BlueScope’s profit soars, shares slide

SHARES in BlueScope Steel slid more than 20 per cent despite its full year profit more than doubling, after the company offered a rare cloudy outlook on the back of rising costs.

The steelmaker expects underlying earnings in the first half of the 2018 fiscal year to be about 80 per cent of the earnings it reported in the second half of FY17.

A number of macro factors, including higher scrap prices in the US, lower steel margins in the Australian market and rising energy costs are expected to weigh on growth.

As BlueScope reported its 2016-17 results yesterday it revealed it was being investigated by the ACCC for potential cartel conduct relating to the supply of steel products in the domestic market between late 2013 and mid-2014.

It also said chief executive Paul O’Malley, credited with helping turn around the steelmaker from the brink of closure two years ago, would retire at the end of this year.

The negative news wiped off more than a fifth of the company’s market value.

Australia’s biggest steelmaking business posted a fullyear net profit of $715.9 million, just over double the result a year earlier, driven by a standout performance by its US-based North Star business.

Sales revenue for the year rose 17 per cent to $10.6 billion.

“Our strategic initiatives implemented in the last two years are delivering strong cashflow,” Mr Malley said.

The company outlined a fully-franked final dividend of five cents a share, up two cents from a year ago. It will perform a further on-market share buyback of up to $150 million in the first half of 2017-18.

But Mr Malley warned that a sharp increase in Australian energy costs risked undermining the recent cost and productivity improvements by the company, blaming failure of energy policy for the debacle.

Its electricity costs will have surged 93 per cent to $113 million in two years by the end of 2017-18, and gas by 33 per cent to $32 million.