Bluescope Steel Limited · ASX:BSL
Bluescope Steel — Investor Presentation (March 2019)
52 slides from Bluescope Steel's investor presentation, Mar 26, 2019
Slide 1: Asia and North America Investor Meetings
ASIA AND NORTH AMERICA INVESTOR MEETINGS Mark Vassella Managing Director and Chief Executive Officer Tania Archibald Chief Financial Officer March 2019 BlueScope Steel Limited. ASX Code: BSL ABN: 16 000 011 058
Slide 2: Important Notice
IMPORTANT NOTICE 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. RELIANCE SHOULD NOT B
Slide 3: BlueScope Overview
BLUESCOPE OVERVIEW Robertson House on the Fleurieu Peninsula, SA, featuring COLORBOND® steel in Windspray®
Slide 4: Overview of BlueScope
OVERVIEW OF BLUESCOPE 4 A different kind of steel building products company BlueScope is a steel building products company, manufacturing and marketing a wide range of branded Underlying EBIT by region ($M) and high quality steel products across a footprint covering North America, Australasia and As
Slide 5: BlueScope: A Different Kind of Steel Building Products Company
BLUESCOPE: A DIFFERENT KIND OF STEEL BUILDING PRODUCTS COMPANY 5 What makes us different? TECHNOLOGY, BUSINESS COST BRANDING & CHANNELS DIVERSIFICATION COMPETITIVENESS DISCIPLINED CASH GENERATION & APPROACH TO GROWTH CAPITAL MANAGEMENT SUSTAINABILITY
Slide 6: Product End-Use Segments by Geography
PRODUCT END-USE SEGMENTS BY GEOGRAPHY 6 Broad exposure across geographies, largely focussed on the building and construction industry BlueScope indicative despatch volume split by region and end-use segment Other (Exports) Manufacturing, Automotive Agri & Other 8% North Star: exposed mainly to the a
Slide 7: Transformation of Earnings
TRANSFORMATION OF EARNINGS 7 BlueScope earnings dramatically transformed over last three years Underlying EBIT ($M) Illustrative spread sensitivities2 Around 10% North America higher1 (+/- US$50/t spread) productivity initiatives 1,269 150 180 20 (23) 1,105 (150) (180) Driven by productivity 103 and
Slide 8: Cash Flow and Net Cash
CASH FLOW AND NET CASH 8 Average free cash flow of ~$740M over last two years; $128M net cash at 31 December 2018 Net cash flow (before investment exp and financing) ($M) Net cash / (debt) ($M) 400 749 731 Net cash target: $200M to $400M 200 128 Average free 493 64 2H cash flow of 0 ~$740M over -200
Slide 9: Capital Allocation and Shareholder Returns
CAPITAL ALLOCATION AND SHAREHOLDER RETURNS 9 Focus on ROIC and EPS growth to ultimately drive shareholder returns Shareholder distributions ($M) Up to 576 Foundation Maintain safe and reliable operations, and operate within 763 Dividend Financial Principles, including meeting net cash targets and Bu
Slide 10: BlueScope's Transformation Over the Last Five Years
BLUESCOPE’S TRANSFORMATION OVER THE LAST FIVE YEARS 10 A significant transformation, with a step change in earnings quality, cash flows and balance sheet strength CY20141 CY20181 Change Operational North Star ownership 50% 100% Control metrics ASP steelmaking breakeven spread ~US$270-300/t ~US$170–2
Slide 11: Safety
SAFETY 11 Continuing our journey towards Zero Harm LTIFR Lost time injuries per million man-hours worked 0.57 0.80 0.62 0.82 FY2016 FY2017 FY2018 1H FY2019 MTIFR 5.6 Medically treated injuries per 5.1 5.4 4.9 million man-hours worked FY2016 FY2017 FY2018 1H FY2019 LTIFR and MTIFR includes Orrcon, Fi
Slide 12: 1H FY2019 Headlines
1H FY2019 HEADLINES 12 $624M reported NPAT and a record half year underlying EBIT of $850M UNDERLYING EBIT1 UNDERLYING EBIT RETURN ON REPORTED NPAT INVESTED CAPITAL $850M 24.9% $624M Up $326M on 1H FY2018 Up from 17.1% in 1H FY2018 Up $183M on 1H FY2018 FREE CASH FLOW CAPITAL MANAGEMENT NET CASH (Op
Slide 13: Underlying EBIT by Segment
UNDERLYING EBIT BY SEGMENT 13 Strong results with a stand out performance from North Star NORTH STAR AUSTRALIAN STEEL PRODUCTS BUILDING PRODUCTS ASIA & NORTH AMERICA $411.6M $319.0M $78.8M Up 183% on 1H FY2018 Up 22% on 1H FY2018 Down 27% on 1H FY2018 NEW ZEALAND & PACIFIC STEEL BUILDINGS NORTH AMER
