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BlueScope upgrades guidance but is the best yet to come?

•5-Bluescope

The BlueScope Limited (ASX: BSL) share price is rising after it announced higher earnings guidance for the first half of FY22.

BlueScope FY22 half year guidance

The company is now expecting underlying earnings before interest and tax (EBIT) for the first half of FY22 to be between $2.1 billion and $2.3 billion.

This updated guidance is above the previous range, which was $1.8 billion to $2 billion.

BlueScope noted that the upgraded guidance is subject to spread, foreign currency movements and market conditions.

Why is the EBIT looking so good?

BlueScope said that some of the main reasons for the improved outlook are:

  • Australian steel products have experienced an increase in domestic volumes, particularly in higher-value products for the building and construction sector.
  • Strong demand experienced by its North America coated products business.
  • Its mini-mill in the US, North Star, has had stronger-than-expected hot rolled coil prices and spreads.
  • Strong steel prices.

The company said that volumes and prices are continuing to outperform expectations. It is seeing a further increase in net working capital employed in the business during the current half.

Managing director and CEO Mark Vassella said:

“The business continues to benefit from strong spreads, prices and demand. Amidst the ongoing challenges of the COVID-19 pandemic, the BlueScope team continues to do an outstanding job.

“The performance continues to demonstrate the value of our business model, and further underpins our capacity to invest for long-term sustainable earnings and growth, to position the business for a low-carbon future and to deliver solid returns to shareholders.”

New board members

BlueScope also announced that it has appointed two internationally based independent non-executive directors, effective from 1 January 2022.

The new board members are Ms K’Lynne Johnson, who is based in the US, and Mr Zhi-Qiang Zhang who is close to the Asian market, with experience in the Chinese market.

BlueScope said that with more than half of its revenue now coming from international markets, it is important that its board better reflects all the regions that it operates in.

Summary thoughts on the BlueScope share price

BlueScope is experiencing buoyant conditions and prices. It’s capitalising on this with a high level of expected profit in the first half of FY22.

However, the question of whether the BlueScope share price is good value depends on how long conditions remain like this (or even get stronger). It’s hard to say, so I usually look for ASX growth shares that have more predictable profit growth potential.

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