Bluescope Steel Limited · ASX:BSL
Bluescope Steel — H1 FY2012 Earnings Presentation
46 slides from Bluescope Steel's earnings presentation, Feb 20, 2012
Slide 1: First Half FY2012 Results and Business Update Presentation
For personal use only First Half FY2012 Results and Business Update Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias, Chief Financial Officer 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: Progress towards our goal of Zero Harm
For personal use only Progress towards our goal of Zero Harm Lost Time Injury Frequency Rate Medically Treated Injury Frequency Rate 18 70 16.0 16 60.0 60 Medically treated injuries per million man-hours worked 14.0 14 52.2 Lost time injuries per million man-hours worked 50 47.1 12 10 40 8.0 8 Inclu
Slide 4: Financial & Business Headlines
For personal use only Financial & Business Headlines Page 4
Slide 5: Reconciliation between 1H FY2012 reported NLAT and underlying NLAT
Reconciliation between 1H FY2012 reported NLAT and underlying NLAT1 For personal use only 1H FY2012 NLAT A$M Reported net loss after tax (530) Underlying adjustments Restructuring & redundancy costs 254 Borrowing amendment fees 6 Asset impairment 3 Deferred Tax impairment 2 184 Steel Transformation
Slide 6: Group financial headlines 1H FY2012 vs. 1H FY2011
Group financial headlines 1H FY2012 vs. 1H FY2011 SIX MONTHS ENDED 1H FY2012 vs 1H FY2011 For personal use only A$ 31 DEC 2010 30 JUN 2011 31 DEC 2011 % Revenue 4,622M 4,531M 4,549M -2% External despatches 3.8M tonnes 3.9M tonnes 3.6M tonnes -5% EBITDA − Reported 127M (814M) (270M) - (1) − Underlyin
Slide 7: BlueScope Steel lays foundation for return to profitability
BlueScope Steel lays foundation for return to profitability For personal use only • On track to deliver $400-500M working capital release • Reduced net debt from $1.55Bn at 31 October 2011 to $796M at 31 December 2011 • Underlying Net Loss After Tax of $76M (before period end NRVs), in line with gui
Slide 8: Global steel market supply/demand dynamics changed since GFC
Global Steel market supply/demand dynamics changed since GFC. Developed world starting to see supply-side constraint; needs demand improvement Monthly Crude Steel Capacity Utilisation* (%) For personal use only 115% • Demand in developed 110% economies remains soft World China World (Excl China) 105
Slide 9: Encouraged by some recent weakness in raw material input costs
…however encouraged by some recent weakness in raw material input costs For personal use only Iron Ore and Hard Coking Coal Prices (FOB) Iron ore fines price US$/t Hard coking price US$/t 180 160 320 US$132/t 140 (Jan 2012) 120 240 US$221/t 100 (Jan 2012) 80 160 Hard coking coal 60 40 80 Iron ore fi
Slide 10: Continued strength of A$ exacerbates contraction of USD spread
…however the continued strength of A$ exacerbates the contraction of USD spread and leads to increased import price pressure in Australia For personal use only Monthly Average Foreign Exchange Rate USD/AUD July 1990 to January 2012 1.10 $1.04 (Jan avg) 1.00 0.90 Avg: $0.89 High: $1.08 Low: $0.65 0.8
Slide 11: Steel spreads remain at historical lows
…and steel spreads remain at historical lows Indicative Steelmaker HRC Spread (A$/t) For personal use only SBB East Asia HRC price less cost of 1.5t iron ore fines and 0.71t hard coking coal $800 $700 $600 $500 A$/t $400 $300 $200 $100 $0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-0
Slide 12: Segment underlying EBIT summary
Segment underlying EBIT summary Underlying EBIT (A$M) (1) Comments For personal use only 1H 2H 1H FY2010 FY2011 FY2011 FY2011 FY2012 Coated & Industrial Restructure well advanced. BF No.6 / 108 (258) (97) (161) (182) Products Australia other assets closed October 2011. Australia Distribution & 2 (34
