Bluescope Steel Limited · ASX:BSL
Bluescope Steel — Investor Presentation (November 2007)
75 slides from Bluescope Steel's investor presentation, Nov 29, 2007
Slide 1: BlueScope's BluePrint for the future – a focus on Execution Excellence
For personal use only BlueScope’s BluePrint for the future – a focus on Execution Excellence Paul O’Malley, Managing Director & Chief Executive Officer 29 November 2007 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 2. “Test and Refresh” process and outcomes 3. Safety, communities and sustainability 4. Global Steel Industry 5. “Test and Refresh” initiatives ¾ Building & Construction ¾ Execution & Manufacturing Excellence ¾ Balance Sheet & Capital Management Review –
Slide 4: Introduction
Introduction For personal use only y Purpose – inform the market of the direction and my approach to doing business at BlueScope y “Test and Refresh” project has confirmed 1. we have world class assets and capabilities 2. AND have significant opportunities to improve our competitiveness and market o
Slide 5: The process we have undertaken to date to develop our BluePrint
The process we have undertaken to date to develop our BluePrint For personal use only COMMENCING AUGUST 21 Weeks: 1 – 4 5–7 8 – 11 12 – 14 Years 1 –3 y Scope “test & y Evaluate industry outlook y Define organisation and y Implementation refresh” process staff levels 1 & 2 of the BluePrint y Evaluate
Slide 6: Test and Refresh has sharpened our strategic areas of focus
“Test and Refresh” has sharpened our strategic areas of focus and identified For personal use only more than 200 potential initiatives to significantly improve shareholder value 1. Reinvigorate our Australian and New Zealand businesses What we will Areas of 2. Continue the improvement process across
Slide 7: To re-iterate the BluePrint focus over the next years
To re-iterate the BluePrint focus over the next 3 years… For personal use only Build on our existing capabilities: Australia and New Zealand y Continue focus on our key market segments, in particular Building & Construction; and y Business and market excellence Improve our businesses: Asia and North
Slide 8: We have reorganised the business to focus on strategic priorities and execution
And we have reorganised the business to focus on our strategic priorities For personal use only and execution Managing Director and CEO Legal (Michael Barron) CFO (TBA) Paul O’Malley People and Organisational Performance (Ian Cummin) Aus/NZ Steel Australian Coated Australian Corporate Strategy Manuf
Slide 9: Our focus on capital management continues
Our focus on capital management continues – we will continue to “reward our shareholders as we grow” Share Buybacks – Public listing to 30 June 2007 Total return to shareholders since BSL’s For personal use only Purchased and cancelled 116m shares ¾ on market – 90m shares public listing (July 20
Slide 10: Safety, Communities, Sustainability
For personal use only Safety Communities Sustainability 10
Slide 11: Zero harm is our goal for our team and communities
Zero harm is our goal for our team and communities For personal use only Lost Time Injury Frequency Rate Medically Treated Injury Frequency Rate 18 70 16 NSW Manufacturing 60 16 Medically treated injuries per million man-hours worked 27.9 in 2005 60 14 Lost time injuries per million man-hours worked
Slide 12: Our Communities - BlueScope tank a day challenge
Our Communities - BlueScope tank a day challenge helping Australians For personal use only conserve water • Donates 200 rainwater tanks over a year at Australian primary schools • A kick start to their water conservation and an education program • 1850 schools registered - 28% of all primary schools
Slide 13: Water conservation – reducing fresh water consumption
Water conservation – clear focus on further reducing fresh water consumption For personal use only Port Kembla Steel Works Western Port Operation Total Water Use (ml/day) for process and cooling y $21.5 million water recycling project with South East Water, including funding from Victorian Waste Wat
Slide 14: New Zealand Steel and sustainability – benefits of cogeneration
New Zealand Steel and sustainability – benefits of cogeneration For personal use only NZ STEEL – EXTERNALLY PURCHASED AND INTERNALLY COGENERATED ELECTRICITY 1200 1000 800 Internal GWh 600 Cogeneration 400 Purchased 200 Energy 0 1990/91 1992/93 1994/95 1996/97 1998/99 2000/01 2002/03 2004/05 2006/07
Slide 15: PKSW Cogeneration plant
PKSW Cogeneration plant – technology led solution that will displace For personal use only greenhouse gas emissions… Proposed Port Kembla Steelworks Surplus process gas Co-Generation Plant from iron & steel making y 12 months feasibility study underway y Reduce approximately 800,000 tpa CO2 equivale
