Bluescope Steel Limited · ASX:BSL
Bluescope Steel — H1 FY2012 Earnings Presentation
68 slides from Bluescope Steel's earnings presentation, Feb 20, 2012
Slide 1: First Half FY2012 Financial Results Supporting Information
For personal use only First Half FY2012 Financial Results Supporting Information 20 February 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: Snapshots of Reporting Segments & Drivers
For personal use only Snapshots of Reporting Segments & Drivers Page 3
Slide 4: Reporting Segments
Reporting Segments Corporate / Group Australia New Zealand Asia North America For personal use only Coated & Australia New Zealand Coated & Hot Coated & Industrial Distribution & Pacific Steel Building Rolled Building Products & Products Products Products Products Australia Solutions Asia North Amer
Slide 5: Segment business drivers
Segment business drivers Corporate / Group Australia New Zealand Asia North America For personal use only Coated & Australia New Zealand Coated & Hot Coated & Industrial Distribution & Pacific Steel Building Rolled Building Products & Products Products Products Products Australia Solutions Asia Nort
Slide 6: Coated & Industrial Products Australia – restructure to exit export business
For personal use only Coated & Industrial Products Australia – restructure to exit export business Page 6
Slide 7: To recap – macro environment and poor returns drove decision to exit export markets
To recap – macro environment and poor returns drove decision to exit Coated & Industrial Products Australia ((CIPA)) segment g export p markets 1,236 1,000 For personal use only Historical CIPA 697 766 546 569 total segment underlying EBIT 224 (pre-NRV charge) (p g ) 35 (A$M) 367 -191 202 Indicative
Slide 8: CIPA FY2011 proforma performance an estimated $225M better under restructure
We noted on 20 August 2011 that CIPA’s FY2011 proforma performance would be have been an estimated $225M1 better under this restructure For personal use only Underlying EBIT A$M (Pre-NRV charge) (1) -80 (1) -182 +487 +34 -191 FY2011 Actual CIPA Add back Export loss Loss retained on Fixed costs retai
Slide 9: CIPA restructure – proforma impact on 2011 income statement
CIPA restructure announced on 22 August 2011 - Proforma impact of restructure on 2011 CIPA income statement For personal use only (1) 2011 Comprised of: Impact of proforma for • Raw materials, including assumption of raw materials mix A$m; year to 30 June 2011A restructure restructure improvement to
Slide 10: CIPA restructure – $315M fixed cost reduction through asset closures
CIPA restructure – $315M fixed cost reduction estimate1 being achieved through the closure of various assets For personal use only 5.3mtpa asset base 2.6mtpa asset base Cokemaking Operating 4 batteries Operate 3 batteries (closing No. 4) and 21/22 Blowers Sinter Plant Full Capacity Reduce production
Slide 11: CIPA restructure – Components of fixed cost reduction
CIPA restructure – Components of fixed cost reduction For personal use only • Electricity, natural gas, internal gases, cryogenic gases, water, steam, compressed air and hot blast Utilities & services • Includes contracted services for management of slag and other materials handling (movement of mat
Slide 12: One blast furnace sufficient to meet all Australian demand
One blast furnace (2.6mtpa capacity) sufficient to meet all Australian demand For personal use only Port Kembla Raw Steel Production Capacity and Domestic Steel Despatches kt 6,000 BlueScope’s historical raw steel production with 5,000 two blast furnaces Excess production 4,000 from two blast furnac
Slide 13: 1H FY2012 Additional Information: Coated & Industrial Products Distribution & Solutions
