The BlueScope Steel Limited (ASX: BSL) share price has surged 11% in early trading after giving a FY21 update.
It describes itself as a global leader in premium branded coated and painted steel products – the third largest manufacturer of painted and coated steel products globally. You may have heard of brands like Colorbond Steel and TrueCore Steel.
BlueScope’s FY21 update
BlueScope announced today that it expects its underlying EBIT (click here to learn what EBIT is) is expected to be around $340 million, which is 30% higher than what was generated in the second half of FY20.
The Australian steel products division is expected to deliver a slightly better result with continued strong demand. There has been an improvement in East Asian spot steel prices in recent months.
In the US, the company said North Star continues to despatch at full capacity with automotive volumes returning to normal across the half. Realised steel spreads have bottomed and are improving driven by a significant increase in the benchmark Midwest hot rolled coil prices in recent months. However, FY21 first half profit is expected to be lower than the second half.
The building products Asia & North America segment is expected to be a lot better thanks to robust across ASEAN (south east Asia) and India. Though there could still be COVID-19 impacts.
The buildings North America segment is performing better than initial expectations.
Management comments
BlueScope CEO Mark Vassella said: “Despite the global disruption caused by COVID-19, we’ve had a solid performance from all our operating segments for the three months to 30 September. This is a clear demonstration of the effectiveness of BlueScope’s strategy and the resilience of our asset portfolio.
“Benchmark steel spreads have improved and demand in most of our markets is robust. This has been supported by current strength in alterations and additions activity, demand for detached housing, rapid growth in e-commerce and logistics, and the recovery of the US automotive industry, which is a key end-market for North Star.
“Our major investment project at North Star is on track, group cash flow remains robust and the balance sheet is in excellent condition.”
Summary
This was a solid update by BlueScope, I’m not surprised to see the share price rise so much in response. However, I’m not sure if it’s a buy today. It’s now at the pre-COVID-19 price and I’m not sure how much further the company can grow.
There are ASX growth shares that I think that can deliver better long-term returns such as Pushpay Holdings Ltd (ASX: PPH).
