Growing Asian Competition causes a decrease in BlueScope’s profits and earnings
Despite facing challenges in its Australia arm, the North American division of the business, which is of a comparable size, was not as severely impacted.
Factors such as stiff competition from Chinese and Indonesian steel producers and a decline in the Chinese housing market led to a decrease in BlueScope Steel’s net profit to $805.7 million (US$538.2 million) for the year ending on June 30, compared to $1 billion the previous year.
Nevertheless, the company has declared that shareholders will receive a fully franked dividend of 30 cents per share for the second half of the financial year. The board aims for a dividend of 60 cents per share annually.
Mark Vassella, the Managing Director and CEO, highlighted that Earnings Before Interest and Taxation reached $1.34 billion, a figure lower than the previous year but demonstrating BlueScope’s resilience. The strength of the U.S. steelmaking and global downstream operations helped offset the challenges faced by the Australian and New Zealand steelmaking businesses due to bottom-of-cycle Asian steel prices.
Vassella mentioned that Chinese steelmakers maintained high production levels despite weak domestic construction, resulting in oversupply to Asian markets.
He expressed his belief that some Chinese steel companies may not be operating sustainably and could be at break-even or loss positions financially.
Softening demand from the Australian construction industry, reflected in reduced housing approval numbers, also contributed to the company’s challenges. BlueScope, however, anticipates sustained robust housing demand in the medium term.
The company acknowledged inflationary pressures, including rising electricity costs, as additional challenges.
Although still one of Australia’s significant greenhouse gas emitters, the steel producer managed to reduce emissions intensity by 12.2 percent against its FY2018 baseline, aligning with its 2030 target.
This reduction was primarily driven by expansion at North Star, along with operational and process efficiencies at Glenbrook and Port Kembla Steelworks.
BlueScope is actively working on multiple projects to pave the way for a low-carbon future, including collaborations with Rio Tinto and BHP, and the Australian Direct Reduced Iron options study (Project IronFlame).
While its Asian operations saw a 13 percent increase to $159.6 million, the New Zealand and Pacific division experienced a 66 percent decline to $43.7 million. Earnings from the North American operation only dipped by 3 percent, reaching $935.1 million.
BlueScope’s response to these conditions includes a heightened focus on managing costs and revenue performance, as well as strategic capital expenditure timing. This approach is particularly crucial for the Australian business to ensure ongoing resilience in an environment of sustained low prices and escalating costs.
The company projects its first-half earnings for FY2025 to be in the range of $350 million to $420 million.
