BlueScope Steel will spend $1.15 billion in an attempt to lower emissions and extend the life of its Port Kembla steelworks as lower export prices dent profits.
The steelmaker on Monday reported a 64 per cent drop in net profit to $1.01 billion for the year ending June 30.
Chief executive Mark Vassella said the relining of a blast furnace at the NSW south coast smelter would allow the company to maintain steel output as it decarbonises its operations, with large-scale low-carbon steel production at least a decade away.
"It secures our immediate future while enabling a transition to lower emissions steelmaking as soon as it is commercially feasible," Mr Vassella said.
"In this sense the reline project is our bridge to the future and critical to maintaining the sovereign capability of flat steelmaking in Australia."
Environmental activist group Steelwatch in July urged BlueScope to ditch the relining to give Australia a chance of meeting its climate targets, calling for a firm redline on investment in coal-based steelmaking.
But Mr Vassella says the upgrade, due to be commissioned in 2026, would not lock the company into a full 20-year blast furnace campaign and would put Port Kembla in the top 15 per cent of emissions-efficient blast furnaces in the world.
He reiterated calls for Australia to impose a carbon border adjustment mechanism, similar to "green tariffs" already enforced by the European Union, on carbon intensive imports.
"From our perspective, if costs are going to be incurred by local industry to decarbonise, then it's completely inappropriate that other countries that don't have the same costs can import their products into this country at some disadvantage," he said.
BlueScope reported underlying earnings before interest and tax of $1.6 billion, in line with guidance.
Lower global steel prices smashed a $2.1 billion dent in earnings, but was partially offset by lower material costs and a ramp up in production volumes at its US steel mill North Star.
Domestic Colorbond steel sales were the highest on record, as value-added building products stole market share from timber and roof tiles, with construction on a $415 million metal coating line in western Sydney underway to boost production.
The 240 kilotonne per annum plant is due to be completed by the end of 2025 and will help meet increased demand for construction products as strong migration and the existing housing shortage drive residential growth, Mr Vassella says.
Bluescope has set aside $45 million in accounting provisions after the federal court in December found it tried to fix pricing agreements with its competitors to illegally boost the price of flat steel, with the company yet to decide on whether it will appeal the findings.
After earnings for the second half came in at $757 million, the company expects a similar result for the first half of financial year 2024.
BlueScope announced a full-year dividend of 25c per share fully franked.
Shares in the company rose three per cent to $21.18 in morning trading.
