Australia's largest steelmaker BlueScope Steel (ASX: BSL) has recorded a dramatic collapse in full-year profits, with earnings tumbling 90% as a massive impairment charge and operational failures in North America devastated the bottom line.
The company posted net profit after tax of $83.8 million for FY 2025, a catastrophic fall from $805.7 million the previous year.
The coated products business in BlueScope's North American division recorded a loss, hit by lower volumes and operational issues alongside an impairment charge of $438.9 million.
North America division's underlying earnings declined 45%, weighed down by weak performance at its North Star and Buildings and Coated Products North America operations.
Market supply glut
But the pain extends beyond isolated operational missteps.
Bloomberg analysis highlighted how a surplus of global steel capacity continued to weigh on prices while higher costs ate into margins.
The global steel industry faces mounting pressure from China's record steel exports and economic uncertainty across major markets.
BlueScope's underlying profit fell 51% to $420.8 million, while revenue slipped 4.4%.
The company maintained its final dividend at 30 Australian cents per share, suggesting management confidence in longer-term prospects despite the immediate carnage.
Steel industry analysts point to systemic headwinds that extend far beyond BlueScope's specific challenges.
The global steel market faces hurdles, including China's aggressive export strategy and rising costs, compounded by economic uncertainties in the U.S.
"These challenges include the continued softness in East Asian spreads off the back of record levels of Chinese steel exports, ongoing cost inflation, and a period of pause and uncertainty in the U.S. pending the outcome of the elections and timing of further rate cuts," BlueScope chief executive Mark Vassella said.
Forward guidance does, however, offer modest optimism for the steelmaker.
BlueScope expects underlying earnings before interest and taxes for the first half at A$550 million to A$620 million, suggesting some recovery from the current trough.
The broader steel sector faces a reckoning as traditional producers grapple with global overcapacity and shifting trade dynamics.
BlueScope's experience serves as a cautionary tale for investors evaluating industrial stocks in an increasingly volatile commodities landscape.
Cost-cutting measures are already underway, with management targeting substantial productivity improvements to weather the downturn and position for eventual market recovery.
At the time of writing, BlueScope Steel (ASX: BSL) stock was trading at A$23.01, down 5.1% from Friday's close of $24.24. BlueScope Steel's market cap stands at $10.63 billion.
