Bluescope Steel Limited · ASX:BSL
Bluescope Steel — FY2019 Earnings Presentation
111 slides from Bluescope Steel's earnings presentation, Aug 19, 2019
Slide 1: FY2019 Financial Results Presentation
FY2019 FINANCIAL RESULTS PRESENTATION Mark Vassella Managing Director and Chief Executive Officer Tania Archibald Chief Financial Officer 19 August 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: Safety First
SAFETY FIRST 3 Safety is a key part of BlueScope’s identity; evolving our approach to the next level of safety improvement Released five year Health, Safety and Environment strategy in FY2019 LTIFR1 Lost time injuries per million hours • Greater focus on injury severity worked 1.16 and the care take
Slide 4: FY2019 Financial Scorecard
FY2019 FINANCIAL SCORECARD 4 $1,016M reported NPAT and underlying EBIT of $1,348M, up 6% on FY2018 UNDERLYING EBIT1 UNDERLYING EBIT RETURN ON REPORTED NPAT INVESTED CAPITAL $1,348M 19.5% $1,016M Up $79M on FY2018 Down from 20.0% in FY2018 Down $553M on FY2018 FREE CASH FLOW CAPITAL MANAGEMENT NET CA
Slide 5: Underlying EBIT by Segment
UNDERLYING EBIT BY SEGMENT 5 Group performance underpinned by record result at North Star and strong result at Australian Steel Products NORTH STAR AUSTRALIAN STEEL PRODUCTS BUILDING PRODUCTS ASIA & NORTH AMERICA $654.7M $535.4M $134.2M Up 52% on FY2018 Down 9% on FY2018 Down 27% on FY2018 BUILDINGS
Slide 6: North Star Expansion Approved
NORTH STAR EXPANSION APPROVED 6 850ktpa expansion, with optionality to 1,400ktpa, approved by Board; target commissioning mid FY2022 • Board has approved expansion of our ‘best-in-class’ mini-mill in Delta, Ohio, Indicative overview of existing and additional equipment to add a third EAF and second
Slide 7: Sustainability – A Core Value
SUSTAINABILITY – A CORE VALUE 7 BlueScope continues to focus on building resilience, embedding sustainability in all that we do CLIMATE CHANGE & ENERGY DIVERSITY & INCLUSION GOVERNANCE & CONDUCT SUPPLY CHAIN SUSTAINABILITY GHG emissions intensity1 Females in the workforce • We encourage a culture of
Slide 8: Financial Results
FINANCIAL RESULTS Millswood House in Adelaide, SA, featuring COLORBOND® steel in Monument® Matt
Slide 9: North Star
NORTH STAR 9 Record full year result, with a softer second half on lower benchmark spreads; continued to run at 100% capacity utilisation Underlying EBIT ($M) 654.7 243.2 2H 430.6 • Benchmark prices and spreads 285.4 411.6 1H reduced through the second half1 145.2 • Continued to operate at 100% FY20
Slide 10: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 10 Strong result in FY2019, however softer second half on lower regional spreads and domestic volumes Underlying EBIT ($M) • 2H FY2019 benchmark spreads lower than 1H, 587.4 partly offset by favourable realised pricing and 535.4 raw material costs 325.7 216.4 2H • Domestic
Slide 11: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 11 Softer domestic volume in 2H, largely due to destocking in distributor channels. Orderly pullback in underlying demand, however volume remains at historically robust levels DWELLING Total Australian external domestic despatch volumes (kt) • A significant proportion of pr
Slide 12: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 12 Residential subsectors to which BlueScope is exposed have proven more resilient through market cycles ALTERATIONS AND ADDITIONS (A&A) NEW DETACHED DWELLINGS • Indicatively consume around half of ASP’s dwelling volume • Non-A&A exposure is mainly to new detached dwellings
Slide 13: Building Products Asia and North America
BUILDING PRODUCTS ASIA AND NORTH AMERICA 13 Softer performance in the second half – intervention continues in ASEAN, with improved performance evident in Q4 Underlying EBIT ($M) • North America: 184.5 – Lower result on softer margins driven by a rapid decline in selling prices against high cost inve
Slide 14: Building Products Asia and North America
BUILDING PRODUCTS ASIA AND NORTH AMERICA 14 Comprehensive ASEAN review undertaken; Building and Construction strategy confirmed; reset of Home Appliance strategy • Outstanding footprint in large and growing markets; focused on growing premium branded businesses to service building and construction m
Slide 15: Buildings North America
BUILDINGS NORTH AMERICA 15 End market demand remains strong; despatch volumes lower in the second half Underlying EBIT ($M) 74.61 • Order intake and backlog remained strong, however despatch volumes 53.4 48.2 lower in 2H on seasonality 31.3 2H • Sales of buildings for end-use 26.4 22.1 1H applicatio
Slide 16: Buildings North America
BUILDINGS NORTH AMERICA 16 BNA offers a stable margin-based earnings stream with medium to long term growth potential • Buildings North America designs, manufactures and markets Engineered Building Solutions into the large and stable low-rise non-residential US construction market, under leading bra
Slide 17: New Zealand and Pacific Steel
