BlueScope Steel (ASX:BSL) outlined a sharp shift from a multi-year investment cycle toward higher shareholder returns as it reported first-half results and updated its financial framework during its earnings call. Managing Director and CEO Tania Archibald, joined by CFO David Fallu, emphasized that the company is “approaching an inflection point” as major projects near completion and cash generation is expected to improve.
Safety update and board stance on acquisition proposal
Archibald opened the call by addressing the death of contractor Jack McGrath during work on the No. 6 blast furnace reline project at Port Kembla. She said the impact had been “profound,” noted the SafeWork New South Wales investigation is ongoing, and said the company is cooperating fully. Archibald said further improving safety performance is her highest priority and described safety as “non-negotiable.”
First-half results and second-half guidance
BlueScope reported underlying EBIT of AUD 558 million for the first half, up AUD 249 million from the prior corresponding period. Archibald said the result reflected the “strength and diversity” of the portfolio, with profitability achieved despite “historically low” Asian steel spreads.
Reported net profit after tax was AUD 391 million. Return on invested capital was 8.1%, which management said remained stable as the company progresses its major capital investment program. BlueScope ended the half with net debt of AUD 2 million, which management described as essentially ungeared, and liquidity of approximately AUD 3.2 billion.
For the second half, BlueScope guided to underlying EBIT of AUD 620 million to AUD 700 million. Management said the expected improvement is driven by stronger U.S. steel spreads and higher sales volumes, offset by softer Asian spreads and higher foreign exchange rates. The guidance is based on an FX rate of US$0.70 per Australian dollar, with management noting outcomes remain subject to spreads, FX, and market conditions.
Regional performance: U.S. strength offsets softer conditions elsewhere
Fallu said the half demonstrated the benefit of BlueScope’s diversified portfolio. In Australia (ASP), underlying EBIT was AUD 122 million, down from AUD 130 million in the prior half. He attributed the decline to softer realized spreads from lower domestic and export pricing, with benchmark Asian steel spreads “depressed” due to elevated Chinese exports. Despite the pricing pressure, ASP increased domestic dispatches to 1.1 million tons, largely driven by residential and non-residential construction. COLORBOND steel sales were 322,000 tons, and cost escalation was offset by improvement initiatives and a one-off AUD 22 million retrospective tax credit.
In Q&A, Archibald pointed to the macro environment and sustained Chinese exports as a key driver of pressure on prices, describing exports as “well north of 120 million tons” versus what she said would normally be 50–60 million tons. She said Australian performance had been “outstanding” given bottom-of-cycle spreads persisting for an extended period, and noted commodity products tied to import parity pricing were at low levels in line with benchmarks.
North America delivered underlying EBIT of US$447 million, up US$115 million on the prior half. North Star contributed US$321 million in EBIT on stronger realized spreads and operated at 100% utilization of available capacity, achieving a new daily production record as debottlenecking projects increased capacity. Buildings and Coated Products, North America delivered EBIT of US$129 million. BlueScope Buildings improved on higher volumes, while BCP improved as turnaround efforts continued but remained loss-making “in line with expectations.”
Archibald said reports about potential U.S. tariff changes appeared speculative and possibly focused on “derivative products.” She emphasized North Star does not compete based on tariffs, describing it as a “privileged asset” that competes on productivity and location. She also said the U.S. remains an importer of steel and a “large, rich, deep market,” with opportunity notwithstanding new capacity additions and blast furnace closures over time.
Asia delivered underlying EBIT of AUD 97 million, up AUD 27 million on the prior half. Fallu attributed the improvement to better cost performance, pricing management in Southeast Asia, and higher premium volumes. He said performance improved in Indonesia, Malaysia, and Vietnam, with continued strong performance in Thailand, while China’s result rose on seasonality but was softer than the prior corresponding period due to soft domestic conditions. BlueScope completed the sale of its 50% interest in Tata BlueScope Steel on Dec. 31, concluding its investment in that region.
