Bluescope Steel Limited · ASX:BSL
Bluescope Steel — Investor Presentation (November 2016)
63 slides from Bluescope Steel's investor presentation, Nov 15, 2016
Slide 1: Australian Steel Products – Briefing Day
For personal use only Australian Steel Products – Briefing Day 15 November 2016 BlueScope Steel Limited. ASX Code: BSL
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: Agenda
Agenda For personal use only 1 Introduction and context 2 Australian manufacturing competitiveness 3 ASP’s market proposition and growth strategy 4 Environment 5 Conclusion 3
Slide 4: Introduction and Context
For personal use only INTRODUCTION AND CONTEXT
Slide 5: Key messages
Key messages Significantly better business • Australian Steel Products (ASP) is a significantly better business than it was five For personal use only through restructuring of last years ago when we produced over five million tonnes of steel, with the majority for five years export markets Profitabi
Slide 6: Today's focus is our Australian Steel Products segment
Today’s focus is our Australian Streel Products segment For personal use only External segment reporting structure1 BlueScope Australia & New Zealand Building Products Global Building North Star ASEAN, North Australian Steel New Zealand and Solutions BlueScope Steel America and India Products Pacifi
Slide 7: Safety is a core value for BlueScope
Safety is a core value for BlueScope BlueScope Australia and New Zealand continues to have world class performance and is striving for zero harm For personal use only Lost Time Injury Frequency Rate (BANZ) Medically Treated Injury Frequency Rate (BANZ) 2.2 12.5 Medically treated injuries per million
Slide 8: Organisational structure of Australian Steel Products
Organisational structure of Australian Steel Products For personal use only Australian Steel Products Coated & Industrial Building Flat Steel Orrcon Products Australia Components Products Steel (CIPA) 8
Slide 9: BlueScope Australia & NZ management team
BlueScope Australia & NZ management team For personal use only Profit & Loss (P&L) Centres Coated & Industrial Products Functional Areas Australia (CIPA) New Zealand Steel & Pacific Islands (NZPI) (P&L Centres) 9
Slide 10: How our strategic goals overlay onto the businesses
A reminder of how our strategic goals overlay onto the businesses For personal use only Grow Deliver Ensure ongoing premium branded steel businesses competitive commodity steel supply financial strength with strong channels to market in our local markets Coated & Painted BlueScope North Star Austral
Slide 11: ASP's three-step journey from stabilising to thriving
ASP has been on a three-step journey from stabilising the business to thriving For personal use only TARGET WINNING MARKETS TRIPLE A GET LEAN, FIT CULTURE AND HUNGRY BROADEN VIEW TO CREATE $ GROWTH OPTIMISE VALUE CHAIN Target >15% ROIC Target >$0 EBIT 11
Slide 12: Today, our strategy is competitive manufacturing
Today, our strategy is … COMPETITIVE MANUFACTURING For personal use only In Australia, continue the pursuit of competitive steel production and manufacturing operations through relentless focus on cost reductions and productivity improvements; Steelmaking to be cash breakeven at bottom of cycle (EBI
Slide 13: Australian Manufacturing Competitiveness
For personal use only AUSTRALIAN MANUFACTURING COMPETITIVENESS
Slide 14: Productivity initiatives dramatically improved ASP's profitability
Delivery of the productivity initiatives of the last couple of years has dramatically improved ASP’s profitability, even at bottom of the cycle spreads For personal use only ASP EBITDA per tonne vs spread Underlying 400 Bottom of cycle EBITDA per spreads1 tonne 350 FY05 A$/t 300 250 FY04 FY08 200 FY
Slide 15: Australian cost savings delivery
Australian cost savings delivery – derived from initiatives right across the business For personal use only Australian savings over FY2015 cost base Composition of FY2016 savings R&M and 1H FY2016 achieved $95M Overheads etc manufacturing 15% 20% Production 2H FY2016 achieved $140M efficiencies / 15
Slide 16: Four planks of change driving productivity improvement
Four planks of change that are driving productivity improvement and cost reduction For personal use only • Workplace productivity improvements 1 Workplace reform • Resetting the manufacturing cost base • Industrial relations reform in 2015 and future reform process Self-funding profit • ‘Self fundin
Slide 17: Workplace reform at Port Kembla - 2015
1 Workplace reform at Port Kembla - 2015 Resetting the manufacturing cost base and boosting productivity For personal use only Outcomes of the 2015 Fair Work Commission (FWC) Mediation process Resetting the cost base: • 3 year Enterprise Agreement (EA) with no wage increase for the life of the EA •
