Bluescope Steel Limited · ASX:BSL
Bluescope Steel — FY2013 Earnings Presentation
66 slides from Bluescope Steel's earnings presentation, Aug 19, 2013
Slide 1: FY2013 Financial Results Presentation
For personal use only FY2013 Financial Results Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias, Chief Financial Officer 19 August 2013 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: Introduction
For personal use only INTRODUCTION
Slide 4: Progress towards our goal of Zero Harm
Progress towards our goal of Zero Harm For personal use only Lost time injury frequency rate Medically treated injury frequency rate 16.0 60.0 14.0 52.2 Medically treated injuries per million man-hours worked 47.1 Lost time injuries per million man-hours worked 8.0 29.1 22.4 21.9 4.8 17.0 4.1 3.5 3.
Slide 5: Summary
Summary For personal use only • FY2013 reported net loss after tax of $84M, a $960M improvement on FY2012 • $30M underlying net profit after tax, a $267M improvement on FY2012 • $49M 2H FY2013 market guidance comparable NPAT1 • Major achievements in delivery of NS BlueScope Coated Products JV transa
Slide 6: Summary (ctd)
Summary (ctd) • Building Products1 underlying EBIT improved to $80M; growth of 57% over FY2012 For personal use only driven by Thailand, Vietnam and North America improvement • Global Building Solutions underlying EBIT result of $34M (excludes one-off impact of prior period provision adjustment). St
Slide 7: Financial headlines FY2013 vs. FY2012
Financial headlines FY2013 vs. FY2012 YEAR ENDED For personal use only $M (unless marked) 30 JUNE 2012 30 JUNE 2013 FY2013 vs FY2012 Total revenue 8,621 7,290 Lower exports External despatches 6,714 5,754 Lower exports EBITDA Underlying 1 99 418 EBIT Reported (820) 52 Underlying 1 (224
Slide 8: Enhanced financial flexibility to invest in growth
Enhanced financial flexibility to invest in growth For personal use only • Drive NS BlueScope Coated Products joint venture and access new customers and Building Products products • Continue to broaden channels to market • Broaden base of global customers • Leverage expansive operating footprint del
Slide 9: Acquisition of Hills Holdings' Orrcon and Fielders businesses
Acquisition of Hills Holdings’ Orrcon and Fielders businesses For personal use only • Announced today agreement to acquire Orrcon and Fielders from Hills Holdings • Orrcon is a pipe and tube manufacturer and distributor – Sales revenue of $290M, despatch volume 179kt in the 12 months ended 31 Dec 20
Slide 10: Rationale and earnings impact of acquisitions
Rationale and earnings impact of acquisitions For personal use only • We have been diligent in reducing our costs across our business footprint • The businesses are close to BlueScope’s core Australian operations. Our objective is to improve the efficiency with which we can serve Australian customer
Slide 11: Segment Discussion
For personal use only SEGMENT DISCUSSION
Slide 12: Building Products ASEAN, North America and India
Building Products ASEAN, North America and India Underlying EBIT growth of 57% in FY2013 For personal use only Comments on FY2013 Underlying EBIT ($M) • Thailand: Strong performance despite competitive 80 environment. Recovery from floods in 1H FY2012, and growth initiatives in all customer segments
Slide 13: Coated Products JV – progress working with NSSMC
Building Products ASEAN, North America and India Coated Products JV – progress from working together with NSSMC For personal use only • Increased painting capacity and new whitegoods product projects in planning – In-line painting capacity in Thailand to further penetrate retail segment – New whiteg
Slide 14: Global Building Solutions
Global Building Solutions Improvement in U.S. performance but softer China building volumes Comments on FY2013 Underlying EBIT ($M) For personal use only 1 • North America: 33 34 – Returned to profit on growing market and further cost 1 25 14 improvements – Volumes up 7% on FY2012 and 2H FY2013 up 6
Slide 15: Global Building Solutions: developing growth opportunities