New Zealand and Pacific Islands recorded an underlying EBIT loss of AUD 18 million. Fallu said results were impacted by the electric arc furnace (EAF) transition, including increased raw material consumption and inventory build to support commissioning, while electricity costs remained elevated. He said those electricity costs are expected to be addressed once the EAF is operational, referencing a first power contract commencing in December.
Major projects, cost programs, land portfolio, and capital returns
Management said its major project pipeline is nearing completion. Updates included:
- North Star debottlenecking: progressing across nine components, targeting an additional 300,000 tons per annum of capacity.
- Western Sydney Metal Coating Line (MCL7): nearing completion after weather delays, with startup expected around mid-year; adds 240,000 tons of coating capacity.
- Port Kembla plate mill upgrades: on track, aimed at enhanced product and service quality.
- New Zealand EAF: in cold commissioning, with hot commissioning expected in coming months; management said it will improve demand response and lower costs.
- No. 6 blast furnace reline and upgrade: progressing, with commissioning flexibility supported by No. 5 blast furnace outperformance, targeted for the second half of the calendar year.
BlueScope also discussed its NeoSmelt joint venture, which it is leading, aimed at converting Pilbara iron ore into molten iron using lower-emissions direct-reduced iron technology. Management said the project’s feasibility study is progressing well.
On costs, management said its existing AUD 200 million cost and productivity program has delivered AUD 190 million of annualized benefit, up from AUD 130 million at the end of FY2025. A new AUD 150 million cost reduction program is underway, focused on corporate, administrative support, and functions, including streamlining leadership teams and rationalizing activities. Archibald said initiatives are targeted to be in place by June 30 with the full run rate delivered in FY2027, and described the AUD 150 million as a gross number.
On property, management highlighted a 1,200-hectare surplus land portfolio and said it is accelerating realization through early wins and broader partnership structures. In the first half, BlueScope agreed to sell 33 hectares at West Dapto for AUD 76 million, and it also established a ground lease at Glenbrook in New Zealand for a 100-megawatt battery storage facility. The company is commencing a process for a 65-hectare logistics hub at Western Port and said it is assessing options including a potential master developer partnership across the broader land portfolio. In Q&A, management said the West Dapto sale reflected land held at historical cost, meaning much of the consideration falls to profit, and noted future valuation disclosures would depend on completing the partnership process.
Capital management was a central focus of the call. BlueScope revised its shareholder distribution target to at least 75% of free cash flow, up from 50%, and increased its net debt target to up to AUD 1.5 billion, with flexibility to move higher if needed. Fallu said the change reflects the nearing completion of the CapEx program and confidence in earnings and cash generation, while maintaining a prudent balance sheet. For calendar 2026, BlueScope plans to deliver AUD 3 per share in shareholder returns, comprising a AUD 1 per share special dividend (announced in January), an annual ordinary dividend level of AUD 1.30 per share (starting with an interim dividend of AUD 0.65 per share), plus an AUD 310 million on-market buyback program or equivalent return method (about AUD 0.70 per share).
Looking ahead by region, Fallu said North America is expected to be about 15% higher in the second half versus the first half of FY2026, while Australia is expected to be lower due to challenging spreads and non-repeat one-offs. Asia is expected to soften on seasonality around Chinese New Year, and New Zealand is expected to return to profitability as the EAF comes online.
About BlueScope Steel (ASX:BSL)
BlueScope Steel Limited produces and sells metal coated and painted steel building products in Australia, New Zealand, Asia, North America, and internationally. The company operates through five segments: Australian Steel Products, North Star BlueScope Steel, Coated Products Asia, Buildings and Coated Products North America, and New Zealand & Pacific Islands. It offers steel slabs, plates, hot and cold rolled coils, coated and painted strip products, roof and wall claddings, and purlins and house framings under the LYSAGHT steel building products, COLORBOND steel, COLORSTEEL, ZINCALUME steel, GALVABOND steel, GALVASPAN steel, BlueScope Zacs, and SuperDyma brands.