Slide 13: Coated & Industrial Products Australia – segment summary
Coated & Industrial Products Australia – segment summary For personal use only Comments on results and business direction Half yearly underlying EBIT comparison (A$M) 188 • 1H FY2012 underlying EBIT loss of $182M driven by (vs. 1H FY2011): Reduced spread is the major driver Higher unit costs (fi
Slide 14: Coated & Industrial Products Australia restructure well advanced
Coated & Industrial Products Australia restructure (to exit export business) well advanced For personal use only • All major plant closures successfully completed by mid October 2011. • On track to deliver targeted fixed cost reductions in FY2012 (pro-rata, from BF closure in mid October 2011) • Tot
Slide 15: Australian Distribution & Solutions – segment summary
Australian Distribution & Solutions (AD&S) – segment summary For personal use only Comments on results and business direction Half yearly underlying EBIT comparison (A$M) 3 • 1H FY2012 underlying EBIT loss of $29M driven by (vs. 1H FY2011): (1) Reduced spread (15) Increased conversion costs driv
Slide 16: 1H FY2012 Australian demand broadly in line with preceding two halves
1H FY2012 Australian demand broadly in line with preceding two halves TOTAL BSL AUSTRALIAN EXTERNAL DOMESTIC DESPATCH VOLUMES(1,4) For personal use only 2H FY2008 1H FY2009 2H FY2009 1H FY2010 2H FY2010 1H FY2011 2H FY2011 1H FY2012 1,800 (Blast furnace 63% No. 5 Reline) 1,600 64% 65% 1,400 27% (436
Slide 17: Absolute export tonnage starting to reduce
… and absolute export tonnage starting to reduce Export Tonnes (kt) Q1 Q2 Australia (CIPA) 488 260 NZ 76 79 Total BlueScope Group External Despatches For personal use only Asia 20 14 NA 1 1 585 354 1H FY2011 2H FY2011 Exports Exports Exports 1H FY2012 33% 3% 33% 26% (1,259kt) 12% 20% (1,276kt) 9% (9
Slide 18: New Zealand and Pacific Steel Products – segment summary
New Zealand and Pacific Steel Products – segment summary For personal use only Comments on results and business direction Half yearly underlying EBIT comparison (A$M) 52 • 1H FY2012 underlying EBIT of $34M driven by 49 (vs. 1H FY2011): Higher utility costs 33 34 Unfavourable FX (USD/NZD) 21 Lo
Slide 19: Coated & Building Products Asia – segment summary
Coated & Building Products Asia – segment summary For personal use only Comments on results and business direction Half yearly underlying EBIT comparison (A$M) 66 62 • 1H FY2012 underlying EBIT of $47M driven by (vs. 50 14 15 1H FY2011): Thailand 46 47 13 20 5 12 11 Indonesia 10 1 Higher sales pri
Slide 20: China - urbanisation continues to drive growth in building and construction
China - urbanisation continues to drive growth in New Gov’t the building and construction sector Focus Old Gov’t Focus China Trends For personal use only • Chinese Central Government is directing a much higher proportion of investment towards the interior versus coastal cities • The continued rise o
Slide 21: Coated & Building Products North America – segment summary
Coated & Building Products North America – segment summary For personal use only Comments on results and business direction Half yearly underlying EBIT comparison (A$M) 11 • 1H FY2012 underlying EBIT of $6M driven by (vs. 6 1H FY2011): Lower costs and higher margins driven by targeted (4) profit i
Slide 22: Restructuring of Coated & Building Products North America
Restructuring of Coated & Building Products North America business to improve current and future earnings potential For personal use only Coated & Building Products North America – Underlying EBITDA vs MBMA Despatches 1 90 89 1,400 80 1,200 70 Annualised industry shipments (metric kt) (RHS) 1 65 Und