Global Building Solutions Developing the opportunities to deliver growth For personal use only Buildings North America Buildings Asia • Targeting further growth – from both market improvement • Positioned to support further growth (both domestic and and share gains Global exports) with Xi’an plant i
Slide 16: Xi'an facility currently being commissioned
Global Building Solutions Xi’an facility currently being commissioned For personal use only • Our new manufacturing facility in Xi’an (western China) supports plans for increased economic expansion in the Chinese interior • The facility is China’s first three-star sustainable industrial building (th
Slide 17: Coated & Industrial Products Australia
Coated & Industrial Products Australia Underlying EBITDA improved to $150M profit For personal use only Comments on FY2013 Underlying EBITDA ($M) • $150M1 underlying EBITDA (of which $71M in 2H) 150 • Decrease in loss-making export tonnes partly offset by higher 2H 71 per-unit operating costs 1H 79
Slide 18: Australian demand
Australian demand Softening of domestic volume in FY2013 For personal use only Total Australian external despatch volumes (Kt) 2H FY08 1H FY09 2H FY09 1H FY10 2H FY10 1H FY11 2H FY11 1H FY12 2H FY12 1H FY13 2H FY13 1,800 (No. 5 Blast 63% Furnace Reline) 1,600 64% Construction 65% 1,400 27% (436kt) 2
Slide 19: External forecasters' outlook for key construction exposures
External forecasters’ outlook for our key construction exposures For personal use only Residential construction Non-residential construction Annual % Change Annual % Change (Fin Yrs) HIA F’casts (Apr 13) (Fin Yrs) BIS Shrapnel F’casts (May 13) 6.0 7 Yr Average 15 7 Yr Average 12.9 4.5 10.2 3.3 10 9.
Slide 20: Building Components & Distribution Australia
Building Components & Distribution Australia For personal use only Comments on FY2013 Underlying EBIT ($M) • Margin (spread) improvement in FY2013 vs FY2012 • Restructure program has delivered cost reductions 2H (19) 2H (18) • Decreased volumes – import competition and tough trading 1H (7) condition
Slide 21: New Zealand and Pacific Steel Products
New Zealand and Pacific Steel Products EBIT improved to $40M in 2H FY2013 ($42M for full year), up from $2M in 1H. Higher steel and iron ore prices in 2H, and fewer planned maintenance outages For personal use only Comments on FY2013 Underlying EBIT ($M) • Benefit of higher iron sands volumes of 1.7
Slide 22: NZ residential construction approvals trending higher
New Zealand and Pacific Steel Products Residential construction approvals trending higher – Christchurch rebuild underway For personal use only Monthly number of New Zealand residential construction approvals1 (Number per month) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Mar Mar Mar Mar Mar Mar
Slide 23: Hot Rolled Products North America
Hot Rolled Products North America Underlying EBIT improved $5M on FY2012 from lower depreciation charge and benefit of cost control despite weaker spread For personal use only Comments on FY2013 Underlying EBIT1 ($M) • Spread contraction vs. FY2012, driven by lower selling 67 prices partially offset
Slide 24: Financials
For personal use only FINANCIALS
Slide 25: Underlying income FY2013 vs. FY2012
Underlying income FY2013 vs. FY2012 For personal use only YEAR ENDED $M 30 JUNE 2012 30 JUNE 2013 Underlying EBIT (224.3) 102.8 Net borrowing costs (109.0) (66.2) Profit/(loss) from ordinary activities before tax (333.3) 36.6 Income tax (expense)/benefit 111.4 14.6 Underlying profit/(loss) from ordi
Slide 26: Reconciliation between reported NPAT and underlying NPAT
Reconciliation between reported NPAT and underlying NPAT1 For personal use only 2H FY2013 FY2013 NPAT $M NPAT $M Reported net loss after tax (72) (84) Underlying adjustments Discontinued Business (gains) / losses 4 4 Steel Transformation Plan (STP) release to align with carbon costs 16 32 Business d
Slide 27: Underlying EBIT variances by item
BlueScope Group Underlying EBIT variances by item +103 For personal use only Net spread improvement $89M +4 -1 +85 +5 +145 Conversion & other costs: Raw material costs: Cost improvement initiatives 223 Coal 241 Volume (75) Iron ore 152 -224 Escalation (91) Scrap & alloys 6 One-off / discretionary 34
Slide 28: Cash flow – solid core earnings improvement