For personal use only 1H FY2012 Additional Information: Coated & Industrial Products Distribution & Solutions Page 13
Slide 14: CIPA underlying EBIT variance analysis (1H FY2012 vs. 1H FY2011)
Coated & Industrial Products Australia – underlying EBIT variance y ((1H FY2012 vs. 1H FY2011)) analysis only Net Spread Reduction ($126m) Raw Material Costs: use -39 Coal (116) Iron ore (62) Scrap (1) +98 Alloys (1) Net realisable value provisions (14) For personal Opening stock adjustment 10 EBIT
Slide 15: CIPA underlying EBIT variance analysis (1H FY2012 vs. 2H FY2011)
Coated & Industrial Products Australia – underlying EBIT variance y ((1H FY2012 vs. 2H FY2011)) analysis only Net Spread Reduction ($66m) use Raw Material Costs: Coal (40) Iron ore (18) Scrap 2 For personal Net realisable value provisions 12 EBIT A$M Opening stock adjustment (12) Coating metals 6 Co
Slide 16: Key drivers of CIPA 1H FY2012 result
BlueScope Steel – Key drivers of Coated & Industrial Products Australia 1H FY2012 result For personal use only 1H FY10 2H FY10 1H FY11 2H FY11 1H FY12 East Asia HRC price1, US$/t 536 628 611 722 683 Influences pricing of some - three month lag, A$/t 630 614 709 668 686 categories of domestic pproduc
Slide 17: CIPA – Despatch Mix
For personal use only Coated & Industrial Products Australia – Despatch Mix Smorgon Distribution IMSA consolidated from Feb consolidated lid t d ffrom A Aug 2008 Internal despatches 2008. Both PKSW Both PKSW Both PKSW 2007 – increases internal increase and external furnaces furnaces Chart shows furn
Slide 18: C&IPA – Annual Capacities
C&IPA – Annual Capacities Port Kembla Steelworks (Wollongong, New South Wales, Australia) #5 Blast Furnace For personal use only 2,600 Slab Casters 2,600 Slab Plate Mill Pl t Plate 450 Hot Strip Mill HRC 2,900 Coupled Pickled Cold Mill CRC 990 Metal Coating Lines Metal Coated 825 Strip Springhill Co
Slide 19: PKSW – Production & Despatch Flow
PKSW – Production & Despatch Flow Port Kembla Steelworks For personal use only Slab Domestic Slab Production 370 872 0 0 1H 2012 1H 2011 1,864 2,643 Export 141 351 IInventory t movements t Interco Western Port (2) & yield losses 229 521 Hot Strip HRC Domestic P t Kembla Port K bl Steelworks St l k M
Slide 20: Port Kembla Steelworks – despatches by half year
For personal use only Port Kembla Steelworks – despatches by half year 2,609 2,599 2,611 2,555 , 2,494 2,421 2,118 2,081 BSL internal* 1,937 1,361 1,295 1348 1,606 1,439 1,352 1,348 , 1,205 1,411 1150 Export external 699 782 838 747 100% exported, with 526 694 geographic sales 846 split being: Domes
Slide 21: Port Kembla Steelworks productivity
For personal use only Port Kembla Steelworks productivity 5,000 Employees Productivity (Tonnes per person per year) 2,000 4705 Output, Tonness/Employee/Yeear) 4,500 1 750 1,750 4049 4,000 3783 3662 3610 3567 1,500 3,500 3406 * 3146 3171 3,123 3087 ** 1,250 3,000 2,836 2 500 2,500 1 000 1,000 Product
Slide 22: Port Kembla Steelworks – cost profile
For personal use only Port Kembla Steelworks – cost profile T t l costt A$ Total A$m FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 HY2012 S&A Conversion Costs Despatch & Freight Raw Materials Notes: (1) Ch t shows Chart h costt off despatches d t h (2) Conversion costs include depre
Slide 23: Consumption of primary raw materials at Port Kembla Steelworks
For personal use only Consumption of primary raw materials at Port Kembla Steelworks Volume consumed in p production (dry ( y mt)) FY2008 FY2009 FY2010 FY2011 1H FY12 Indicative use rate per slab tonne Iron Ore ((Assuming g 1 blast furnace running g at capacity) p y) Fines 4.0 2.9 4.0 4.4 1.8 1.13t
