Bluescope Steel Limited · ASX:BSL
Bluescope Steel — H1 2024 Earnings Presentation
40 slides from Bluescope Steel's earnings presentation, Feb 19, 2024
Slide 1: 1H FY2024 Financial Results Presentation
1H FY2024 Financial Results Presentation Mark Vassella Managing Director and Chief Executive Officer David Fallu Chief Financial Officer 19 February 2024 BlueScope Steel Limited. ASX Code: BSL ABN: 16 000 011 058 Pictured: Level 24, 181 William Street, Melbourne, VIC, 3000 Polo House in Strath Creek
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: Acknowledgement of Country
ACKNOWLEDGEMENT OF COUNTRY BlueScope acknowledges the Traditional Custodians of the land on which we work, live and operate. We recognise our First Nations Peoples who have inhabited Australia for millennia, their enduring connection to Country, sky, and waterways and their rich and vital cultures.
Slide 4: A Resilient Business Delivering Returns Through the Cycle
A RESILIENT BUSINESS DELIVERING RETURNS THROUGH THE CYCLE Diversified business delivering quality through-cycle earnings – Leading positions in Australia and NZ; best-in-class steelmaking in the US – Suite of premium branded products and solutions that enhance margins Performance underpinned by qual
Slide 5: 1H FY2024 Highlights
1H FY2024 HIGHLIGHTS Positioning for long term sustainable growth and returns • Underlying EBIT of $718M and a LTM ROIC of 13.4% in volatile economic and industry conditions – ~$600M net cash balance sheet; ~$300M in shareholder returns – Announced 25 cps dividend and increase to the buy-back • Deli
Slide 6: Health, Safety & Environment Starts With All of Us
HEALTH, SAFETY & ENVIRONMENT STARTS WITH ALL OF US Key developments in our integrated, people-centred HSE strategy in 1H FY2024: • Progressed the roll out of BlueScope’s HSE culture, systems and reporting to recently acquired businesses – now reported in lag indicators • Recognised by worldsteel for
Slide 7: 1H FY2024 Financial Highlights
1H FY2024 FINANCIAL HIGHLIGHTS A robust performance against a backdrop of volatile economic and industry conditions Underlying EBIT1 Underlying EBIT Return Reported NPAT On Invested Capital2 $718M 13.4% $439M Down $133M on 1H FY2023 Down from 23.4% in 1H FY2023 Down $160M on 1H FY2023 Free Cash Flow
Slide 8: 1H FY2024 Financial Highlights
1H FY2024 FINANCIAL HIGHLIGHTS A robust performance against a backdrop of volatile economic and industry conditions Australia North America1 Asia $258M $417M $96M Down 6% on 1H FY2023 Down 14% on 1H FY2023 Up 54% on 1H FY2023 New Zealand and Corporate, Group and Profit Pacific Islands in Stock Elimi
Slide 9: 1H FY2024 Sustainability Update
1H FY2024 SUSTAINABILITY UPDATE Embedding sustainability in all that we do Climate Change Inclusion & Diversity • Continuing progress on Australian DRI Options study • Continuing our work to % of females in BSL workforce • Deepening collaboration with steelmaking technology reflect the communities i
Slide 10: Partnering with Rio Tinto and BHP
PARTNERING WITH RIO TINTO AND BHP Working together to unlock ironmaking decarbonisation using Pilbara ores • Focus on developing Electric Smelter Furnace (ESF) technology ─ Has the potential to unlock emissions intensity reduction of >80% through Hydrogen DRI-ESF process (compared to Blast Furnace p
Slide 11: New Zealand Steel Electric Arc Furnace
NEW ZEALAND STEEL ELECTRIC ARC FURNACE BlueScope and NZ Government agreed to co- fund NZ$300M in decarbonisation of NZ Steel • Reduces NZ Steel’s Scope 1 and 2 greenhouse gas emissions by more than 45% • Project on schedule – Initial construction and equipment supply contracts commenced – Domestic s
Slide 12: Our Purpose and Strategy
OUR PURPOSE AND STRATEGY In place since late 2019, Our Strategy sets out how we will deliver on Our Purpose and drive transformation and growth, while continuing to deliver on core expectations for our stakeholders OUR PURPOSE We create and inspire smart solutions in steel, to strengthen our communi
Slide 13: Project Updates North America
