Why Did BlueScope’s EBIT Plunge $601M? Inside the $439M Impairment Shock
BlueScope Steel reported a sharp decline in FY2025 underlying EBIT to $738 million, weighed down by a significant impairment in its North American Coated Products business. Despite the setback, the company projects a confident start to FY2026 with targeted cost savings and growth initiatives.
- FY2025 underlying EBIT falls $601 million to $738 million
- Net profit after tax plunges to $84 million
- $439 million impairment on North American Coated Products business
- Cost and productivity improvements targeting $200 million net gain in FY2026
- Final dividend of 30 cents per share and $240 million buy-back program extended
A Challenging Year for BlueScope
BlueScope Steel’s FY2025 financial results reveal a company navigating a tough global steel market marked by cyclical softness and economic uncertainty. The underlying earnings before interest and tax (EBIT) dropped sharply to $738.2 million, down $601 million from the previous year. Net profit after tax (NPAT) also took a significant hit, falling to $83.8 million, a decline of nearly $722 million.
CEO Mark Vassella acknowledged the softer performance but highlighted the resilience afforded by BlueScope’s diversified portfolio and multi-domestic strategy. The company’s geographic spread across Australia, North America, Asia, and New Zealand helped mitigate some of the market headwinds, though each region faced its own challenges.
Regional Performance and Impairment Impact
Australia’s operations delivered a solid result with underlying EBIT of $261.6 million, despite a 31% decline year-on-year, supported by strong domestic volumes and steady demand for COLORBOND® and TRUECORE® steel products. North America, however, saw a 45% drop in EBIT to $514.4 million, largely due to lower benchmark spreads and operational inefficiencies in the BlueScope Coated Products (BCP) segment.
The BCP business, acquired in 2022, underperformed expectations, prompting a substantial $439 million impairment charge against goodwill and intangible assets. This write-down underscores the challenges in integrating and turning around the business, although BlueScope remains committed to its North American growth strategy centered on this platform.
Asia’s EBIT declined by 13% to $138.8 million, with mixed results across Southeast Asia, China, and India. New Zealand’s performance was notably weak, posting a loss of $16.5 million amid soft domestic demand and rising energy costs, compounded by the transition to an Electric Arc Furnace model.
Strategic Focus on Cost Reduction and Growth
Looking ahead, BlueScope is aggressively pursuing cost and productivity improvements, aiming for a $200 million net gain in FY2026 building on the $130 million improvement already achieved in FY2025. The company also targets an additional $500 million in annual earnings by 2030 through various initiatives, including unlocking value from its extensive land portfolio.
Capital management remains disciplined, with a final dividend of 30 cents per share declared and an extension of the $240 million on-market buy-back program. Operating cash flow was $180 million, down from the prior year due to softer earnings and increased capital expenditure, yet the balance sheet remains robust with net debt of just $28 million.
Sustainability and Safety Commitments
BlueScope continues to advance its sustainability agenda, including decarbonisation projects such as the Electric Arc Furnace in New Zealand and the NeoSmelt electric smelting initiative in Australia. Safety remains a priority, with ongoing efforts to reduce injury rates and improve risk controls, although the company acknowledges that further progress is needed.
Outlook, Cautious Optimism for FY2026
Entering FY2026, BlueScope expresses confidence despite mixed macroeconomic signals. The company expects underlying EBIT in the first half of FY2026 to range between $550 million and $620 million, contingent on market spreads, foreign exchange rates, and broader economic conditions. Signs of recovery in Australian construction and improving US steel spreads offer some optimism.
BlueScope’s journey through FY2025 highlights the steelmaker’s resilience amid adversity, but also the significant work ahead to restore growth momentum and fully realise the potential of its North American assets.
Bottom Line?
BlueScope’s FY2025 results underscore the steel sector’s volatility, with a critical turnaround phase ahead as the company bets on cost cuts and market recovery to regain momentum.
Questions in the middle?
- How quickly can BlueScope’s North American Coated Products business return to profitability?
- What impact will global steel price fluctuations and currency movements have on FY2026 earnings?
- How will BlueScope’s sustainability projects influence long-term operational costs and market positioning?