NEW ZEALAND AND PACIFIC STEEL 17 Underlying EBIT of $81M in FY2019, however softened meaningfully in the second half Underlying EBIT ($M) 111.7 • Decline in steel pricing in 2H FY2019 on the back of softer global steel prices 80.6 70.7 8.7 2H • Domestic demand continues to be strong driven by constr
Slide 18: Underlying Group EBIT Variance
UNDERLYING GROUP EBIT VARIANCE 18 6% improvement in underlying EBIT over FY2018, largely due to spread. 2H impacted by falling spreads FY2019 vs FY2018 ($M) Conversion & other costs ($M) 2H FY2019 vs 1H FY2019 ($M) Cost improvement initiatives 73 Net spread increase $203.6M Escalation (127) Timing,
Slide 19: Impact of AASB 16 – Leases
IMPACT OF AASB 16 – LEASES 19 Estimated impact of capitalisation of operating leases under AASB 16 • Effective 1 July 2019 (first reported in December 2019 half year statements) • Brings most operating lease commitments onto balance sheet as an asset and a form of debt, and splits income statement c
Slide 20: Financial Framework
FINANCIAL FRAMEWORK Crackenback Stables in the Snowy Mountains region of NSW, featuring ZINC-HI-TEN® steel
Slide 21: Financial Framework
FINANCIAL FRAMEWORK 21 Clearly stated financial framework to guide our decision making 1 RETURNS FOCUS 2 OPTIMAL CAPITAL STRUCTURE 3 DISCIPLINED CAPITAL ALLOCATION • ROIC > WACC through the cycle • Strong balance sheet, with a target of Invest to maintain safe and reliable operations, around zero ne
Slide 22: Returns Focus – Delivering ROIC
1 RETURNS FOCUS – DELIVERING ROIC 22 Targeting returns above cost of capital through the cycle Group ROIC Performance (%) • ROIC1 is the primary measure of performance 20.0% 19.5% across all business units and the Group. ROIC is 18.5% a key discipline for: 9.5% i. performance management, ii. project
Slide 23: Returns Focus – Maximising Cash Generation
1 RETURNS FOCUS – MAXIMISING CASH GENERATION 23 Average free cash flow of $928M over last three years Net cash flow, before investment expenses and financing ($M) Implied 21% cash flow yield, based on 1,304 ~$12.50 share price 749 731 2H 1H FY2017 FY2018 FY2019 As at 30 June 2019 the BlueScope Steel
Slide 24: Optimal Capital Structure – Target Around Zero Net Debt
2 OPTIMAL CAPITAL STRUCTURE – TARGET AROUND ZERO NET DEBT 24 Flexible and resilient balance sheet with investment grade rating Net cash / (debt) ($M) Leverage (Net debt to LTM underlying EBITDA1) Strong working capital performance in 2H 693 FY2019, including around $150M benefit Step-up and rapid •
Slide 25: Optimal Capital Structure – Prudent Liquidity and Maturity Profile
2 OPTIMAL CAPITAL STRUCTURE – PRUDENT LIQUIDITY AND MATURITY PROFILE 25 Liquidity (undrawn facilities and cash, $M) Maturity profile2 ($M) Receivables securitisation program: 428 In addition to debt facilities, 2,5421 BSL Syndicated Bank Facility BlueScope has $493M of off-balance Reg-S Bonds shee
Slide 26: Disciplined Capital Allocation – Capital and Acquisition Expenditure
3 DISCIPLINED CAPITAL ALLOCATION – CAPITAL AND ACQUISITION EXPENDITURE 26 Drive competition for capital with disciplined, returns focused process Capital expenditure focus areas FY2019 and FY20201 ($M) Broadly split evenly MAINTAIN SAFE AND $188M in 1H, across 1H and 2H RELIABLE OPERATIONS $301M in
Slide 27: Disciplined Capital Allocation – Shareholder Returns
3 DISCIPLINED CAPITAL ALLOCATION – SHAREHOLDER RETURNS 27 Distribute at least 50% of free cash flow to shareholders Dividends paid and buy-backs ($M) Underlying earnings per share (EPS) improvement from buy-backs • Final dividend of 8 cents per share1 586 180 cps Dividend Buy-back 76 Actual EPS • $2
Slide 28: North Star Expansion
NORTH STAR EXPANSION
Slide 29: North Star Expansion Investment Case
NORTH STAR EXPANSION INVESTMENT CASE 29 An attractive opportunity to maximise value from a ‘best-in-class’ asset 1 The US is an attractive market for BlueScope North Star is an advantaged, ‘best-in-class’ asset built for expansion • Located in a geographically advantaged position 2 • Sells predomina
Slide 30: The US Is an Attractive Market for BlueScope
1 THE US IS AN ATTRACTIVE MARKET FOR BLUESCOPE 30 The US is a large and stable market; underlying demand drivers for North Star remain broadly positive A large and sophisticated market Positive US macroeconomic outlook Stable activity in key end-markets US real GDP growth (%) US light vehicle sales
Slide 31: North Star Is an Advantaged 'Best-in-Class' Asset
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 31 Achieving industry leading margins; consistently full asset utilisation; first in customer satisfaction EBIT margins1 (%) HRC capacity utilisation2 (%) Customer satisfaction 29.8% 100% North Star • Measured by the Jacobson &
Slide 32: North Star – Geographically Advantaged Position
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 32 Located in a geographically advantaged position Located close to customers… …and close to scrap suppliers 5% North Star Scrap merchants 10% Detroit WI WI Major scrap markets NY NY MI 35% MI HBI plant (under construction) Nort
