Slide 1: North Star Site Visit
For personal use only NORTH STAR SITE VISIT 17 September 2019 BlueScope Steel Limited. ASX Code: BSL ABN: 16 000 011 058
Slide 2: Important Notice
IMPORTANT NOTICE For personal use only THIS PRESENTATION IS NOT AND DOES NOT FORM PART OF ANY OFFER, INVITATION OR RECOMMENDATION IN RESPECT OF SECURITIES. ANY DECISION TO BUY OR SELL BLUESCOPE STEEL LIMITED SECURITIES OR OTHER PRODUCTS SHOULD BE MADE ONLY AFTER SEEKING APPROPRIATE FINANCIAL ADVICE.
Slide 3: BlueScope Overview
For personal use only BLUESCOPE OVERVIEW
Slide 4: BlueScope's Investment Proposition
BLUESCOPE'S INVESTMENT PROPOSITION 4 For personal use only Disciplined and advantaged steel building products company focussed on growing long term shareholder value ASSETS & CAPABILITY CAPITAL DISCIPLINE RETURNS FOCUS • Integrated and resilient Australian business • Strong balance sheet with target
Slide 5: BlueScope's Transformation Over the Last Five Years
BLUESCOPE’S TRANSFORMATION OVER THE LAST FIVE YEARS 5 For personal use only A significant transformation, with a step change in earnings quality, cash flows and balance sheet strength FY20151 FY20191 Change Operational North Star ownership 50% 100% Control metrics ASP steelmaking breakeven spread ~U
Slide 6: Our Strategy – A Disciplined Approach to Growth and Shareholder Returns
OUR STRATEGY – A DISCIPLINED APPROACH TO GROWTH AND SHAREHOLDER 6 RETURNS FROM A POSITION OF STRENGTH For personal use only We are A steel building products company Our Target Top quartile shareholder returns and safe operations Our Strategic Focus areas Deliver Grow premium branded steel Maximise v
Slide 7: North Star Overview
For personal use only NORTH STAR OVERVIEW
Slide 8: North Star Overview
NORTH STAR OVERVIEW 8 For personal use only Industry leading hot rolled coil producer; competitive advantage in safety, quality, service and delivery Facility overview North Star’s competitive advantage • Industry leading hot rolled coil producer, established in 1995 as a 50-50 JV between Quality Bl
Slide 9: Experienced Management Team; Engaged and Motivated Workforce
EXPERIENCED MANAGEMENT TEAM; ENGAGED AND MOTIVATED WORKFORCE 9 For personal use only A strong management team with a deep history in the business and understanding of the markets it serves Experienced management team Robin Davies President Motivated, skilled and flexible workforce • 4211 non-union e
Slide 10: Health, Safety and Environment
HEALTH, SAFETY AND ENVIRONMENT 10 For personal use only Finding opportunities to learn, reduce risk, and enhance our Health, Safety and Environment performance Collaborative culture • Continuous communication and feedback LTIFR with regular incident reporting (including Lost time BlueScope FY2019 in
Slide 11: Markets and Products
MARKETS AND PRODUCTS 11 For personal use only Serving a diversified range of end use markets and products, predominantly though service centre channels Volume by end-market Customers by type • Sales and production focused on 25-30 grades, produced at a Other Tubers consistently high quality Agricult
Slide 12: Raw Material Supply
RAW MATERIAL SUPPLY 12 For personal use only Producing high quality hot rolled coil using readily available prime and obsolete scrap, and pig iron Main raw materials Raw material mix • Scrap – recycled metal suitable for SCRAP (~75% of mix) reprocessing. Scrap types include: Clips, #1 Frag, #2 Frag,
Slide 13: Production Process
PRODUCTION PROCESS 13 For personal use only Our highly-skilled team uses a high-tech process to convert scrap metal into high quality hot rolled coil Scrap and pig iron (stored at scrap yard) Melt Scrap Electric Arc Ladle furnace Slab Caster Slab Shop bucket Furnace (EAF) (fluxes, alloys, temperatur
Slide 14: North Star Expansion
For personal use only NORTH STAR EXPANSION
Slide 15: North Star Expansion Approved
NORTH STAR EXPANSION APPROVED 15 For personal use only 850ktpa expansion, with optionality to 1,400ktpa, approved by Board; target commissioning mid FY2022 • Board has approved expansion of our ‘best-in-class’ mini-mill in Delta, Ohio, Indicative overview of existing and additional equipment to add
Slide 16: North Star Expansion Investment Case
NORTH STAR EXPANSION INVESTMENT CASE 16 For personal use only An attractive opportunity to maximise value from a ‘best-in-class’ asset 1 The US is an attractive market for BlueScope North Star is an advantaged, ‘best-in-class’ asset built for expansion • Located in a geographically advantaged positi
Slide 17: The US Is an Attractive Market for BlueScope
1 THE US IS AN ATTRACTIVE MARKET FOR BLUESCOPE 17 For personal use only The US is a large and stable market; underlying demand drivers for North Star remain broadly positive A large and sophisticated market Positive US macroeconomic outlook Stable activity in key end-markets US real GDP growth (%) U
Slide 18: North Star Is an Advantaged 'Best-in-Class' Asset Built for Expansion
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 18 For personal use only Achieving industry leading margins; consistently full asset utilisation; first in customer satisfaction EBIT margins1 (%) HRC capacity utilisation2 (%) Customer satisfaction 29.8% 100% North Star • Measu
Slide 19: Located in a Geographically Advantaged Position
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 19 For personal use only Located in a geographically advantaged position Located close to customers… …and close to scrap suppliers 5% North Star Scrap merchants 10% Detroit WI WI Major scrap markets NY NY MI MI HBI plant (under
Slide 20: Sells Predominantly to Service Centres, Modest Share of Wallet
