BlueScope Steel Shares Decline on Profit Warning
Australian steelmaker BlueScope Steel has alerted investors to a significant drop in its first-half profit due to rising costs and softening demand.
BlueScope Steel issued a profit warning on Tuesday, anticipating a substantial decrease in its earnings for the first half of the fiscal year. The Australian steel manufacturer cited escalating costs and a weakening market as primary drivers for the projected decline.
The company expects its underlying earnings before interest and taxes (EBIT) for the first half of fiscal 2024 to be in the range of AUD$450 million to $500 million. This figure represents a considerable drop from the AUD$939 million EBIT recorded in the same period of the previous year.
BlueScope attributed the downturn to a confluence of factors, including higher input costs for raw materials and energy, as well as a softening in demand across several of its key markets. The company's North Star project in Ohio, United States, which is undergoing expansion, is also expected to incur higher costs than initially forecast, further impacting profitability.
Despite the near-term challenges, BlueScope reaffirmed its commitment to its strategic growth initiatives. The company indicated that the North Star expansion remains on track for completion, although revised cost estimates will be provided in its upcoming interim results. The projected increase in costs for the North Star project is estimated to be an additional $100 million, bringing the total project cost closer to $1.3 billion.
In response to the profit warning, shares of BlueScope Steel fell sharply in early trading on Wednesday, reflecting investor concerns about the company's short-term financial outlook. The company is scheduled to release its full interim financial results on February 20, at which time more detailed information regarding its performance and outlook is expected to be disclosed.