BlueScope Steel boss Paul O'Malley has warned Australian manufacturing could face an "energy catastrophe", even as the rejuvenated steelmaker posted a surge in half-year profit on the back of booming operations in North America.
Shares in Bluescope jumped on Monday as the company boosted its dividend, announced a $150 million share buyback and said it expected to maintain growth in the second half of the year.
However Mr O'Malley warned that rising energy prices were forcing the company to squeeze out further cost reductions in Australia.
"Perhaps, the highest cost we are facing is the increasing price of energy - both in the ability to contract gas volumes, and the escalating prices," he said.
"If there's gas in Australia and we say it can go overseas and we don't have any baseload generation, then I think we're going to have an energy catastrophe in Australia."
Energy costs in North America were dramatically lower that what the company faces in Australia, the BlueScope chief executive said.
The company reported net profit of $359.1 million for the six months to December 31, $159 million higher than the same period a year earlier.
Underlying earnings more than doubled to $603.6 million, in line with its upgraded guidance in January. Total revenue rose 17 per cent to $5.2 billion.
The gains were mainly driven by its US North Star business, with earnings from the business up fourfold at $211 million, helped by rising margins, productivity improvements and benefits from BlueScope taking full ownership in October 2015.
BlueScope's Australian steel business was the other big contributor, with earnings up 40 per cent at $242.5 million.
Australia's largest steelmaking business has made a sharp turnaround since 2015, when it was poised to end operations at the flagship Port Kembla steelworks in NSW as steel prices slumped.
Since then it has improved performance through job cuts, pay freezes and a three-year tax break from the NSW government.
The company has also benefited from a rise in steel prices, while a rebound in iron ore prices has boosted profits from its iron sands business in New Zealand.
BlueScope increased its fully-franked interim dividend by a third and approved an on-market share buy-back of up to $150 million.
The company also set a target of returning 30-50 per cent of free cash flow to shareholders.
BlueScope expects to maintain its growth momentum, with underlying earnings for the second half expected to grow 50 per cent from the $340.3 million it realised last year.
BlueScope shares closed 49 cents, or four per cent, higher at $12.68 - an almost seven-year high.
BLUESCOPE FIRST HALF PROFIT JUMPS
* Net profit of $359.1m vs $200.1m
* Revenue of $5.2 b, up 17pct
* Fully-franked interim dividend of 4.0 cents per share, up 1.0 cent
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