Steelmaker BlueScope Steel (ASX:BSL) has cut its first-half profit forecast, citing economic headwinds such as record Chinese steel exports, inflationary pressures and political uncertainty in the United States ahead of the presidential election.
BSL now anticipates underlying earnings before interest and tax (EBIT) of between $270 million and $310 million for the six months to December, down from its previous forecast of $350 million to $420 million.
The company notes that the challenging market conditions are impacting the company and the broader steel industry.
BlueScope chief executive Mark Vassella said, “These pressures are impacting near-term performance; however, we are confident in BlueScope’s resilience, underpinned by a robust balance sheet, diversified business model and strong operating disciplines.
“BlueScope has a culture of rising to these challenges and we will continue our work in balancing near-term performance with longer-term sustainable growth and returns.”
To offset economic challenges and sustain longer-term growth, the company is pursuing around $200 million in cost and productivity initiatives.
In North America, BlueScope’s North Star division expects EBIT at roughly one-third of its 2024 fiscal result, with softer spreads and deferred customer orders amid US economic uncertainty weighing on outcomes.
In Australia, BlueScope expects stable domestic demand but reports that softer export coke contributions and continued weakness in East Asian steel prices have pressured Australian Steel Products (ASP).
Consequently, ASP’s first-half EBIT is projected at about two-thirds of its second-half FY2024 performance. Additionally, subdued demand in China and operational issues in Thailand, now resolved, have affected performance across Asia.
Citi recently downgraded its recommendation on BlueScope to neutral, with analyst Paul McTaggart citing a peak in US steel prices with the prospect of higher scrap prices exerting pressure over the coming months and reduced Chinese steel consumption.