Slide 14: Our Bond, Strategy, Financial Principles & Approach to Sustainability
OUR BOND, STRATEGY, FINANCIAL PRINCIPLES & APPROACH TO SUSTAINABILITY 14 GUIDE WHAT WE AIM TO ACHIEVE AND HOW WE DO IT
Slide 15: Our Bond
OUR BOND 15 We and our customers proudly bring inspiration, strength and colour to communities with BlueScope Steel OUR CUSTOMERS ARE OUR PARTNERS OUR PEOPLE ARE OUR STRENGTH OUR SHAREHOLDERS ARE OUR FOUNDATIONS OUR COMMUNITIES ARE OUR HOMES
Slide 16: Our Strategy – A Disciplined Approach to Growth and Shareholder Returns
OUR STRATEGY – A DISCIPLINED APPROACH TO GROWTH AND SHAREHOLDER 16 RETURNS FROM A POSITION OF STRENGTH 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 value from competitive
Slide 17: Financial Principles
FINANCIAL PRINCIPLES 17 Clearly stated financial principles to guide our decision making RETURN INVESTMENT BALANCE SHEET HURDLES TIMING CAPACITY STEELMAKING • Every business to deliver • Intent to have financial • Target positive cash of • Commodity steelmaking in ROIC > WACC capacity through the cy
Slide 18: Climate Change
CLIMATE CHANGE 18 Our commitment to action WE SUPPORT THE PARIS AGREEMENT AND THE COMMITMENTS OF THE COUNTRIES IN WHICH WE OPERATE WE ACKNOWLEDGE STEELMAKING PRODUCES EMISSIONS AND ARE WORKING TO REDUCE THE IMPACT OUR GOVERNANCE STRUCTURES SEEK TO ENSURE UNDERSTANDING AND MANAGEMENT OF CLIMATE RISK
Slide 19: Supply Chain Sustainability
SUPPLY CHAIN SUSTAINABILITY 19 Updating our supply chain standards; risk prioritised approach to assessing and engaging suppliers Supply Chain Sustainability project continues, with focus on: 1 Rollout of Supplier Code of Conduct 2 Training on improved processes 3 Engagement with suppliers 4 Assessm
Slide 20: Culture, Conduct and Governance
CULTURE, CONDUCT AND GOVERNANCE 20 A core responsibility for Board and Management BlueScope seeks to live the values in its Bond by promoting a culture of integrity and highest possible standards across our global operations In 1H FY2019, we have: • Enhanced our ethics and compliance function • Cont
Slide 21: Diversity and Inclusion
DIVERSITY AND INCLUSION 21 Strong focus and effective strategies creating demonstrable improvement in workforce diversity Female % of workforce Female % of recruitment 25% Board 25% 33% 38% 11% Executive 25% Leadership Team 33% 33% 14% 15% Executives 20% 24% 45% 27% 40% 40% Salaried 27% 37% 28% 33%
Slide 22: 1H FY2019 Results Highlights
1H FY2019 RESULTS HIGHLIGHTS Calder Woodburn Rest Area in Shepparton, VIC, featuring COLORBOND® steel in Night Sky® and Surfmist®
Slide 23: North Star
NORTH STAR 23 Record underlying EBIT of $412M on stronger spreads Underlying EBIT ($M) • 44.8% Underlying ROIC 411.6 • Continued strength in Midwest benchmark steel prices during 1H FY2019, supported by 285.4 robust demand and favourable trade environment 145.2 • Continued to operate at 100% capacit
Slide 24: North Star Expansion Opportunity – Update
NORTH STAR EXPANSION OPPORTUNITY – UPDATE 24 Commencing detailed design and engineering and critical path items. Targeting final decision during 1H FY2020 • Expansion option through possible third electric arc furnace and second Indicative overview of existing and additional equipment caster • Inves
Slide 25: North Star Expansion Opportunity – Update
NORTH STAR EXPANSION OPPORTUNITY – UPDATE 25 Strong strategic rationale in alignment with BlueScope’s established capital expenditure principles INCREMENTAL EXPANSION OPENS UP FURTHER A STRONG CASH FLOW COMPELLING RETURNS ON SERVING A LARGE AND INVESTMENT IN A HIGH CAPACITY EXPANSION ASSET THROUGH T
Slide 26: North Star Expansion Opportunity – Update
NORTH STAR EXPANSION OPPORTUNITY – UPDATE 26 Best in class asset located close to customers and raw materials, with consistently full asset utilisation A geographically advantaged asset North Star’s competitive position Capacity utilisation1 GFC EBIT margin2 100% • Facility strategically located wit
