The 11 th Annual JP Morgan Asia Pacific Conference, New York Kirby Adams, Managing Director and Chief Executive Officer 25 to 27 September 2006 ASX Code: BSL
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 BE PLACED ON INFORMATION OR OPINIONS CONTAINED IN THIS PRESENTATION AND, SUBJECT ONLY TO ANY LEGAL OBLIGATION TO DO SO, BLUESCOPE STEEL DOES NOT ACCEPT ANY OBLIGATION TO CORRECT OR UPDATE THEM. THIS PRESENTATION DOES NOT TAKE INTO CONSIDERATION THE INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY PARTICULAR INVESTOR. TO THE FULLEST EXTENT PERMITTED BY LAW, BLUESCOPE STEEL AND ITS AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, ACCEPT NO RESPONSIBILITY FOR ANY INFORMATION PROVIDED IN THIS PRESENTATION, INCLUDING ANY FORWARD LOOKING INFORMATION, AND DISCLAIM ANY LIABILITY WHATSOEVER (INCLUDING FOR NEGLIGENCE) FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS PRESENTATION OR RELIANCE ON ANYTHING CONTAINED IN OR OMITTED FROM IT OR OTHERWISE ARISING IN CONNECTION WITH THIS. Page 2
Introduction Page 3
Our Bond what we value Our customers are our partners Our people are our strength Our shareholders are our foundations Our communities are our homes Page 4
Our customers serving them in over 20 countries Over 30,000 customers using BlueScope Steel products with confidence Americas 20% Exports 40% Europe / Africa 6% Geographic markets (tonnes by destination) FY2006 North America- NSBSS + C&BPNA 15% Asia 14% Asia 9% Australia 32% New Zealand / Pacific 4% Painted 13% Global Product Mix ($ Revenue) FY2006 PEB/Roll formed 27% Metal Coated 20% Slab 8% CRC 3% Plate 5% HRC 24% PRODUCT OFFER Services Solutions Technical support Warranty Just In Time Delivery Transport & Logistics Design / Build / Install Information systems - web based - connectivity 7.593 million tonnes Indicative Page 5
Our employees - zero harm is our goal for our team and communities Lost Time Injury Frequency Rate Medically Treated Injury Frequency Rate Lost time injuries per million man-hours worked 40 35 30 25 20 15 10 5 35 29 16 14 8.0 Reported performance for IISI member companies 4.8 3.4 4.1 3.4 2.8 1.8 1.5 0.8 0.8 Medically treated injuries per million man-hours worked 90 80 70 60 50 40 30 20 10 80 68 60 52.2 47.1 29.1 22.4 21.9 17 12.2 9.3 8.2 9.3 6.4 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Includes Contractor performance from 1996 Includes Butler performance from May 2004 Includes Contractor performance from 2004 Includes Butler performance from May 2004 18,000 Employees, 91 manufacturing sites, 17 countries Page 6
Our shareholders - continuing to reward our shareholders as we grow Share Buybacks Public listing to 30 June 2006 Purchased and cancelled 116m shares on market 90m shares off market 26m shares Shares on issue 699 million Dividend reinvestment scheme Effective from and including final FY2006 ordinary dividend Total return to shareholders since BSL s public listing (July 2002): Share buybacks $ 707m 30% Dividends paid $ 1,109m Final dividend 54% (to be paid 24 Oct 06) $ 168m $ 1,984m 84% $2.67 share or 84% payout ratio (NPAT) Dividends All fully franked (ordinary / special) Cents Per Share 50 45 40 35 30 25 20 15 10 5 0 42 / 20 30 / 10 22 / 7 20 44 / 0 10 7 24 18 18 20 24 9 13 12 FY2003-1H FY2003-2H FY2004-1H FY2004-2H FY2005-1H FY2005-2H FY2006-1H FY2006-2H Interim Final Special Page 7