Cash flow – solid core earnings improvement $M FY2012 FY2013 1H FY13 2H FY13 Reported EBITDA (489) 368 204 164 1H adverse item predominantly due to For personal use only classification of proceeds of sale of Adjust for other cash profit items 327 (24) (32) 8 previously unrecognised intangible asset
Slide 29: Controlled capital expenditure and working capital
Controlled capital expenditure and working capital For personal use only Total capital expenditure Working capital items1 Includes Indonesian steel • Improved operating working capital position maintained coating line expansion Approx $100M since Port Kembla restructuring growth capex 398 -583 365 3
Slide 30: Inventory
Inventory Movement from June 2012 driven by FX and higher volumes, partly offset by lower rates For personal use only RM $258M RM $238M RM $234M WIP 532 WIP 594 WIP 527 FG 466 FG 434 FG 521 Other 153 Other 146 Other 153 +1,409 +1,412 +1,435 +109 -10 -11 +7 +15 -85 -71 +73 Jun 2012 Rate / Volume FX N
Slide 31: Strengthened balance sheet
Strengthened balance sheet For personal use only Net debt ($M) Net debt / EBITDA2 Gearing (ND/ND+E) 19.5% Significant debt reduction largely driven by: • $600m equity raising 9.2% • Working capital release from CIPA 0.4x $148M net debt restructure comprised of: 3.2% Also benefited from favourable ti
Slide 32: Debt facilities maturity profile at June 2013
Debt facilities maturity profile at 30 June 2013 For personal use only Nil drawn of $675M Receivables securitisation program: 675 committed In addition to debt facilities, BSL has an undrawn receivables securitisation program $150M maturing September 2014 Syndicated Bank Facility Current estimat
Slide 33: Indicative EBIT sensitivities for 1H FY2014
Indicative EBIT sensitivities for 1H FY2014 For personal use only Estimated impact on 1H FY2014 EBIT A$M 1 Assumption +/– US$25 / tonne movement in BlueScope’s average realised export HRC price 2 28 +/– 1¢ movement in Australian dollar / US dollar exchange rate 3 2 +/– US$10 / tonne movement in coal
Slide 34: Outlook & Summary
For personal use only OUTLOOK & SUMMARY
Slide 35: 1H FY2014 outlook
1H FY2014 outlook For personal use only • We expect to maintain Company performance and deliver a profitable 1H FY2014 (pre period- end NRV adjustments), however given uncertainty in domestic Australian demand we do not expect a 1H FY2014 outcome better than the 2H FY2013 outcome (subject to spread,
Slide 36: Enhanced financial flexibility to invest in growth
Enhanced financial flexibility to invest in growth For personal use only • Drive NS BlueScope Coated Products joint venture and access new customers and Building Products products • Continue to broaden channels to market • Broaden base of global customers • Leverage expansive operating footprint del
Slide 37: Questions & Answers
For personal use only QUESTIONS & ANSWERS
Slide 38: Additional Information
For personal use only ADDITIONAL INFORMATION
Slide 39: Overview of Fielders
Overview of Fielders For personal use only Key points Sales and distribution facilities • Fielders manufactures a comprehensive range of roll- formed steel products that are supplied to commercial, NT WA industrial and domestic building contractors • Darwin • Geraldton • Wangara • 12 sites across NS
Slide 40: Overview of Orrcon
Overview of Orrcon For personal use only Key points Mills and distribution facilities • Orrcon is a manufacturer, importer and distributor of steel tube and pipe in Australia, including structural tubes, precision tubes, hot rolled structural steel and pipes WA • Bibra Lake QLD • 2 mills and 12 dist
Slide 41: Summary of financial items by segment
BlueScope Group Summary of financial items by segment For personal use only Revenue Reported EBIT A$M FY12 1H13 2H13 FY13 A$M FY12 1H13 2H13 FY13 Coated & Industrial Products Australia 4,280 1,668 1,681 3,349 Coated & Industrial Products Australia (726) 7 (52) (45) Build Components & Dist Australia
Slide 42: Despatch summary by segment
BlueScope Group Despatch summary by segment For personal use only Total steel despatches Australian despatch summary A$M FY12 1H13 2H13 FY13 A$M FY12 1H13 2H13 FY13 Coated & Industrial Products Australia 3,544 1,248 1,367 2,615 CIPA Domestic Despatches 1,991 903 888 1,791 Build Components & Dist Aus
