Australian steelmaker BlueScope has delivered its largest profit since 2005 and outlined billion-dollar plans to expand its United States operations.
BlueScope Steel on Monday revealed a 10% sales growth to $11.6 billion, a 15% lift in underlying EBIT to $1.3 billion, and a 27% underlying net profit after tax increase, to $826 million.
The strong FY18 results helped Australia’s largest steelmaker provide shareholders a final dividend of 8c per share, up from 5c per share at the end of FY17.
Chief executive Mark Vassella said the result was driven by strong demand and steel spreads in the US and Australia. “We have a simple and sustainable strategy across a complex and diverse business that is working,” he said.
“During the last six months, the company was upgraded to an investment grade credit rating by both S&P and Moody’s. We have subsequently refinanced our capital markets and syndicated bank debt to deliver improved cost, scale and tenor. This is just another example of the strength of the new BlueScope.”
Vassella spoke enthusiastically about the potential expansion of BlueScope’s North Star steelmaking facility in Ohio.
BlueScope has launched a “comprehensive study” to examine plans to add between 600,000 and 900,000 tonnes of annual steelmaking capacity to North Star, which currently operates at 2.1 million tonnes per annum.
The project, which forms the core of BlueScope’s growth strategy, will be decided on in FY19, with an update expected in BlueScope’s half-year presentation in February 2019.
Depending on its scale, the project would cost between US$500 million and US$700 million (A$690m to A$960m).
“Our financial principles will continue to govern our decision making around this and all capital allocation decisions,” Vassella said. “We believe the project may deliver BlueScope compelling through-cycle economics, and the study will seek to confirm that.”