Bluescope Steel Limited · ASX:BSL
Bluescope Steel — H1 2013 Earnings Presentation
47 slides from Bluescope Steel's earnings presentation, Feb 18, 2013
Slide 1: 1H FY2013 Financial Results Presentation
For personal use only 1H FY2013 Financial Results Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias, Chief Financial Officer 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: Introduction
For personal use only Introduction Page 3
Slide 4: 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 Medically treated injuries per million man-hours worked 60 14.0 14 Lost time injuries per million man-hours worked 52.2 50 47.1 12 10 40 8.0 8 29.1
Slide 5: Summary
For personal use only Summary • 1H FY2013 reported net loss after tax of $12M: a $518M improvement on 1H FY2012 • $10M underlying net profit after tax, or $16M market guidance comparable NPAT1 – exceeding guidance of ‘NLAT approaching breakeven’ • Building Products2 segment underlying EBIT growth of
Slide 6: Summary (ctd)
For personal use only Summary (ctd) • North Star 1H result 65% better on 1H FY2012. Continuing review of expansion opportunities • CIPA underlying EBITDA improved to $79M profit1. Cost reduction performance strong; domestic HRC volumes softened. Expect positive underlying EBITDA in 2H FY2013 2 • Bui
Slide 7: Enhanced financial flexibility to invest in growth
Enhanced financial flexibility to invest in growth For personal use only • Broad base of global customers • Low cost manufacturing base Building Solutions • IP and brands support our competitive market offer • Growth opportunities require little capital • Complete NS Coated Products joint venture an
Slide 8: Reconciliation between 1H FY2013 reported NLAT and underlying NPAT
For personal use only Reconciliation between 1H FY2013 reported NLAT and underlying NPAT1 1H FY2013 NPAT A$M Reported net loss after tax (12) Underlying adjustments Profit on sale of a previously unrecognised intangible asset (26) Restructuring & redundancy costs 2 3 Steel Transformation Plan (STP)
Slide 9: Financial headlines 1H FY2013 vs. 1H FY2012
Financial headlines 1H FY2013 vs. 1H FY2012 For personal use only SIX MONTHS ENDED 1H FY2013 vs 1H FY2012 A$M (unless marked) 31 DEC 2011 31 DEC 2012 % Total revenue 4,539 3,704 Reduced 18% External despatches 3,590Kt 2,831Kt Reduced 21% EBITDA − Underlying 1 23 196 Improved EBIT − Underlying 1 (137
Slide 10: Segment Discussion
For personal use only Segment Discussion Page 10
Slide 11: Global Building Solutions: improvement in U.S. performance but softer China volumes
Global Building Solutions: improvement in U.S. performance but softer China volumes. Expect pick-up in China post lunar new year For personal use only Comments on 1H FY2013 Half yearly underlying EBITDA comparison (A$M) • North America: 41 41 1 ¾ Volumes up 7% on 1H FY2012 and up 20% on 2H FY2012. 1
Slide 12: Building Products ASEAN, North America and India: underlying EBITDA growth of 25%
Building Products ASEAN, North America and India: underlying EBITDA growth of 25% in 1H FY2013 vs 1H FY2012 For personal use only Comments on 1H FY2013 Half yearly underlying EBITDA comparison (A$M) • Thailand: Strong performance despite competitive 80 environment. Recovery from floods in 1H FY2012,
Slide 13: Coated Products JV with NSSMC – working towards completion by end of March 2013
Coated Products JV with Nippon Steel & Sumitomo Metal Corporation (NSSMC) – working towards completion by end of March 2013. Accelerating work on value opportunities For personal use only • Obtained almost all of the regulatory approvals required for Coated Products JV transaction to be completed an
Slide 14: Coated & Industrial Products Australia: underlying EBITDA improved to $79M profit
Coated & Industrial Products Australia: underlying EBITDA improved to $79M profit; cost reduction performance strong; domestic HRC volumes softened. Expect positive underlying EBITDA for 2H FY20131 For personal use only Comments on 1H FY2013 Half yearly underlying EBITDA comparison (A$M) • $79M unde
Slide 15: 1H FY2013 Australian demand: volumes largely unchanged
1H FY2013 Australian demand: dwelling & non-dwelling volumes largely unchanged; engineering weaker on lower HRC sales for pipe & tube TOTAL AUSTRALIAN EXTERNAL DESPATCH VOLUMES For personal use only 2H FY08 1H FY09 2H FY09 1H FY10 2H FY10 1H FY11 2H FY11 1H FY12 2H FY12 1H FY13 1,800 (No. 5 Blast 63
Slide 16: Australian residential construction starts slowly improving
Australian residential construction starts (total new houses) slowly improving from near lowest point of last three decades For personal use only Quarterly number of Australian residential construction starts (total new houses) to September 2012 1 (Number per quarter) 40,000 35,000 30,000 25,000 20,
Slide 17: External forecasters’ outlook for our key construction exposures