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 20 For personal use only Sells predominantly to service centres, and holds a modest share of wallet with its customers Sales by end customer type Customer share of wallet Tubers • Service centres value North Star supply due to c
Slide 21: Strong EBITDA and Cash Generation Through the Cycle
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 21 For personal use only Strong EBITDA and cash generation through the cycle; investment case based on historical long term spreads US$M EBITDA and spread (100% basis)1 600 U.S. mini-mill spread EBITDA (100% basis) Cash flow (EB
Slide 22: Built with Embedded Expansion Capacity
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 22 For personal use only North Star was built with embedded expansion capacity, with a large hot strip mill Potential future North Star capacity by production unit (million metric tonnes per annum) capacity, subject to debottlen
Slide 23: Track Record of Successful Debottlenecking
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 23 For personal use only Track record of successful debottlenecking; further enabled post-expansion North Star despatches since commencement (100% basis, million metric tonnes) 2.5 +87% 2.0 1.5 GFC 1.0 0.5 0.0 FY98 FY99 FY00 FY0
Slide 24: EAF Replacement of Blast Furnaces Is a Long Term Trend
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 24 For personal use only The EAF replacement of blast furnaces is a long term trend in the US, and is still emerging in the HRC market Crude steel production mix (%, million metric tonnes) Flat steel production m
Slide 25: Trend Assisted by Industry Consolidation and Rationalisation
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 25 For personal use only A trend assisted by consolidation and rationalisation within the industry Consolidation of US HSM capacity (%, million metric tonnes) Total producers 20 10 Gulf States 73mt Existing produ
Slide 26: EAF HRC Capacity Being Added in North Star's Region
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 26 For personal use only EAF HRC capacity being added in North Star’s region, blast furnace HRC capacity recently idled US HRC capacity additions (million metric tonnes) Overview of US HRC capacity Key Nameplate
Slide 27: Regional Supply and Demand Expected Largely in Balance in 2023
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 27 For personal use only Supply and demand in North Star’s region is expected to be largely in balance in 2023 Regional flat rolled supply and demand balance (million metric tonnes) 3.65 ~3.3 (~2.3) ~30 Demand ~2
Slide 28: National HRC Supply and Demand Largely in Balance in 2023
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 28 For personal use only National HRC supply and demand is expected to be largely in balance in 2023 National flat rolled supply and demand balance ~105 (million metric tonnes) Specialty steels ~(3.0) Plate, P&T
Slide 29: HRC Supply-Demand Dynamics Supporting Long Term Spread Assumptions
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 29 For personal use only HRC supply-demand dynamics projected to be at or above post-GFC levels, supporting the view on long term spread assumptions US Hot Strip Mill utilisation (%) 100% Possible future utilisat
Slide 30: Favourable Metallics Market Will Remain Adequately Supplied
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 30 For personal use only Favourable metallics market will remain adequately supplied North Star regional prime scrap dynamics Prime scrap supply-demand balance (million metric tonnes) ~5.5 • The current prime scr
Slide 31: Sustainability Considerations Embedded into Project Evaluation and Execution
4 SUSTAINABILITY CONSIDERATIONS ARE EMBEDDED INTO PROJECT EVALUATION AND EXECUTION 31 For personal use only Strong focus on sustainability impacts and opportunities for the evaluation and execution of the project Scrap based, • Installation of low emission EAF capacity CLIMATE CHANGE lower emission
Slide 32: Project Delivers Compelling Returns on Historical Spreads
5 PROJECT DELIVERS COMPELLING RETURNS ON HISTORICAL SPREADS, PROVIDING FURTHER UPSIDE THROUGH DEBOTTLENECKING 32 For personal use only Targeting a minimum 15% IRR and 15% ROIC when fully ramped-up, based on long-term historical spreads • Targeting a minimum 15% IRR and 15% ROIC when fully ramped-up,
Slide 33: Comprehensive Management of Project Execution and Integration
6 COMPREHENSIVE MANAGEMENT OF PROJECT EXECUTION AND INTEGRATION 33 For personal use only Strong governance and execution regime; thoroughly reviewed by internal and external experts Risk area Management Experienced • Governance steering committee including highly experienced executives project • Dri
Slide 34: Total Capital Spend of $700M Over Three Years
6 COMPREHENSIVE MANAGEMENT OF PROJECT EXECUTION AND INTEGRATION 34 For personal use only Total capital spend of $700M over three years, appropriate contingency and escalation built in to capital cost 1H FY2020 2H FY2020 1H FY2021 2H FY2021 1H FY2022 2H FY2022 Indicative CAPEX timing 20 – 30% 50 – 70
Slide 35: Summary
For personal use only SUMMARY
Slide 36: Summary
SUMMARY 36 For personal use only 1 The US is an attractive market for BlueScope 2 North Star is an advantaged, “best-in-class” asset, built for expansion. It’s core to BlueScope’s strategy 3 Expansion is consistent with longer-term transition to highly efficient EAF suppliers 4 Highly engaged and mo
Slide 37: North Star Site Visit
For personal use only NORTH STAR SITE VISIT 17 September 2019 BlueScope Steel Limited. ASX Code: BSL ABN: 16 000 011 058