Slide 33: North Star – Sells Predominantly to Service Centres
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 33 Sells predominantly to service centres, and holds a modest share of wallet with its customers Sales by end customer type Customer share of wallet Tubers • Service centres value North Star supply due to consistently high servi
Slide 34: North Star – EBITDA and Cash Generation Through the Cycle
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 34 Strong EBITDA and cash generation through the cycle; investment case based on historical long term spreads US$M EBITDA and spread (100% basis)1 600 U.S. mini-mill spread EBITDA (100% basis) Cash flow (EBITDA less capex) Moved
Slide 35: North Star – Embedded Expansion Capacity
2 NORTH STAR IS AN ADVANTAGED ‘BEST-IN-CLASS’ ASSET BUILT FOR EXPANSION 35 North Star was built with embedded expansion capacity, with a large hot strip mill Potential future North Star capacity by production unit (million metric tonnes per annum) capacity, subject to debottlenecking Current capacit
Slide 36: Expansion Consistent With Longer-Term Transition to EAF
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 36 The EAF replacement of blast furnaces is a long term trend in the US, and is still emerging in the HRC market Crude steel production mix (%, million metric tonnes) Flat steel production mix (%, million metric
Slide 37: EAF HRC Capacity Being Added in North Star's Region
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 37 EAF HRC capacity being added in North Star’s region, blast furnace HRC capacity recently idled US HRC capacity additions (million metric tonnes) Overview of US HRC capacity Key Nameplate capacity additions, no
Slide 38: Supply and Demand in North Star's Region Balanced in 2023
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 38 Supply and demand in North Star’s region is expected to be largely in balance in 2023 Regional flat rolled supply and demand balance (million metric tonnes) 3.65 ~3.3 (~2.3) ~30 Demand ~29 ~1 increase Imports
Slide 39: HRC Supply-Demand Dynamics and Utilisation
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 39 HRC supply-demand dynamics projected to be at or above post-GFC levels, supporting the view on long term spread assumptions US Hot Strip Mill utilisation (%) 100% Possible future utilisation scenarios 90% 0.8%
Slide 40: Favourable Metallics Market Will Remain Adequately Supplied
3 EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY EFFICIENT EAF SUPPLIERS 40 Favourable metallics market will remain adequately supplied North Star regional prime scrap dynamics Prime scrap supply-demand balance (million metric tonnes) ~5.5 • The current prime scrap market is in a surp
Slide 41: Sustainability Considerations Embedded Into Project Evaluation
4 SUSTAINABILITY CONSIDERATIONS ARE EMBEDDED INTO PROJECT EVALUATION AND EXECUTION 41 Strong focus on sustainability impacts and opportunities for the evaluation and execution of the project Scrap based, • Installation of low emission EAF capacity CLIMATE CHANGE lower emission • Expected to lower Bl
Slide 42: Project Delivers Compelling Returns on Historical Spreads
5 PROJECT DELIVERS COMPELLING RETURNS ON HISTORICAL SPREADS, PROVIDING FURTHER UPSIDE THROUGH DEBOTTLENECKING 42 Targeting a minimum 15% IRR and 15% ROIC when fully ramped-up, based on long-term historical spreads • Targeting a minimum 15% IRR and 15% ROIC when fully ramped-up, based on long-term hi
Slide 43: Summary and Outlook
SUMMARY AND OUTLOOK Ivanhoe Grammar School in Ivanhoe, VIC, featuring COLORBOND® steel in Monument®
Slide 44: Industry Update
INDUSTRY UPDATE 44 BlueScope is well positioned in robust, developed economies, and in high growth regions across Asia CHINA GLOBAL • Continued focus on overcapacity and environmental performance • Global steel industry in overcapacity • Shift to EAF production, rapidly growing scrap pool • Trade pr
Slide 45: Segment Guidance for 1H FY2020
SEGMENT GUIDANCE FOR 1H FY20201 45 Australian Building Products Asia New Zealand & Buildings North Star Steel Products & North America Pacific Steel North America • Expect a softer result on • Expect a softer result, due to: • Overall, expect a stronger • Expect a better result mainly • Similar resu
Slide 46: 1H FY2020 Group Outlook
1H FY2020 GROUP OUTLOOK1 46 • The Company currently expects weaker commodity steel spreads in North Star and ASP, leading to an underlying EBIT around 45% lower than 2H FY2019 (which was $499 million) • Based on 1H FY2020 average assumptions: – East Asian HRC price of ~US$510/t2 – 62% Fe iron ore pr
Slide 47: BlueScope's Investment Proposition
BLUESCOPE'S INVESTMENT PROPOSITION 47 Disciplined and advantaged steel building products company focussed on growing long term shareholder value ASSETS & CAPABILITY CAPITAL DISCIPLINE RETURNS FOCUS • Integrated and resilient Australian business • Strong balance sheet with target of around • Target R
Slide 48: Questions?
