BlueScope has made an announcement to the market that it expects to deliver unaudited underlying earnings before interest and tax (EBIT) for 1H16 of $230m, 28% ahead of previous guidance of $180m
A link to the ASX announcement is available here
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The stronger performance has been driven largely by earlier delivery of cost reductions, growth in Australian domestic sales and improved margins. BlueScope has benefited from the continued falls in its underlying costs of production (such as iron ore and coal).
The company has also announced it is reviewing the carrying value of its assets, and expects to book an impairment of $570m in the value of its Australian and New Zealand assets, offset by a $700m write-up in the carrying value of its recently acquired 50% interest in North Star.
Clearly the earnings uplift is very positive for the company and we continue to see a buying opportunity in the bond. The BlueScope May 2018 US dollar bond is currently indicatively offered at a yield to maturity of 8.13% which we believe is good value for a solid BB/Ba3 credit and a relatively short duration. Also note Moody’s has BlueScope on a positive rating outlook. Equity markets have responded in dramatic fashion, with the share price up 14% following the news.
The company is due to release its half-yearly results on 22 February and we will prepare a detailed report then.
Please contact your FIIG representative for further information on the BlueScope USD bond. Quoted pricing is indicative and subject to change. Available to wholesale investors only.