Our communities the world s largest and fastest growing construction markets with over 3 billion people Asia 20 Roll forming 5 sites India (50:50 JV with Tata Steel) MC 250kt (100%) Painting 150kt (100%) 2 Roll forming sites 1 Butler PEB Thailand Cold Rolling 300kt Metal Coating 375kt Painting 90kt Malaysia Metal Coating 160kt Painting 70kt Australia 7 Service Centres 31 Lysaght Sites 7 BlueScope Water Indonesia Metal Coating 100kt Painting42kt Western Port Hot Rolling 1.43mt Cold Rolling 1.0mt MC (3 lines) 830kt + Painting (2 lines) 330kt + * To be reallocated when business closed China MC 250kt Painting 150kt 3 Butler PEB Vietnam MC 125kt Painting 50kt Brisbane Painting 90kt Sydney Paint Line (1 line) 120 kt Coated and Building Products North America North Star JV Hot Rolling 1.80mt (100%) Castrip JV Port Kembla / Springhill Raw Steel 5.1mt Hot Rolling 2.4mt +400kt Plate 360kt Cold Rolling 930kt [Tinplate/Black plate 450kt*] MC (3 lines) 750kt + PL (2 lines) 207kt + New Zealand / Pacific Iron sand Mining Raw Steel 625kt Hot Rolling 750kt Cold Rolling360kt Metal Coating 230kt + Painting 60kt Hollow Sections 45kt Pacific Roll forming sites 4 Page 8
Upstream steel making Capability Products Statistics Port Kembla Steelworks NSW, Australia New Zealand Steel North Star BlueScope Ohio, USA Slab Hot Rolled Coil Plate Raw steel capacity (mtpa) - PKSW 5.1 - NZS 0.6 - NS (50%) 0.9 6.6 Cost curve (HRC) - PKSW & NZS - lowest quartile - NS - most efficient EAF Turnover (FY2006) - PKSW A$3,472m - North Star BlueScope (50%) A$712m Performance FY2006 vs. FY2005 - PKSW higher raw material costs and lower steel prices - NZ lower raw materials but lower prices - North Star BlueScope lower spread Markets - Australia, NZ, Americas and Asia Operations - excellent performance apart from New Zealand Page 9
Midstream cold rolled, metallic coating and painting network Capability Products Statistics Australia: - Western Port, Vic - Illawarra Coated Products, NSW - Queensland - Sydney New Zealand Asia: - India JV (Tata) -Indonesia - Malaysia - Thailand - Vietnam - China Research & Development Technical Support COLORBOND ZINCALUME CLEAN COLORBOND GALVASPAN Capacity (ktpa) growing Asia FY06 FY07 FY09 - Cold Rolled Coil 300 300 350+ - Metallic Coating 490 745 990+ - Painting 175 280 420+ Australia - Cold Rolled Coil 1,930 1,930 1,930+ - Metallic Coating 1,580 1,580 1,580+ - Painting 627 627+ 747+ NZ - Cold Rolled Coil 360 360 360 - Metallic Coating 230 230+ 230+ - Painting 60 60+ 60+ Feed source of Hot Rolled Coil and Cold Rolled Coil - Asia local suppliers and internal - Australia & NZ internal Customers - Principally construction, manufacturing & auto Markets - In market local supplier - + exports Page 10
Downstream - metal building products and solutions Capability Products Statistics Australia New Zealand & Pacific Asia North America Lysaght roll formed steel components Butler Pre-Engineered Buildings (PEB) BlueScope Water Market leader in - Australia - China - South East Asia - and No. 2 in USA (PEB) Feed - Australia - internal - Asia - internal - NZ internal - NA external / internal Customers - Principally construction sector Markets - In market local supplier - Branded products - Supply, install and fix Page 11
Our strategy remains unchanged and is focused on growing value and diversification and a more stable revenue / earnings profile GROWTH PROJECTS FY2006 Completed FY2007 FY2008 Downstream Asia India - start-up PEB and Lysaght facilities at Pune China Guangzhou buildings start-up USA Successful turnaround of Tennessee facility. Vistawall expansion Asia Thailand start up PEB facility (1Q) India start up Lysaght facility at Chennai & New Delhi (2Q) China new panels, residential plants & new beam facility Midstream Asia Thailand start-up second metal coating line (MCL2) ramp up CRC Vietnam start-up metal coating (MCL) and paint line (PL) China start-up paint line (PL) Asia Thailand MCL2 & CRC Ramp up Vietnam MCL & PL ramp up China start up MCL (1Q), ramp up MCL & PL Australia Sydney Colorbond plant start up (2H) Asia India new MCL & PL construction Indonesia MCL2 & PL2 (project deferred) Upstream USA North Star BlueScope best ever operating performance Australia 400kt HSM expansion at PKSW Start-up 1Q New Zealand Front end study USA North Star BlueScope new bag house Australia BF No 5 reline (TBA FY2008 or FY2009) MCL: Metallic Coating Line PL: Paint Line Page 12
