Net cash / (debt) for FY19 is $692.7 million, up 989 per cent from FY18.
  • Underlying EBIT for North Star for FY19 is $654.7 million, up 52 per cent from FY18.
  • Underlying EBIT for Australian Steel Products for FY19 is $535.4 million, down 9 per cent from FY18.
  • Underlying EBIT for Building Products Asia and North America for FY19 is $134.2 million, down 27 per cent from FY18.
  • Underlying EBIT for Buildings North America for FY19 is $53.4 million, down 28 per cent from FY18.
  • Underlying EBIT for New Zealand and Pacific Steel for FY19 is $80.6 million, down 28 per cent from FY18.

 

What were the drivers of this result?

North Star:

  • The positive North Star result was driven by strong steel spreads combined with favourable foreign exchange translation.

Australian Steel Products:

  • Australian Steel Products did not perform very well in FY19 because of a weakening in domestic volumes due to some slowing in construction activity and distribution channel destocking, as well as high short-term costs with operation instability.

Building Products Asia and North America:

  • The negative result in Building Products Asia and North America was because in ASEAN and North America, margins were lower due to higher steel feed costs combined with weaker despatch volumes.

New Zealand and Pacific Steel:

  • The negative result from this section was mainly driven by higher raw material and electricity costs.

Buildings in North America:

  • Another negative result, mainly due to lower despatch volumes and an unusually high contribution from BlueScope Properties Group in FY2018.

 

What is the outlook for BlueScope?

BlueScope management noted that “in the current half, the Company expects weaker commodity steel spreads in North Star and ASP, leading to an underlying EBIT around 45 per cent lower than 2H FY2019 (which was $499 million). Expectations are subject to spread, FX and market conditions”.

However, on the positive side, BlueScope management also noted, “This is the short term outlook. BlueScope is now a very resilient, global company with a strong balance sheet and high quality assets which provide the capacity to withstand and potentially take advantage of tough cyclical conditions”.

 

What is the market reaction?

The initial market reaction to BlueScope FY19 results is negative. Today (19 August 2019) BlueScope is down 6 per cent and is currently trading at a price of A$11.36 (10.40am). BlueScope has a P/E ratio around A$4 and has an annual dividend yield of 1.1 per cent.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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