Slide 27: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 27 Stronger spreads and domestic demand led to $319M underlying EBIT Underlying EBIT ($M) • 24.6% Underlying ROIC 325.7 319.0 • Stronger benchmark spreads 261.7 – Domestic and export steel price rises following lift in lagged global steel prices • Realised spreads moderated
Slide 28: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 28 Exposure to residential markets is predominantly into alterations and additions and new detached houses A&A indicatively consumes over half of ASP’s Total Australian external domestic despatch volumes (kt) A&A Building Approvals and House Prices4 dwelling volume Dwelling
Slide 29: Building Products Asia and North America
BUILDING PRODUCTS ASIA AND NORTH AMERICA 29 Strong performances from North America, India and China – intervention underway in ASEAN Underlying EBIT ($M) • 10.4% Underlying ROIC 108.3 • North America: – Slightly lower result on weaker prices and volume, however overall market conditions remain posit
Slide 30: New Zealand and Pacific Steel
NEW ZEALAND AND PACIFIC STEEL 30 Strong performance higher steel prices and net vanadium contribution Underlying EBIT ($M) • 40.4% ROIC 70.7 71.9 • Higher selling prices on the back of stronger global steel prices 41 • Domestic demand continues to be strong – Continued strong building activity – Rob
Slide 31: Buildings North America
BUILDINGS NORTH AMERICA 31 End market demand remains strong; despatch volumes marginally lower Underlying EBIT ($M) • 10.4% ROIC 48.21 • Sales of buildings for end-use applications in the industrial, manufacturing, healthcare, warehousing, aviation and 26.4 energy sectors remain strong 22.1 • Order
Slide 32: BlueScope: A Different Kind of Steel Building Products Company
BLUESCOPE: A DIFFERENT KIND OF STEEL BUILDING PRODUCTS COMPANY House in the Central Coast Hinterland, NSW, featuring COLORBOND® steel in Ironstone®
Slide 33: BlueScope: A Different Kind of Steel Building Products Company
BLUESCOPE: A DIFFERENT KIND OF STEEL BUILDING PRODUCTS COMPANY 33 What makes us different? TECHNOLOGY, BUSINESS COST BRANDING & CHANNELS DIVERSIFICATION COMPETITIVENESS DISCIPLINED CASH GENERATION & APPROACH TO GROWTH CAPITAL MANAGEMENT SUSTAINABILITY
Slide 34: Technology, Branding & Channels
TECHNOLOGY, BRANDING & CHANNELS 34 Continued investment in research & development to maintain leadership in steel coating and painting technologies Product Technology and Development Leadership Advanced pre-painted and metallic coating development for building, construction and home appliance market
Slide 35: Technology, Branding & Channels – Brands
TECHNOLOGY, BRANDING & CHANNELS 35 Brands – a portfolio of many well-known and respected names to support our premium branded positions Australia New Zealand Asia North America ® ® ® ® ® ® ®
Slide 36: Technology, Branding & Channels – Channels
TECHNOLOGY, BRANDING & CHANNELS 36 Channels – clear focus on knowing our end customers and maintaining strong channels to market Australia New Zealand Asia North America ® ® ® ® ® ® ® ® ®
Slide 37: Business Diversification
BUSINESS DIVERSIFICATION 37 Geographic diversity and increasing contribution from value-added products Underlying EBITDA by region ($M) BlueScope despatch volume mix 100% Buildings North America Asia NZ & Pacific $89M 90% $141M 5% Building products 8% 80% Higher value added 70% Australia cold rolled
Slide 38: Cost Competitiveness
COST COMPETITIVENESS 38 Australian steelmaking breakeven at minimum recent spreads following business transformation Asian steel spread & estimated steelmaking cash breakeven (US$/t) Asian steel spread & EBITDA per tonne ($A/t) 800 Underlying EBITDA per tonne A$/t 400 Bottom of cycle spreads2 700 35
Slide 39: Cost Competitiveness
COST COMPETITIVENESS 39 North Star generates positive returns through the cycle, with a leading margin in US steelmakers US$M EBITDA and spread1 North Star’s and North American peers’ EBIT margin 600 29.8% U.S. mini-mill spread 524 EBITDA (100% basis) 500 Cash flow (EBITDA less capex) Move to full o
Slide 40: Disciplined Growth
