The BlueScope Steel Limited (ASX: BSL) share price crashed as much as 9% today after the steel producer released its half-year FY20 results.
At the time of writing, BlueScope shares are trading 7.73% lower at $12.65.
Sharp decline in profitability
BlueScope reported a very sharp 70% decline in reported net profit after tax (NPAT) to $185.8 million compared to the prior corresponding period (pcp).
Underlying earnings before interest and tax (EBIT) for the half was also significantly down, coming in 64% lower than the pcp at $302.4 million, down from $849.6 million in 1H19.
These disappointing results were driven by the decline in commodity steel spreads which the company had flagged to the market in August last year. However, Bluescope did point out that with improving conditions at the latter part of 1H20, the company finished the period slightly stronger than its market guidance.
North Star delivered underlying EBIT of $114.5 million, a 72% drop on the pcp, while Australian Steel Products came in with an underlying EBIT result of $127.9 million, down 60%. The company noted that steel spreads had been compressed, and this was driven by weaker regional steel prices as well as higher raw material costs.
The Building Products segment for Asia and North America recorded underlying EBIT of $80.2 million, up 2% on the pcp, driven by improved margins. In addition, there was reported to be continued benefits from the cost reduction and manufacturing improvement program that the division currently has in place.
Coronavirus update
The group's China businesses were all reported to be operational, with the exception of its Hubei sales office. Most employees were reported by the company to have returned to work and no cases of COVID-19 had been reported within BlueScope China.
Outlook for the remainder of FY20
Commenting on the results, BlueScope Managing Director and CEO, Mark Vassella said:
"Underlying demand across our major markets is generally stable, however the economic impact of COVID-19 has created uncertainty for our Asian businesses and Asian steel spreads in the near term. The impact to US Midwest spreads, if any, is unclear. We are aware of some impacts to our supply chains which, to date, have been mitigated; we continue to monitor the situation."
Due to these factors, the company stated that it anticipates second-half underlying EBIT to be similar to H1FY20, which was $302.4 million. The company further commented, however, that these expectations are subject to spread, foreign exchange and market conditions.