QUESTIONS? Walumba Elders Centre in Warmun, WA, featuring COLORBOND® steel in Surfmist® and Headland®
Slide 49: BlueScope: A Different Kind of Steel Building Products Company
BLUESCOPE: A DIFFERENT KIND OF STEEL BUILDING PRODUCTS COMPANY STEAK On.3 Coffee & Wine in Chum Phon, Thailand, featuring Clean COLORBOND® steel in Posh Grey
Slide 50: What Makes Us Different?
BLUESCOPE: A DIFFERENT KIND OF STEEL BUILDING PRODUCTS COMPANY 50 What makes us different? TECHNOLOGY, BUSINESS COST BRANDING & CHANNELS DIVERSIFICATION COMPETITIVENESS DISCIPLINED CAPITAL APPROACH TO ALLOCATION SUSTAINABILITY
Slide 51: Technology, Branding & Channels
TECHNOLOGY, BRANDING & CHANNELS 51 Continued investment in research & development to maintain leadership in steel coating and painting technologies Product Technology and Development Leadership Advanced pre-painted and metallic coating development for building, construction and home appliance market
Slide 52: Technology, Branding & Channels – Brands
TECHNOLOGY, BRANDING & CHANNELS 52 Brands – a portfolio of many well-known and respected names to support our premium branded positions Australia New Zealand Asia North America ® ® ® ® ® ® ®
Slide 53: Technology, Branding & Channels – Channels
TECHNOLOGY, BRANDING & CHANNELS 53 Channels – clear focus on knowing our end customers and maintaining strong channels to market Australia New Zealand Asia North America ® ® ® ® ® ® ® ® ®
Slide 54: Business Diversification
BUSINESS DIVERSIFICATION 54 Geographic diversity and increasing contribution from value-added products Underlying EBITDA by region ($M) BlueScope despatch volume mix 100% Buildings North America NZ & Pacific $128M 90% Asia 7% Building products $151M 80% 8% Higher value added Australia 70% Australia
Slide 55: Business Diversification
BUSINESS DIVERSIFICATION 55 Broad exposure across geographies, largely focussed on the building and construction industry BlueScope indicative despatch volume split by region and end-use segment Other (Exports) Automotive Manufacturing, 9% North Star: exposed mainly to the automotive, Agri & Other 1
Slide 56: Cost Competitiveness
COST COMPETITIVENESS 56 Australian steelmaking breakeven at minimum recent spreads following business transformation Asian steel spread & estimated steelmaking cash breakeven (US$/t) Asian steel spread & EBITDA per tonne ($A/t) 800 Underlying EBITDA per tonne A$/t 400 Bottom of cycle spreads2 700 35
Slide 57: Cost Competitiveness
COST COMPETITIVENESS 57 North Star generates positive returns through the cycle, with a leading margin in US steelmakers US$M EBITDA and spread1 North Star’s and North American peers’ EBIT margin 600 29.8% U.S. mini-mill spread 524 EBITDA (100% basis) 500 Cash flow (EBITDA less capex) Move to full o
Slide 58: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION 58 Balance sheet strength, and a disciplined approach to balancing investment for long-term growth and returns to shareholders ROBUST BALANCE SHEET – NET CASH INCREASED RETURNS TO SHAREHOLDERS INVESTING FOR LONG TERM GROWTH Net cash / (debt) ($M) Dividends paid and buy
Slide 59: Disciplined Capital Allocation – Growth Opportunities
DISCIPLINED CAPITAL ALLOCATION – GROWTH OPPORTUNITIES 59 Investing for the future across our portfolio through a returns focussed process driving competition for capital Capital expenditure focus areas Examples of growth opportunities Building Products Asia MAINTAIN SAFE AND Continued roll out of ZA
Slide 60: Investing in Growth at ASP
DISCIPLINED CAPITAL ALLOCATION – INVESTING IN GROWTH AT ASP 60 Light gauge steel framing growth continues; new coil plate capacity provides a strong foundation for growth Light gauge steel framing growth TRUECORE® sales volumes1 New TRU-SPEC® coil plate line Coil plate sales volumes1 • Continues to
Slide 61: Robotics and Automation
DISCIPLINED CAPITAL ALLOCATION – ROBOTICS AND AUTOMATION 61 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 m
