Cap S.a. · BCS:CAP
Cap — Santander Global Banking & Markets conference (September 2008)
33 slides from Cap's conference presentation, Sep 22, 2008
Slide 1: Jaime Charles Coddou, Chief Executive Officer
Jaime Charles Coddou Chief Executive Officer Santander Global Banking & Markets September 22, 2008
Slide 2: Vertically integrated ferrous metals company
Vertically integrated ferrous metals company • Exporting iron ore products mainly to Asia • Produces steel for the domestic market • Processes steel products, creating high value-added solutions in Chile, Peru and Argentina Mining Steel production Steel processing 1
Slide 3: Corporate structure
Corporate structure Iron Ore Mining Steel Production Steel Processing 2
Slide 4: Product value-added chain
Product value-added chain Total Consolidated Sales 2007: US$ 1.583 million Steel Processing Iron Ore Sales 2007 Steel Sales 2007 Sales 2007 8.37 million tons 1.21 million tons 402 thousand tons Self-Fluxing Long Perú Pellets Feed Pellets products 8% 35,6% 15.6% Argentina 49% Lumps 16% 8.2% Fines 3.5
Slide 5: Iron ore mining
Iron ore mining 4
Slide 6: Iron ore mining - Areas of operation
Iron ore mining - Areas of operation Punta Totoralillo Port Cerro Negro Norte Copiapó Magnetite Plant Los Colorados Guacolda II Port Vallenar Pellets Plant El Algarrobo Cristales El Tofo El Romeral La Serena Guayacán Port 5
Slide 7: Iron ore mining
Iron ore mining • Largest producer of iron ore and pellets on the Pacific coast of South America • Ample resources and known reserves, together with the expansion of its exploration activities, guarantee continuity of operations for many decades • Increases in projected capacity from 11.4 to 17.5 mi
Slide 8: Iron ore mining – Resources and reserves
Iron ore mining – Resources and reserves Mine / Deposit Total Mineral Resources (1) Reserves (2) Recoverable Product (3) Mine Life (4) MTM Grade (% Fe) MTM MTM Years Los Colorados (5) 352,4 44,8% 283,0 125,8 15,0 El Romeral 413,1 31,2% 117,0 56,8 18,0 Candelaria (6) 394,8 10,0% 394,8 44,5 16,0 Cerro
Slide 9: Iron ore mining - Stability of sales and markets
Iron ore mining - Stability of sales and markets Deliveries Markets Th. MT ASIA : 74% CHILE : 21% OTHERS : 5% 8.500 8.377 7.612 7.437 7.312 7.579 7.674 Indonesia Perú 7.500 Australia 6.500 12% 1% China 1% 5.500 4.500 35% Japan 3.500 20% 2.500 1.500 500 Malaysia USA Chile 2002 2003 2004 2005 2006 200
Slide 10: Steel production
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Slide 11: Steel production
Steel production • Chile’s steel market leader • 53% and 66% market share in total and target markets respectively • 1.45 million tons of annual liquid steel production capacity • Strong long-term commercial relations with customers in Chile • Vertical integration in iron and limestone provides adva
Slide 12: Steel production – Evolution of CSH's target market
Steel production – Evolution of CSH´s target market Evolución Histórica y Proyección del Consumo Aparente del Mercado Objetivo de Acero en Chile Forecast 3.000 2.500 Miles de Toneladas 2.000 1.500 1.000 500 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2
Slide 13: Steel production - Share of CSH in its target market
Steel production - Share of CSH in its target market Sales of CSH in its Total Steel Market CSH Sales Target Market (2007) (1.21 million tons in 2007) (2.27 million tons in 2007) (thousands tons sold – market share) 2.500 80% 70% Thousands 2.000 60% 1.500 50% 40% 1.000 30% 20% Construction (32%) 500
Slide 14: Steel production - Quarterly deliveries and average prices
Steel production - Quarterly deliveries and average prices 400 1200 350 1000 300 T 250 800 U h S . $ 200 600 / M M T 150 400 T 100 200 50 0 0 E- A -J J-S O-D E-M '01 A -J J-S O-D E- A -J J-S O-D E- A -J J-S O-D E- A -J J-S O-D E- A -J J-S O-D E- A -J J-S O-D E- A -J J-S O-D E- A -J M '00 M '02 M '03
Slide 15: Steel processing
Steel processing 14
Slide 16: Steel processing
Steel processing • Creates value-added solutions for construction, industry and infrastructure sectors in Chile, Peru and Argentina • Its addition to the CAP group seeks to promote steel consumption • Should result in improvements in consolidated returns 15
Slide 17: Steel processing - Deliveries
Steel processing - Deliveries Deliveries Deliveries by company 450 Purchase to CSH 400 350 Tupemesa Tasa 8% 16% Thousands of MT 300 250 Centroacero 200 19% 150 100 Varco Pruden 50 2% 0 Instapanel 2004 2005 2006 2007 9% Cintac 46% Source: CAP 16
Slide 18: Financial highlights