Slide 23: Global Building Solutions opportunity
Global Building Solutions opportunity For personal use only • Established a global sales network and multinational company account management program, in addition to BlueScope’s existing USA and China capability • Better utilisation of BlueScope’s manufacturing footprint gives capability to deliver
Slide 24: Hot Rolled Products North America – segment summary
Hot Rolled Products North America – segment summary For personal use only Comments on results and business direction Half yearly underlying EBIT comparison (A$M) 64 • 1H FY2012 underlying EBIT of $20M driven by (vs. 1H FY2011) increased spread 47 • Potential upgrade in production capacity from ~2.1
Slide 25: Strengthened the balance sheet
Strengthened the balance sheet For personal use only • Raised gross $600M (net $577M) equity in December 2011 • Balance sheet metrics: 30 June 2011 31 Oct 2011 31 Dec 2011 Net debt $1,068M $1,555M $796M Gearing (net debt) 19.5% 27.7% 15.7% Liquidity (undrawn facilities & cash) $1,137M $701M $1
Slide 26: Improvement in operating working capital
Improvement in operating working capital For personal use only Working Capital (A$M)1 • $230M increase from June 2011 to Oct 2011, as reported +242 at Nov 2011 equity raising (subsequently adjusted to -357 $242M for $12M FX impact on restatement of working 1,391 capital balances) $110M in CIPA: cr
Slide 27: Initiatives on track to further reduce net debt by June 2012
… with initiatives on track to further reduce net debt by 30 June 2012 For personal use only • Initiatives: $50-150M further estimated release of working capital $100-150M potential from sale of non-core assets $100M Steel Transformation Plan received in January 2012 However expected payment
Slide 28: Financial Results
For personal use only Financial Results Page 28
Slide 29: Underlying EBIT variance 1H FY2012 to 1H FY2011 by major item
Underlying EBIT variance 1H FY2012 to 1H FY2011 by major item Net Spread Reduction ($117m) For personal use only Conversion & Other Costs: Raw Material Costs: Cost Improvement Initiatives 84 (1) Coal (122) Volume (103) +51 Iron ore (62) Escalation (57) Scrap (1) One-off / discretionary (2) Alloys (1
Slide 30: Underlying EBIT variance 1H FY2012 to 2H FY2011 by major item
Underlying EBIT variance 1H FY2012 to 2H FY2011 by major item For personal use only Net Spread Reduction ($70m) Domestic Prices: Raw Material Costs: C&IPA 15 Coal (33) Conversion & Other Costs: AD&S 4 Iron ore (18) Cost Improvement Initiatives 93 NZPac 1 Scrap 2 Volume (70) (1) C&BP Asia (2) Externa
Slide 31: Cashflow
Cashflow For personal use only Weaker spreads and A$ millions FY2007 FY2008 FY2009 FY2010 FY2011 1H FY11 1H FY12 restructuring costs Cash from operations 1,364 1,579 534 596 308 166 (265) Working capital movement (21) 69 250 (133) (166) (182) 2353 See working Net operating cash flow 1,343 1,648 784
Slide 32: Movements in total equity
Movements in total equity (A$M) For personal use only +577 -524 +4,396 -175 +4,277 +2 Predominantly after tax actuarial loss on defined benefit plans (largely NZ), which was composed of: • actuarial asset loss due to turbulent international and domestic equity markets • actuarial liability loss due
Slide 33: Indicative EBIT sensitivities for 2H FY2012
Indicative EBIT sensitivities for 2H FY2012 For personal use only Estimated impact on 2H FY2012 EBIT A$m (1) Assumption +/– US$25 / tonne movement in BlueScope’s average realised export HRC price(2) 27 +/– 1¢ movement in Australian dollar / US dollar exchange rate (3) 3 +/– US$10 / tonne movement in
Slide 34: Business Potential & Outlook