Slide 62: Our Bond, Strategy, Financial Framework & Approach to Sustainability
OUR BOND, STRATEGY, FINANCIAL FRAMEWORK & APPROACH TO SUSTAINABILITY 62 GUIDE WHAT WE AIM TO ACHIEVE AND HOW WE DO IT
Slide 63: Approach to Sustainability – Our Bond
APPROACH TO SUSTAINABILITY – OUR BOND 63 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 64: Our Strategy – A Disciplined Approach to Growth and Shareholder Returns
OUR STRATEGY – A DISCIPLINED APPROACH TO GROWTH AND SHAREHOLDER 64 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 65: Financial Framework
FINANCIAL FRAMEWORK 65 Clearly stated financial framework to guide our decision making 1 RETURNS FOCUS 2 OPTIMAL CAPITAL STRUCTURE 3 DISCIPLINED CAPITAL ALLOCATION • ROIC > WACC through the cycle • Strong balance sheet, with a target of Invest to maintain safe and reliable operations, around zero ne
Slide 66: Approach to Sustainability – A Core Value for BlueScope
APPROACH TO SUSTAINABILITY – A CORE VALUE FOR BLUESCOPE 66 Continued focus on improving our sustainability performance and disclosure SAFETY, HEALTH & CLIMATE CHANGE SUPPLY CHAIN GOVERNANCE AND DIVERSITY AND WELLBEING AND ENERGY SUSTAINABILITY BUSINESS CONDUCT INCLUSION • We are evolving to the next
Slide 67: Approach to Sustainability – Climate Change and Energy
APPROACH TO SUSTAINABILITY – CLIMATE CHANGE AND ENERGY 67 Our commitment to action Support the Paris agreement and Acknowledge steelmaking produces BLUESCOPE’S CLIMATE CHANGE STRATEGY the commitments of the countries emissions; working to reduce the in which we operate impact Resilient, efficient Ad
Slide 68: Approach to Sustainability – Sustainable Supply Chain
APPROACH TO SUSTAINABILITY – SUSTAINABLE SUPPLY CHAIN 68 Significant progress made; design and rollout progressing – supplier due-diligence processes operational Processes and documentation in place Internal training and rollout • Supplier Code of Conduct published and available in 8 languages. • Si
Slide 69: Approach to Sustainability – Governance and Business Conduct
APPROACH TO SUSTAINABILITY – GOVERNANCE AND BUSINESS CONDUCT 69 BlueScope seeks to live the values in its Bond by promoting a culture of integrity across our global operations • Our inclusion goal is that our culture invites and rewards contributions from people with different perspectives • We cont
Slide 70: Approach to Sustainability – Diversity and Inclusion
APPROACH TO SUSTAINABILITY – DIVERSITY AND INCLUSION 70 Strong focus and effective strategies creating demonstrable improvement in workforce diversity • Our diversity goal is that our workplaces reflect Female % of workforce Female % of recruitment the communities in which we operate 25% Board 25% 4
Slide 71: Additional Information – North Star Expansion
ADDITIONAL INFORMATION – NORTH STAR EXPANSION
Slide 72: Expansion Consistent With Longer-Term Transition to EAF
EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY 72 EFFICIENT EAF SUPPLIERS A trend assisted by consolidation and rationalisation within the industry Consolidation of US HSM capacity (%, million metric tonnes) Total producers 20 10 Gulf States 73mt Existing producers Closed or consolida
Slide 73: National HRC Supply and Demand Balanced in 2023
EXPANSION IS CONSISTENT WITH LONGER-TERM TRANSITION TO HIGHLY 73 EFFICIENT EAF SUPPLIERS National HRC supply and demand is expected to be largely in balance in 2023 National flat rolled supply and demand balance ~105 (million metric tonnes) Specialty steels ~(3.0) Plate, P&T and other ~(15.5) Long p
Slide 74: Additional Information – Group-Level Material
ADDITIONAL INFORMATION – GROUP-LEVEL MATERIAL The Condensery – Somerset Regional Art Gallery, Toogoolawah, QLD, featuring COLORBOND® steel in Manor Red®
Slide 75: Financial Headlines
FINANCIAL HEADLINES 75 FINANCIAL YEAR ENDED $M (unless marked) 30 JUN 2018 30 JUN 2019 FY2019 vs FY2018 Total revenue 11,578.2 12,586.4 External despatches of steel products (kt) 7,591.1 7,451.2 EBITDA − Underlying 1 1,644.6 1,761.4 EBIT − Reported 1,462.9 1,340.8 − Underlying 1 1,269.3 1,348.3 NPAT