Slide 43: Committed debt facilities as at June 2013
BlueScope Group Committed debt facilities as at 30 June 2013 For personal use only Committed Drawn Maturity Local currency A$M A$M Syndicated Bank Facility December 2015 A$675M A$675M - US unsecured notes May 2018 US$300M A$324M A$324M NS BlueScope JV facilities (100%) - Corporate facilities Mar – J
Slide 44: Balance sheet
BlueScope Group Balance sheet $M 30 Jun 2012 31 Dec 2012 30 Jun 2013 For personal use only Assets Cash 214 193 514 Receivables * 995 971 1,097 Inventory * 1,409 1,412 1,435 Property, Plant & Equipment 3,296 3,225 3,420 Intangible Assets 454 436 496 Other Assets 366 376 369 Total Assets 6,734 6,613 7
Slide 45: Reconciliation of reported to underlying earnings by nature of item
BlueScope Group Reconciliation of reported to underlying earnings by nature of item ($M) FY2012 FY2013 1H FY2012 2H FY2012 1H FY2013 2H FY2013 For personal use only Reconciliation of EBITDA and EBIT EBITDA 2 Reported (489) 368 (270) (219) 204 164 EBIT 2 Reported (820) 52 (435) (385) 47 5 Discontinue
Slide 46: Reconciliation of reported to underlying earnings by segment
BlueScope Group Reconciliation of reported to underlying earnings by segment ($M) FY2012 FY2013 1H FY2012 2H FY2012 1H FY2013 2H FY2013 For personal use only Coated & Industrial Products Australia Reported EBIT (726) (45) (463) (263) 7 (52) Restructure / redundancies 363 16 347 16 2 14 Asset Impairm
Slide 47: Background to the CIPA / Port Kembla restructuring
BlueScope Group Background to the CIPA / Port Kembla restructuring For personal use only • Long track record of positive underlying EBITDA in key business segments until CIPA impacted in FY2011 and FY212 ($M, years ended 30 June) Segment 2005 2006 2007 2008 2009 2010 2011 2012 05-12 avg 09-12 avg FY
Slide 48: Building Products ASEAN, North America & India: financial summary
Building Products ASEAN, North America & India Financial summary For personal use only Key segment financial items Despatches by business A$M FY12 1H13 2H13 FY13 '000 tonnes FY12 1H13 2H13 FY13 Revenue 1,644 800 835 1,635 Thailand 325 180 173 353 Underlying EBITDA 98 55 72 127 Indonesia 208 100 119
Slide 49: Building Products: underlying EBIT variance
Building Products ASEAN, North America & India Underlying EBIT variance +80 For personal use only Gross margin improvement $13M -9 +8 -1 +18 +51 Conversion & other costs: -5 Cost improvement initiatives 9 Escalation (14) One-off / discretionary (5) Other 1 +113 -95 FY2012 Export prices Domestic Raw
Slide 50: Global Building Solutions: financial and despatches summary
Global Building Solutions Financial and despatches summary For personal use only Key segment financial items Despatches by business A$M FY12 1H13 2H13 FY13 '000 tonnes FY12 1H13 2H13 FY13 Revenue 1,446 728 635 1,363 North America Buildings 197 112 99 211 Underlying EBITDA 66 33 26 59 Buildings Asia
Slide 51: Global Building Solutions: underlying EBIT variance
Global Building Solutions Underlying EBIT variance One-off prior period (FY2005-FY2009) provision adjustment in 1H FY2013 Net margin improvement $6M For personal use only +33 0 -4 +34 -1 -8 +26 +56 -50 FY2012 Domestic Raw material Conversion & Volume & mix Other Provision FY2013 prices costs other c
Slide 52: CIPA: financial and despatch summaries
Coated & Industrial Products Australia Financial and despatch summaries For personal use only Key segment financial items Despatches breakdown A$M FY12 1H13 2H13 FY13 '000 tonnes FY12 1H13 2H13 FY13 Revenue 4,280 1,668 1,681 3,349 Hot rolled coil 634 245 261 506 Underlying EBITDA (151) 79 71 150 Pla
Slide 53: CIPA: underlying EBIT variance
Coated & Industrial Products Australia Underlying EBIT variance Reduced volume of loss making exports -4 0 For personal use only +71 -20 Net spread improvement $107M Conversion & other costs: +133 Cost improvement initiatives 156 Higher unit costs on lower volumes (89) Escalation (39) Raw material c
Slide 54: CIPA: despatch mix
Coated & Industrial Products Australia Despatch mix (kt) For personal use only 2H FY2013 Product Mix FY2013 Product Mix 1,367 1,248 Export 479 Export 345 HRC Plate CRC Metal Coated Painted Other Domestic 903 888 Domestic Dec-2012 Jun-2013 54
