August 21, 2017 / 1:38 AM / 10 months ago

UPDATE 2-Bluescope faces weaker earnings, taps new CEO

* First-half earnings set to fall 30 pct from year ago

* Import competition, soaring gas, power prices bite

* CEO O’Malley to hand reins to Australia chief

* Shares dive nearly 22 pct (Adds analyst comment)

MELBOURNE, Aug 21 (Reuters) - Australia’s Bluescope Steel warned on Monday of a steep drop in earnings in the current half due to import competition and soaring energy costs and said its long-serving boss was set to retire, sending its shares down more than 20 percent.

Australia’s biggest steel manufacturer also cited weaker margins from its operations in the United States for the fall.

Investors knocked more than A$1.7 billion ($1.35 billion) off the value of Bluescope’s shares. The stock had run up strongly over the past year on the back of management’s track record of delivering growth that consistently beat forecasts.

Citi analysts said new headwinds facing the company came as a shock on top of known factors like tighter margins at its U.S. Northstar business and higher energy costs at its Port Kembla steel mill in Australia.

“(We) were surprised by the commentary that Australia had become a dumping ground for global steel yet again,” Citi analysts said in a note.

Comments from outgoing-Chief Executive Paul O’Malley that the company was addressing the “macro headwinds” gave investors little comfort.

O’Malley, who engineered a huge turnaround at Bluescope over the past five years, said he would retire in December after 10 years in the job. He will be succeeded by the head of the company’s Australian arm Mark Vassella.

Underlying earnings were set to drop 20 percent in the current half from the second half of the 2017 financial year to around A$422 million ($334 million), implying a 30 percent drop from a year earlier, according to the company.

“A sharp increase in energy costs for our Australian operations risks undermining recent cost and productivity improvements,” O’Malley said.

Combined gas and power costs for the company’s three main steel mills are expected to soar 75 percent to A$145 million in 2018 from levels two years earlier.

“We need more gas, preferably at lower prices,” O’Malley said.

“We are very concerned about tightening of supply in the gas and electricity markets, and have highlighted our concerns to government and regulators,” he said.

Underlying profit rose 112 percent to A$650.8 million for the year to June 2017, based mainly on cost-cutting. However the result was below market forecasts of A$682 million, according to Thomson Reuters I/B/E/S.

The final dividend of 5 cents a share was also below market forecasts for 7 cents.

Bluescope said it would still return a further A$150 million to shareholders through an on-market share buyback.

$1 = 1.2625 Australian dollars Reporting by Sonali Paul and James Regan; Editing by Richard Pullin

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