Bluescope Steel Limited · ASX:BSL
Bluescope Steel — H1 FY2013 Earnings Presentation
64 slides from Bluescope Steel's earnings presentation, Feb 18, 2013
Slide 1: 1H FY2013 Financial Results Supporting Information
For personal use only 1H FY2013 Financial Results Supporting Information 18 February 2013 BlueScope Steel Limited. ASX Code: BSL
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: Segment business drivers
Segment business drivers Corporate / Group For personal use only Building Coated & Building Hot Global New Zealand Products Industrial Components & Rolled Building & Pacific Steel ASEAN, NA Products Distribution Products Solutions Products and India Australia Australia North America • Despatch volum
Slide 5: Globally our focus is primarily on building products and solutions
Globally our focus is primarily on building products and solutions For personal use only China Building Products & Building Solutions 100% North America North Star USA 10% 25% ASEAN 100% 10% 45% 20% 90% Australia New Zealand 15% 5% 10% 40% 55% Building & construction 10% 65% Manufacturing Auto Ag &
Slide 6: Global Building Solutions
For personal use only Global Building Solutions Page 6
Slide 7: Global Building Solutions – underlying EBIT variance analysis (1H FY2013 vs. 1H FY2012)
Global Building Solutions – underlying EBIT variance analysis (1H FY2013 vs. 1H FY2012) For personal use only Net Margin Improvement $4M One-off prior period (FY2005-FY2009) provision adjustment -4 -2 0 -1 +25 +24 EBIT A$M -8 +17 +30 -22 1H FY2012 Domestic Raw Material Conversion Volume Mix Other Pr
Slide 8: Global Building Solutions – underlying EBIT variance analysis (1H FY2013 vs. 2H FY2012)
Global Building Solutions – underlying EBIT variance analysis (1H FY2013 vs. 2H FY2012) For personal use only One-off prior period (FY2005-FY2009) provision adjustment -2 +25 -8 +17 Net Margin Reduction $6M +24 EBIT A$M +9 +5 -26 +15 2H FY2012 Domestic Raw Material Conversion & Volume / Mix Other Pr
Slide 9: Unrivalled manufacturing, engineering, and sales footprint
Unrivalled manufacturing, engineering, and sales footprint For personal use only Global Building Solutions footprint China • 4 x Buildings manufacturing facility1 • 4 x Lysaght manufacturing facility • 1 x Metal coating/painting facility • 32 x Sales offices North America • 1 x Global Engineering Ce
Slide 10: New Global Accounts team to deliver engineered building solutions globally
A new Global Accounts team will leverage our strong brand reputations and operating footprint to deliver engineered building solutions on a global scale For personal use only Recent projects Russia Customer HQ: Russia Sector: Sports/Recreation Supply from: North America Ivory Coast Customer HQ: Sing
Slide 11: So what is an engineered building solution?
