Slide 1: Financial Results Half year ended 31 December 2015
For personal use only Financial Results Half year ended 31 December 2015 19 February 2016
Slide 2: Improving the business and returns for shareholders
Improving the business and returns for shareholders For personal use only Rapid deployment of business resetting actions $57 million in controllable costs savings during 1H FY161 Reduced global headcount by 500 and closed 10 underperforming facilities Underlying EBIT profit in 2Q FY16 Stro
Slide 3: Financial Performance
For personal use only Financial Performance 3
Slide 4: Results reflect challenging market conditions and operational actions
Results reflect challenging market conditions and operational actions For personal use only Global economic growth concerns, steel overproduction, record Chinese exports and the strong US dollar caused metal prices to fall sharply Ferrous prices down 37% in 1H FY16 (down 31% in 1Q FY16) Non Fe
Slide 5: Results reflect challenging market conditions and resetting actions
Results reflect challenging market conditions and resetting actions For personal use only Incurred $245 million of charges from asset impairment and business resetting actions $119 million impairment of investment in SA Recycling $43 million write-off of Global E-Recycling goodwill $83 milli
Slide 6: Lower metals prices felt across all businesses
Lower metals prices felt across all businesses Underlying EBIT (A$m)1 1H FY15 1H FY16 For personal use only North America Metals 33.0 (23.1) ANZ Metals 29.9 14.0 Europe Metals 14.9 2.1 Global E-Recycling 16.5 (0.3) Unallocated & Other 0.6 2.5 Underlying EBIT 94.9 (4.8) Operations to be discontinued
Slide 7: EBIT Bridge: HY16 decline driven by lower volumes & non-ferrous prices
EBIT Bridge: HY16 decline driven by lower volumes & non-ferrous prices For personal use only 100 80 Underlying EBIT1 (A$ million) 60 Significant reduction in fixed E-Recycling impacted by costs as the business reset -98 decline in non-ferrous and 95 for lower volume conditions precious metals prices
Slide 8: EBIT Bridge: Q2 recovery driven by lower costs & improved metal margin
EBIT Bridge: Q2 recovery driven by lower costs & improved metal margin For personal use only 10 -5 5 17 -2 1 Underlying EBIT1 (A$ million) 0 -6 -5 -10 -15 -18 15 -20 -25 EBIT Volumes Metal Margin Controllable Costs E-Recycling Other 2 EBIT 1Q FY16 2Q FY16 1. Underlying earnings from continuing opera
Slide 9: Capital management strategy balances investment, cash retention, and capital returns
Capital management strategy balances: business investment, cash retention, and capital returns Net Cash of $373 million For personal use only Cash • Preservation of cash for future Strong operational cash flow of $139 million working capital requirements Management Free cash flow after capex of
Slide 10: Strategic Update & Resetting Initiatives
For personal use only Strategic Update & Resetting Initiatives 10
Slide 11: Strategy based on lowering costs and widening margins
Strategy based on lowering costs and widening margins For personal use only original plan: 14 +10% volume 12 original plan: Sales volumes (million tonnes) 10 break-even point reduction 8 6 4 $320m EBIT 2 & $67m >10% EBIT ROC 0 FY13 FY14 FY15 1H FY16 2H FY16 FY18 FY18 (annualised) (resetting run- (ad
Slide 12: Business improvement offset lower market volumes over first two years
Business improvement offset lower market volumes over first two years of the strategy For personal use only 14 Volumes fall 25% below expectations 12 on weak supply and low ferrous prices Sales volumes (million tonnes) 10 Significant business 8 improvements to break-even point exceed FY18 target 6 4
Slide 13: Volume break-even point further improved in HY16
Volume break-even point further improved in HY16 For personal use only 14 Volumes fall 40% below original 12 expectations as market supply drops Sales volumes (million tonnes) 10 8 Further improvement in break-even point 6 offset by rapid drop in sales volumes 4 $320m EBIT 2 ($4.8m) & $67m $136m $14
Slide 14: New initiatives create significant positive leverage
New initiatives create significant positive leverage: Volume break-even lowered with upside leverage retained For personal use only Significant 14 earnings leverage when volumes recover 12 Sales volumes (million tonnes) 10 8 6 New initiatives to drive further improvement in 4 break-even point >10% 2
Slide 15: Clear path to reach strategic earnings target
Clear path to reach strategic earnings target 12.0% For personal use only 10.0% 8.0% Return on Capital % 6.0% 4.0% >6% 2.0% ROC >10% (year-end ROC run-rate) 0.0% Q2 FY16 2H FY16 2H FY16 FY16 FY17-18 FY18 (annualised) Streamline Optimise (annualised) Optimise (target) (annualised) (annualised) Return
