Australian takeover target BlueScope Steel forecast on Monday higher second-half earnings and reported first-half profit above estimates, helped by stronger U.S. spreads, higher volumes across key markets, and good cost control.
The steelmaker expects second-half underlying earnings before interest and taxes (EBIT) to be between A$620 million and A$700 million ($437.72 million and $494.20 million).
For the six months ended December 31, BlueScope posted underlying EBIT of A$557.5 million and underlying net profit after tax (NPAT) of A$382 million, more than double last year's A$176.4 million and above a Visible Alpha estimate of A$349.2 million.
Despite the upbeat result, the stock ended the session down 2.7% at A$28.37, after swinging to a drop of 3.3% from a gain of 3.2%.
"Today's move looks less like a verdict on the quality of the result and more like a recalibration around second-half expectations and where we sit in the cycle," said Marc Jocum, senior product and investment strategist at Global X ETFs.
After last month's rejection of a A$13.2 billion takeover proposal from SGH and U.S.-based Steel Dynamics, parts of the market had priced in hopes of a higher rival bid in the range of A$35 to A$40 versus the original A$30 offer.
With no fresh corporate developments, focus has shifted back to fundamentals and near-term earnings risk, Jocum added.
The group said it was strongly positioned to generate more cash flows, for a total of A$3 a share to shareholders in 2026, including a special dividend of A$1 a share announced earlier.
It declared an interim dividend of 65 Australian cents a share, up from 30 cents a year earlier, and announced a A$310 million on-market buyback, in line with its distribution target to return at least 75% of free cash flow to shareholders.
"In the half, all major projects have progressed towards completion, including the EAF at New Zealand Steel ..., all of which underpin BlueScope's operational resilience and growth," said Managing Director and CEO Tania Archibald.
The company has also simplified its portfolio with the sale of 50% stake in Tata BlueScope Steel and sold a portion of its West Dapto site, setting the stage to increase shareholder returns, Archibald said.
($1=1.4164 Australian dollars)
(Reporting by Sneha Kumar and Roshan Thomas in Bengaluru; Editing by Alistair Bell, Diane Craft and Clarence Fernandez)
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This article was written by Roshan Thomas and Sneha Kumar from Reuters and was legally licensed through the DiveMarketplace by Industry Dive.