So what is an engineered building solution? For personal use only Engineered Building Solution Conventional steel building Engineered solution Basic designs using hot using tapered beams and rolled long sections columns Inefficient steel use – Efficient steel use – steel steel volume where i
Slide 12: A Global Accounts example – Span/Costco
A Global Accounts example – Span/Costco For personal use only BlueScope, Span and Mulvanny G2 design and build Membership warehouse retailer – Costco warehouse outlets worldwide seventh largest retailer in the world Strategic partnership since 1989 891 projects completed totalling 6.2 million sq
Slide 13: ‘Breakthrough’ results
‘Breakthrough’ results For personal use only 110,000 sqm facility erected in 28 working days Page 13
Slide 14: BlueScope Building Solutions customers
BlueScope Building Solutions customers For personal use only Page 14
Slide 15: Example projects – manufacturing
Example projects – manufacturing For personal use only Page 15
Slide 16: Example projects – retail / warehousing
Example projects – retail / warehousing For personal use only Page 16
Slide 17: Growth will come in four key areas
Growth will come in four key areas For personal use only Global Accounts • Building a new line of sales through our unique Global Accounts offer • Explore expansion into new global geographies Continued growth at • Strong industrial and commercial growth forecasts across the Asian region Buildings A
Slide 18: Building Products ASEAN, North America & India
For personal use only Building Products ASEAN, North America & India Page 18
Slide 19: Building Products ASEAN, North America & India – EBIT variance (vs 1H FY2012)
Building Products ASEAN, North America & India – underlying EBIT variance analysis (1H FY2013 vs. 1H FY2012) For personal use only Gross Margin Improvement $5M +4 +31 -9 -1 +5 +6 +21 Conversion & Other Costs: Cost improvement initiatives 4 Escalation (6) One-off / discretionary1 (7) EBIT A$M -29 +80
Slide 20: Building Products ASEAN, North America & India – EBIT variance (vs 2H FY2012)
Building Products ASEAN, North America & India – underlying EBIT variance analysis (1H FY2013 vs. 2H FY2012) For personal use only Predominantly higher conversion and marketing costs in ASEAN businesses to support volumes Gross Margin Improvement $3M -1 +3 +31 -7 +31 -1 -1 +3 EBIT A$M +35 -31 2H FY2
Slide 21: $1.36 Billion Joint Venture with Nippon Steel & Sumitomo Metal Corporation
$1.36 Billion Joint Venture with Nippon Steel & Sumitomo Metal Corporation (NSSMC) For personal use only • Establishment of 50:50 joint venture over BlueScope’s building products business in ASEAN and the U.S. (Steelscape and ASC Profiles businesses) • Joint venture business to be called NS BlueScop
Slide 22: This JV fits with our strategy
This JV fits with our strategy For personal use only • Global brands – COLORBOND®, Lysaght®, Butler® – Underpinned by leading edge technologies like Vision Engineering System and next generation products • Global partnerships – Cargill, Tata, NSSMC, Costco, P&G – Enables us to prosper in widely dive
Slide 23: Why we are partnering with NSSMC
Why we are partnering with NSSMC For personal use only • Strong, long-standing relationship with NSSMC through many technical collaborations (over 65 projects since 1970) Currently working with NSSMC on next generation COLORBOND® and ZINCALUME® • Both companies are leaders in steel coating and man
Slide 24: NS BlueScope Coated Products geographic spread
NS BlueScope Coated Products geographic spread For personal use only BSL NSSMC 50% 50% FY2012 underlying results for JV: Revenue: A$1,644M NS BlueScope Coated Products EBITDA: A$115M EBIT: A$68M ASEAN1 North America Thailand Indonesia Malaysia Vietnam Steelscape ASC Profiles (75%) 2 (100%) (100%) 3
Slide 25: Why did NSSMC partner with BlueScope?
Why did NSSMC partner with BlueScope? For personal use only • Well established manufacturing footprint including eight metal coating lines and ten paint lines (includes in-line painting facilities) • Comprehensive network of rollforming facilities • Established marketing capability and deep channels
Slide 26: Growth of the Coated Products business, before creation of the JV
