Bluescope Steel Limited · ASX:BSL
Bluescope Steel — FY2012 Earnings Presentation
62 slides from Bluescope Steel's earnings presentation, Aug 20, 2012
Slide 1: FY2012 Financial Results Presentation
For personal use only FY2012 Financial Results Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias Elias, Chief Financial Officer 20 August 2012 ASX Code: BSL Page 1
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: Progress towards our goal of Zero Harm
For personal use only Progress towards our goal of Zero Harm Lost Time Injury Frequency Rate Medically Treated Injury Frequency Rate 18 70 16.0 16 60 0 60.0 Medicaally treated injuriees per million mann-hours worked 60 14.0 Lostt time injuries perr million man-hours worked 14 52.2 50 47.1 12 10 40 8
Slide 4: Recap on US$1.36 Billion Coated Products Joint Venture
For personal use only Recap on US$1.36 Billion Coated Products Joint Venture A Announcedd on 13 August A t 2012 Page 4
Slide 5: US$1.36 Billion Joint Venture with Nippon Steel Corporation (NSC)
For personal use only US$1.36 Billion Joint Venture with Nippon Steel Corporation (NSC) y 50:50 joint venture over BlueScope’s building products business in ASEAN (ex-China & India JV) and the U.S. U S (Steelscape and ASC Profiles businesses) y Joint venture enterprise value of US$1,360M (100%) y Bl
Slide 6: FY2012 Financial Headlines & Achievements
For personal use only FY2012 Financial Headlines & Achie ements Achievements Page 6
Slide 7: Reconciliation between FY2012 reported NLAT and underlying NLAT
For personal use only Reconciliation between FY2012 reported NLAT and underlying NLAT1 2H FY2012 FY2012 NLAT A$M NLAT A$M Reported net loss after tax (514) (1,044) Underlying adjustments Discontinued operations 3 (4) Asset sales (2) (2) Restructuring & redundancy costs 2 34 288 Borrowing amendment f
Slide 8: Group financial headlines FY2012 vs. FY2011
For personal use only Group financial headlines FY2012 vs. FY2011 TWELVE MONTHS ENDED FY2012 vs FY2011 A$ 30 JUNE 2011 30 JUNE 2012 % Revenue 9,134M 8,622M (6%) E t External l despatches d t h 7 7M tonnes 7.7M t 6 8M tonnes 6.8M t (12%) EBITDA − Reported (687M) (489M) 29% − Underlying 1 240M 99M (59
Slide 9: Delivery on FY2012 targets
In addition to the material cost reduction initiatives of $696M in Australasia, Asia and North America since 2008, the Company has delivered on its other FY2012 targets For personal use only Coated & Industrial Products Australia restructure Asian growth 5 Successful equipment closures between mid A
Slide 10: Segment underlying EBIT summary for FY2012
Segment underlying EBIT summary for FY2012; expecting earnings growth in all businesses in FY2013 Underlying EBIT (A$M) 1 1H 2H For personal use only FY10 FY11 FY12 FY12 FY12 FY2012 vs FY2011 FY2013 Direction • Restructure in FY12; domestic margin • Earnings growth due to Coated & Industrial 108 (25
Slide 11: Cash flow – significant working capital release
For personal use only Cash flow – significant working capital release Significant improvement in 2H with Australian steelmaking A$M FY11 FY12 1H FY12 2H FY12 restructure Cash from operations 308 (162) (265) 103 W ki capital Working it l movementt (166) 617 2351 382 Large working capital release from
Slide 12: Strategy Update
For personal use only Strategy Update Page 12
Slide 13: BlueScope's strategic business focus
For personal use only BlueScope’s strategic business focus … Structured as four main businesses … • Expanding profitable Chinese business – Xi’an plant to be operational by end of FY2013 • North American business restructured – material earnings upside as economy recovers Building Solutions • Access
Slide 14: Global Building Solutions business
Global Building Solutions business For personal use only Comprised of: Building Solutions • Buildings North America • China: Buildings Buildings, Lysaght and Coated Coated. Buildings Asia • Buildings & Solutions Australia • Other global buildings activities Building Products Business strategy: • Acc