Global group revenue sales mix growing downstream quadruples in size FY2003 FY2006 Downstream A$589M A$2,366M +300% Midstream A$3,026M A$3,383M +12% Upstream A$3,346M A$4,321M +29% Less internal / other Total revenue (A$1,689M) A$5,272M (A$2,057M) A$8,013M +52% Page 13
Pricing over the cycle Indicative Selling Price $ PEB Paint ZAL Galv CRC HRC Slab Time Page 14
Acquisition of stake in Smorgon Steel The Global steel industry is consolidating and BlueScope Steel has repeatedly stated the existing Australian structure works effectively and that we would not initiate a change A change is now occurring Smorgon Steel has indicated a preparedness to sell and break-up its business The proposed merger of OneSteel and Smorgon Steel, in its current form, is not in the interests of BlueScope Steel s shareholders BlueScope Steel has acquired approximately 19.9% of the outstanding shares in Smorgon Steel at an average price of $1.77 per share at a total cost of approximately $320m A revised Scheme of Arrangement may represent an opportunity for BlueScope Steel to acquire businesses which: fit our strategy and portfolio of businesses add value to commodity HRC and other flat steel products, and provide improved channels to market BlueScope Steel has no intention to acquire further Smorgon Steel shares, but reserves the right to do so in different circumstances Page 15
FY2006 In review Page 16
Group financial headlines FY2006 vs. FY2005 Revenue A$8,031 million Up 1% External despatches 7.5 million metric tonnes Up 5% EBITDA A$850 million Down 49% EBIT A$556 million Down 59% NPAT A$338 million Down 66% EPS Reported 48 Down from 134 Before June 06 one-off restructuring 67 Down from 134 Underlying operational EPS 80 Down from 154 After tax Return on Invested Capital 8.5% Down from 26% After tax Return on Equity 10.4% Down from 31% Net operating Cashflow before capex $803 million Down 35% after capex / investments $10 million Down 98% Dividend final ordinary 24 per share Constant full year 44 per share Up 5% (fully franked) Gearing (net debt) 38% 33% (Dec 05) including SOR Page 17
Underlying FY06 BSL financial performance EBIT A$m 556 185 741 115 856 June 06 restructuring includes: A$m - PP impairment and closure costs 120 - Staff and executive restructuring 32 - Taiwan closure 8 - CPL7 closure 13 - Rail operation outsourcing 9 -Other 3 185 Other unusual and one-off adjustments include: Reported Results June 06 Restructuring Results B4 Restructure Costs Other One-off & unusual Underlying Results NPAT 338 132 470 94 565 EPS 0.48 0.19 0.67 0.13 0.80 - Business development and pre-operating costs 40 - Western Port fire 40 - Losses from Packaging Products and Taiwan business to be closed 43 - Asset sales (Myaree & Galesburg) (14) -Other 6 115 Total 300 Page 18
New reporting business segments Corporate / Group Australia New Zealand Asia North America Hot Rolled Products Australia Coated & Building Products Australia New Zealand & Pacific Steel Products Coated & Building Products Asia Hot Rolled Products North America Coated & Building Products North America Lowest quartile producer Leading supplier of flat steel in Australia Global scale o Port Kembla Steelworks Largest supplier of metallic coated and painted steel in Australia Leading market shares in most key products o Western Port o Springhill o Lysaght Australia o Service Centres Only fully integrated flat steel maker in New Zealand Leading domestic market share of flat products o Pacific Islands o Glenbrook, NZ Pre-eminent seller of branded steel in Asia Lower cost backward integration growth strategy o Indonesian, Malaysian, Thailand and Vietnamese operations o Lysaght Asia o China, including Butler o India Tata BlueScope JV 50:50 joint venture with Cargill Inc. Again voted no. 1 flat rolled steel supplier in North America (Jacobson Survey) o Delta, Ohio Pre-eminent global designer / supplier Pre-engineered buildings No 2 position in North America and no. 1 in China o Butler buildings o Vistawall Page 19