Slide 16: Clear streamline initiatives driving significant cost reductions
Clear streamline initiatives driving significant cost reductions across the business For personal use only Actions taken in 1H FY16 10 underperforming facilities closed during HY16 including: 7 in North America Metals 2 in ANZ Metals 1 in Europe Metals Total group headcount reduced by 500,
Slide 17: Clear optimise initiatives: Leveraging logistics to improve supply and margins
Clear optimise initiatives: Leveraging logistics to improve supply and margins For personal use only Minimising transport expenses is critical to maximise margins, while keeping prices attractive for suppliers Network Increasing use of low cost water-based transport Shipping Planning & Execution Pro
Slide 18: Clear optimise initiatives: Operational excellence driving productivity gains
Clear optimise initiatives: Operational excellence driving productivity gains Maximising non-ferrous extraction from shredding For personal use only Improving downstream systems Constructing new downstream non-ferrous recovery plant in Kwinana, WA Reducing shredder non-ferrous entrapment acros
Slide 19: Clear optimise initiatives: Operational excellence driving productivity gains
Clear optimise initiatives: Operational excellence driving productivity gains Minimising overall costs through For personal use only Australia and New Zealand Metals strategic decentralisation Installation of shear and balers into regional centres Allows clean light gauge material to be processe
Slide 20: Clear optimise initiatives: Enhancing product quality to improve value to customers
Clear optimise initiatives: Enhancing product quality to improve value to customers Improving supply quality For personal use only Targeting the right raw material supply, to suit the needs of end-customers Refining processing methods to meet end market requirements IE: Densification of cut grad
Slide 21: Market Outlook & Summary
For personal use only Market Outlook & Summary 21
Slide 22: Market conditions tough, however emerging signals this situation may improve
Market conditions tough, however emerging signals this situation may improve Positive signals that China’s steel exports For personal use only Increasing steel exports from may decline: China is the #1 challenge for the metals recycling industry 120 400 Plans to reduce annual steelmaking 350 capac
Slide 23: Outside China and a few others, the rest of the world uses ferrous scrap
Outside China and a few others, the rest of the world uses ferrous scrap to make steel For personal use only Total World Steel Production World Steel Production Outside China, Russia, Japan & EU 480Mt 152Mt 302Mt 1120Mt Electric Arc Furnance Steel Production Electric Arc Furnance Steel Production (F
Slide 24: Planning for the long-term
Planning for the long-term Adapting to current lower volumes, For personal use only Total US Ferrous Scrap Generation but prepared for a recovery 80 Consolidation Path 70 Maximise profitability by taking advantage of low 60 breakeven point Million tonnes per annum 50 Pursue targeted acquisitions
Slide 25: Resetting the business to thrive in all conditions
Resetting the business to thrive in all conditions For personal use only Strong balance sheet Improved net cash position to $373 million Share buyback initiated and ongoing 3.2 million shares repurchased to date Up to a further 17.3 million shares that may be repurchased Resetting the bu
Slide 26: Appendix
For personal use only Appendix 26
Slide 27: 1H FY16 Operating Conditions
1H FY16 Operating Conditions For personal use only Average Prices 1H FY16 1H FY15 Chg % Ferrous HMS East Coast Export (FOB) US$/t 193 329 (41%) HMS West Coast Export (FOB) US$/t 189 320 (41%) HMS Mid-West US (Delivered) US$/t 194 349 (44%) US Ferrous Scrap Domestic Consumption Mt 24.1 26.0 (7%) US F
Slide 28: Group Financial Performance
Group Financial Performance For personal use only A$m 1H FY16 1H FY151 Chg % Sales revenue down primarily due to lower Sales Revenue 2,412.2 3,363.5 (28.3) sales volumes and lower commodity prices Statutory EBITDA (11.0) 153.5 NMF Lower underlying EBITDA driven by lower Underlying EBITDA 1 61.4
Slide 29: Significant Items
Significant Items Notes: For personal use only A$m 1H FY16 Note 1. Goodwill impairment charge related primarily Goodwill impairment 43.3 1 to E-Recycling operations in the US Impairment of investment in joint venture 119.1 2 2. Related to impairment charge on the SA Recycling joint venture Other int
Slide 30: Business Unit Performance