Slide 18: Industrial relations – Future Reform Process
Industrial relations – Future Reform Process 1 Memorandum of Agreement is the catalyst to re-setting workplace relationships For personal use only Future Reform Process – creating a modern workplace • Future Reform Process formed as part of the Memorandum of Agreement that was agreed at the FWC medi
Slide 19: Self-funding Profit Share Plan for FY2017
2 ‘Self-funding’ Profit Share Plan for FY2017 How the Profit Share Plan will work For personal use only • The Profit Share Plan (PSP) is designed to link payment of bonuses to profit • Affordable and self-funded • Eliminates the cost of paying incentives when the Company is not making money • The PS
Slide 20: Capability and engagement: diversity
3 Capability and engagement Diversity driving capability and innovation For personal use only Having a talented, capable and engaged workforce gives us a competitive advantage Diversity is good for • Whilst diversity is only one driver, we are seeing teams with greater diversity business reporting s
Slide 21: Changing plate mill culture with diverse work practices
Capability and engagement 3 Example – changing plate mill culture with diverse and flexible work practices to match market demand For personal use only The plate mill has traditionally been staffed entirely by men. It was selected as a pilot site for the more active pursuit of gender diversity Oppor
Slide 22: Partnering with the AIS to Change the Game
3 Capability and engagement Example – partnering with the AIS to ‘Change the Game’. Mentoring program with 10 female AIS athletes partnered with 10 BlueScope employees For personal use only • Designed to develop the skills on both sides. While the athletes learn how their skills can apply to busines
Slide 23: Workplace by Facebook
Capability and engagement 3 ‘Workplace’ by facebook – to better connect, communicate and collaborate with our employees For personal use only • BlueScope beat 100,000 companies to be invited to trial ‘Workplace’ by facebook • As early adopters, BlueScope was the only steelmaker worldwide and one of
Slide 24: Process innovation: BOS retained slag practices
4 Process innovation Case study – BOS retained slag practices For personal use only Delivered yield, flux and energy benefits by safely retaining a portion of the slag / metal mixture in the BOS furnace at the end of each heat (previously all tipped out every heat). Earnings benefit of $11M in FY201
Slide 25: Automation at Metal Coating Lines
Process innovation 4 Case study – investing in automation technology to drive efficiency gains and cost reductions at Metal Coating Lines For personal use only • We have invested in advanced automation technology with the installation of robots on our Metal Coating Lines at our Springhill in Port Ke
Slide 26: Automation in slabmaking
Process innovation 4 Case study – investing in automation technology to drive productivity gains and cost savings in slabmaking For personal use only • Currently subject to pre-feasibility assessment, we are planning to invest up to $36M in advanced manufacturing technology (eg. automated cranes) in
Slide 27: Australian steel measures up on World Steel Dynamics' grid
Australian steel operations measure up well now on World Steel Dynamics’ grid of what it takes to be a structurally attractive and globally competitive For personal use only WSD’s Competitive Relative Dimensions PKSW Strength / Weakness Strength Important regional • Proximity to local coal supply ad
Slide 28: World Steel Dynamics' grid (cont'd)
Australian steel operations measure up well now on World Steel Dynamics’ grid of what it takes to be a structurally attractive and globally competitive (cont’d) For personal use only WSD’s Competitive Relative Dimensions PKSW Strength / Weakness Strength Gaining market share • Well positioned, but o
Slide 29: ASP's Market Proposition and Growth Strategy
For personal use only ASP’S MARKET PROPOSITION AND GROWTH STRATEGY
Slide 30: ASP's domestic offering: four key value drivers
ASP’s domestic offering is underpinned by four key value drivers For personal use only Focus on premium • Strong position with well recognised industrial brands eg COLORBOND® steel branded steel 1 products • Extensive reach and influence with key product and brand decision makers • 3rd largest produ
Slide 31: Focus on premium, branded steel products
1 Focus on premium, branded steel products Product categories and applications For personal use only Product Primary end use markets Applications Painted (including pre-painted • Building and construction • Residential, commercial and industrial construction including COLORBOND® steel) roofing, wall