EBIT A$ Millions EBIT variance FY2005 to FY2006 by reporting business segment 1600 1400 1,358 Net Price (506) 1200 Net raw materials (286) 1000 800 600 400 (693) (15) (84) (84) (11) 45 40 556 200 0 FY 2005 EBIT movements Hot Rolled Products Australia Coated & Building Products Australia New Zealand & Pacific Steel Products Coated & Building Products Asia Hot Rolled Products North America Coated & Building Products North America Corporate & Group FY 2006 From (FY2005) $1,149M $(183M) $189M $83M $199M $(18M) $(61M) To (FY2006) $456M $(198M) $105M $(1M) $188M $27M $(21M) Issues Iron Ore + Coal costs Steel prices down WP fire Zn & AL Tin mill performance Reliability Production NZ market Stocks Growth Taiwan Scrap spread Production record Restructured Jackson fixed Margin growth Lower profit in inventory Page 20
EBIT A$ Millions Hot Rolled Products Australia (PKSW) higher raw material costs and lower prices FY2006 vs. FY2005 Sales revenue down 7% to A$3,472m EBIT down 60% to A$456m FY2006 return on net assets (pre-tax) 24% 1400 1200 1,149 1000 800 (286) 600 389 488 95 50 9 486 456 400 200 (446) (25) (60) (30) 0 FY June 03 FY June 04 FY June 05 Raw Material Costs Export Prices (Slab, HRC) Domestic Prices (HRC, Plate) Volume Mix Conversion & Oth Costs Other FY2006 Pre One-offs One-offs FY June 06 FY2006 vs. FY2005 - Lower steel prices - Higher coal and iron ore prices - Unfavourable sales mix - Lower domestic pipe and tube sales - Annual production records, incl. 5.283m slab - Successful cost reduction programme Page 21
Hot Rolled Products Australia markets and business improvement initiatives Lower conversion costs $ of day 2003 2004 2005 2006 2007 S&A Conversion Costs Despatch & Freight Raw Materials Markets Slab - Global demand and prices stronger in Q4 HRC - Tight global market and stronger prices in Q4 Plate - Domestic demand stronger, but domestic sales down due to: - offshore fabrication - lower priced imports - project deferral Business improvement initiatives No5 Blast Furnace Reline Work continues in FY2007 to prepare for the planned reline late CY2007. Spent $56M to 30/06/06 Restructuring program Significant cost savings will be realised following implementation of the recent announcements in staff and management positions. Sinter Plant Upgrade Feasibility work is well advanced to expand capacity of the sinter plant. Additional high grade sinter will reduce the cost of raw material feed. Supply Chain Velocity Work has commenced on initiatives to further lower working capital. Continued conversion cost focus Targeted programs to further reduce cost base. Page 22
EBIT A$ Millions Coated and Building Products Australia (excluding Packaging Products) another difficult year 250 238 200 156 150 100 50 0-50 2 102 (35) (18) 104 16 15 (18) (3) -100-150 (89) FY June 03 FY June 04 FY June 05 Export Prices Domestic Prices Mix Conversion & Oth Costs (67) Raw Materials - Zinc & Aluminium Raw Materials - Steel / Other Other FY2006 Pre One-offs One-offs FY June 06 FY2006 vs. FY2005 Lower export prices and steel input costs reflecting lower average global steel prices Total despatch volumes consistent with last year, but shift to export (record despatches in Q4) Significant increase in zinc and aluminium costs (mainly H2) Conversion costs mainly Western Port HSM fire Improved domestic pricing in building market One-offs reflect restructuring, including exiting Solid Block Painting Page 23