Growth of the Coated Products business, before creation of the JV For personal use only • Anticipated volume and top-line growth driven by: – Expansion of downstream manufacturing facilities in domestic markets – Best-in-class technology (including in-line painting), quality, product range and R&D c
Slide 27: Significant opportunities from this JV
Significant opportunities from this JV For personal use only • Stronger platform to capture growth in existing markets, especially Southeast Asia – On-going BSL 50% interest – Quicker ramp up to 100% utilisation of existing coating and painting capacity • Enhancement of existing product mix to highe
Slide 28: Evaluating the opportunities of NS BlueScope Coated Products
Evaluating the opportunities of NS BlueScope Coated Products For personal use only • New products and solutions for customers utilising NSSMC’s Initially quantified comprehensive solution technologies opportunities to – Home appliance segment applications of SuperDyma® and deliver an expected Initia
Slide 29: Initially quantified growth opportunities focused in home appliance sector
The initially quantified growth opportunities are focused in home appliance manufacturing sector For personal use only Composition of US$75M FY2017 target-case indicative earnings uplift to JV by identified opportunity • Availability of stable feed coil supply from 5% NSSMC – Thailand and Steelscape
Slide 30: Thailand is the key market for initial growth opportunities
Thailand is the key market in which initial growth opportunities are expected to be delivered For personal use only Estimate of FY2012 market size in which main growth Composition of US$75M FY2017 target-case opportunities will be pursued indicative earnings uplift to JV by geography 566 5% 126 5% 4
Slide 31: Opportunities expected to deliver US$30-75M by FY2017
Initially quantified opportunities arising from partnership expected to deliver US$30-75M by FY2017 above the existing business growth profile For personal use only This initial assessment of expected merger benefits was advised in August 2012. We remain comfortable with these estimates; once the jo
Slide 32: Coated & Industrial Products Australia
For personal use only Coated & Industrial Products Australia Page 32
Slide 33: Coated & Industrial Products Australia – EBIT variance (vs 1H FY2012)
Coated & Industrial Products Australia – underlying EBIT variance analysis (1H FY2013 vs. 1H FY2012) For personal use only Net Spread Improvement $65M +7 -1 +4 -6 +19 Conversion & Other Costs: +82 Cost improvement initiatives 20 Higher unit costs on lower volumes (30) EBIT A$M Escalation (20) One-of
Slide 34: Coated & Industrial Products Australia – EBIT variance (vs 2H FY2012)
Coated & Industrial Products Australia – underlying EBIT variance analysis (1H FY2013 vs. 2H FY2012) For personal use only Net Spread Improvement $18M +5 0 -6 +68 Conversion & Other Costs: Raw Material Costs: Coal 67 Cost improvement initiatives 12 Iron ore 49 Volume 26 EBIT A$M Scrap & alloys 6 Esc
Slide 35: BlueScope Steel – Key drivers of CIPA result
BlueScope Steel – Key drivers of CIPA result For personal use only 2H FY10 1H FY11 2H FY11 1H FY12 2H FY12 1H FY13 East Asia HRC price1, US$/t 628 611 722 683 647 564 Influences pricing of - three month lag, A$/t 614 709 668 686 624 592 some categories of domestic product Iron ore fines index averag
Slide 36: Coated & Industrial Products Australia – Despatch Mix (kt)
Coated & Industrial Products Australia – Despatch Mix (kt) For personal use only Australian restructure commences: closure of 2,453 No. 6 BF, MCL5 & WP 2,375 HSM during period 1H FY2013 Product Mix 2,110 Volumes decline materially as Export export market exit progresses 1,421 Export 1,383 1,111 1,43
Slide 37: Coated & Industrial Products Australia – Annual Capacities
Coated & Industrial Products Australia – Annual Capacities Port Kembla Steelworks (Wollongong, New South Wales, Australia) For personal use only #5 Blast Furnace 2,600 Slab Casters 2,600 Slab Plate Mill Plate 450 Hot Strip Mill HRC 2,900 Coupled Pickled Cold Mill CRC 990 Metal Coating Lines Metal Co
Slide 38: CIPA – steel business cost components