Slide 15: Global Building Solutions positioned to capture non-residential construction growth
Global Building Solutions is well position to capture opportunities in the g and fastest ggrowingg non-residential construction markets world’s largest For personal use only 54 Add Addressable bl market k 201 2015 US$ Bn B Source: Global Insight 14 2 1 2 4 6 6 9 Existing presence 10 China North Indi
Slide 16: New structure to service multi-national corporations
The new organisational structure also enables Global Building Solutions to better service multi-national corporations with their global expansion requirements For personal use only • Unique proposition to design, design manufacture and construct for global clients, clients such as Costco and Procter
Slide 17: Volume growth for Global Building Solutions expected to outpace market
Volume growth for Global Building Solutions is expected to continue to outpace market growth and recent restructuring efforts are expected to deliver ongoing profit growth For personal use only • Recently established Global Accounts team to drive penetration of significant global customer opportunit
Slide 18: Building Products business
Building Products business For personal use only Building Solutions Comprised of: Building Products • NS BlueScope Coated Products JV (once completed): ASEAN coating lines, Lysaght businesses and Ranbuild businesses. Steelscape and ASC Profiles (U.S.) Focus • Tata BlueScope Steel JV (India) Maarket
Slide 19: $1.36 Billion Joint Venture with NSC to form NS BlueScope Coated Products
$1.36 Billion Joint Venture with Nippon Steel Corporation (NSC) announced on 13 August 2012, to form NS BlueScope Coated Products For personal use only y Establishment of 50:50 joint venture over BlueScope’s building products business in ASEAN and the U.S. (Steelscape and ASC Profiles businesses). T
Slide 20: Growth of the Coated Products business before the JV
Growth of the Coated Products business, before creation of the JV For personal use only • Anticipated volume and top-line growth driven by: – Expansion of downstream manufacturing facilities in domestic markets – Best-in-class technology (including in-line painting), quality, product range and R&D c
Slide 21: Evaluating opportunities of NS BlueScope Coated Products
Evaluating the opportunities of NS BlueScope Coated Products For personal use only • New products and solutions for customers utilising NSC’s comprehensive Initially quantified solution technologies opportunities to – Home appliance segment applications of SuperDyma® and d li an expected deliver t d
Slide 22: BlueScope Australia & New Zealand
BlueScope Australia & New Zealand For personal use only Building Solutions Building Products Comprised of: Focus • Coated & Industrial Products Australia Maarket First F • Building B ildi Components C t & Distribution Di t ib ti Australia A t li (BlueScope (Bl S BlueScope Australia & Distribution &
Slide 23: Iron ore economic hedge from Taharoa iron sands exports
Once Taharoa 2.4 Mtpa iron sands export rate achieved, BlueScope will be 55% economicallyy hedged g for iron ore,, on a value-in-use basis For personal use only Portion of iron ore consumption economically hedged1 within BlueScope 2011 Today FY2014 Expected Before CIPA Restructure, combined Post CIP
Slide 24: Hot Rolled Products North America
Hot Rolled Products North America For personal use only Building Solutions Building Products Focus Maarket First F BlueScope Australia & New Zealand Comprised of: • North Star BlueScope Steel JV (Ohio) • Castrip JV Hot Rolled Products North America • Business strategy: • Maintain robust profitabilit
Slide 25: Hot Rolled Products North America – growth opportunities
Hot Rolled Products North America – growth opportunities For personal use only S Second d slab l b caster t project j t DRI project • Potential upgrade in production capacity from ~2.2 • Build a 1 million ton per annum Direct Reduced Iron million to ~2.6 million tons per annum (DRI) Plant. DRI would