Slide 24: Supply and pricing of iron ore to the Port Kembla Steelworks
Supply and pricing of iron ore to the Port Kembla Steelworks ((Updated p for single g blast furnace operations) p ) For personal use only Supplier Term Approximate Volume (p/a) Pricing Basis 10 years from BHP Billiton 1.1mt(1) Trailing monthly index 1 Julyy 2009 10 years from Pricing reviewed quarte
Slide 25: Supply and pricing of metallurgical coals to the Port Kembla Steelworks
Supply and pricing of metallurgical coals to the Port Kembla Steelworks ((Updated p for single g blast furnace operations) p ) For personal use only Product / Supplier Term Pricing Basis Approximate Volume (p/a) Hard coking coal; BHP Billiton 30 years from Quarterly market based pricing for long ter
Slide 26: HRC price benchmark
For personal use only HRC price benchmark • Steel Business Briefing prices continue to be a reasonable public benchmark for BlueScope’s BlueScope s Asian HRC sales and an influence on domestic commoditised product pricing (noting this can change over time) US$/t SBB East Asian Hot Rolled Coil Price,
Slide 27: Australia Distribution & Solutions – EBIT variance (1H FY2012 vs. 1H FY2011)
Australia Distribution & Solutions – underlying EBIT variance analysis ((1H FY2012 vs. 1H FY2011)) For personal use only Net Spread Reduction ($11m) EBIT A$M M 0 -15 -9 -2 -2 -1 -1 +1 -29 29 0 1H FY2011 Export Prices Domestic Raw Material Volume Mix Conversion & Exchange Other 1H FY2012 Prices Costs
Slide 28: Australia Distribution & Solutions – EBIT variance (1H FY2012 vs. 2H FY2011)
Australia Distribution & Solutions – underlying EBIT variance analysis ((1H FY2012 vs. 2H FY2011)) For personal use only Net Spread Reduction ($11m) T A$M EBIT +4 -19 -15 +4 -3 0 -29 2H FY2011 Domestic Prices Raw Material Costs Volume/Mix Conversion Costs Other 1H FY2012 Page 28
Slide 29: Australia Distribution & Solutions
For personal use only Australia Distribution & Solutions The Distribution Th Di t ib ti and dS Solutions l ti di division i i bbrings i ttogether th BlueScope Steel’s Australian-based downstream businesses Solutions Sheet Metal Supplies y Plate y Pre-Engineering y Tube y Roofing Buildings y Structur
Slide 30: Australia Distribution and Solutions – Overview
Australia Distribution and Solutions – Overview Darwin For personal use only KEY Lysaght Cairns Mareeba BlueScope Distribution Sheet Metal Supplies Townsville BlueScope Solution incl. Water Mount Isa Charters Towers Mackay Rockhampton Balcatta Kewdale (3) Emerald Gladstone Forrestfield Bellevue Bund
Slide 31: New Zealand & Pacific Islands
For personal use only New Zealand & Pacific I l d Islands Page 31
Slide 32: New Zealand and Pacific Steel Products – EBIT variance (1H FY2012 vs. 1H FY2011)
New Zealand and Pacific Steel Products – underlying EBIT y ((1H FY2012 vs. 1H FY2011)) variance analysis only Net Spread Improvement $3M +2 use -8 +9 +49 -1 -4 For personal EBIT A$M -11 -22 +34 0 E Conversion & Other Costs: Cost Improvement Initiatives 5 Volume (2) Raw Material Costs: Escalation (15
Slide 33: New Zealand and Pacific Steel Products – EBIT variance (1H FY2012 vs. 2H FY2011)
New Zealand and Pacific Steel Products – underlying EBIT y ((1H FY2012 vs. 2H FY2011)) variance analysis only Net Spread Improvement $11m use 0 +6 -5 +1 +4 For personal +33 -9 +34 +1 +3 T A$M EBIT Conversion & Other Costs: Cost Improvement Initiatives 10 Escalation (16) Raw Material Costs: Other (3)
Slide 34: New Zealand - unique direct reduction process
For personal use only New Zealand - unique direct reduction process Page 34
Slide 35: New Zealand – raw materials
