Bluescope Steel shares have lifted seven per cent after the steelmaker lifted its earnings forecasts thanks to cost cutting and an increase in steel and iron ore prices.
The company says it expects underlying earnings before interest and tax of about $270 million, a big increase on its previous estimate of $209 million for the six months to June 30.
“The stronger performance has been driven largely by early delivery of targeted cost reductions, higher steel and iron ore prices, better-than-anticipated Australian domestic dispatches and better-than-expected margins in the international businesses,” Bluescope said in a statement.
But Australia’s largest steelmaker cautioned the guidance was subject to market conditions and foreign exchange movements.
Bluescope also said its North Star plant in the US had resumed production following a fire earlier in May and the cost was in line with previous guidance of $5 million.
Iron ore is trading around $US55 a tonne, with prices up around 30 per cent over the past three months, while steel prices have risen on the back of record credit expansion in China.
Bluescope doubled its net profit to $200 million in the six months to February 2016 thanks to earlier-than-expected cost reductions and an increased stake in its North American business.
The result was a sharp turnaround for the company which in 2015 was poised to shut down operations at its flagship Port Kembla steelworks in NSW as steel prices slumped amid weaker demand and a supply glut in Asian export markets.