(Reuters) - Australia's BlueScope Steel Ltd <BSL.AX> warned lower sales margins would crimp first half earnings as it posted a fall in full-year profit on Monday, prompting the biggest drop in the company's shares in two years.
Bluescope said its underlying earnings before interest and tax (EBIT) for the current half would be about 45% lower than the A$499 million it reported in the second half of fiscal 2019, dragged down by weaker commodity steel spreads in its Australia and U.S. steel businesses.
Bluescope's shares fell as much as 10.8%, the biggest intraday drop since August 2017, to their lowest since June 18, compared with a 0.8% jump in the broader market <.AXJO>.
The company reported net profit of A$1.02 billion for the year to June 30, compared with A$1.57 billion a year earlier.
A 9% rise in annual revenue to A$12.53 billion due to higher steel prices and the favourable impact of a weaker Australian dollar was not enough to offset increased raw material costs and the absence of last year's big one-off gains that included U.S. tax benefits.
Underlying profit, which excludes one-time items, rose 17% to A$966.3 million.
The Melbourne-based steelmaker said it was going ahead with the $700 million expansion of its North Star steel mill in Ohio, which would increase capacity by about 850,000 metric tonnes per year.
"Based on long-term historical spreads, this project is expected to deliver compelling ROIC (return on invested capital) of 15% or more, once fully ramped-up," Chief Executive Officer Mark Vassella said in a statement.
BlueScope earlier this year reported underlying first-half 2019 EBIT of A$850 million.
(Reporting by Aditya Soni in Bengaluru; editing by Jane Wardell.)