EBIT A$ Millions Coated and Building Products Australia Packaging Products Closure of tin mill announced 29 June 0 FY June 03 FY June 04 FY June 05 Prices Volume Conversion & Oth Costs Other FY2006 Pre One-offs One-offs FY June 06-50 (41) (45) -100 24-150 31-200 (185) (31) (11) (172) (23) (195) -250 FY2006 vs. FY2005 Significant impairment and restructuring in both years - $120M in 2006, $97M in 2005 Improved domestic pricing, but lower domestic volumes and No. 2 Electrolytic Tinning Line closure affect conversion costs Closure Decision on 29 June to exit tinplating business Timing to follow discussions with customers Approx 250 positions redundant Pickle line and cold mill to continue Page 24
EBIT A$ Millions New Zealand and Pacific Steel Products second best year FY2006 vs. FY2005 Sales revenue down 5% to A$709m EBIT down 44% to A$105m second best year ever FY2006 return on net assets (pre-tax) 32% 200 180 $189m 160 140 120 100 ($28m) ($12m) ($30m) $3m $105m 80 60 $49m $62m ($17m) 40 20 0 FY June 03 FY June 04 FY June 05 Prices Volume Conversion & Oth Costs Raw Material Costs Other FY June 06 FY2006 vs. FY2005 Softer NZ residential market Lower steel prices and volumes in export markets Higher electricity costs due to drought Lower vanadium sales prices Production issues Higher zinc and aluminium costs Page 25
EBIT A$ Millions Coated and Building Products Asia it is time to deliver FY2006 vs. FY2005 Sales revenue up 5% to A$1,075m, including A$227m from BlueScope Butler China EBIT down 101% to (A$1m) FY2006 return on net assets annualised (pre-tax) 0% EBIT variance analysis Main variances Lower sales prices across Asia Higher unit costs from ramp-up of new facilities (Thailand, Vietnam & China) Higher zinc and aluminium costs Taiwan performance and closure Partly offset lower HRC & CRC feed costs 120 100 80 102 84 83 60 40 (41) (3) 34 25 20 (2) 0-20 (46) FY June 03 FY June 04 FY June 05 Prices Volume / Mix Conversion & Oth Costs Raw Material Costs Other FY2006 Pre One-offs (26) (1) One-offs FY June 06 Page 26
Our Asian Coating / Painting / Roll-Forming / PEB Capacity to double by FY2009 (k tonnes) 1100 1000 900 800 700 600 500 400 300 200 100 0 490 175 990 FY2006 FY2007 FY2008 FY2009 Metal coating By Region X 2 X 2.4 Painting 420 Page 27
EBIT A$ Millions Hot Rolled Products North America another excellent year New reporting segment comprising: 240 220 200 180 160 140 120 100 80 60 40 20 North Star BlueScope Steel (50% interest) Castrip LLC and North American and European sales offices FY2006 vs. FY2005 EBIT variance analysis 83 78 199 14 (25) 188 FY2006 vs. FY2005 (North Star BlueScope 50% only) Sales revenue down 7% to A$712m EBIT down 13% to A$169m lower scrap / HRC spread FY2006 return on net assets (pretax) 63% Other headlines (North Star BlueScope Steel) Record annual production and despatches of 1.9mt (100%) Paid dividends to BSL of A$168m in FY2006 0 FY June 03 FY June 04 FY June 05 Trading offices North Star FY June 06 Page 28
EBIT A$ Millions Coated and Building Products North America acquisition turnaround 50 40 30 20 10 0-10 -20-30 -40 Comprises: Butler buildings Vistawall FY2006 vs FY2005 EBIT variance (19) (28) (18) 5 FY June 03 FY June 04 FY June 05 Volume Net Price Raw Materials Conversion & Other Costs 10 39 (9) Performance FY2006 vs. FY2005 Buildings Increased despatches Higher transition costs associated with closing Galesburg and opening new Tennessee plant Vistawall Higher sales Partly offset by higher aluminium and energy costs 27 FY June 06 Sales revenue up 7% to A$1,213m EBIT to A$27m (turnaround) FY2006 return on net assets (pre-tax) 12% Page 29