Slide 76: Reconciliation Between Reported and Underlying EBIT and NPAT
RECONCILIATION BETWEEN REPORTED AND UNDERLYING EBIT AND NPAT1 76 FY2018 FY2019 EBIT $M NPAT $M EBIT $M NPAT $M Reported Results 1,462.9 1,569.1 1,340.8 1,015.8 Underlying adjustments Discontinued Business (gains) / losses 25.3 23.3 2.1 4.1 Asset impairment / (write-back) (216.0) (216.0) 63.8 33.2 Ta
Slide 77: Underlying Earnings, Net Finance and Tax Cost
UNDERLYING EARNINGS, NET FINANCE AND TAX COST 77 $M 1H FY2019 2H FY2019 FY2019 Breakdown of net finance costs Underlying EBIT 849.6 498.7 1,348.3 Reg-S Bonds 19.4 Underlying finance costs (27.2) (27.8) (55.0) Syndicated bank facility charges 5.0 Finance leases 12.0 Interest revenue 7.3 11.7 19.0 Amo
Slide 78: Summary of Financial Items by Segment
SUMMARY OF FINANCIAL ITEMS BY SEGMENT 78 Sales revenue Total steel despatches $M FY2018 1H FY2019 2H FY2019 FY2019 '000 tonnes FY2018 1H FY2019 2H FY2019 FY2019 North Star BlueScope Steel 1,923.9 1,265.0 1,110.8 2,375.7 North Star BlueScope Steel 2,104.7 1,036.4 1,073.9 2,110.4 Australian Steel Prod
Slide 79: Cash Flow Statement
CASH FLOW STATEMENT 79 $M FY2018 FY2019 1H FY2019 2H FY2019 Reported EBITDA 1,839.5 1,753.8 1,046.1 707.7 Adjust for other cash profit items (228.3) (22.0) (0.7) (21.3) Cash from operations 1,611.2 1,731.8 1,045.4 686.4 Includes favourable impact of timing benefit on working Working capital movement
Slide 80: Working Capital
WORKING CAPITAL 80 Increased inventory due to strong demand and FX the main driver of higher than normal working capital Included approximately $100M unfavourable timing of working capital 30 June 2017 benefitted 1,652.7 Includes approximately by $100M from timing of (16.5) $150M favourable year-end
Slide 81: Inventory Movement
INVENTORY MOVEMENT 81 Increase in inventory driven by rate, volume and FX, on the back of high activity levels and a softening A$ RM $617.2M WIP $664.4M FG $629.4M $116.8M increase comprised of segmental movements: RM $581.9M Other $219.2M (including eliminations and other of $3.8M) WIP $526.2M FG $
Slide 82: Balance Sheet
BALANCE SHEET 82 $M 30 Jun 2018 31 Dec 2018 30 Jun 2019 Assets Cash 944.4 1,057.0 1,644.5 Receivables * 1,485.6 1,276.4 1,259.9 Inventory * 2,013.4 2,283.1 2,130.2 Property, Plant & Equipment 4,049.3 4,085.5 4,147.5 Intangible Assets 1,747.0 1,800.5 1,827.0 Other Assets 691.4 694.0 688.0 Total Asset
Slide 83: Committed Debt Facilities as at 30 June 2019
COMMITTED DEBT FACILITIES AS AT 30 JUNE 2019 83 Committed Drawn Maturity Local currency A$M A$M Syndicated Bank Facility - Tranche 1 Aug 2021 A$250M A$250M A$0M - Tranche 2 Aug 2022 A$250M A$250M A$0M Reg-S Bonds May 2023 US$300M A$428M A$428M Inventory Finance Aug 2020 US$55M A$79M A$0M NS BlueScop
Slide 84: Indicative Half Year EBIT Sensitivities
INDICATIVE HALF YEAR EBIT SENSITIVITIES1 84 Sensitivities may vary subject to volatility in prices, currencies and market dynamics – refer to page 91 Australian Steel Products segment New Zealand Steel & Pacific Steel segment North Star segment +/- US$10/t move in average benchmark hot rolled coil p
Slide 85: Additional Information – Segment Material
ADDITIONAL INFORMATION – SEGMENT MATERIAL
Slide 86: North Star
NORTH STAR 86 Financial and despatch summaries Key segment financial items (A$M) Key segment financial items (US$M) $M unless marked FY2018 1H FY2019 2H FY2019 FY2019 US$M FY2018 1H FY2019 2H FY2019 FY2019 Revenue 1,923.9 1,265.0 1,110.8 2,375.7 Revenue 1,488.4 916.3 784.6 1,700.9 Underlying EBITDA
Slide 87: North Star Underlying EBIT Variance
NORTH STAR 87 Underlying EBIT variance FY2019 vs FY2018 ($M) 2H FY2019 vs 1H FY2019 ($M) Net spread increase $217.6M (52.9) 654.7 (37.4) 42.5 1.4 270.5 Net spread decrease 430.6 $192.7M 411.6 (227.3) 243.2 17.0 4.9 2.4 34.6 FY2018 Prices Raw material Conversion & Volume FX translation FY2019 1H FY20