Slide 16: It is all about supply & demand
It is all about supply & demand “CHINA & EMERGING only “POST WAR INDUSTRIALISATION” “OIL SHOCKS” ECONOMIES” 1,200,000,000 World steel demand 1,000,000,000 DEMAND 800,000,000 “5% 600,000,000 personal use “5-8% GROWTH” “NO GROWTH” GROWTH” 400,000,000 200,000,000 0 1944 46 48 50 52 54 56 58 60 62 64 66
Slide 17: Chinese growth is driving the current steel super cycle
Chinese growth is driving the current steel super cycle For personal use only Global steel consumption CAGR 2000–07 Mt Percent 1,400 World 1,200 5.0 Average 1,000 17.0 China 800 600 8.0 Other developing** 400 200 Developed* 0.5 0 1980 1985 1990 1995 2000 2005 *Western Europe, NAFTA, Japan, South-Kor
Slide 18: Previous super cycle resulted in 30 years of 5-8% growth in demand
Previous super cycle (fuelled by Japan’s industrialisation) resulted For personal use only in 30 years of 5-8% growth in demand Historic world steel production evolution* World steel demand Tonne Industrialisation fuelled by Japan Post industrialisation Chinese growth era 1,200,000,000 1,000,000,000
Slide 19: China is at a very early stage in steel intensity
China is at a very early stage in steel intensity providing significant upside For personal use only potential… Crude steel intensity Kg/capita Taiwan (1970-2006) 1200 South Korea (1970-2006) 1000 800 600 Japan (1955-2006) China (1970-2006) 400 USA (1900-2006) 200 0 0 5000 10000 15000 20000 25000 30
Slide 20: China should reach peak crude steel intensity in 10 years
…and it should reach peak in crude steel intensity at earliest in 10 years For personal use only time Crude steel intensity Kg/capita 850 China following Japan 800 intensity curve 750 700 650 600 550 China following slope of US intensity curve China reaches 500 450 maximum steel intensity by 2024 40
Slide 21: China's urbanisation and industrialisation are key enablers
China’s continued urbanisation and industrialisation are the key enablers for For personal use only continued steel demand growth Real GDP growth Urbanisation Industry and service output Annual GDP growth rate Urbanisation rate GDP structure % Agri- 11 8 culture 51.5% 51 54 Industry 43.9% 10.7% 7.7%
Slide 22: Healthy spreads during periods of demand growth
… and during periods of demand growth, healthy spreads have prevailed, For personal use only noting spreads are not at historic highs in real terms Historic global steel spreads**over raw materials Industrialisation fuelled by Japan Post industrialisation China growth Real spreads** 180 1945 = 100 1
Slide 23: Steel supply - global steel industry consolidation continues
Steel supply - global steel industry consolidation continues For personal use only 120 100,000 Europe 90,000 / Americas Crude Steel Production (MT) 100 Europe / Asia Revenue (US$m) 80,000 70,000 Asia 80 60,000 Australia, Asia, Americas 60 50,000 Europe 40,000 40 30,000 Americas 20,000 20 10,000 0 0
Slide 24: In summary – the outlook
In summary – the outlook is For personal use only China Rest of World • Steel demand remains strong • Consolidation to continue • Raw steel production growth • Continued production discipline slowing • Russian economy using more • Evidence of higher spot raw steel material costs making some • Middle
Slide 25: Test & Refresh initiatives: Building & Construction
For personal use only “Test & Refresh” initiatives Building & Construction 25
Slide 26: Continued focus on Building and Construction markets
BlueScope Steel will continue its focus on the Building and Construction For personal use only Markets whilst concurrently looking after all of its customers in all segments y Residential and commercial construction is a large and growing market for BlueScope. y However, there is a high degree of va
Slide 27: Primary market sector focus: building and construction
BlueScope’s primary market sector focus will continue to be the For personal use only attractive building and construction sector The building and construction sector is the largest … with steel intensity / capita and flat steel penetration sector for which BlueScope has differentiated varying by ma
Slide 28: Opportunity to increase steel penetration in Australian building market
In Australia BlueScope has further opportunity to increase steel For personal use only penetration in the very large building and construction market 2006/2007 Australian building market size, A$ billions The Australian Building & … and the opportunity for BlueScope Construction segment is large…… i
Slide 29: Australia - Residential framing opportunity
