08/16/2021 | Press release | Archived content
BlueScope today reported FY2021 net profit after tax (NPAT) of $1.19 billion, a $1.10 billion increase over FY2020.
Confirming a record performance, Managing Director and CEO, Mark Vassella said, 'Underlying EBIT for the year was $1.72 billion, tripling that of FY2020. This is an impressive result. All operating segments performed exceptionally well - driven by strong demand and steel spreads. Earnings momentum built throughout the year, with the Company delivering $1.19 billion in underlying EBIT in the second half.'
Operating cash flow for the year, after capital expenditure, was $898 million including investment expenditure on the North Star expansion. The balance sheet finished the half in a strong position with $798 million net cash.
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The results mean BlueScope will now accelerate its strategic growth plans. 'Our balance sheet strength and cash flows give us confidence to implement a strategy that will see BlueScope:
'For shareholders, today we are announcing a final unfranked dividend of 25 cents per share, up from 8 cents in the corresponding period last year, a special unfranked dividend of 19 cents per share and an on-market buy-back of up to $500 million.
'Today's outstanding results are the product of our clear strategy and disciplined financial framework, and the operating leverage of our diverse portfolio. Most importantly, the performance is a tribute to the efforts of our 14,000 people across all 18 countries who have served customers and communities throughout the most difficult pandemic circumstances,' Mr Vassella said.
Mr Vassella said BlueScope would actively use the strength of its balance sheet and cash flow to build a growth pipeline, leveraging trends like growth in detached residential construction, e-commerce and logistics, and national infrastructure programs.
Specific growth opportunities include:
A core part of BlueScope's Financial Framework is balancing the competition between capital growth initiatives and returns to shareholders with the objective of distributing at least 50 per cent of free cash flow in the form of consistent dividends and on-market buy-backs.
The Board's intention is to increase annual ordinary dividends and will now target 50 cents per share per annum (i.e. 25 cents per share per half). For FY2021, the dividend will be comprised of the 25 cents per share final ordinary dividend and 19 cents per share special dividend announced today, complementing the 6 cents per share interim ordinary dividend paid in March 2021.
A share buy-back of up to $500M has been approved to be conducted over the next twelve months. The timing and value of shares purchased will be dependent on prevailing market conditions, share price and other factors.
BlueScope made a further significant strategic announcement today, stating its goal of net zero greenhouse gas emissions by 2050 covering operational scope 1 and 2 GHG emissions across its global operations. Achieving the 2050 net zero goal is highly dependent on several enablers, including the commerciality of emerging and breakthrough technologies, the availability of affordable and reliable renewable energy and hydrogen, the availability of quality raw materials and appropriate public policy settings.
Mr Vassella said the Company would allocate up to $150 million over the next five years on near-term action on climate change. 'This immediate capital allocation will fund our technology plan that seeks to optimise current operating assets and prepare for emerging and breakthrough technologies. Immediately, we'll focus on production efficiencies such as increased usage of scrap, indigenous gases and renewable energy. We are actively investigating the use of biochar as a replacement for a proportion of pulverised coal injection into the blast furnace, and are seeking government co-funding for this and other pilot projects, including a hydrogen electrolyser to trial hydrogen injection in the blast furnace. And we will be developing government and industry partnerships, collaborative opportunities with suppliers, and breakthrough R&D projects.
'We are serious about playing our role in meeting the decarbonisation challenge. Our recent appointment of a Chief Executive Climate Change was a significant step forward; this capital allocation is the second step and there is more to come,' Mr Vassella said.
He said the Company would reveal details of its climate action plan including a decarbonisation pathway and a capital planning process to underpin that, when it releases its Climate Action Report in early September.
As announced in February, BlueScope is exploring options for the future configuration of the Port Kembla Steelworks, once Blast Furnace No.5 comes to the end of its current operating campaign, which is expected to occur sometime between 2026 and 2030.
The initial focus is on the option to reline the currently mothballed No.6 Blast Furnace. The pre-feasibility assessment is well progressed as part of a rigorous multi-stage capital investment evaluation process, with further updates to be provided during 1H FY2022. The highly indicative capital cost is around $700-$800M, likely to be spent over FY2023 to FY2025.
This pre-feasibility work aligns with BlueScope's climate strategy and technology pathway. As part of the reline assessment, latest technologies available to reduce GHG emissions intensity will be evaluated as an integral part of the project. The strong earnings and cash flow capability of our Australian Steel Products business provides significant flexibility and optionality to adopt new technologies and iron making configurations as and when they are technically and commercially viable.
At the beginning of 1H FY2022, order and despatch rates in key markets remain robust. Spot steel spreads in North America are materially higher than both 2H FY2021 and longer-term averages. In light of these unusually strong conditions, the Company expects underlying EBIT in 1H FY2022 to be in the range of $1.8 billion to $2.0 billion.
While in the medium term we see supportive industry and end use demand trends, it is uncertain how long the current robust conditions will be sustained.
Expectations are subject to spread, foreign exchange and market conditions.