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HY21: Why the BlueScope (ASX:BSL) share price is on watch this morning

The BlueScope Steel Limited (ASX: BSL) share price is on watch this morning after the steel business announced a strong half-year result.

What did BlueScope report for HY21?

BlueScope reported that its underlying EBIT (EBIT explained) increased by 75% to $531 million.

The company broke down how each of its segments performed in the six month period. It said that robust demand and improving spreads delivered better results across most segments.

Australian steel products saw EBIT growth of 103% to $259 million, building products in Asia and North America experienced EBIT growth of 87% to $150 million, building in North America grew EBIT by 189% to $71 million, New Zealand and Pacific Islands EBIT jumped 345% to $57 million, North Star EBIT fell 39% to $70 million and corporate & other EBIT worsened by 33% to negative $76 million.

This helped the reported net profit after tax (NPAT) increase by 78% to $330 million. BlueScope was able to generate free cashflow of $265 million, which was an improvement of $305 million compared to the prior corresponding period.

BlueScope balance sheet and dividend

BlueScope’s board decided to declare an interim unfranked dividend of 6 cents per share.

The net cash position on the balance sheet improved to $305 million, up from $79 million at 30 June 2020.

North Star expansion

Management said that the North Star expansion is on track and set for commissioning during the June 2022 half year. The melt shop and tunnel furnace buildings completion is targeted for the second half of FY21. It will take an 18-month ramp up to the full run rate.

The projection is going to add to business significantly, which is why it’s a capital priority for the business.

Trends and outlook

BlueScope noted that Australian detached housing approvals are up 25%. This is leading to a rise in residential construction from stimulus and redirection of discretionary spending.

Australian regional net migration is up 60%. There is a shifting preference towards lower density and regional residential housing, where flat steel products are competitive.

Another observation was that there’s growth in steel intense e-commerce infrastructure with online retail growing a lot in both the US and Australia.

Government infrastructure spending is also increasing as fiscal stimulus for the economy, with significant programs announced in all of BlueScope’s operating regions.

Finally, the preference for private road travel driving is seeing a fast rebound of US car sales.

BlueScope expects underlying EBIT for the second half of FY21 to be in the range of $750 million to $830 million.

This was a strong result and it’s good to see the company doing well. However, I’m not sure how long this strong demand will continue for, so I’d rather not try to guess.

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Afterpay, Zip Co, Sezzle…

Is BNPL the opportunity of a lifetime or is the sector a ticking time bomb?

Rask's analyst has just finished a 7,500-word report, The Ultimate BNPL Sector Report, taking a deep dive into this booming ASX sector. It shines a spotlight on each of the major players. You can get the full analyst report for FREE by CLICKING HERE NOW.

Note: the report is 100% free.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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As we emerge from COVID-19, some tech companies are growing faster than ever. Rask’s investment analysts have identified 3 growth stocks set to benefit. Big time.

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