For personal use only New Zealand – raw materials Iron Sand Concentrate (Waikato North Head Mine) y Iron sand mined and concentrated on site – 58.5% Fe y Sufficient resource for long term steel making operations y Concentrate is slurry pumped 18km underground to Glenbrook Thermal Coal y Predominantl
Slide 36: New Zealand Steel – 1H FY2012 product flow
New Zealand Steel – 1H FY2012 product flow Mine Sites Iron Sands Export 0.47mt For personal use only 1.13mt HRC 36% Domestic 7% NZS Slab 0.30mt Export 27% Interco (Export) 66% Export Vanadium Slag 6.7kt Plate 13% Domestic 33% Export 67% Pipe 5% Domestic 96% Export 4% Cold Mill 46% Domestic 11% Expor
Slide 37: New Zealand – 1H FY2012 product distribution
For personal use only New Zealand – 1H FY2012 product distribution (external and internal) Indicative Product Mix (t) Indicative Sales by Region (t) Pacific Islands Painted 8% Australia 8% 15% Cold Rolled Metal Coated 10% 27% Asia Americas 11% Pipe 23% 5% Other Oth 1% Indicative Sales by Sector (t)
Slide 38: New Zealand – 1H FY2012 Non steel product sales
New Zealand – 1H FY 2012 Non steel product sales For personal use only Iron Sand y Iron sands exports from Taharoa in 1H FY2012 of 467kt on par with 1H 2011 volumes (467kt) and higher than 2H FY2011 (352kt) due to an additional shipment. shipment Ferrous Scrap y Volumes in1H FY2012 of 18kt higher th
Slide 39: Asia: Coated & Building Products Asia
For personal use only Asia Coated & Building Products Asia Page 39
Slide 40: Coated & Building Products Asia – EBIT variance (1H FY2012 vs. 1H FY2011)
Coated & Building Products Asia – underlying EBIT variance analysis (1H FY2012 vs. 1H FY2011) Conversion & Other Costs: only Cost Improvement Initiatives 2 Escalation (13) One-off / discretionary (6) Net Spread Improvement $16m Other (1) use +3 -22 +33 +12 -18 For personal EBIT A$M -7 +46 +5 -5 +47
Slide 41: Coated & Building Products Asia – EBIT variance (1H FY2012 vs. 2H FY2011)
Coated & Building Products Asia – underlying EBIT variance analysis (1H FY2012 vs. 2H FY2011) only Net Spread Reduction ($7m) +62 +4 -2 +2 use -9 +7 -12 -2 -33 +47 For personal Raw Material Costs: EBIT A$M Steel Feed (9) Conversion & Other Costs: Cost improvement initiatives 5 Exchange rates: Escala
Slide 42: North America: Coated & Building Products
For personal use only North America Coated & Building g Products Page 42
Slide 43: Coated & Building Products North America – EBIT variance (vs. 1H FY2011)
Coated & Building Products North America – underlying EBIT variance analysis (1H FY2012 vs. 1H FY2011) only Net Margin Improvement $19m Net Spread Improvement $18m For personal EBIT A$M use -47 E +65 0 0 -2 +66 +5 +1 0 -16 16 1H FY2011 Export Prices Domestic Raw Material Conversion Volume Mix Exchan
Slide 44: Coated & Building Products North America – EBIT variance (vs. 2H FY2011)
Coated & Building Products North America – underlying EBIT variance analysis (1H FY2012 vs. 2H FY2011) only N t Margin Net M i R Reduction d ti ($3($3m)) Net Spread Reduction ($6m) For personal EBIT A$M use +21 +6 +2 E 0 0 -27 +11 0 -4 +3 2H FY2011 Export E t Prices Pi Domestic D ti Raw Material R M
Slide 45: BlueScope Buildings North America – traditional markets
BlueScope Buildings North America (pre-engineered buildings) – commercial,, communityy and industrial are traditional markets For personal use only Retail Distribution Manufacturing Healthcare Service Page 45
Slide 46: 1.2 million square foot distribution facility erected in 28 days
Buildings North America: 1.2 million square foot distribution facility y for major erected in 28 days j retailer For personal use only Page 46
Slide 47: Other
For personal use only Other Page 47