Slide 32: ASP FY2016 despatch mix
1 Focus on premium, branded steel products ASP FY2016 despatch mix FY2016 Product Mix For personal use only 2.89 Export 0.70 Export Domestic - 0.18 externally sourced HRC Metal Coated Plate Painted Million metric tonnes CRC Other inc ext sourced Domestic Domestic - BSL 2.01 manufactured FY2016 32
Slide 33: The Colours of Australia since 1966
THE COLOURS OF AUSTRALIA SINCE 1966 For personal use only 50 DAYS OF ACTIVITIES: 22 AUGUST – 11 OCTOBER 33 33
Slide 34: COLORBOND steel 50th anniversary activities
COLORBOND® steel celebrated its 50th anniversary with 50 days of activity involving customers and employees For personal use only Industry Breakfasts Coffee Vans Trade Promotion 34 34
Slide 35: COLORBOND steel 50 years – television commercial
1 Focus on premium, branded steel products COLORBOND® steel 50 years – television commercial For personal use only 35
Slide 36: Technical leadership: third largest global manufacturer
Technical Leadership 2 Third largest global manufacturer; #1 in building and construction For personal use only Global painted steel manufacturers by volume (Mtpa) Global ZnAl coated steel manufacturers by volume (Mtpa) 2.8 6.7 2.4 4.6 BlueScope 1.5 BlueScope 3.6 1.4 1.8 1.3 1.7 1.2 1.5 1.0 1.2 1.0
Slide 37: Technical leadership
2 Technical leadership For personal use only • Advanced metallic coating development for building and construction (e.g. innovated AZ coatings, proprietary AM coating launched 2013) • Advanced pre-painted coating development: – World class premium coatings standing the test of time for building and
Slide 38: Next Generation ZINCALUME steel
2 Technical leadership Case study – Next Generation ZINCALUME® steel • Production of next generation ZINCALUME® steel with Activate™ technology commenced in FY2013 following For personal use only development and testing over a number of years • The introduction of magnesium into the aluminium-zinc a
Slide 39: TRU-SPEC coil plate steel
2 Technical leadership Case study – TRU-SPEC™ coil plate steel For personal use only • Invested $8M in coil-plate line adjacent to hot strip mill at PKSW. Expected pay-back within two years • Produces new TRU-SPEC™ coil plate steel product with superior flatness, ‘memory free’ properties and improve
Slide 40: Sizeable participation in downstream channels
3 Sizeable participation in downstream channels For personal use only Processing & Manufacturing End Markets Distribution Building Component Manufacturers Market Segments (including Lysaght and Fielders) Residential construction Steel Distribution Non-residential (including BlueScope Domestic constr
Slide 41: BlueScope Building Components
3 Sizeable participation in downstream channels BlueScope Building Components For personal use only • BlueScope Building Components manufactures and markets an extensive range of roll formed steel products for the building industry with specific offerings into the residential, commercial, structural
Slide 42: BlueScope Flat Steel Products
3 Sizeable participation in downstream channels BlueScope Flat Steel Products • The BFSP processing and distribution businesses are an efficient channel to For personal use only market for BlueScope. BFSP operates Australia-wide through 17 branches • Encompasses the business brands of BlueScope Shee
Slide 43: Orrcon Steel
3 Sizeable participation in downstream channels Orrcon Steel For personal use only • Orrcon Steel is a leading Australian distributor and manufacturer of steel, tube and pipe • Acquired by BlueScope in February 2014 from Hills Limited. Acquisition is delivering returns in excess of cost of capital •
Slide 44: Growth focus
4 Growth focus For personal use only • Domestic volume growth can be driven by three areas: • Relative weakness of Australian dollar over last few years has assisted Increased competitiveness and • Action taken by Anti-Dumping Commission on unfair trade offer compared to imports • Growth with both a
Slide 45: State of Australian end-use segments
4 Growth focus State of Australian end-use segments Total Aust. despatches (Kt) For personal use only FY2015 FY2016 2,200 • A significant proportion of product goes to alterations and additions, which is largely driven 2,000 by house prices. Sub-segment is growing and performing well 33% • Balance i
Slide 46: Strength in A&A and new commencements drove residential despatches
Growth focus 4 Strength in A&A and new commencement activity has driven 35% growth in residential segment despatches since FY2013 For personal use only A&A value of work done New dwelling approvals Dwelling segment despatches Rolling annual total, measured quarterly for projects greater than $10,000
Slide 47: Alterations & additions activity tracking house prices
