Posted on 23 May 2016
BlueScope Steel has sharply upgraded its second-half profit forecast as its cost-cutting program beats expectations and iron ore trades well above its earlier projections.
The ASX-listed steelmaker now expects to deliver a pre-tax profit of around $270 million in the six months to June 30, up 29 per cent from earlier guidance of $209m.
The firm's shares jumped 10 per cent on the news, rising to $6.45 at 10.10am (AEST).
Should the new second half forecast come into fruition it would represent an improvement from its $230.1m profit result for the first half, which in itself represented the firm's best result in five years.
The first-half result also came in above expectations as the firm raised its guidance by $50 million just a week and a half prior to the release of the numbers.
The group's prior outlook for the second half, detailed in February, had been pegged to an iron ore price of just $US40 a tonne, but with prices holding above $US55 the firm has been able to realise stronger earnings.
BlueScope also said its cost reduction program, which was implemented to address the weaker commodity price environment, was paying higher dividends than it had anticipated.
"The stronger performance has been driven largely by earlier delivery of targeted cost reductions, higher steel and iron ore prices, better than anticipated Australian domestic despatches and better than expected margins in the international businesses," the group said, adding the new forecast was subject to market conditions remaining fairly steady through the final five weeks of the financial year.
The steelmaker also confirmed the resumption of full production at its North Star plant in Ohio, with repairs forcing a $5m hit to the bottom-line, as tipped by the company on May 9.