CIPA – steel business cost components For personal use only CIPA Steel Business Underlying Cost Base (A$M) Conversion & overhead Depreciation Freight Conversion & Overhead Components (in order of size) • Direct labour • Repairs & maintenance • Sales & administration Raw materials • Services & contra
Slide 39: Port Kembla Steelworks productivity
Port Kembla Steelworks productivity For personal use only Employees Productivity (Tonnes per person per year) 4,000 2,000 3783 3662 3610 3567 3,500 3406 1,750 Productivity (Crude Steel Output, Tonnes/Employee/Year) 1 3146 3171 3123 3087 3,000 1,500 2 2646 2,495 2,500 1,250 2,000 1,000 1,500 750 1,00
Slide 40: Consumption of primary raw materials at Port Kembla Steelworks
Consumption of primary raw materials at Port Kembla Steelworks For personal use only Transition to Volume consumed in production (dry Mt) single blast furnace from Oct FY2008 FY2009 FY2010 FY2011 FY 2012 1H FY13 Indicative use rate per slab tonne Iron Ore (Assuming 1 blast furnace running at capacit
Slide 41: Supply and pricing of iron ore and metallurgical coal to Port Kembla
Supply and pricing of iron ore and metallurgical coal to the Port Kembla Steelworks For personal use only Supplier Term Approximate Volume (p/a) Pricing Basis 10 years from Linked to average monthly index in the month of BHP Billiton Up to 4.18Mt(1) lump & fines 1 July 2009 shipment Iron ore Grange
Slide 42: HRC price benchmark
HRC price benchmark For personal use only • Steel Business Briefing prices continue to be a reasonable public benchmark for BlueScope’s Asian HRC sales, and an influence on domestic commoditised product pricing (noting this tends to lag by 2 to 5 months and changes over time) US$/t SBB East Asian Ho
Slide 43: Raw material costs weaker in 1H FY2013; iron ore price rebounded
Raw material costs were weaker during 1H FY2013; iron ore price has rebounded early in 2H FY2013 For personal use only Iron Ore and Hard Coking Coal Prices (FOB) Iron ore fines price US$/t Hard coking price US$/t 180 Iron ore 160 fines 320 140 120 240 100 Hard 80 coking 160 coal 60 40 80 20 0 0 2001
Slide 44: Spread continues to be a major determinant of C&IPA profitability
Spread (steel prices less raw material prices) continues to be a major determinant of C&IPA profitability For personal use only East Asia HRC Price (US$/t) and Indicative Steelmaker HRC Spread (A$/t) Spread: SBB East Asia HRC price less cost of 1.5t iron ore fines and 0.71t hard coking coal $800 SBB
Slide 45: Building Components & Distribution Australia
For personal use only Building Components & Distribution Australia Page 45
Slide 46: Building Components & Distribution Australia – EBIT variance (vs 1H FY2012)
Building Components & Distribution Australia – underlying EBIT variance analysis (1H FY2013 vs. 1H FY2012) For personal use only Gross Margin Improvement $15M 0 +1 -7 +10 -6 EBIT A$M 0 +25 0 -27 -10 1H FY2012 Export Prices Domestic Raw Material Volume Mix Conversion & Exchange Other 1H FY2013 Prices
Slide 47: Building Components & Distribution Australia – EBIT variance (vs 2H FY2012)
Building Components & Distribution Australia – underlying EBIT variance analysis (1H FY2013 vs. 2H FY2012) For personal use only +1 -7 EBIT A$M +7 +4 Gross Margin Unchanged -19 -8 +8 2H FY2012 Domestic Prices Raw Material Costs Volume/Mix Conversion Costs Other 1H FY2013 Page 47
Slide 48: Building Components & Distribution Australia segment
Building Components & Distribution Australia segment For personal use only • The Building Component & Distribution segment, effective from FY2013, brings together BlueScope Steel’s Distribution and Lysaght businesses • The Australian solutions businesses (Buildings, Water, Ranbuild, Highline etc) ar
Slide 49: Building Components and Distribution Australia – presence
Building Components and Distribution Australia – presence For personal use only Darwin KEY Lysaght BlueScope Distribution Cairns Mareeba Sheet Metal Supplies Townsville Mount Isa Charters Towers Mackay Rockhampton Emerald Gladstone Bundaberg Acacia Ridge Archerfield Eagle Farm (2) Biggera Waters Rom
Slide 50: New Zealand & Pacific Islands
For personal use only New Zealand & Pacific Islands Page 50