4 Growth focus Alterations & additions activity tracking house prices with a lag For personal use only A&A Building Approvals [LHS] vs Sydney/Melbourne Established House Price Index [RHS] 8.0 160 Rolling 12 Months (A$Bn)* [LHS] 7.8 Sydney Index [RHS]# 150 Melbourne Index [RHS]# 7.6 140 7.4 130 7.2 1
Slide 48: Three key inter-material growth opportunities
4 Growth focus Three key inter-material growth opportunities For personal use only Scale of opportunity: Light gauge steel • Renewed focus on light gauge steel framing framing • Develop and support steel facades solutions through our channel Steel facades to penetrate the architectural façade segmen
Slide 49: Residential light gauge steel framing growth
4 Growth focus Residential light gauge steel framing growth For personal use only • Light gauge steel (LGS) framing offers a material growth opportunity for BSL – In residential products where the framing market is very large and steel currently has a very low share – Low to mid-rise commercial, ins
Slide 50: Facades opportunity
4 Growth focus Facades opportunity For personal use only • Steel facades currently have low penetration in the commercial building sector • Steel, as a material, is well positioned to capitalise on many of the global trends evolving in the façade industry, such as material cost, environmental issues
Slide 51: Integrated steel decking solution for high-rise construction
4 Growth focus Integrated steel decking solution for high-rise construction For personal use only • BSL’s SlimFlor system is a proprietary shallow floor system promoted by Fielders, and creates the opportunity for more buildings to be designed using steel framing, particularly in the high-rise multi
Slide 52: High rise steel decking growth
4 Growth focus High rise steel decking growth (ctd) • SlimFlor allows a steel framed building to compete with a concrete framed building because it reduces the typical For personal use only floor construction depth of a steel framed building • Delivers a cost effective form of construction compared
Slide 53: Environment
For personal use only ENVIRONMENT
Slide 54: Committed to improving environmental footprint
Environment BlueScope remains committed to continuously improving the environmental footprint of its operations For personal use only • The BlueScope Steel Environment Management System comprises the following major elements: Our Bond HSEC Policy Environment Principles Environment Standards
Slide 55: Greenhouse gas emissions
Greenhouse gas emissions Step-change in emissions in 2012 through Australian restructure. Seeking to progressively reduce energy and greenhouse gas intensity GHG emissions – BlueScope global operations GHG intensity of raw steelmaking (per tonne)3 For personal use only -17% 15.9 -35% 2.2 2.3 2.1 2.1
Slide 56: Water management
Water management Fresh water use reduced by 67% since FY2011, and we continue to explore and implement further water conservation initiatives For personal use only • Water is used extensively throughout steelmaking Fresh and recycled water usage – Australian mills for a number of purposes such as co
Slide 57: Conclusion
For personal use only CONCLUSION
Slide 58: Key messages
Key messages Significantly better business • Australian Steel Products (ASP) is a significantly better business than it was five For personal use only through restructuring of last years ago when we produced over five million tonnes of steel, with the majority for five years export markets Profitabi
Slide 59: Additional Information
For personal use only ADDITIONAL INFORMATION
Slide 60: Fundamental drivers of profitability
Fundamental drivers of profitability For personal use only Domestic Demand Domestic Domestic Mix Volume / Mix Market Share ASP Profitability Spread Margins Domestic Value Proposition 60
Slide 61: Better profitability in coated & painted products
Better profitability in coated & painted products For personal use only Category Summary Hot rolled coil • Intermediate products, typically substantially transformed into final Limited goods Plate product • BSL offer principally differentiated by service, supply reliability and differentiation Cold
Slide 62: Annual capacities of steelmaking and coating
Annual capacities of steelmaking and coating Port Kembla Steelworks (Wollongong, New South Wales, Australia) #5 Blast Furnace Plate Mill Plate & BOS: 2,800 450 For personal use only Slab Casters Hot Strip Mill HRC 2,800 2,900 Coupled Pickled Cold Mill CRC 990 Metal Coating Lines Metal Coated 825 Str
Slide 63: Australian Steel Products – Briefing Day
For personal use only Australian Steel Products – Briefing Day 15 November 2016 BlueScope Steel Limited. ASX Code: BSL
BlueScope Steel — Investor Presentation (November 2016) on 6ix