Balance sheet BlueScope to focus on working capital As at A$ Millions 30 June 2006 31 December 2005 Assets Cash 62 79 Receivables 1,344 1,081 Inventory 1,329 1,439 Other Assets 783 732 Net Fixed Assets 3,743 3,592 Total Assets 7,261 6,923 Liabilities Creditors 959 728 Interest Bearing Liabilities 1,952 1,709 Provisions & other Liabilities 1,265 1,207 Total Liabilities 4,176 3,644 Net Assets 3,085 3,279 Net Debt / (Net Debt + Equity) 38.0% 33.2% Page 30
Cash - $551 million to shareholders and $816 million in capex A$ millions 2002 (1) 2003 2004 2005 2006-1H 2006-2H 2006 Cash from operations 795 1,012 1,671 569 334 903 Working Capital Movement (31) (94) (432) (222) 122 (100) Net operating cashflow before borrowing costs and income tax 381 764 918 1,239 347 456 803 Net investing cashflows - Capital expenditure & Investments - Other (162) 8 (209) 44 (585) 7 (663) 41 (381) 15 (435) 8 (816) 23 Net cashflow before financing & tax 227 599 340 617 (19) 29 10 Net financing cashflow (468) 309 348 642 230 872 Payment of income tax (29) (119) (312) (240) (116) (356) Share buy-back (26) (259) (327) (74) (21) (95) Dividends - ordinary (75) (191) (273) (174) (140) (314) - special - (53) (75) (142) - (142) Net increase in cash held 1 27 (22) (7) (18) (25) (1) 2002 normalised. (2) All periods normalised to reflect sale of receivables program cash flow movements as debt. Page 31
Global steel industry currently squeezed by China s increased steel making capacity and higher raw material costs Million tonnes 450 400 350 China Crude Steel Production 349 411 300 280 250 222 200 182 151 150 93 95 101 109 115 124 127 100 50 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sources: IISI, BSL Research $700 Asian HRC Benchmark Price SBB HRC East Asia Import CFR 70 JSM Benchmark Prices, Lump Iron Ore (1987-2006) $600 60 $500 50 US$/mt $400 $300 40 30 $200 20 $100 Source: Steel Business Briefing $0 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 10 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 US$ / DMT. Lump trend indicative of all iron ore types. Source: CRU Page 32
Million Tonnes World crude steel production - 1950 to 2005 China driving growth Compound Annual Growth Rates 2.8% 1200 1000 0.3% 3.1% China: 9.1% 800 6.0% USSR: -4.1% World Excluding USSR: 1.1% World Excluding China: 1.2% (1995-2005) 600 400 Japan: 6.9% World Excluding Japan: 1.8% (1980-1995) 200 (1965-1980) 1950 1960 1970 1980 1990 2000 2005 0 Source: IISI, BSL Page 33
Global steel industry consolidation into mega companies 120 100 80 60 80mt GAP 40 20 0 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Page 34 Arcelor + Mittal POSCO JFE Nippon Steel Baosteel US Steel Nucor Corus Severstal Thyssen Krupp Evraz Gerdau Wuhan ChinaSteel Maanshan BlueScope CSN SSAB Tata Steel Base Production (Mt) Revenue (US$m)
Global steel industry our long term view has not changed Current industry issues: China s capacity growth / fragmentation Higher raw material costs Higher energy and other costs (coating metals) Increased volatility Steel availability Non-China steel world Continued production and capex discipline Continuing industry consolidation India growing steel requirements (3-5 years) Likely industry outcomes long term: China steel reform initiatives taken / exports discouraged China increased demand / steel displaces other materials Prices and spreads improve and then stabilise Raw material costs moderate steel industry backward integrates Other costs remain high Competition BUT on increased global demand Expansion programs being re-evaluated Consolidation continues Page 35
Value added solutions - we recently have had Olympic success in China Page 36
