Shares in BlueScope Steel have jumped to an eight-year high after the company lifted its first-half net profit 23 per cent and flagged a further increase in second-half earnings.

Australia’s largest steelmaking business posted net profit of $441.2 million for the six months to December 31, up from $359.1 million a year ago.

Underlying earnings before interest and tax of $516.8 million was ahead of its guidance for $460 million, but still 11 per cent lower from a year ago because of lower margins.

The company now expects underlying earnings in the second half to be 25 per cent higher than the first-half, and has also extended its share buyback by a further $150 million.

Shares in the company peaked at $16.45 on Monday morning, their highest level since January 2010. At 1336 AEDT, the stock was trading at $16.175, still up 4.4 per cent.

New managing director Mark Vassella said the result shows that BlueScope’s earnings momentum has continued.

“We think we have re-based the earnings to make them more consistent,” he told an investor call.

“We are working very hard to reduce the volatility.”

The company expects margins to recover in the second half, after raw material and energy costs weighed on the first-half results.

Earnings at its main Australian operations rose eight per cent despite headwinds from energy costs.

“It is not as disastrous as we thought six months ago, but energy costs have still gone from $50 million to $100 million, which is unacceptable,” Mr Vassella said.

He pointed out that energy costs at its North Star operations in the US were a third of the costs in Australia.

However, North Star earnings dipped as margins moderated, while softer demand in southeast Asia also led to selling prices lagging cost increases.

Citi analysts said that while the first-half results beat guidance, the second-half outlook looked somewhat underwhelming.

“What is probably more believable is Bluescope is using price to grow share. We suspect new the CEO is being more cautious into second-half,” they said in a note.

The company will pay a partially-franked interim dividend of 6.0 cents per share, compared to a fully franked four cents a year ago.


* Net profit of $441.2m vs $359.1m

* Revenue of $5.48b, up 7pct

* Partially-franked interim dividend of 6.0 cents per share, vs 4.0 cents fully franked

By Prashant Mehra