BlueScope Steel (BSL) – Shipping steel

BlueScope Steel produces and markets metal coated and painted steel building products in Australia, New Zealand, Asia, North America and elsewhere. The company was spun out of BHP when BHP divested its steel operations in 2003, and is headquartered in Melbourne.

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BlueScope Steel (BSL) reported first-half FY25 earnings above market expectations, as a surge in volumes of its higher-margin COLORBOND products allowed the Australian steel products division to outperform its US operations where volumes dropped sharply, although the steelmakers guidance for second-half earnings fell short of consensus forecasts. Management also flagged planned cost savings of $200 million a year and a target of an additional $500 million in annual earnings from growth initiatives by FY30.Using the numbers laid out by the company in the result, this implies earnings before interest and tax (EBIT) of $1.7–2.4 billion, significantly above prior long-term markets estimates centred around $1.4 billion.

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The US market is still BlueScope’s preferred market to invest its capital, but management highlighted that the impact of new tariffs imposed by the new American administration were not all one-way – US steel prices were expected to benefit but there was uncertainty on the effect of the new impost on American imports of Australian products. As part of this longer-term framework, BlueScope has delayed plans for investment in US midstream assets to allow it to consider its options in a market where industry consolidation is afoot.

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Based on assumptions of a mid-cycle steel spread over the period, Ord Minnett views the company’s FY30 earnings growth and cost-savings targets as achievable. We raise our target price on BlueScope to $27.50 from $24.00 and reiterate our Accumulation recommendation.

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