Slide 88: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 88 Financial and despatch summaries Key segment financial items Despatches breakdown $M unless marked FY2018 1H FY2019 2H FY2019 FY2019 '000 Tonnes FY2018 1H FY2019 2H FY2019 FY2019 Revenue 5,423.2 2,869.9 2,837.6 5,707.5 Hot rolled coil 580.9 301.9 254.0 555.9 Underlying E
Slide 89: Australian Steel Products Underlying EBIT Variance
AUSTRALIAN STEEL PRODUCTS 89 Underlying EBIT variance Conversion & other costs ($M) FY2019 vs FY2018 ($M) Cost improvement initiatives 21 2H FY2019 vs 1H FY2019 ($M) Escalation (30) Net spread increase $56.2M Timing, one-off & other (38) Depreciation, due to ASP (25) Raw material costs ($M) 124.4 (1
Slide 90: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 90 Spot spreads have contracted due to softening HRC prices and increasing raw material rates Indicative steelmaker HRC lagged spread Notes on calculation: • ‘Indicative steelmaker HRC spread’ representation based on $800 simple input blend of 1.5t iron ore fines and 0.71t
Slide 91: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 91 Relationships with benchmark pricing • Selling prices across majority of domestic product correlated with SBB East Asia HRC price; lagged generally three to five months; degree of correlation Steel prices between realised and benchmark prices can vary within a given half
Slide 92: Australian Steel Products – Domestic
AUSTRALIAN STEEL PRODUCTS 92 Despatch mix (Mt) 1.65 FY2019 Product Mix 1.60 1.52 1.47 0.41 0.34 0.28 0.59 Export Export 0.08 0.08 0.08 Domestic - 0.06 externally sourced HRC Metal Coated Plate Painted CRC Other inc ext sourced 1.10 1.11 1.11 Domestic - BSL 1.00 manufactured Domestic 1H FY2018 2H FY2
Slide 93: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 93 Revenue and underlying costs FY2019 Revenue Underlying costs (to EBIT line) A$5,708M Non-steel business costs relate to: Conversion & overhead components A$5,172M • Export coke sales (in order of value): Non-steel business • Cold ferrous feed to Liberty OneSteel • Direct
Slide 94: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 94 Housing market correction dominated by multis, while detached demonstrating more orderly pullback Long-Term Dwelling Approvals: rolling 12 months1 (‘000) Dwelling Commencements: by halves2 (‘000) Despite pullback, detached house approvals holding in stable historic range
Slide 95: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 95 Non-residential approvals and work done remain robust Non-Residential Building Approvals: rolling 12 months1 (A$bn) Non-Residential Work Done: by halves2 (A$bn) Approvals remain at robust levels, improving post election Activity remains elevated based on strong approvals
Slide 96: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 96 Portfolio of premium brands and strong channel focus; leading supplier to the building and construction industry Brands Recent marketing campaigns COLORBOND® Matt steel campaign A portfolio of many well-known and respected premium product brands 50 Years of COLORBOND® st
Slide 97: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 97 An integrated and resilient business that delivers returns across the cycle East Asian benchmark and ASP steelmaking indicative cash breakeven spreads (US$/t) • Steelmaking and coated operations optimised as a 350 single unit to maximise overall profitability East Asian
Slide 98: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 98 Robust earnings and cash flows through the cycle – a fundamentally different business to FY2015 Earnings transformation Recent impacts on cost ASP underlying EBIT ($M) and ROIC (%) 24.6% • The Australian Steel Products business • Energy costs increased materially in went
Slide 99: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 99 Disciplined approach to retain the benefit of structural cost reduction; increasing focus on automation and robotics • Cost reductions will increasingly be Automated slab yard cranes Automated BOS Limekiln PCI injection performance driven through automation and robotics