Slide 26: Balance Sheet
Balance Sheet For personal use only Building Solutions Building Products Focus Maarket First F BlueScope Australia & New Zealand Hot Rolled Products North America • Maintain a strong balance sheet Balance Sheet • Reduce cost & manage liquidity through the cycle • Support growth initiatives Page 26
Slide 27: Performance of Reporting Segments in FY2012
For personal use only Performance of Reporting Segments in FY2012 Page 27
Slide 28: Coated & Industrial Products Australia – segment summary
Coated & Industrial Products Australia – segment summary For personal use only C Comments on results and business direction H lf yearly Half l underlying d l i EBIT comparison i (A$M) • 2H FY2012 underlying EBIT loss of $145M driven by (vs. 188 1H FY2012): ¾ LLower ‘l‘loss-making’ ki ’ exportt volum
Slide 29: 2H FY2012 Australian demand broadly in line with preceding halves
2H FY2012 Australian demand broadly in line with preceding two halves, but some mix deterioration away from higher Building & Construction segment TOTAL BSL AUSTRALIAN EXTERNAL DESPATCH VOLUMES (1) For personal use only 2H FY2008 1H FY2009 2H FY2009 1H FY2010 2H FY2010 1H FY2011 2H FY2011 1H FY2012
Slide 30: External forecaster expectations of construction sector improvement
External forecaster expectations of residential construction sector improvement in FY2013 and non-residential improvement in FY2014 Residential Mining Engineering Construction For personal use only Annual % Change Annual % Change ((Fin Yrs)) Annual % Change (Fin Yrs) (Fi Y (Fin Yrs)) HIA F’casts (Au
Slide 31: Recent weakness in raw material input costs encouraging
Recent weakness in raw material input costs encouraging For personal use only Iron Ore and Hard Coking Coal Prices (FOB) Iron ore fines price US$/t Hard coking price US$/t 180 US$110/t $ 160 (1-10 Aug 320 2012) 140 120 240 100 US$176/t 80 (1-13 Aug 2012) 160 Hard coking coal 60 40 80 Iron ore fines
Slide 32: Spread continues to be a major determinant of C&IPA profitability
Spread (steel prices less raw material prices) continues to be a major determinant of C&IPA pprofitabilityy East Asia HRC Price (US$/t) and Indicative Steelmaker HRC Spread (A$/t) For personal use only Spread: SBB East Asia HRC price less cost of 11.5t 5t iron ore fines and 0.71t 0 71t hard coking c
Slide 33: Coated & Industrial Products Australia outlook
For personal use only Coated & Industrial Products Australia outlook • Expect CIPA to deliver positive underlying EBITDA in FY2013, with a positive contribution in 2H FY2013, and neutral to negative contribution in 1H FY2013 (subject to spread, FX and domestic margin and demand) Improvements driven
Slide 34: Australia Distribution and Solutions – segment summary
Australia Distribution and Solutions (AD&S) – segment summary For personal use only C Comments on results and business direction H lf yearly Half l underlying d l i EBIT comparison i (A$M) 3 • 2H FY2012 underlying EBIT loss of $23M driven by (vs 1H FY2012): (vs. (1) ¾ Improved spread driven by lower
Slide 35: New Zealand and Pacific Steel Products – segment summary
For personal use only New Zealand and Pacific Steel Products – segment summary C Comments on results and business direction H lf yearly Half l underlying d l i EBIT comparison i (A$M) 52 • 2H FY2012 underlying EBIT of $35M driven by 49 (vs 1H FY2012): (vs. 33 34 35 ¾ Small improvement in domestic de
Slide 36: Coated & Building Products Asia – segment summary
For personal use only Coated & Building Products Asia – segment summary C Comments on results and business direction H lf yearly Half l underlying d l i EBIT comparison i (A$M) 66 62 51 • 2H FY2012 underlying EBIT of $51M driven by Thailand 50 14 15 47 (vs. 1H FY2012): 46 19 I d Indonesia i 13 20 5
Slide 37: Coated & Building Products Asia – constant currency analysis