For personal use only Business Potential & Outlook Page 34
Slide 35: Significant actions since the GFC to improve business performance
Management has taken a number of significant actions since the GFC to improve business performance For personal use only • Significant business-wide cost savings initiatives Reduced expenditure in aggregate by $696M to June 2011 (off FY2008 cost base, pre-escalation) • Asian business restructured
Slide 36: Further business potential
Further business potential For personal use only • Delivering on our investment in Asia Material upside as we grow sales from our existing investments • Continue to grow our global presence in building construction markets • Taharoa iron sands expansions progressing well Larger charter vessel ex
Slide 37: Second half FY2012 outlook
Second half FY 2012 outlook For personal use only • For 2H FY2012, we expect a slightly lower underlying Net Loss After Tax (excluding period end NRV adjustments and/or impairments), subject to spread, FX and market conditions, compared with the 1H FY 2012 result, including our expectation of a retu
Slide 38: Questions & Answers
For personal use only Questions & Answers Page 38
Slide 39: Further Detail on Financial Results
For personal use only Further Detail on Financial Results Page 39
Slide 40: Historical earnings performance
Historical earnings performance For personal use only A$ Millions FY2007 FY2008(3) FY2009 FY2010 FY2011 1H FY12 1H FY11 Revenue(1) 8,913 10,495 10,329 8,624 9,153 4,549 4,622 EBITDA – Reported(2) 1,423 1,420 380 590 (687)(6) (270) 127 – Underlying(4) 1,374 1,630 536 60 254 32 134 EBIT(2) – Reported
Slide 41: Balance Sheet
Balance Sheet As at For personal use only A$M 31 Dec 2010 30 Jun 2011 31 Dec 2011 See cash flow slide Assets Cash 86 172 186 See working capital Receivables 987 1,050 1,059 slide Inventory 1,962 2,029 1,791 Mainly due to lower Other Assets 1,198 1,041 1,099 inventory volumes in Australia Net Fixed A
Slide 42: Balance Sheet – inventory reduction since June 2011
Balance Sheet … $238M reduction in inventory since June 2011 mainly due to reduction in volumes held For personal use only RMS $388M +2,815 RMS $421M WIP 750 WIP 690 FGS 714 RMS $397M RMS $344M FGS 679 Other 177 WIP 639 WIP 770 RMS $338M Other 172 FGS 618 FGS 509 WIP 569 Other 175 Other 168 FGS 498
Slide 43: Debt facilities and maturity profile as at December 2011
Debt facilities and maturity profile as at 31 December 2011 For personal use only 753 675 Cost of Debt Syndicated Loan Note Facility Effective average cost of drawn US Private Placement Notes debt in 1H FY2012 was 7.16% Other 675 Plus: 240 Commitment fees on 197 undrawn bank facilities average
Slide 44: Historical Earnings Performance – Reconciliation of Reported to Underlying
Historical Earnings Performance – Reconciliation of Reported to Underlying (A$M) For personal use only FY 2010 FY2011 1H FY2011 2H FY2011 1H FY2012 Reconciliation of EBITDA and EBIT EBITDA 2 Reported 590 (687) 127 (814) (270) EBIT 2 Reported 240 (1,043) (48) (995) (435) Discontinued Business (gains)
Slide 45: EBIT Segment Summary – Reconciliation of Reported to Underlying
EBIT Segment Summary – Reconciliation of Reported to Underlying (A$M) For personal use only FY2010 FY2011 1H FY2011 2H FY2011 1H FY2012 Coated & Industrial Products Australia Reported EBIT 84 (1,063) (97) (966) (463) Restructure / redundancies 24 8 - 8 347 Asset Impairments - 797 - 797 - Steel Trans
Slide 46: First Half FY2012 Results and Business Update Presentation
For personal use only First Half FY2012 Results and Business Update Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias, Chief Financial Officer 20 February 2012 ASX Code: BSL Page 46