Australian steel manufacturer BlueScope Steel Limited (ASX: BSL) has this morning unveiled an increase in revenues and profits.
Here's what you need to know:
- Revenues rose 7% to $8.57 billion
- Underlying earnings before interest and tax (EBIT) jumped 14% to $301.8 million
- Underlying net profit after tax (NPAT) gained 9% to $134.1 million
- Dividends for the full year totalled 6 cents per share fully franked, up from no dividend payments in the prior year. The shares will trade ex the 3 cents dividend on September 17 with payment to shareholders on October 19.
- Gearing remained low at just 5.5%
- Net tangible assets (NTA) per share added 3% to $6.35
The financial year (FY) 2015 results are certainly positive, however, what really concerns investors is what the long-term future holds for BlueScope and in particular the viability of its Australian manufacturing operations.
Here's what management had to say about strategy:
"The Company's strategy is to focus on growing premium branded steel businesses with strong channels to market, and on delivering competitive commodity steel supply in its local markets."
To achieve the above, management is targeting $200 million in annual permanent cost savings within its Australian steelmaking business by 2017; likewise within the New Zealand steelmaking operations NZ$50 million in permanent cost savings are being targeted.
Most importantly however, management noted that:
"The Company is also reviewing the ongoing viability of steelmaking in both Australia and New Zealand and comparing the existing business model with an alternative business model of importing quality hot rolled coil and billet substrate."
Buy, Hold, or Sell?
Management's guidance is for the first half of financial year 2016 to be similar to the second half of financial year 2015.
With the share price at $3.38, management appearing intent on putting BlueScope onto a sustainable business model for the future and with the stock trading at a significant discount to NTA now could be the time for contrarian investors to take a close look at BlueScope Steel.