Coated & Building Products Asia – Constant currency analysis better g ggrowth in our Asian operations demonstrates the real earnings p For personal use only Coated & Building Products Asia – Underlying EBIT on FY2003 constant currency (A$M) 180 155 157 135 160 140 116 107 120 111 109 108 100 123 51
Slide 38: Coated & Building Products North America – segment summary
For personal use only Coated & Building Products North America – segment summary C Comments on results and business direction H lf yearly Half l underlying d l i EBIT EBIT, excluding l di Metl-Span M tl S (A$M) • 2H FY2012 underlying EBIT loss of $8M driven by 9 (vs. 1H FY2012): 0 ¾ Seasonally lower
Slide 39: Restructuring of Buildings (PEB) business in North America
Restructuring of Buildings (PEB) business in North America business to p improve current and future earnings g ppotential For personal use only Buildings North America – Underlying EBITDA vs MBMA Despatches 1 100 1,400 90 90 80 1 1,200 Annualised industry shipments (metric kt) (RHS) 70 Underlying EB
Slide 40: Hot Rolled Products North America – segment summary
Hot Rolled Products North America – segment summary For personal use only C Comments on results and business direction H lf yearly Half l underlying d l i EBIT comparison i (A$M) 64 • 2H FY2012 underlying EBIT of $42M driven by (vs. 1H FY2012) increased spread (lower cost of scrap) 47 42 • Conversio
Slide 41: Financial Results
For personal use only Financial Results Page 41
Slide 42: Underlying EBIT variance FY2012 to FY2011 by major item
Underlying EBIT variance FY2012 to FY2011 by major item For personal use only Net Spread Reduction ($116m) Conversion & Other Costs: Cost Improvement Initiatives 45 Escalation (116) One-off / discretionary (132) Other (20) -27 -10 +35 -108 -12 +191 Raw Material Costs: 139 -139 Coal (63) Iron ore 2 -
Slide 43: Underlying EBIT variance 2H FY2012 to 1H FY2012 by major item
For personal use only Underlying EBIT variance 2H FY2012 to 1H FY2012 by major item Net Spread Improvement $25m +22 -7 -58 8 +82 -88 -5 -87 Raw Material Costs: Conversion & Other Costs: -138 Coal 62 Cost Improvement Initiatives 29 Iron ore 57 Escalation (40) -43 One-off / discretionary (40) Scrap 3
Slide 44: Improvement in operating working capital
Improvement in operating working capital Working Capital (A$M)(1) For personal use only • $437M decrease in working capital from December 2011 +242 t June to J 2012 -357 1,391 ¾ $382M decrease in inventory driven by: – $274M in CIPA as a result of PK restructure 1,149 -437 – $103M in C&BP Asia and N
Slide 45: Strengthened the balance sheet – net debt reduced to $384M
Strengthened the balance sheet – net debt reduced to $384M (or approx j $580M when adjustingg for favourable timingg of yyear-end cash flows)) For personal use only 30 June 2012, 30 June 2012, Key Metrics: 30 June 2011 31 Oct 2011 31 Dec 2011 actual adjusted (1) ¾ Net debt $1,068M $1,555M $796M $384
Slide 46: Debt facilities maturity profile at June 2012
Debt facilities maturity profile at 30 June 2012, pro-forma adjusted for g 2012 repurchase 7 August p of US$88M of U.S. Private Placement Notes For personal use only 753 Receivables securitisation program: 675 y In addition to debt facilities, BSL has a receivables securitisation program Syndicated
Slide 47: Movements in total equity
For personal use only Movements in total equity (A$M) Actuarial loss on defined benefit plans (largely NZ) composed of: • actuarial asset loss due to turbulent international and domestic equity markets +4,396 • actuarial liability loss due to significant decrease in long term bond rates in all count
Slide 48: Indicative EBIT sensitivities for 1H FY2013
Indicative EBIT sensitivities for 1H FY2013 For personal use only Estimated impact on $ (1) 1H FY2013 EBIT A$M Assumption +/– US$25 / tonne movement in BlueScope’s average realised export HRC price(2) 23 +/– 1¢ movement in Australian dollar / US dollar exchange rate(3) 1 +/– US$10 / tonne movement i
Slide 49: Outlook & Summary
For personal use only Outlook & Summary Page 49
