SGH builds war chest for M&A opportunities but CEO Ryan Stokes rules out a bumper Bluescope counter-bid

SGH generated strong cash flow growth to start the 2026 financial year, giving the conglomerate renewed hunger for acquisitions and internal expansion opportunities — for the right price.

Amid another robust half-year result for SGH, in particular its building materials business, company chief executive Ryan Stokes said interest rate rises, government largesse and the prospect of capital gains reform is piling further pressure on housing affordability.

SGH delivered a $10 million rise in profit to $518m despite revenue marginally declining from $5.5 billion to $5.4b. A 32 per cent rise in operational cash flow to $1.1b reduced SGH’s leverage to below its targeted range.

The better-than-expected deleveraging provides “greater balance sheet capacity to pursue value-accretive growth”, the company stated on Wednesday.

This comes a month after ASX-listed BlueScope Steel rejected what it labelled a “cheap” $13b joint takeover offer from SGH and US-based Steel Dynamics.

Mr Stokes said SGH would be “disciplined” with any avenue it pursues.

“If the (Bluescope) board, but really the shareholders, don’t see value in our proposal, then frankly, we’ll move on. There’s other compelling opportunities for SGH,” he said.

“We feel the offer at that $29 dividend-adjusted price is full and fair, and probably say that the bird in the hand versus the execution risk is one where we think the offer should be seen as compelling, but ultimately it’s a decision for shareholders.

“We have built value for our shareholders through being disciplined with the way we look at opportunities and that will continue. So I think it’ll kind of depend on situations and circumstances, but we are still focused in and around the industrial sector.”

SGH also has ample growth avenues within its own portfolio, according to Mr Stokes, with the Crux gas project off the north-west WA highlighted as a key example.

Mr Stokes said the energy requirements for the data centres that facilitate artificial intelligence has “probably been under-appreciated” and represents a major tailwind for gas producers with proper government support.

Building materials business Boral was again the standout performer for SGH, delivering earnings before interest and tax growth of 10 per cent to $284m.

Boral is eyeing growth in WA as the State grapples with an unprecedented housing supply crisis.

The recent interest rate rise, high levels of “non-productive” government expenditure, and the prospect of capital gains discounts being cut does nothing to ease the supply issues, Mr Stokes said.

“Interest rates are a pressure, inflation is a pressure, reducing the capital gains discount is a pressure, none of which will help housing supply constraints,” he said.

“We want to see a vibrant, growing economy with inflation in check, and I think that there’s significant opportunity for government to rationalise some of the expenditure in non-productive or less productive areas, to take some of that inflationary heat out of the economy in a measured way.”

On the media side of the business, Mr Stokes refuted persistent rumours that SGH lost interest with Seven West Media by supporting the merger with Southern Cross Austereo.

“We’re committed. We believe that there’s value opportunity,” he said.

“The whole logic of supporting the merger was seeing an opportunity through scale, and we’ve spoken about that quite openly over a long period of time, that in this environment, scale is really important, and leveraging diverse media assets to create value is increasingly important.

“We think it’s the best opportunity to drive returns for shareholders.”

SGH declared an interim fully franked dividend of 32¢ per share, up 7 per cent year-on-year.