Bluescope Steel expects a sharp lift in first-half earnings but has warned of increased margin pressures in the second half of the year.
Chief executive Paul O'Malley said the company is benefiting from growth in domestic demand, on the back of the housing construction boom and a weaker Australian dollar.
The steelmaker in late October raised its earnings forecast for the first half by $50 million, saying underlying earnings in the six months to December would likely be 40 per cent higher compared to the six months ended June 30.
That followed nearly $200 million in cost savings at its Port Kembla operations in New South Wales over two years. It involved job cuts, pay freezes for remaining workers and a three-year tax break from the state government.
"We have made progress more quickly than expected on the cost reductions within our control and may in fact outperform in this area. This is necessary given that steel prices continue to fall," Mr O'Malley told shareholders at the company's annual general meeting on Thursday.
The troubled steelmaker has been under financial pressure due to weakening demand and a slump in prices, amid a supply glut of steel from China.
It posted a $136 million annual profit in August, up from a loss of $82.4 million the previous year.
However, Mr O'Malley warned that margins would remain under pressure in the second half of the financial year, as spreads continue to be weak.
The company has also made cost reductions in its New Zealand and Pacific steel divisions, while its US-based North Star Steel business will also make a strong contribution to earnings.
Last month, the company acquired the remaining 50 per cent stake in the North Star business from partner Cargill, for $US720 million.
At Thursday's AGM, retiring chairman Graham Kraehe formally handed over the reigns to John Bevan.
Bluescope shares closed 22 cents, or 5.3 per cent higher on Thursday, at $4.37 each.
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