Slide 48: In FY2010 we revisited our strategic direction
For personal use only In FY2010 we revisited our strategic direction Reinvigorate. Products, channels and markets, cost base Australian, New Zealand and U.S. steel businesses Secure cost-effective supply of raw materials Extract maximum value from our Asian footprint Global building products & solut
Slide 49: Strategy – focus on building products and solutions
Strategy – globally our focus is primarily on building products and solutions (indicative) ( ) For personal use only China 1% Coated & Building NA North Star USA 10% 99% 25% ASEAN 35% 10% 30% 100% 90% Australia New Zealand 15% 25% 10% 35% Building & construction 10% 65% Manufacturing 40% Auto Ag & m
Slide 50: BlueScope Steel's global footprint and capacities as at Dec 2011
BlueScope Steel’s global footprint and capacities as at 31 Dec 2011 North Star (2) Kalama For personal use only • Raw Steel 2.3mt • Cold Rolling 455kt • Hot Rolling 2.1mt India (1) • Metal Coating 235kt • Metal Coating +250kt • Painting 110kt • Painting +150kt North America • Lysaght / PEB Sites 4 •
Slide 51: New combined Butler PEB and Lysaght rollforming facility in Xi'an
Development of new combined Butler PEB and Lysaght rollforming facilityy in Xi’an due to strongg ggrowth outlook in central China For personal use only • Construction of a new joint Butler and Lysaght plant in Xi’an. The plant will be similar to existing plant in Guangzhou • Expected to be operation
Slide 52: BlueScope Steel North America footprint 1H FY2012
BlueScope Steel North America footprint 1H FY2012 REVENUE: A$737M EBITDA (reported): A$29M EMPLOYEES: 3,591 incl. North Star NET OPERATING ASSETS (PRE-TAX): A$781M For personal use only NB: Revenue excludes BSL’s 50% interest in North Star BlueScope Steel of A$340M. A$340M HQ Key ASC ASC Metl-Span S
Slide 53: Calendar year earnings
For personal use only Calendar year earnings A$ Millions Milli CY03 CY04(3) CY05 CY06 CY07 CY08(4) CY09 CY10 CY11 Revenue(1) 5,328 7,029 7,980 8,693 9,333 11,926 8,283 9,148 9,141 EBITDA(2) 857 1,501 1,411 1,052 1,130 1,775 (324) 563 (1,084) EBIT(2) - reported 581 1,212 1,111 742 792 1,399 (673) 215
Slide 54: Dividend history
For personal use only Dividend history 42 / 20¢ 20 49 / 0¢ 47 / 0¢ 44 / 0¢ 30 / 10¢ 10 27 26 22 / 7¢ 24 24 Special 7 18 Final 13 20 21 22 18 5 / 0¢ 12 5 / 0¢ Interim 9 2 / 0¢ 5 5 2 0 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Page 54
Slide 55: Underlying Corporate and Group Costs
Underlying Corporate and Group Costs – impacted each half by pprofit in stock elimination and foreign g exchange g movements For personal use only 30 A$M 6 -3 -99 -16 -27 -35 -41 -49 -51 -90 -105 -135 1H FY08 2H FY08 FY08 1H FY09 2H FY09 FY09 1H FY10 2H FY10 FY10 1H FY11 2H FY11 FY11 1H FY12 Compris
Slide 56: Major approved capital projects and investment summary
Major approved capital projects and investment summary (in addition “Stay in Business” capital is approx. 75% of depreciation) Total Est. Actual to For personal use only A$M Capex / Cost 31 Dec 11 2H FY2012 FY2013 FY2014 Projects completed Thailand – Coating expansion 80 80 - - - Vietnam – Coating /
Slide 57: Committed Debt Facilities as at December 2011
For personal use only Committed Debt Facilities as at 31 December 2011 Maturity Committed Drawn US$ / THBm / MYRm A$m A$m Syndicated Facility Tranche 1 Dec-13 675 101 Tranche 2 Dec-15 675 0 2004 US Private Placement Notes Series B Jul-14 US$200 197 197 2008 US Private Placement Notes Series A Jun-15
Slide 58: Shares on issue
For personal use only Shares on issue Milli ((rounded) Million d d) y Shares on issue at listing, July 2002 793 y Sh buy-backs Share b b k (116) y Dividend reinvestment scheme issues +67 y Employee share plan issues +34 34 y Institutional share placement, Dec 2008 +97 y Share purchase plan issue, Fe
