The BlueScope (ASX: BSL) share price is up more than 1% after giving investors some profit guidance for FY20.
What is BlueScope?
BlueScope Steel Limited is the steel producer which spun out of BHP in 2002 and has operations in Australia and throughout the oceanic region. It’s perhaps best known for its Colourbond range of products.
BlueScope’s FY20 profit guidance
BlueScope announced today that it expects to deliver underlying EBIT (click here to learn what EBIT means) for around $560 million, with expectations that the June half will generate around $260 million of EBIT.
Domestic demand for Australian steel products was resilient with despatch volume similar to the first half. North Star has seen weaker prices due to the shutdowns from March to May, though capacity is still being utilised above 90%.
The Building Products Asia and North America segment has delivered a result reasonably similar to the first half of FY20 after good performance in North America and Thailand. But there was weaker demand from other Asian countries apart from China.
In Buildings North America, the unfavourable impact of seasonality with slowing demand and project delays as a result of COVID-19.
New Zealand and Pacific Steel’s performance was impacted by the compulsory government shutdown of operations and ongoing cost pressures.
Due to the difficulties faced in the New Zealand and Pacific Steel. BlueScope said that based on expectations of lower sustainable earnings in the longer term, it is going to reduce its carrying value of New Zealand and Pacific Steel by $200 million. The company is doing a strategic review of its NZ business.
Summary
The company said that the current environment is very uncertain due to COVID-19 impacts. Steel spreads are lower at the beginning of FY21 compared to the average for the second half of FY20. I hope BlueScope can do well, but it’s not the type of business I’d invest in.
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