Australia - Residential framing is one opportunity to increase steel For personal use only penetration Framing and roofing can pull through …and will make a step-change in overall most tonnes (2007E)… steel penetration per home (2007E) • Residential Building Potential tonnes/home Steel usage on new
Slide 30: Steel penetration in commercial buildings
Increasing steel penetration in commercial buildings is another For personal use only opportunity and has successfully occurred in other markets Steel penetration in structural framing of commercial multistorey buildings, percent • Steel penetration in Steel penetration Evolution of steel penetratio
Slide 31: Flat steel penetration across Asia building markets
Flat steel penetration across the Asia building and construction markets varies presenting different opportunities by country Total Building Materials1 within the For personal use only Construction Markets (2007E) US$ Billions 250 225 Non Residential Residential 200 China - large market with low fla
Slide 32: India and China's relative consumption of steel in construction is low
But India and China’s relative consumption of steel in construction is For personal use only low Total steel and cement consumption, 2004 Percent y India’s total cement and construction steel consumption has been far below China y Tata BlueScope Steel joint venture - an early mover in a very attract
Slide 33: Global leader in steel product innovation
… and being a global leader in steel product innovation will greatly For personal use only enhance our growth opportunities. We will invest more in this area… • CASTRIP® LYSAGHT TRIMDEK® – Is a technology that allows steel – Is a modern ribbed roofing makers to produce thin flat- profile with subtle
Slide 34: Innovation is not just new product development
…and innovation is not just new product development For personal use only Description Involves the introduction of goods or services that are new Product/Service or substantially improved. This might include improvements in functional characteristics, technical abilities, ease of use or any other di
Slide 35: Matching customers' needs with steel solutions
Using innovation and with an increasing focus on our customer service, we For personal use only will match customers’ needs with steel solutions From customer’s needs Installation Complete frame, Manufacturing to design floor, facade & roof EXAMPLES… Customers Needs Customer Concerns BlueScope Solut
Slide 36: Execution & Manufacturing Excellence
For personal use only “Test & Refresh” initiatives Execution & Manufacturing Excellence 36
Slide 37: Manufacturing excellence - key manufacturing outcomes
“Manufacturing excellence” - BSL will execute against key manufacturing For personal use only outcomes at all operations BlueScope’s Operating System Key Outcomes • Improve total cost per tonne produced Management • Decrease variable costs infrastructure • Increase uptime Technical system • Optimise
Slide 38: Opportunity to improve uptime performance
As an example, there is further opportunity to improve uptime performance For personal use only even relative to internal best practice… BSL has significantly lifted its production levels … with further potential to meet benchmark uptime over time … performance Indexed production (Australian manufac
Slide 39: Areas to improve uptime, e.g. reducing unscheduled breakdowns
…and we have already identified areas to improve uptime, e.g. reducing For personal use only unscheduled breakdowns… Average losses (BlueScope’s Australian manufacturing facilities), percent of • A reduction in total time breakdowns presents 100% an improvement opportunity X Improvement • Even relat
Slide 40: Improving delivery performance
Improving our delivery performance will better position us to improve cost For personal use only efficiency and customer service… Customers note “delivery performance as the second most important reason for switching to imports” Weekly DP (Business A) Percentage 100 90 80 70 60 50 40 30 20 Week 15,
Slide 41: Supply chain improvement and performance metrics
…and we will support this supply chain improvement, using more For personal use only comprehensive processes and performance metrics… Currently assessed performance metrics across 2 of our businesses • An Integrated Planning and Control Measure Indicative Business Unit Business Unit process capabili
Slide 42: Balance Sheet & Capital Investment Review
For personal use only “Test & Refresh” initiatives Balance Sheet & Capital Investment Review 42
Slide 43: Balance sheet – initiatives to free up cash
Balance sheet –we have identified a number of initiatives to free up cash For personal use only and maintain a lean balance sheet As at A$ Millions 31 December 2006 30 June 2007 Assets Cash 58 36 Receivables 1,207 1,269 Inventory 1,409 1,271 Other Assets 1,143 1,259 Net Fixed Assets 3,736 3,671 Tota
