BlueScope Steel Limited (ASX: BSL) shares have been soaring lately. Could today’s FY21 results catapult BlueScope shares even higher?
Bluescope produces and markets a range of high value coated and painted steel products across the globe.
BSL share price
FY21 headlines
BlueScope recorded a massive improvement in net profit after tax of $1.19 billion, a $1.10 billion jump over FY20. How did it pull this off?
A solid increase in revenue from $11.3 billion to $12.9 billion helped BlueScope’s cause. This was driven by a significant leap in sales within the North Star BlueScope Steel, which produces hot-rolled coil in the US, located in one of the largest scrap regions in North America. All I can say, it’s true to its name.
Demand from building and construction customers in Australia, Asia and North America also contributed heavily to the increase in revenue.
Investors should be mindful that unusually higher steel prices played a strong role as well.
The only detractor was the Buildings North America segment, which meets the low-rise non-residential construction needs of engineering and manufacturing customers.
Raw materials and consumables used stayed relatively the same as a percentage of revenue. And employee expenses did not differ too much.
As a result, BlueScope is declaring a final dividend of 25 cents per share.
What’s ahead for BlueScope?
In light of rising prices for steel in North America, the company expected underlying earnings before interest and taxation (EBIT) to be in the order of $1.8 billion to $2 billion for 1H FY22.
Management has placed a caveat though, noting their uncertainty on how long such strong conditions will be sustained.
The steel producer said the outlook is dependant on steel prices, foreign exchange and market condiitons.
Final thoughts
As BlueScope indicated, its flying high on favourable conditions and management is unsure how long this will last.
They are smiling and cautiously optimistic in the medium term but are fully aware of the uncertainty clouding the long-term outlook.
As you can probably tell, BlueScope’s future growth is reliant on the current favourable waves to keep rolling.
In line with the Rask Investment Philosophy, I prefer businesses that are more condition-proof and capable of producing sustainable long term growth.
In saying that, if your circle of competence lies in the steelmaking industry, BlueScope could be a sound investment if the steel waves continue to get bigger.
I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access all of our free analyst reports.