Slide 100: Australian Steel Products
AUSTRALIAN STEEL PRODUCTS 100 Robotics and automation opportunities unlocking the next wave of productivity improvements and cost savings DATA ADVANCED ROBOTICS AND VISUALISATION ANALYTICS AUTOMATION Finishing mill example: Value-in-use model example: Automated coil field example: • Improved data vi
Slide 101: Building Products Asia & North America
BUILDING PRODUCTS ASIA & NORTH AMERICA 101 Financial and despatch summaries Key segment financial items Despatches by business $M unless marked FY2018 1H FY2019 2H FY2019 FY2019 '000 Tonnes FY2018 1H FY2019 2H FY2019 FY2019 Revenue 2,693.8 1,481.2 1,398.2 2,879.4 Thailand 377.0 158.5 182.9 341.4 Und
Slide 102: Building Products Asia & North America
BUILDING PRODUCTS ASIA & NORTH AMERICA 102 Underlying EBIT variance FY2019 vs FY2018 ($M) 2H FY2019 vs 1H FY2019 ($M) Net spread decrease $54.9M 112.3 (170.2) 184.5 3.0 Net spread decrease $18M 78.8 (0.8) 23.1 (16.6) 134.2 12.5 (15.5) 55.5 (1.9) (2.3) (66.9) 49.7 FY2018 Export Domestic Raw Conversio
Slide 103: Buildings North America
BUILDINGS NORTH AMERICA 103 Financial and despatch summaries Key segment financial items (A$M) Key segment financial items (US$M) $M unless marked FY2018 1H FY2019 2H FY2019 FY2019 US$M FY2018 1H FY2019 2H FY2019 FY2019 Revenue 1,106.4 587.4 590.6 1,178.0 Revenue 854.4 425.6 415.7 841.4 Underlying E
Slide 104: Buildings North America
BUILDINGS NORTH AMERICA 104 Underlying EBIT variance FY2019 vs FY2018 ($M) 2H FY2019 vs 1H FY2019 ($M) Net margin decrease $16.8M1 35.7 (54.8) 74.6 Net margin increase $20.7M 53.4 7.6 (6.5) 2.3 (10.1) 5.7 (10.2) 31.3 19.6 (1.3) 22.1 FY2018 Prices1 Raw material Conversion & Volume FX translation FY20
Slide 105: New Zealand & Pacific Steel
NEW ZEALAND & PACIFIC STEEL 105 Financial and despatch summaries Key segment financial items Steel despatches $M unless marked FY2018 1H FY2019 2H FY2019 FY2019 '000 Tonnes FY2018 1H FY2019 2H FY2019 FY2019 Revenue 833.6 463.5 424.6 888.1 Domestic despatches Underlying EBITDA 156.1 96.6 32.4 129.0 -
Slide 106: New Zealand & Pacific Steel
NEW ZEALAND & PACIFIC STEEL 106 Underlying EBIT variance FY2019 vs FY2018 ($M) 2H FY2019 vs 1H FY2019 ($M) Net spread decrease $11.0M 18.6 111.7 (35.0) 5.4 (18.6) 0.5 80.6 (2.0) Net spread decrease $24.7M 71.9 (7.3) (9.7) (7.7) (33.8) (6.5) 8.6 1.7 FY2018 Export Domestic Raw Conversion Volume FX FY2
Slide 107: New Zealand & Pacific Steel – Despatch Mix
NEW ZEALAND & PACIFIC STEEL 107 Despatch mix (kt) 342.7 FY2019 Product Mix 12.2 307.5 307.5 299.8 0.8 22.5 0.6 Export long 116.6 67.9 Domestic 55.9 76.2 Export flat 92.3 97.5 95.7 Domestic long 85.9 HRC Plate CRC 146.5 Metal Coated 131.6 128.0 127.3 Domestic flat Painted Other flat products Pacific
Slide 108: East Asian Rebar Price
NEW ZEALAND & PACIFIC STEEL 108 The East Asian rebar price influences domestic and export long product pricing SBB East Asian rebar price, unlagged (US$/t) $800 $700 $600 $500 $400 $300 $200 $100 $0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan
Slide 109: NZ Economy Sound Momentum
NEW ZEALAND & PACIFIC STEEL 109 The NZ economy maintaining sound momentum especially supported by robust construction Residential Building Consents: rolling 12 months1 (‘000) Residential Work Put in Place: by quarters2 (NZ$bn) Running at record high levels Activity pipeline strong off back of record
Slide 110: Glossary
GLOSSARY 110 1H Six months ended 31 December in the relevant financial year FY2018 12 months ending 30 June 2018 1H FY2018 Six months ended 31 December 2017 FY2019 12 months ending 30 June 2019 1H FY2019 Six months ended 31 December 2018 FY2020 12 months ending 30 June 2020 1H FY2020 Six months ende
Slide 111: FY2019 Financial Results Presentation
FY2019 FINANCIAL RESULTS PRESENTATION Mark Vassella Managing Director and Chief Executive Officer Tania Archibald Chief Financial Officer 19 August 2019 BlueScope Steel Limited. ASX Code: BSL ABN: 16 000 011 058