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Aussie steel producer increases profit guidance, sights improved market conditions

Xinhua, May 23, 2016 Adjust font size:

Producing steel might not be as gloomy after Australian producer Bluescope Steel on Monday lifted its earnings forecasts following the latest round of cost cutting and improved market conditions.

Bluescope on Monday upped its underlying earnings forecast to 270 million Australian dollars (195.68 million U.S. dollars) in the six months to June 30, a 61 million Australian dollars (44.21 million U.S. dollars) increase from its February update.

"The stronger performance has been driven largely by earlier delivery of targeted cost reductions, higher steel and iron ore prices, better than anticipated Australian domestic despatches and better than expected margins in the international businesses,"Bluescope said in a statement to the ASX.

Investors took note, sending shares soaring 7.69 percent higher to 6.30 Australian dollars (4.56 U.S. dollars) on Monday in an underperforming market.

The manufacturer however added a caveat stipulating guidance expectations"are subject to spread, foreign exchange and market conditions."

The global steel industry has been combatting with the collapse in global iron ore and steel prices, which have seen manufacturing plants closed or moved as creditors sour on indebted companies in the market downturn.

BlueScope itself has been subject of government support after being granted 60 million Australian dollars (46.31 million dollars) in payroll tax relief to save its ailing Port Kembla steelworks in New South Wales (NSW) state.

Late last month, the company announced a 500 million U.S. dollar debt raising, offering unsecured notes to institutional investors as it seeks to diversify funding sources, extend bond maturities and take advantage of its recently raised credit rating.

The company on Monday also confirmed its U.S. North Star plant in Ohio state had returned to full production following repairs after a fire earlier in May, suffering a 35,000 metric tonne production loss.

Bluescope took full control of the plant in October 2015 after buying out venture partner Cargill's 50-percent stake, which enabled the embattled steel manufacturer to double first half net profit to 200 million Australian dollars, coupled with earlier than expected cost reductions. Endit