International credit rating agency Moody’s has announced that it has upgraded the credit rating of Australian steelmaker BlueScope Steel to Ba1 from Ba2. The outlook is stable.
According to Moody’s statement, the upgrade to BlueScope’s ratings reflects the improvements in Bluescope's business profile. BlueScope has significantly improved its earnings over the last 12-18 months, by reducing costs substantially, and lowering its breakeven levels at its Australian and New Zealand steelworks. It has also benefited from the full ownership of its strongly performing North American mini-mill operation North Star.
Moody's expects the company’s earnings in the first half ending December 31 of the financial year 2016-17, combined with a substantially improved cost profile, will result in materially higher full year earnings compared to the previous year. However, Moody's also expects earnings in the second half of the financial year 2016-17 to be weaker as the impact of high raw material costs filters through. In particular, Moody's expects that BlueScope's EBIT margins will improve to over seven percent in the full financial year 2016-17.