Slide 55: CIPA: revenue and underlying costs FY2013
Coated & Industrial Products Australia Revenue and underlying costs FY2013 For personal use only Revenue Underlying costs (to EBIT line) A$3,369m A$3,349m Conversion & Overhead Non-steel business costs Components (in order Non-steel business relate to: Non-steel business costs of value): • Export co
Slide 56: Spread a major determinant of segment profitability
Coated & Industrial Products Australia Spread continues to be a major determinant of segment profitability East Asia HRC price (US$/t) and indicative steelmaker HRC spread (A$/t) For personal use only Spread: SBB East Asia HRC price less cost of 1.5t iron ore fines and 0.71t hard coking coal $800 SB
Slide 57: Australian residential construction starts
Coated & Industrial Products Australia Australian residential construction starts For personal use only Quarterly number of Australian residential construction starts (total new houses) to March 2013 1 (Number per quarter) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 Jun Jun Jun Jun Jun Jun Jun
Slide 58: Supply and pricing of iron ore and met coal to Steelworks
Coated & Industrial Products Australia Supply and pricing of iron ore and met coal to Steelworks For personal use only Supplier Term Approximate Volume (p/a) Pricing Basis 10 years from Linked to average monthly index in the month of Iron ore BHP Billiton Up to 4.18Mt1 lump & fines 1 July 2009 shipm
Slide 59: Progress on challenging unfair trade and dumping
Coated & Industrial Products Australia Progress on challenging unfair trade and dumping For personal use only Process Current Duties1 • Preliminary Affirmative Determination (PAD) issued Oct 2012; • Interim Dumping Duties (IDD) rates: Minister sign off Dec 2012 – Japan 0-7.5% Hot Rolled Coil – Korea
Slide 60: Building Components & Distribution Australia: financial summary
Building Components & Distribution Australia Financial summary For personal use only Key segment financial items Despatches breakdown A$M FY12 1H13 2H13 FY13 '000 tonnes FY12 1H13 2H13 FY13 Revenue 1,486 720 656 1,376 Domestic despatches 747 358 339 697 Underlying EBITDA (27) 2 (10) (8) Export despa
Slide 61: BCDA: underlying EBIT variance
Building Components & Distribution Australia Underlying EBIT variance For personal use only Gross margin improvement $14M 0 +16 -25 -9 -46 +55 -41 FY2012 Domestic prices Raw material costs Volume & mix Conversion costs Other FY2013 Gross margin reduction $(5)M -7 -8 -23 +1 +1 -18 +18 1H FY2013 Domes
Slide 62: New Zealand Steel & Pacific Steel Products: financial summary
New Zealand Steel & Pacific Steel Products Financial summary For personal use only Key segment financial items Despatches breakdown A$M FY12 1H13 2H13 FY13 '000 tonnes FY12 1H13 2H13 FY13 Revenue 755 319 362 681 Domestic despatches 247 125 130 255 Underlying EBITDA 113 27 62 89 Export despatches 333
Slide 63: NZ Steel: underlying EBIT variance
New Zealand Steel & Pacific Steel Products Underlying EBIT variance For personal use only Impact of lower global steel prices and NZD/USD exchange rate +69 Net spread reduction $(40)M (influencing both domestic and export prices), combined with fixed cost of iron sands extraction. Partly offset by c
Slide 64: Steel despatch mix
New Zealand Steel & Pacific Steel Products Steel despatch mix (kt) For personal use only 2H FY2013 Product Mix FY2013 Product Mix 317 Export 261 187 Export 136 HRC Plate CRC Metal Coated Painted Other Domestic Domestic 125 130 Dec-2012 Jun-2013 64
Slide 65: Non-steel product sales
New Zealand Steel & Pacific Steel Products Non-steel product sales For personal use only Iron Sands Exports Vanadium Slag Taharoa (57% Fe) and Waikato North Head (58.5% Fe) Vanadium production was up 6% on 1H FY2013 iron sands mined and concentrated on site benefitting from increased steel produ
Slide 66: FY2013 Financial Results Presentation
For personal use only FY2013 Financial Results Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias, Chief Financial Officer 19 August 2013 BlueScope Steel Limited. ASX Code: BSL