3 ASX Companies Positioned for Margin Expansion

Margin expansion is one of the most reliable indicators of long-term value creation. It shows that a business is not just growing, but growing smarter. When costs rise slower than revenue, or when a company shifts toward higher-quality earnings, profitability improves even without dramatic sales growth. On the ASX, three companies from very different sectors illustrate how margin expansion can emerge through discipline, strategy and business mix improvement: BlueScope Steel Ltd, Macquarie Group Ltd, and Origin Energy Ltd.

Rather than relying on favourable cycles alone, each of these companies is shaping its operations in ways that support better profitability per dollar earned.

BlueScope Steel: Efficiency Over Volume

Steel is a cyclical business, but not all steel producers are equal. BlueScope has spent years refining where and how it produces steel, with a focus on cost control, geographic balance and higher-value products.

One of BlueScope’s key margin levers is its “produce close to customer” strategy. By manufacturing steel in the regions where it is consumed, the company reduces transport costs, shortens supply chains and improves responsiveness to local demand. This approach matters because logistics can be a significant drag on margins in heavy industry.

Another important contributor is the company’s North Star operation in the United States. This mill has historically sat toward the lower end of the cost curve, benefiting from scale, modern equipment and proximity to customers. When steel spreads improve, assets like this tend to amplify profitability more efficiently than higher-cost plants.

BlueScope has also been disciplined in simplifying its portfolio. Stepping back from non-core property exposure and concentrating capital on core steelmaking and downstream products reduces complexity and overhead. Over time, this kind of focus supports steadier margins even when pricing conditions fluctuate.

The broader point is that margin expansion for BlueScope does not depend solely on higher steel prices. It is also driven by structural efficiency, asset quality and operating discipline, which can persist across cycles.

Macquarie Group: Shifting Toward Higher-Quality Earnings

Macquarie Group occupies a unique place in Australian finance. Unlike traditional banks that rely heavily on interest margins, Macquarie generates a significant portion of earnings from asset management, advisory services and fee-based activities.

This business mix is important for margins. Fee income typically requires less balance sheet usage than lending, which means higher returns on capital. As Macquarie’s asset management platform has grown over time, so too has the proportion of earnings that come from recurring fees rather than cyclical trading or lending spreads.

The group’s diversified structure also allows capital to flow toward areas with the best risk-adjusted returns. When one segment faces margin pressure, others can offset it. This flexibility supports overall margin stability and, in periods of favourable conditions, expansion.

Operational discipline plays a role as well. Macquarie has a long history of adjusting cost bases, exiting lower-return activities and reinvesting in areas where expertise and scale deliver pricing power. This constant refinement of the business mix is one reason margins have remained resilient across different market environments.

For Macquarie, margin expansion is less about cutting costs aggressively and more about earning a greater share of revenue from high-value services that scale efficiently.

Origin Energy: Stability, Discipline and Optionality

Energy markets are often associated with volatility, but Origin Energy’s margin story is increasingly tied to stability and strategic optionality rather than pure commodity exposure.

At the core of Origin’s business is its energy retail and generation portfolio. Retail electricity and gas supply provides relatively predictable earnings, particularly when customer churn is managed and operating costs are controlled. As efficiency initiatives take hold, margins in these segments can improve gradually over time.

A notable contributor to margin stability has been the decision to extend the operating life of the Eraring power station. While the broader energy transition continues, maintaining this asset provides reliable generation capacity and supports margins during the transition period. This reduces the risk of near-term cost spikes associated with replacing capacity too quickly.

Beyond traditional energy, Origin’s stake in the Kraken software platform adds a different dimension to its margin profile. Software and digital platforms typically generate higher margins than commodity-based businesses once scale is achieved. Any value realisation or deeper operational integration of Kraken introduces the possibility of margin uplift that is not directly linked to energy prices.

Taken together, Origin’s margin expansion potential comes from a mix of operational discipline, asset management and exposure to technology-driven earnings streams.

Common Threads Across All Three

Although BlueScope Steel, Macquarie Group and Origin Energy operate in very different industries, their margin expansion stories share several important characteristics.

First, all three are actively managing their business mix. They are not simply accepting legacy structures, but reallocating effort and capital toward areas with better returns.

Second, cost discipline is deliberate rather than reactive. Instead of cutting costs only when conditions worsen, each company has embedded efficiency into its operating model.

Third, none of these margin stories rely entirely on favourable external conditions. While cycles matter, the underlying drivers are structural, which makes margin improvements more durable.

What Investors Should Watch Over Time

For those tracking margin expansion, a few practical indicators matter more than short-term profit fluctuations.

For BlueScope, watch unit costs, utilisation rates at key assets, and the balance between upstream steelmaking and downstream products.

For Macquarie, pay attention to the proportion of earnings from asset management and advisory services versus more volatile activities.

For Origin, monitor operating cost trends in energy retail, progress in generation optimisation, and any developments around software or digital platforms.

These indicators help distinguish temporary margin changes from structural improvement.

A Final Perspective on Margin Expansion

Margin expansion is rarely loud or dramatic. It tends to emerge quietly through better decisions, sharper focus and patience. BlueScope Steel, Macquarie Group and Origin Energy each demonstrate how companies can improve profitability not by chasing growth at any cost, but by refining how they operate and where they earn their returns.

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