Financial highlights Sales EBITDA (1) 1.800 450 1.600 400 416 1.583 1.400 350 336 1.200 300 305 1.000 250 256 1.016 997 247 800 200 880 208 741 725 600 150 530 400 100 481 114 50 72 200 0 0 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Jun-07 Jun-08 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Jun-07 Jun-0
Slide 19: Financial evolution
Financial evolution (million of US$) 2002 2003 2004 2005 2006 2007 1H07 1H08 Sales 481 530 725 880 997 1.583 741 1.016 Operational Margin 42 84 180 185 170 301 146 234 EBITDA (1) 72 114 208 256 247 336 305 416 (million of US$) 2002 2003 2004 2005 2006 2007 1H07 1H08 Cash 4 15 62 154 242 184 264 375
Slide 20: Financial highlights - EBITDA by Business Unit
Financial highlights EBITDA by Business Unit 70% 61% 60% 54% 52% 54% 51% 47% 50% 38% 40% 40% 36% 36% 34% 30% 24% 20% 16% 13% 13% 12% 12% 8% 10% 0% Dec-04 Dec-05 Dec-06 Dec-07 Jun-07 Jun-08 CMP CSH SPG 19
Slide 21: Financial policy
Financial policy Net Financial Debt / EBITDA • Maximum committed level of 3.0x. To operate preferably at levels substantialy lower that the agreed limit • Internal target < 2.0x Dividend policy • 50% of net income • CAP has suspended payment of dividends in difficult economic cycles Financing policy
Slide 22: Consolidation
Consolidation Market Share — Largest 10 companies 81% 77% 56% 33% Steel Cement Aluminium Automobile • The steel industry currently shows low levels of consolidation compared to other sectors • With rising risks and costs, the number of mergers and acquisitions is increasing at an accelerating rate.
Slide 23: Other trends
Other trends Consolidation is not the only emerging trend in the steel industry TREND Logic Steel producers’ downstream integration To add value to steel for manufacturing products with more technology & margins for niche markets Steel producers’ upstream integration To assure access to raw material
Slide 24: Current steel market position
Current steel market position Steel Production 2008E Largest Steel Producers Other Latin Europa Others America 2% 3% 4% North America 9% Asia UE 58% 15% CIS 9% Steel Consumption 2008E Principal Steel users Other Europa Others 2% Latin America 5% 4% North America 10% Asia 56% UE 18% CIS 5% Source: UB
Slide 25: Infraestructure investments
Infraestructure investments US$ 2.25 trillion annually in infraestructure during the next three years. China, Middle East and Russia account for more than 70% of this amount Investment by country Investment by sector 11% 3% 38% 6% 12% 16% 37% 16% 20% 41% China Middle East Russia India Turkey Brazil
Slide 26: Urban areas development
Urban areas development Every year between 2000 and 2020, around 25 to 30 million people will migrate from the countryside to the cities in India and China. This is a decisive factor in the acceleration in demand for steel Projection of annual urbanization in China and India Millions of people Sourc
Slide 27: Projected mining production capacity
Projected mining production capacity CMP HA I HA II CMH 18.000 16.000 14.000 12.000 (Th. MT) 10.000 8.000 6.000 4.000 2007 2008 2009 2010 2011 2012 2013 2014 2015 26
Slide 28: Projected liquid steel production capacity
Projected liquid steel production capacity CSH 1,450 MT Project 3,000 MT Project 3.000 2.500 (Th. MT) 2.000 1.500 1.000 500 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 27
Slide 29: Development program - Steel production
Development program - Steel production Galvanized Plant Blast Furnace N°3 Conox Steel Mill and Continuous Caster ert. Prod. Recubi AH 3 BOF y CC MP L.P.C. Coke Plant ater ials M Raw P. C . Raw Upgrade Hot Rolling Materials Mill Port 28
Slide 30: Capex
Capex CMP CSH GPA (2) Total Hierro Atacama Phase II 633 Upgrade Hot Rolling Mill 280 Equipments 64 Pellets Plant N°1 247 Galvanized Plant 272 Pellets Plant N°2 247 Expansion to 3,000 MT of liquid steel 1.872 El Romeral Mine 132 Environmental investment 70 3.961 Maintenance and others 54 Maintenance
Slide 31: Sources and uses of cash
Sources and uses of cash Sources of cash Uses of cash Portion of existing cash CMP expansion projects Internally generated cash Capital increase in CAP CSH capacity expansion Additional debt Other Other CAP projects 30
Slide 32: CAP and global trends
CAP and global trends • Vocation of autonomous business development and complementation with customers and related producers • Especially favorable upstream integration to the production of steel raw materials • Important downstream integration to the processing of value-added steel production, prom
Slide 33: WWW.CAP.CL
WWW.CAP.CL
CAP — Santander Global Banking & Markets conference (September 2008) on 6ix