For personal use only External forecasters’ outlook for our key construction exposures Residential Construction Non Residential Construction Annual % Change Annual % Change (Fin Yrs) HIA F’casts (Jan 13) (Fin Yrs) BIS Shrapnel F’casts (Nov 12) 6.0 7 Yr Average 15 7 Yr Average 12.8 4.5 3.6 3.2 10 3.0
Slide 18: Launching next generation ZINCALUME® – reinforcing status as market leader
For personal use only Launching next generation ZINCALUME® – reinforcing status as market leader • Production of next generation ZINCALUME® steel with Activate™ technology commences in 2H FY2013 following development and testing over a number of years, and recently completed modifications to Springh
Slide 19: Building Components & Distribution Australia segment earnings improved
Building Components & Distribution Australia segment earnings improved For personal use only Comments on 1H FY2013 Half yearly underlying EBITDA comparison (A$M) • Gross margin (spread) improvement in 1H FY2013 vs 1H 2 3 2 FY2012 • Benefits of restructuring flowing; and closure, sale or consolidatio
Slide 20: New Zealand and Pacific Steel Products: profit lower on weaker iron sands prices
New Zealand and Pacific Steel Products: profit lower on weaker iron sands export prices, lower steel prices and higher NZ$; however significant improvement expected in 2H FY2013 and iron sands expansion to 2.7Mtpa run-rate on track for Jan 2014 For personal use only Comments on 1H FY2013 Half yearly
Slide 21: New Zealand residential construction approvals trending higher
New Zealand residential construction approvals trending higher For personal use only Monthly number of New Zealand residential construction approvals to November 20121 (Number per month) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Fe
Slide 22: Hot Rolled Products North America: 1H FY2013 result improved
For personal use only Hot Rolled Products North America: 1H FY2013 result improved on 1H FY2012 Comments on 1H FY2013 Half yearly underlying EBITDA1 comparison (A$M) • Spread in 1H FY2013: 64 ¾ Improved over 1H FY2012 driven by lower scrap costs, partially offset by lower selling price ¾ Reduced com
Slide 23: Financials
For personal use only Financials Page 23
Slide 24: Cash flow – solid core earnings improvement
For personal use only Cash flow – solid core earnings improvement A$M 1H FY12 2H FY12 1H FY13 Predominantly due to classification of proceeds of Reported EBITDA (270) (219) 204 sale of previously unrecognised intangible asset as an Adjust for other cash profit items 5 322 (32) investing cash flow (s
Slide 25: Controlled capital expenditure and working capital
For personal use only Controlled capital expenditure and working capital Total capital expenditure Working capital items1 Includes Indonesian steel • Improved operating working capital position maintained coating line expansion $102M, of which since Port Kembla restructuring approx. one third $210M
Slide 26: Inventory … overall value largely unchanged
Inventory … overall value largely unchanged, driven by lower costs/value and slightly higher volume For personal use only RMS $258M RMS $238M RMS $344M WIP 532 WIP 594 WIP 770 FGS 466 FGS 434 FGS 509 +1,791 Other 153 Other 168 Other 146 +1,409 +1,412 +109 -10 -11 -85 Dec 2011 Jun 2012 Rate / feed co
Slide 27: Strengthened balance sheet supports our strategy
For personal use only Strengthened balance sheet supports our strategy • Completion of Coated Products JV transaction will deliver a further strengthened balance sheet Net debt ($M) Net debt / EBITDA1 Gearing (ND/ND+E) 19.5% Significant debt reduction largely driven by: Includes $132M benefit from s
Slide 28: Debt facilities maturity profile at December 2012
For personal use only Debt facilities maturity profile at 31 December 2012 754 Receivables securitisation program: Nil drawn of $675M 675 committed y In addition to debt facilities, BSL has a receivables securitisation program Syndicated Bank Facility y $150M maturing September 2014 US Private Place
Slide 29: Indicative EBIT sensitivities for 2H FY2013
For personal use only Indicative EBIT sensitivities for 2H FY2013 Estimated impact on 2H FY2013 EBIT A$M 1 Assumption +/– US$25 / tonne movement in BlueScope’s average realised export HRC price 2 28 +/– 1¢ movement in Australian dollar / US dollar exchange rate 3 2 +/– US$10 / tonne movement in coal
Slide 30: Outlook & Summary
For personal use only Outlook & Summary Page 30
Slide 31: 2H FY2013 outlook
For personal use only 2H FY2013 outlook • In 2H FY2013, we expect a continued improvement in financial performance with a small net profit after tax (before period-end net realisable value adjustments, and subject to domestic demand and margins, spread and FX) Page 31
Slide 32: Enhanced financial flexibility to invest in growth