DISCIPLINED GROWTH 40 Investing for the future across our portfolio through a returns focussed process driving competition for capital Capital expenditure principles Examples of growth opportunities Building Products Asia INVEST TO MAXIMISE Continued roll out of ZACS® Authorised Dealer retail networ
Slide 41: Disciplined Growth – Investing in Growth at ASP
DISCIPLINED GROWTH – INVESTING IN GROWTH AT ASP 41 New coil plate capacity provides a strong foundation for growth; light gauge steel framing growth continues New TRU-SPEC® coil plate line Coil plate sales volumes1 Light gauge steel framing growth TRUECORE® sales volumes1 • Investing in a new 160kt
Slide 42: Disciplined Growth – Robotics and Automation
DISCIPLINED GROWTH – ROBOTICS AND AUTOMATION 42 Robotics and automation opportunities unlocking the next wave of productivity improvements and cost savings Coil marking robot, North Star Coil core robot, Vietnam • A new robotic arm that replaced a basic • The robot autonomously inserts marking tool
Slide 43: Cash Generation & Capital Management
CASH GENERATION & CAPITAL MANAGEMENT 43 Robust cash generation to support growth and shareholder returns Free cash flow ($M) Net debt / (cash) ($M) Shareholder returns ($M)1 Operating cash flow less capex 778 Dividend 749 731 Buy-back 638 493 362 337 62 44 Up to 275 232 239 190 322 154 40 250 300 Up
Slide 44: Approach to Sustainability
APPROACH TO SUSTAINABILITY 44 Continued focus on our key materiality topics driving improvements in performance and disclosure SAFETY, HEALTH AND WELLNESS CLIMATE CHANGE GOVERNANCE AND BUSINESS CONDUCT • LTIFR (lost time injuries) and MTIFR (medically treated • Achieved an additional 1.2% reduction
Slide 45: Climate Change
CLIMATE CHANGE 45 Our four pillars of commitment to action Support the Paris agreement Acknowledge steelmaking Governance structures seek to Steel plays a key role in sustainable and the commitments of the produces emissions; ensure understanding and development, given its longevity countries in whi
Slide 46: Sustainability Reporting
SUSTAINABILITY REPORTING 46 Enhancing our sustainability reporting FY2016 Report FY2017 Report FY2018 Report Initial step towards sustainability reporting, Enhanced disclosure on material topics, further Substantive update using stakeholder combining content of BlueScope’s annual alignment to TCFD r
Slide 47: Additional Information
BLUESCOPE ADDITIONAL INFORMATION
Slide 48: Reconciliation Between Reported and Underlying EBIT and NPAT
RECONCILIATION BETWEEN REPORTED AND UNDERLYING EBIT AND NPAT1 48 1H FY2018 1H FY2019 EBIT $M NPAT $M EBIT $M NPAT $M Reported results 510.5 441.2 840.0 624.3 Underlying adjustments Discontinued business (gains) / losses 14.3 14.3 4.9 5.3 Tax asset impairment / (write-back) - (75.5) - (17.8) Restruct
Slide 49: Underlying Earnings, Net Finance and Tax Cost
UNDERLYING EARNINGS, NET FINANCE AND TAX COST 49 $M 1H FY2018 2H FY2018 1H FY2019 Breakdown of net finance costs Underlying EBIT 524.2 745.0 849.6 Reg-S Bonds 9.6 Syndicated bank facility charges 3.9 Underlying finance costs (40.6) (40.0) (27.2) Finance leases 6.1 Interest revenue 3.8 4.9 7.3 Amorti
Slide 50: Summary of Financial Items by Segment
SUMMARY OF FINANCIAL ITEMS BY SEGMENT 50 Sales revenue Total steel despatches $M 1H FY2018 2H FY2018 FY2018 1H FY2019 '000 tonnes 1H FY2018 2H FY2018 FY2018 1H FY2019 North Star BlueScope Steel 860.6 1,063.3 1,923.9 1,265.0 North Star BlueScope Steel 1,037.5 1,067.2 2,104.7 1,036.4 Australian Steel
Slide 51: Liquidity & Debt Maturity Profile
LIQUIDITY & DEBT MATURITY PROFILE 51 Liquidity (undrawn facilities and cash, $M) Maturity profile2 ($M) 2,136 BSL Syndicated Bank Facility Receivables securitisation program: 2,026 Reg-S Bonds 426 In addition to debt facilities, BSL has 1,932 1,8901 $493M of off-balance sheet NS BlueScope JV facil
Slide 52: Asia and North America Investor Meetings
ASIA AND NORTH AMERICA INVESTOR MEETINGS Mark Vassella Managing Director and Chief Executive Officer Tania Archibald Chief Financial Officer March 2019 BlueScope Steel Limited. ASX Code: BSL ABN: 16 000 011 058