Strong operating performance
RESULTS
Need To Know
- An inline earnings performance, with guidance better than feared
Commits $1.15bn capex Port Kembla blast furnace moderation over FY24-26E
Despite soft global manufacturing activity (ex-autos), steel margins are vols are being supported by construction activity
FY23 Result Overview:
NPAT $1,098m vs $1,140m consensus
EBIT $1,601m vs $1,590m consensus
DPS 25cps inline.
Operating cash flow $2,150m inline, free cash flow $1,340 vs consensus $1,500
Balance sheet net cash $700m
CAPEX: Port Kembla (NSW) steelworks modernisation, including new blast furnace reline expect to cost $1.15bn split over the FY24-26 period.
1H24 guidance: EBIT $700-770m vs consensus $760m, on $50/t lower US steel spreads than 2H23, effectively implies spot spreads). Consensus is at $1500m for FY24.
BSL’s rolling buyback extended/increased to $400m (vs $380m 1H23). BSL purchased $285m in repurchases in FY23.
Investment Implications
Overall a better-than-anticipated result, particularly in light of guidance for 1H24 given some softness in US steel margins over the last 6 weeks (there were some fears guidance could be materially below consensus).
The bigger picture for BSL remains of a business operating well, with industry conditions in many end markets subdued given manufacturing weakness and impact from higher interest rates.
We note in the US, the strength of US construction activity and the resilience of auto volumes (one reason why it is hard to get too bearish on US steel margins). Net cash balance sheet creates both resilience and optionally for BSL. Maintain the Buy rating.
Stock Overview
Share Price
Company Overview
BSL produces and sells metal coated and painted steel building products. They offer various products and solutions for industrial and commercial markets, serving customers in construction, manufacturing, automotive, agriculture industries.
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