Slide 44: Particular areas of opportunity
…particular areas of opportunity are… For personal use only Assessment Potential opportunities • BlueScope has an extensive • Sale, lease or development of under Property property portfolio associated with its utilised or not required properties manufacturing locations which has not been optimised f
Slide 45: Major capital projects focused on stay in business capital
Current future major capital projects focused on stay in business capital Total Est. Actual to For personal use only PROJECTS All in A$million Capex / Cost 30/6/07 FY2008 FY2009 FY2010 Projects completed Thailand – Coating expansion 80 80 - - - Vietnam – Coating / Painting 136 136 - - - China - Coat
Slide 46: Blast Furnace No. 5 reline and cogeneration plant
Major capital and investment projects – Blast Furnace No. 5 reline and For personal use only cogeneration plant 1. Blast Furnace No. 5 Reline (CURRENT EXPECTATION) • Total capital cost A$330m ($106m spent by end of FY2007). Depreciated over 20 years • The project will take approx. 100 days, commenci
Slide 47: Port Kembla Steelworks - Blast Furnace No. 5 reline
We continue to invest in our businesses - Port Kembla Steelworks - Blast For personal use only Furnace No. 5 reline 47
Slide 48: Major capital projects – Sinter Plant Upgrade
Major capital and investment projects – Sinter Plant Upgrade For personal use only 3. Sinter Plant Upgrade (CURRENT EXPECTATIONS) Sinter y Main shutdown planned for April – May 2009 (approx. 35 days) y Coincide with BF No. 5 reline, when demand for sinter is reduced. y Total capital cost A$134m. y W
Slide 49: Port Kembla Steel Works – Sinter Plant upgrade
Port Kembla Steel Works – Sinter Plant upgrade For personal use only Exit End Entry End • Rebuild cooler • New Ignition Furnace • Increase Width • New Strand Feeding Device • Increase Fan Power • Relocate Lowering wheel and extend building • New cooler feed chute Precipitators • Refurbish zones 2, 3
Slide 50: NZ Iron Sands feasibility studies underway
NZ Iron Sands feasibility studies underway, project teams are For personal use only revitalised Glenbrook Taharoa • The abundant iron sand resource at New Zealand Steel is an increasingly valuable asset in the BlueScope Steel portfolio • There are a number of “brownfield” opportunities to better exp
Slide 51: Australian Distribution and Solutions
For personal use only Australian Distribution and Solutions Mark Vassella 51
Slide 52: The outlook for Distribution and Solutions
The outlook for Distribution and Solutions For personal use only Organisation agenda: – Smorgon Steel Distribution integration – Distribution & Solutions – Significant market facing businesses • Approximately 150 sites • Different challenges - defence to growing pains! Market agenda: – Developing ou
Slide 53: Key messages from Test & Refresh for Distribution and Solutions
The key messages coming out of “Test & Refresh” for Distribution and For personal use only Solutions y Downstream focus has been on integration activities: ¾ Customer reaction to structure change y Key issues to be addressed in the Downstream “Test & Refresh” process: ¾ Re brand to BlueScope Distrib
Slide 54: Customer Satisfaction trends in Distribution and Solutions
Key facts and the trends in Distribution and Solutions - Customer Satisfaction For personal use only 100% 95% 90% 85% 80% Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Distribution - DIFOT Service Centres - DP Lysaght - DP 54
Slide 55: Key risks and uncertainties for Distribution and Solutions
Key risks and uncertainties for Distribution and Solutions that we will manage For personal use only y Strength of AUD & impact of imports - margins, channel y Imported fabricated steel y Underlying economic growth y Labour - skills shortages y Decline in Manufacturing & Auto demand y Systems platfo
Slide 56: The next steps for Distribution and Solutions
The next steps for Distribution and Solutions For personal use only y Interim Structure put in place ¾ Integration of Distribution & Solutions y Strategic Review – next round ¾ Key issues y Organisation design & strategy ¾ Quarter 1 2008 56
Slide 57: Strategy
For personal use only Strategy 57
Slide 58: Strategy for longer term earnings growth
Strategy for longer term earnings growth For personal use only y Reinvigorate our position in the Australian/NZ markets, through ongoing focus on strengthening our customer relationships, product and service innovation and driving operational efficiency. y Continue to improve our position in select
Slide 59: Current Business Update
For personal use only Current Business Update 59
Slide 60: Business update – solid first four months