PROJECT UPDATES NORTH AMERICA North Star Debottlenecking BlueScope Recycling BlueScope Coated Products • Ramp-up of initial expansion • Integration program complete • Acquired 7 under-utilised paint progressing well – Processed 30% of North Star’s lines for below replacement cost – 320kt produced fr
Slide 14: Advancing Our US Value Chain Integration
ADVANCING OUR US VALUE CHAIN INTEGRATION Commencing feasibility study to further integrate US value chain through addition of cold rolling and metal coating capacity • Existing upstream footprint and acquisition of seven paint lines provides Location Site Product Capacity (per annum) opportunity to
Slide 15: Project Updates Australia
PROJECT UPDATES AUSTRALIA 6BF Reline & Upgrade MCL7 in Western Sydney • Project to secure future of • Additional metal coating capacity ironmaking at PKSW underway to support continued shift towards – Commenced early works, incl. premium branded products mobilising contractors and • Project progress
Slide 16: Premium Branded Products and Value-Adding Solutions
PREMIUM BRANDED PRODUCTS AND VALUE-ADDING SOLUTIONS Shifting increasing proportions of ASP’s steel production into premium branded products and value- adding solutions – a through-cycle growth opportunity Despatch volumes by category / product (kt) • Greater than system volume growth in premium bran
Slide 17: Substantial Portfolio of Land
SUBSTANTIAL PORTFOLIO OF LAND Includes ~1,200-hectares of adjacent landholdings to be positioned for strategic value Port Kembla, NSW Glenbrook, NZ • ~200ha, 80km from Sydney on a • ~400ha, 40km from Auckland ~400 hectares deep-water port Port Kembla • Master Planning process underway NZ Steel • Com
Slide 18: Substantial Portfolio of Land
SUBSTANTIAL PORTFOLIO OF LAND Positioning for strategic value • Reviewing potential use for land through Master Planning processes – Considering interaction with existing operations and implications for potential use – Potential uses to be reviewed in concert with associated long-term planning requi
Slide 19: Business performance
Business performance 19
Slide 20: Australia
AUSTRALIA Similar performance with higher costs offset by higher spreads Underlying EBIT ($M) • Underlying domestic demand remained 274 263 258 solid, though despatches saw some softening in the final months of the half – Continued strong performance in painted products, with sales of COLORBOND® ste
Slide 21: Australia
AUSTRALIA Slight contraction in demand in 1H FY2024 across all segments, particularly at the end of the half Total Australian domestic despatch volumes (kt) Dwelling • Approximately half of product goes to Alterations & Total construction % shown in dark red Additions (A&A) sub-segment 74% 74% • Dem
Slide 22: Australia
AUSTRALIA Through-cycle margins supported through focus on shift towards premium branded products combined with a strong cost focus in steelmaking Asian steel spread1 & indicative steelmaking Asian steel spread1 & ASP EBITDA per tonne ($A/t) cash breakeven2 (US$/t) 550 Underlying EBITDA per tonne (A
Slide 23: North America
NORTH AMERICA Slightly weaker spreads at North Star driven by the UAW strike; strong performance from engineered buildings and ASC Profiles continues on robust margins Underlying EBIT ($M) North Star 484 481 EBIT $201M in 1H FY2024; $242M in 2H FY2023 417 • Slightly weaker spreads in 1H FY2024 drive
Slide 24: North America
NORTH AMERICA Economy has proved more resilient than expected, reflected in stable auto sales and rebound in manufacturing activity. 1H FY2024 non-residential strength reflects public investment plans underway Non-residential construction1 Automotive2 Manufacturing3 (Value of work put in place, US$B
Slide 25: Asia
ASIA Strong performance on improved margins in both Southeast Asia and China Underlying EBIT ($M) Southeast Asia1 96 EBIT $53M in 1H FY2024; $57M in 2H FY2023 80 62 • Solid result with slightly weaker despatches offset by stronger margins on lower raw material costs • Continued strong performance in
Slide 26: New Zealand and Pacific Islands
NEW ZEALAND AND PACIFIC ISLANDS Softer result on elevated costs in the half and weaker pricing Underlying EBIT ($M) 86 • Elevated conversion costs in the half, driven by higher energy costs 43 and planned and unplanned 26 maintenance shuts • Weaker net vanadium contribution 1H FY2023 2H FY2023 1H FY