Enhanced financial flexibility to invest in growth For personal use only • Broad base of global customers • Low cost manufacturing base Building Solutions • IP and brands support our competitive market offer • Growth opportunities require little capital • Complete NS Coated Products joint venture an
Slide 33: Questions & Answers
For personal use only Questions & Answers Page 33
Slide 34: Additional Information
For personal use only Additional Information Page 34
Slide 35: BlueScope’s global manufacturing footprint at December 2012
BlueScope’s global manufacturing footprint at December 2012 Kalama Kalama North North Star (2) Star (2) For personal use only • Cold Rolling 455kt • Raw Steel 2.3mt • Metal Coating 235kt • Hot Rolling 2.1mt • Painting 110kt India (1) India (1) • Metal Coating 250kt United States • Painting 150kt • B
Slide 36: Business segments and strategy
Business segments and strategy External operating segment reporting structure1 For personal use only Building Products Coated & Industrial Building New Zealand and Global Building Hot Rolled Products ASEAN, North Products Australia Components & Pacific Steel Solutions North America America and India
Slide 37: Global despatch mix
Global despatch mix Origin of 1H FY13 External Export Volume Australia 132Kt NZ 127 Asia 29 For personal use only Total BlueScope Group External Despatches NA (incl Metl-Span) 12 300 Kt 1H FY2012 2H FY2012 1H FY2013 Exports Exports Exports 26% 18% 11% (939Kt) 7% (572Kt) 6% (300Kt) 3% 8% 3%5% 22% 24%
Slide 38: Products and end markets
Products and end markets Product Primary end use markets Applications For personal use only Iron sands • Internal and export steel manufacturers • Crude steel manufacturing Slab • Steel manufacturing • Hot rolled coil and plate Plate • Manufacturing, building and construction • Infrastructure projec
Slide 39: Overview of the CIPA / Port Kembla Steel Works Restructuring
For personal use only Overview of the CIPA / Port Kembla Steel Works Restructuring Actions undertaken and rationale Improved balance between domestic production and demand (‘000 tonnes) Shutting down one blast furnace involved: • Reduction in capacity from 5.3Mtpa to 6,000 BlueScope’s historical 2.6
Slide 40: Background to the CIPA / Port Kembla Restructuring
For personal use only Background to the CIPA / Port Kembla Restructuring • Long track record of positive underlying EBITDA in key business segments until CIPA impacted in FY2011 and FY212 (A$ in millions, years ended 30 June) Segment 2005 2006 2007 2008 2009 2010 2011 2012 05-12 avg 09-12 avg 1H FY1
Slide 41: BSL Underlying EBIT variance 1H FY2013 to 1H FY2012 by major item
For personal use only BSL Underlying EBIT variance 1H FY2013 to 1H FY2012 by major item Net Spread Improvement $56m +38 +13 -11 +2 +2 +24 +89 Conversion & Other Costs: Cost improvement initiatives 57 Volume (37) Escalation (51) One-off 16 Other 4 -137 Raw Material Costs: Coal 126 -115 Iron ore 102 S
Slide 42: BSL Underlying EBIT variance 1H FY2013 to 2H FY2012 by major item
For personal use only BSL Underlying EBIT variance 1H FY2013 to 2H FY2012 by major item Net Spread Reduction $22m +38 +5 0 +63 -9 +29 +59 -87 Conversion & Other Costs: -62 Cost improvement initiatives 59 Volume 22 Raw Material Costs: Escalation (47) Coal 70 One-off 18 Iron ore 49 Other 11 +118 Scrap
Slide 43: Balance Sheet
For personal use only Balance Sheet A$M 31 Dec 2011 30 Jun 2012 31 Dec 2012 Assets Cash 186 214 193 Receivables * 1,059 995 971 Inventory * 1,791 1,409 1,412 Property, Plant & Equipment 3,466 3,296 3,225 Intangible Assets 686 454 436 Other Assets 413 366 376 Total Assets 7,601 6,734 6,613 Liabilitie
Slide 44: Impact of Coated Products joint venture on financial statements
Impact of Coated Products joint venture on financial statements after transaction completion For personal use only • BlueScope and NSSMC have now obtained almost all of the regulatory approvals that are required for the Coated Products Joint Venture transaction to be completed and are working toward
Slide 45: Historical Earnings Performance – Reconciliation of Reported to Underlying
Historical Earnings Performance – Reconciliation of Reported to Underlying (A$M) FY2011 FY2012 1H FY2012 2H FY2012 1H FY2013 For personal use only Reconciliation of EBITDA and EBIT EBITDA 2 Reported (687) (489) (270) (219) 204 EBIT 2 Reported (1,043) (820) (435) (385) 47 Discontinued Business (gains
Slide 46: EBIT Segment Summary – Reconciliation of Reported to Underlying
EBIT Segment Summary – Reconciliation of Reported to Underlying (A$M) For personal use only FY2011 FY2012 1H FY2012 2H FY2012 1H FY2013 Coated & Industrial Products Australia Reported EBIT (1,063) (726) (463) (263) 7 Restructure / redundancies 8 363 347 16 3 Asset Impairments 797 136 - 136 - Sale of
Slide 47: 1H FY2013 Financial Results Presentation
For personal use only 1H FY2013 Financial Results Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias, Chief Financial Officer 18 February 2013 BlueScope Steel Limited. ASX Code: BSL