Business Unit Performance Earnings were impacted by a significant drop in volumes For personal use only Underlying EBIT (A$m)1 1H FY16 1H FY15 related to falling commodity prices North America Metals (23.1) 33.0 North America Metals earnings pressure was felt ANZ Metals 14.0 29.9 strongest in th
Slide 31: North America Metals
North America Metals For personal use only A$m 1H FY16 1H FY15 Chg % Sales Revenue 1,235.6 1,913.3 (35.4) Statutory EBITDA (2.3) 65.9 (103.5) Underlying EBITDA 15.9 65.3 (75.7) Depreciation 32.2 25.9 24.3 Amortisation 6.8 6.4 5.9 Statutory EBIT (167.2) 33.6 NMF Underlying EBIT (23.1) 33.0 NMF Assets
Slide 32: Australia & New Zealand Metals
Australia & New Zealand Metals For personal use only A$m 1H FY16 1H FY15 Chg % Sales Revenue 377.5 553.6 (31.8) Statutory EBITDA 23.1 43.6 (47.0) Underlying EBITDA 27.7 43.6 (36.5) Depreciation 13.1 13.2 (0.8) Amortisation 0.6 0.5 20.0 Statutory EBIT 9.4 29.9 (68.6) Underlying EBIT 14.0 29.9 (53.2)
Slide 33: Europe Metals
Europe Metals For personal use only A$m 1H FY16 1H FY15 Chg % Sales Revenue 372.3 513.2 (27.5) Statutory EBITDA (40.5) 22.7 (278.4) Underlying EBITDA 9.2 21.1 (56.4) Depreciation 7.1 6.2 14.5 Amortisation 0.0 0.0 - Statutory EBIT (47.8) 16.5 (389.7) Underlying EBIT 2.1 14.9 (85.9) Assets 218.7 263.1
Slide 34: Global E-Recycling
Global E-Recycling For personal use only A$m 1H FY16 1H FY15 Chg % Sales Revenue 426.8 377.8 13.0 Statutory EBITDA 5.8 22.2 (73.9) Underlying EBITDA1 5.7 22.2 (74.3) Depreciation 5.7 5.4 5.6 Amortisation 0.3 0.3 - Statutory EBIT (46.2) 16.5 NMF Underlying EBIT1 (0.3) 16.5 (101.8) Assets 433.3 473.3
Slide 35: Sales Revenue & Volume by Product
Sales Revenue & Volume by Product For personal use only Sales Revenue (A$m) HY16 HY15 Chg % HY16 Sales Revenue 2% Ferrous Metals 1,354.3 2,250.8 (39.8) 18% Non Ferrous Metals 577.3 682.9 (15.5) Ferrous Metals Non Ferrous Metals Global E-Recycling 426.8 377.8 (13.0) 56% Global E-Recycling Secondary p
Slide 36: 1H FY16 income tax expense considerations
1H FY16 income tax expense considerations A$m Loss Before Tax Income Tax Benefit Effective Tax % For personal use only Statutory Result (255.1) (5.0) 2.0% Reconciling items: Tax losses not benefitted (30.9) Non-deductible impairment charge (41.5) Underlying Results (255.1) (77.4) 30.3% 36
Slide 37: Significant items by region – 1H FY16
Significant items by region – 1H FY16 NA ANZ Europe Global Pre-Tax After-Tax For personal use only HY16 (A$m) Unallocated Metals Metals Metals E-Recycling Total Total Goodwill impairment - - 0.2 43.1 - 43.3 34.2 Other intangible asset 6.8 - - 2.9 - 9.7 8.6 impairment Impairment of investment in 119.
Slide 38: Significant items by region – 1H FY15
Significant items by region – 1H FY15 NA ANZ Europe Global Pre-Tax After-Tax For personal use only HY15 (A$m) Unallocated Metals Metals Metals E-Recycling Total Total Reversal of an impairment of (0.6) - - - (0.6) (0.6) loan receivable - Net impact from investments in - - - - (2.0) (2.0) (2.0) assoc
Slide 39: Financial Summary - Group
Financial Summary - Group A$m FY10 FY11 FY12 FY13 FY14 FY151 1H FY151 1H FY16 For personal use only Group Results Sales Revenue 7,453 8,847 9,036 7,193 7,129 6,311 3,363 2,412 Underlying EBITDA 379 414 253 190 242 263 153 61 Underlying EBIT 235 283 123 67 119 142 95 -5 Underlying NPAT 127 182 74 17
Slide 40: Financial Summary – Segment
Financial Summary – Segment A$m FY10 FY11 FY12 FY13 FY14 FY151 1H FY151 1H FY16 For personal use only Sales Revenue North America Metals 4,834 5,782 5,773 4,256 3,996 3,417 1,913 1,236 ANZ Metals 1,126 1,300 1,190 1,047 1,188 1,053 554 377 Europe Metals 783 954 1,056 935 1,063 1,037 513 372 Global E
Slide 41: Financial Summary – Segment (cont.)
Financial Summary – Segment (cont.) A$m FY10 FY11 FY12 FY13 FY14 FY15 1H FY15 1H FY16 For personal use only Sales tonnes (‘000) North America Metals 9,906 10,964 11,080 9,377 8,152 7,018 3,818 2,990 ANZ Metals 1,578 1,764 1,765 1,764 2,054 1,874 944 700 Europe Metals 1,394 1,466 1,651 1,645 1,609 1,
Slide 42: Financial Summary – Segment (cont.)
Financial Summary – Segment (cont.) A$m FY10 FY11 FY12 FY13 FY14 FY151 1H FY151 1H FY16 For personal use only Sales tonnes (‘000) Ferrous Trading 9,068 10,115 10,320 9,396 9,331 8,325 4,426 3,361 Ferrous Brokerage 3,264 3,518 3,597 2,840 1,918 1,617 801 688 Non Ferrous 565 571 586 550 566 539 273 25
Slide 43: Disclaimer
Disclaimer For personal use only The material contained in this document is a presentation of information about the Group’s activities current at the date of the presentation, 19 February 2016. It is provided in summary form and does not purport to be complete. It should be read in conjunction with