Business update – solid first four months Another strong operations performance at all facilities For personal use only UPSTREAM MID & DOWNSTREAM y North America y Australia ¾ HRC price to scrap cost spread ¾ increased customer focus narrowed relative to previous year y Asia ¾ evidence of price incr
Slide 61: Second Half FY 2008
Second Half FY 2008 For personal use only y Opportunities and risks for the second half will have a major bearing on our FY 2008 result Opportunities Risks ¾ Stronger global steel prices ¾ Continued strengthening of A$ ¾ Improved domestic sales ¾ Zinc cost volatility y Will further update market at
Slide 62: EBIT sensitivity to prices, raw material costs and US$
EBIT remains sensitive to realised hot rolled coil prices, raw material costs For personal use only and US$ movements Estimated impact on forecast EBIT (A$mil) Assumption FY08 FY07 (current) (previous) +/– US$25 / tonne movement in BlueScope’s average realised export 85 86 HRC price (1) +/– 1¢ movem
Slide 63: BluePrint Summary
BluePrint Summary For personal use only y Execution excellence within existing businesses y Improved customer focus across all of our market segments y Innovation y Disciplined growth y Continuing our focus on ¾ Safety ¾ Sustainability ¾ Our communities ¾ Shareholder value & capital management y Nex
Slide 64: Questions & Answers
For personal use only Questions & Answers 64
Slide 65: Supporting Information
For personal use only Supporting Information 65
Slide 66: External reporting business segments have not changed
External reporting business segments have not changed Corporate / Group For personal use only Australia New Zealand Asia North America Hot Rolled Coated & New Zealand & Coated & Hot Rolled Coated & Products Building Pacific Islands Building Products Building Australia Products Products Products Asia
Slide 67: Leadership team – background
Leadership team – background For personal use only Noel Cornish Brian Kruger Australia & New Zealand Manufacturing Corporate Strategy/Innovation; North America • previously President Port Kembla Steelworks and • previously President Coated Australia and CFO New Zealand • involved in Butler acquisiti
Slide 68: Unique production footprint in the world's fastest growing regions
Unique production footprint in the world’s fastest growing regions For personal use only Asia China 24 Lysaght and MC 250kt PEB Sites Painting 150kt • Coated and Building Products India North America Metal Coating 250kt • North Star BlueScope JV Vietnam Painting 150kt MC 125kt Hot Rolling 1.80mt (10
Slide 69: BlueScope Steel China footprint
BlueScope Steel China footprint For personal use only FY 2007 REVENUE: A$407M EBITDA: (A$7M) EMPLOYEES: 1,810 INVESTED CAPITAL: A$405M SUZHOU BlueScope Steel in China 1 Metal Coating/Painting Line Facility 4 Lysaght Manufacturing Facilities 2 Butler PEB Manufacturing Facilities 60 Butler/CSC Sales O
Slide 70: BlueScope Steel North American sites
BlueScope Steel North American sites For personal use only FY 2007 REVENUE: A$1,354 M EBITDA: A$231M EMPLOYEES: 2,403 incl. North Star INVESTED CAPITAL: A$295M All Include BSL’s 50% interest in North Star BlueScope Steel HCI Steel Building Systems Inc MANUFACTURING CASTRIP® PLANTS BlueScope Steel in
Slide 71: North America – acquisition of HCI Steel Building Systems
North America – acquisition of HCI Steel Building Systems, Inc y On 1 November 2007 BlueScope acquired privately owned HCI Steel Building For personal use only Systems Inc. (a pre-engineered steel buildings business) ¾ HCI designs & manufactures steel PEB’s for heavy industry, commercial and communi
Slide 72: Coated Australia – Project update
Coated Australia – Project update For personal use only y West Sydney Colorbond Facility ¾Plant handed over to manufacturing team and paint on strip August 2007 ¾Capital cost $150m (including land, buildings and processing equipment) ¾Nameplate capacity up to 120,000 tpa − technical ramp up is expec
Slide 73: New West Sydney Colorbond Facility
Coated & Building Products Australia – new West Sydney Colorbond Facility For personal use only 73
Slide 74: Indicative FY2008 Zinc and Aluminium usage vs FY2007
Indicative FY2008 Zinc and Aluminium usage vs FY2007 For personal use only Tonnes Zinc Aluminium FY2008(E) FY2007 FY2008(E) FY2007 AUSTRALIA Springhill 21,423 22,787 11,281 10,632 Western Port 22,261 21,800 11,284 10,900 Sub-total 43,684 44,587 22,565 21,532 NEW ZEALAND 7,300 6,800 3,700 3,500 ASIA
Slide 75: BlueScope's BluePrint for the future – a focus on Execution Excellence
For personal use only BlueScope’s BluePrint for the future – a focus on Execution Excellence Paul O’Malley, Managing Director & Chief Executive Officer 29 November 2007 ASX Code: BSL
BlueScope Steel — Investor Presentation (November 2007) on 6ix