Slide 51: New Zealand and Pacific Steel Products – EBIT variance (vs 1H FY2012)
New Zealand and Pacific Steel Products – underlying EBIT variance analysis (1H FY2013 vs. 1H FY2012) For personal use only Impact of lower global steel prices and NZD/USD +34 Net Spread Reduction ($28M) exchange rate (influencing both domestic and export prices), combined with fixed cost of iron san
Slide 52: New Zealand and Pacific Steel Products – EBIT variance (vs 2H FY2012)
New Zealand and Pacific Steel Products – underlying EBIT variance analysis (1H FY2013 vs. 2H FY2012) For personal use only Impact of lower global steel prices (combined with fixed cost of iron sands extraction) and higher inventory net Net Spread Reduction $30M realisable value provisions +35 -19 EB
Slide 53: New Zealand Steel – unique direct reduction process using captive iron sands
New Zealand Steel – unique direct reduction process using captive iron sands resource For personal use only Page 53
Slide 54: New Zealand – 1H FY2013 product distribution
New Zealand – 1H FY2013 product distribution (external and internal) For personal use only Indicative Product Mix Indicative Sales by End Use Segment / Market (volume) (volume) Pipe Painted 5% Distribution 9% Hot rolled Cold rolled 29% 22% 8% Export 54% 18% 20% Plate Building & Construction 31% 4% M
Slide 55: New Zealand – raw materials fed into steelmaking
New Zealand – raw materials fed into steelmaking For personal use only Iron Sand Concentrate (Waikato North Head Mine) Iron sand mined and concentrated on site – 58.5% Fe Sufficient resource for long term steel making operations Concentrate is slurry pumped 18km underground to Glenbrook Therma
Slide 56: New Zealand – non-steel product sales
New Zealand – non-steel product sales For personal use only Iron Sands Exports Ferrous Scrap Taharoa (57% Fe) and Waikato North Head (58.5% Fe) Volumes: 1H FY2013 24kt vs. 1H FY2012 18kt iron sands mined and concentrated on site Taharoa concentrate is slurry pumped to a buoy 3km Iron & Steelma
Slide 57: Taharoa iron sands export rate and iron ore economic hedge
Once Taharoa 2.4 Mtpa iron sands export rate achieved, BlueScope will be 55% economically hedged for iron ore, on a value-in-use basis For personal use only Portion of iron ore consumption economically hedged1 within BlueScope 2011 Today FY2014 Expected Before CIPA Restructure, combined Post CIPA Re
Slide 58: Other
For personal use only Other Page 58
Slide 59: Global steel 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 For personal use only Monthly Crude Steel Capacity Utilisation1 (%) 115% World China World (Excl China) 110% 105% 100% • Demand in developed economies remain
Slide 60: Calendar year earnings
Calendar year earnings For personal use only A$ Millions CY03 CY04 3 CY05 CY06 CY07 CY08 4 CY09 CY10 CY11 CY12 Revenue 1 5,330 7,029 7,976 8,667 9,119 11,917 8,276 9,134 9,161 7,787 Reported EBITDA2 857 1,501 1,411 1,051 1,131 1,775 (323) 563 (1,084) (15) EBIT 2 - reported 581 1,212 1,111 742 792 1,
Slide 61: Dividend history
Dividend history (adjusted for 1-for-6 share consolidation, and bonus elements of 2009 and 2011 entitlement offers) For personal use only 82 41 110 106 98 98 Special 29 73 Final 53 82 86 90 73 49 Interim 37 20 25 0 0 10 0 0 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 1H FY1
Slide 62: Underlying Corporate and Group Costs
Underlying Corporate and Group Costs – impacted each half by profit in stock elimination and foreign exchange movements For personal use only EBIT A$M -16 -27 -30 -35 -39 -51 -66 1H FY11 2H FY11 FY11 1H FY12 2H FY12 FY12 1H FY13 Comprised of: Corporate Costs (37) (33) (70) (33) (38) (70) (30) Profit
Slide 63: Committed debt facilities as at December 2012
Committed debt facilities as at 31 December 2012 For personal use only Committed Drawn Maturity Local currency A$M A$M Syndicated Bank Facility Tranche 1 December 2013 A$675M A$675M A$350M Tranche 2 December 2015 A$675M A$675M - 2004 U.S. Private Placement Notes Series B July 2014 US$74M A$71M A$71M
Slide 64: 1H FY2013 Financial Results Supporting Information
For personal use only 1H FY2013 Financial Results Supporting Information 18 February 2013 BlueScope Steel Limited. ASX Code: BSL