Slide 50: 1H FY2013 outlook
For personal use only 1H FY2013 outlook • For the 1H FY2013 FY2013, we expect a continued improvement in financial performance with underlying net after tax loss (before period-end net realisable value adjustments) approaching break-even (subject to spread, FX and market conditions) • In FY2013 $300
Slide 51: Summary – growing our four businesses and maintaining a conservative balance sheet
Summary – growing our four businesses and maintaining a conservative balance sheet For personal use only • Global brands, global partnerships, global networks Building Solutions • Positioned for growth and to access global opportunities – potential to double revenue to $3 Bn in three years • Outstan
Slide 52: Questions & Answers
For personal use only Questions & Answers Page 52
Slide 53: Further Detail on Financial Results
For personal use only Further Detail on Financial Results Page 53
Slide 54: Historical earnings performance
For personal use only Historical earnings performance A$ Millions FY2008(3) FY2009 FY2010 FY2011 FY2012 1H FY12 2H FY12 Revenue(1) 10,495 10,329 8,624 9,134 8,622 4,549 4,085 EBITDA(2) – Reported 1,420 380 590 (687) (489) (270) (219) – Underlying(4) 1,618 506 594 240 99 23 76 EBIT(2) – Reported 1,06
Slide 55: Balance Sheet
Balance Sheet For personal use only A$M 30 Jun 2011 31 Dec 2011 30 Jun 2012 Assets Cash 172 186 214 Receivables 1,050 1,059 995 Inventory 2,029 1,791 1,409 Other Assets 1 041 1,041 1 099 1,099 816 Net Fixed Assets 3,501 3,466 3,296 Total Assets 7,793 , 7,601 , 6,730 , Liabilities Creditors 1,163 988
Slide 56: $382M reduction in inventory since June 2011
Balance Sheet … $382M reduction in inventory since June 2011 mainly due to reduction in volumes held For personal use only +2 815 +2,815 RMS $421M RMS $388M RMS $344M WIP 750 WIP 770 RMS $397M WIP 690 FGS 714 FGS 509 WIP 639 FGS 679 Other 177 Other 168 RMS $338M FGS 618 Other 172 WIP 569 Other 175 F
Slide 57: Historical Earnings Performance – Reconciliation of Reported to Underlying
Historical Earnings Performance – Reconciliation of Reported to Underlying U de y g (A$M) ( $ ) FY 2010 FY2011 FY2012 1H FY2011 2H FY2011 1H FY2012 2H FY2012 For personal use only Reconciliation of EBITDA and EBIT EBITDA 2 Reported 590 (687) (489) 127 (814) (270) (219) EBIT 2 Reported 240 (1,043) (8
Slide 58: EBIT Segment Summary – Reconciliation of Reported to Underlying
EBIT Segment Summary – Reconciliation of Reported to Underlying ((A$M) $ ) For personal use only FY2010 FY2011 FY2012 1H FY2011 2H FY2011 1H FY2012 2H FY2012 Coated & Industrial Products Australia Reported EBIT 84 (1,063) (726) (97) (966) (463) (263) Restructure / redundancies 24 8 363 - 8 347 16 As
Slide 59: Global despatch mix
Global despatch mix Export Tonnes (kt) 1H 2H Australia 747 384 NZ 156 159 Total BlueScope Group External Despatches Asia 34 27 For personal use only NA (incl Metl-Span) 2 1 939 572 FY2010 FY2011 FY2012 Exports Exports Exports 27% 33% 22% (1,914kt) 4% (2,535kt) 6% (1,511kt) 7% 6% 21% 19% 11% 10% 23%
Slide 60: BlueScope's global manufacturing footprint at June 2012
BlueScope’s global manufacturing footprint at June 2012 (shown by FY2013 reporting segments) Kalama Kalama North North Star (2) Star (2) For personal use only • Cold Rolling 455kt • Raw Steel 2.3mt • Metal Coating 235kt • Hot Rolling 2.1mt 2 1mt • Painting 110kt India (1) India (1) • Metal Coating +
Slide 61: Segment underlying EBIT summary – new segments
For personal use only Segment underlying EBIT summary – new segments Underlying EBIT (A$M) (1) FY2010 FY2011 1H FY2012 2H FY2012 FY2012 Coated & Industrial Products 108 (258) (182) (145) (327) Australia Building Components & 9 (22) (27) (19) (46) Distribution Australia New Zealand Steel & Pacific 73
Slide 62: FY2012 Financial Results Presentation
For personal use only FY2012 Financial Results Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias Elias, Chief Financial Officer 20 August 2012 ASX Code: BSL Page 62