Slide 27: Underlying Group EBIT Variance
UNDERLYING GROUP EBIT VARIANCE Robust 1H FY2024 result, with spread and cost the key driver of the softer performance 1H FY2024 vs 1H FY2023 ($M) 1H FY2024 vs 2H FY2023 ($M) Conversion & other costs ($M) Cost improvement initiatives 10 Conversion & other costs ($M) Net spread decrease $105M Escalati
Slide 28: Financial framework
Financial framework 28
Slide 29: Financial Framework Underpinning Resilience
FINANCIAL FRAMEWORK UNDERPINNING RESILIENCE Strong focus on driving financial performance and disciplined allocation of capital Disciplined Returns Focus Robust Capital Structure Capital Allocation • ROIC > WACC on average through • Strong balance sheet, with a target • Invest to maintain safe and r
Slide 30: Returns Focus Delivering ROIC
RETURNS FOCUS DELIVERING ROIC Targeting returns above cost of capital through the cycle Group ROIC1 (%) and invested capital2 ($Bn) • ROIC1 is the primary measure of performance $10.7Bn $10.8Bn $10.8Bn across all business units and is a key focus for the $7.5Bn $6.7Bn Group. ROIC is a key Invested d
Slide 31: Returns Focus Maximising Cash Generation
RETURNS FOCUS MAXIMISING CASH GENERATION Strong operating cash flow funding investment in the portfolio and returns to shareholders Net cash flow ($M) Net cash / (debt)1 ($M) (before investment exp and financing) $M FY2022 FY2023 2H23 1H24 (306) Reported EBITDA 4,398 2,146 990 1,021 721 Adjust for o
Slide 32: Robust Capital Structure Net Cash Position; Ample Liquidity
ROBUST CAPITAL STRUCTURE NET CASH POSITION; AMPLE LIQUIDITY Strong balance sheet providing the foundation to deliver long term sustainable earnings and growth • Maintain investment grade credit Net cash / (debt)1 ($M) Liquidity ($M) ratings (undrawn facilities and cash) 3,655 • Strong balance sheet
Slide 33: Disciplined Capital Allocation Capital Expenditure
DISCIPLINED CAPITAL ALLOCATION CAPITAL EXPENDITURE Investing for sustainable earnings growth Capital allocation framework Capital and acquisition expenditure1 ($M) ~620 Operating North Star expansion Acquisitions Foundation and Climate Asset Sales Divestments Cash Flow BF6 reline & upgrade Growth Su
Slide 34: Disciplined Capital Allocation Shareholder Returns
DISCIPLINED CAPITAL ALLOCATION SHAREHOLDER RETURNS $3.3Bn returned since FY2017; announced 25cps fully franked interim dividend and an increase in the scale and tenor of on-market share buy-back program; target dividend level under review Dividends paid and buy-backs3 ($M) • BlueScope’s capital mana
Slide 35: 2H FY2024 Guidance and Summary
2H FY2024 Guidance and Summary 35
Slide 36: Regional Guidance for 2H FY2024
REGIONAL GUIDANCE FOR 2H FY2024 Outlook subject to assumptions and qualifiers referenced on page 37 Australia • Expect a result less than half that of 1H FY2024 Asia • Expect a result around three quarters that • Weaker benchmark spreads and unfavourable of 1H FY2024 realised pricing • Southeast Asi
Slide 37: 2H FY2024 Group Outlook
2H FY2024 GROUP OUTLOOK1 • Underlying EBIT in 2H FY2024 is expected to be in the range of $620M to $690M. Slightly below 1H FY2024 in an environment of unprecedented softness in Asian steel spreads – reinforcing the strength of BlueScope’s diversified business model • For the purposes of the outlook
Slide 38: A Resilient Business Delivering Returns Through the Cycle
A RESILIENT BUSINESS DELIVERING RETURNS THROUGH THE CYCLE Diversified business delivering quality through-cycle earnings – Leading positions in Australia and NZ; best-in-class steelmaking in the US – Suite of premium branded products and solutions that enhance margins Performance underpinned by qual
Slide 39: Questions
Questions 39
Slide 40: 1H FY2024 Financial Results Presentation
1H FY2024 Financial Results Presentation Mark Vassella Managing Director and Chief Executive Officer David Fallu Chief Financial Officer 19 February 2024 BlueScope Steel Limited. ASX Code: BSL ABN: 16 000 011 058 Pictured: Level 24, 181 William Street, Melbourne, VIC, 3000 Polo House in Strath Creek