Cost cutting helps BlueScope double profit in first half

Significant cost cutting measures and a favourable Aussie Dollar have led BlueScope Steel to a net profit after tax of more than $200m in the first half, a five-year high.

BlueScope’s NPAT figure of $200.1m, announced on Monday, is a $107.4m increase from the first half last year – a difference of 116%.

The company announced an underlying net profit after tax of $119.0m, up 47%, and an underlying earnings before interest and tax of $230.1m, up 35% from this time last year.

Both figures were more substantially up on the corresponding figures for the most recent prior half, with underlying NPAT up 125% on the second half of 2014/15, and underlying EBIT up 76% on that period.

BlueScope managing director Paul O’Malley said the company had continued good momentum through the half, and this had corresponded into strong earnings growth.

“Today’s result is the outcome of a deliberate strategy that has been underway for over a year,” O’Malley said.

“Our focus on costs and lifting the performance of steelmaking operations in Australia and New Zealand is paying off.

“Right across the portfolio, our people are executing the strategy well.

“We continue to invest in and grow our premium branded steel business – their results rose strongly.

“And we have a reinvigorated focus on innovation to drive the next generation of products and solutions for our customers.”

O’Malley praised the company’s shareholders for allowing it to execute its strategy to keep the Port Kembla steelworks open late last year, after workers voted in favour of a union plan to sacrifice 500 jobs for the same purpose a month earlier.

“With the support of all our stakeholders we have been able to pursue Plan A at Port Kembla Steelworks,” O’Malley said. “This occurred despite the continuing headwinds of global overproduction causing weaker commodity steel prices and spreads.”

BlueScope will look to continue its cost-cutting success in the next 18 months.

“Our relentless focus on cost reductions in Australia must continue,” O’Malley said, “and we are now targeting $270m in FY2017.”

He concluded: “The results today confirm our strategy is working; it has delivered substantial bottom line benefits in the half.”

BlueScope’s recent success comes in stark contrast to the ongoing struggles of iron ore and mining consumables business Arrium, with both businesses once spin-offs of BHP Billiton.