Slide 59: Update on BlueScope's Australian Emissions Profile
Update on BlueScope’s Australian Emissions Profile GFC & For personal use only • The overwhelming majority of BSL’s direct emissions are BF reline chemical process emissions derived from the reduction of iron Mt CO2-e ore to metallic iron via the Blast Furnace route. e.g. 1.0 1.0 00.99 1.9 18 1.8 F
Slide 60: BlueScope Steel under the Australian Carbon Pricing Mechanism
BlueScope Steel under the Australian Carbon Pricing Mechanism • BlueScope Steel will be a liable entity under the scheme, which commences 1 July 2012 For personal use only • A Jobs and Competitiveness Program will allow for allocation of permits to emissions-intensive trade-exposed (EITE) activities
Slide 61: Steel Transformation Plan (STP)
For personal use only Steel Transformation Plan (STP) • The Steel Transformation Plan was established in 2011 to encourage investment, innovation and competitiveness in the Australian steel manufacturing industry. • It will provide $300M of funding to the steel industry over the four years from 2012
Slide 62: Australian PCI decline continues as new orders weaken
Australian PCI decline continues as new orders weaken. PMI indicates manufacturing activity positive on back of mining sector; respondents remain cautious i For personal use only Monthly AiG/PWC Performance of Manufacturing Index (PMI) Monthly AiG/HIA Performance of Construction Index (PCI) 70 70 PM
Slide 63: Australian construction indicators point to weak, stabilising housing market
Overall, Australian construction indicators still point to a weak, but g, Australian housingg market stabilising, Australian Dwelling Construction - Leading Indicators Monthly Housing Finance For personal use only Quarterly Aggregated Volumes (Seasonally Adjusted data*) Loans Approved for Constructi
Slide 64: Australia: Key Steel Sectors – Growth Summary Short Term Outlook
Australia: Key Steel Sectors – Growth Summary Short Term Outlook Residential Non Residential For personal use only Annual % Change Annual % Change (Fi Y (Fin Yrs)) (Fi Y (Fin Yrs)) HIA F’casts (Dec 11) BIS Shrapnel F’casts (Dec 11) 6.0 14 12.8 7 Yr Average 4.5 3.8 12 3.6 3.2 10 9.1 30 3.0 8.6 8 74 7
Slide 65: Australia: Key Steel Sectors – Growth Summary Long Term Index
Australia: Key Steel Sectors – Growth Summary Long Term Index Non Residential For personal use only Residential Index 2004 2004=100 100 Index 2004=100 (Fin Yrs) (Fin Yrs) 125 170 120 160 Actual 115 150 HIA F’casts (Dec 11) 110 140 105 130 100 120 95 110 90 100 Actual 85 BIS Shrapnel F’casts (Dec 11)
Slide 66: Residential Construction Work Done Outlook by Major Australian State
Residential Construction Work Done Outlook by Major Australian State New South Wales Victoria South Australia For personal use only % Annual Change % Annual Change % Annual Change 79 7.9 8 (Fin Yrs) 10 (Fin Yrs) 10 (Fin Yrs) 9 8.1 6 8.0 4.1 8 7.0 8 4.5 6.5 4 3.8 6 7 4.6 6.0 2 6 4 5 48 4.8 4.5 0 2 4
Slide 67: Non-Residential Construction Work Done Outlook by Major Aust. State
Non-Residential Construction Work Done Outlook by Major Aust. State New South Wales Victoria South Australia For personal use only % Annual Change % Annual Change % Annual Change 25.0 (Fin Yrs) 25 (Fin Yrs) (Fin Yrs) 22.5 55 20.0 50 17.5 20 17.5 45 15.0 12.8 12.9 16.0 12.5 11.6 40 15 34 7 34.7 10.0
Slide 68: First Half FY2012 Financial Results Supporting Information
For personal use only First Half FY2012 Financial Results Supporting Information 20 February 2012 ASX Code: BSL Page 68