BlueScope Coated Steel China June 2006 Page 37
Questions Strong Strong Board Board & Management Team Team Profitable Profitable Through Through the the Cycle Cycle Dynamic Dynamic Global Global Steel Steel Market Market Value Value Added Added Branded Branded Products Products Growth Growth Opportunities in in Asia Asia A VERY DIFFERENT KIND OF STEEL COMPANY Strong Strong Operating Operating Track Track Record Record Strong Strong and and Flexible Flexible Capital Capital Structure Structure Consistently Strong Strong Cash Cash Flows Flows Geographic Geographic and and Product Product Diversity Diversity Low Low Cost Cost Producer Producer Page 38
The 11 th Annual JP Morgan Asia Pacific Conference, New York Kirby Adams, Managing Director and Chief Executive Officer 25 to 27 September 2006 ASX Code: BSL
Supporting Information Page 40
Employee profile by country China 1969 SE Asia 2342 30 June 2006 Other 70 North America 4066 Australia 8445 1384 New Zealand and Pacific Islands Total 18,276 Page 41
Hot Rolled Products Australia - product flow (Indicative) FY2006 Approximately 50% sold externally Port Kembla Steelworks 5.3mt slab FY2006 (5.1mt slab FY2005) Approximately 50% Further processed internally Export Slab (1) 27% (20%) Hot Strip Mill (1) 49% (51%) Plate Mill 8% (8%) C&BP Australia (2) (Western Port) 16% (21%) Export HRC 25% (12%) Domestic HRC 21% (28%) C & BP Australia (2) (Springhill) 54% (60%) Notes: (1) +400kt HSM expansion was completed July 2006. Technically it will take approximately 6 months to ramp-up production by the additional 400kt. This will reduce slab sales by an equivalent amount. (2) C&BP Australia is Coated and Building Products Australia Page 42
New Zealand Steel product flow* (FY2006) Mine Sites Iron Sand Concentrate 2.1mt * Indicative annual prime production and sales (t) Export Iron Sand Concentrate 0.9mt Export Vanadium Slag 15 kt New Zealand Steel 0.6mt Slab 0.6mt Hot Rolled Export Hot Rolled 39% (28%+11%) Cold Strip Mill 49% Domestic Pipe 4% Domestic Hot Rolled 8% Export Cold Rolled 14% (8%+ 6%) Coating lines 75% Domestic Cold Rolled 11% Export Painted 7% (5%+2%) Export Metal Coated 17% (10% + 7%) Domestic Metal Coated 57% Domestic Painted 19% (External % + Internal %) Page 43
North Star BlueScope Steel EAF operational excellence Focus on energy management given recent spike in electricity and natural gas prices Natural Gas Consumption Electricity Consumption (MMBTU per ton, FY) (KWH per ton, FY) 2002 2003 2004 2005 2006 Tap to Tap Time (minutes) 2002 2003 2004 2005 2006 EAF Power on Time per Heat (Minutes of Power Used per heat)) 2001 2002 2003 2004 2005 2006 Annual Steel Prod 1.5 1.6 1.6 1.7 1.8 1.9 (mtonnes) (100%) 2001 2002 2003 2004 2005 2006 Page 44
Castrip - scale comparison with current casting technologies 1-2m/minute Gas cutter Cooling 200-300 mm thick Reheat furnace Conventional Slab Casting Rougher Coil box 500-800 m Finisher Run out table cooling 1-10mm thick Coiler 20-40 metric ton coil Thin-Slab Casting 4-6 m/minute Finisher Run out table cooling 1-10mm thick Strip Casting 50-60mm thick Holding furnace 300-400 m Coiler 20-40 metric ton coil Scale Control Chamber 15-150 m/minute Run out table Mill cooling 60 m 0.7-1.8 mm thick Coiler 20-40 metric ton coil Page 45
Coated and Building Products Australia packaging products material flow chart 1. Pickling 4. Temper Rolling Single Reduce (TM1) or Double Reduce (TM2) Temper Mill 2 2. Cold Reduction 5. Electrolytic Tinning ET2 or ET3 3. Annealing 6. Final Processing Continuous or Cleaning....& Batch Page 46
From construction to production Major project capital spending profile All in A$million Total Est. Capex / Cost Actual to 30/6/05 Thailand Coating expansion 80 78 Vietnam Coating / Painting (1) 136 Indonesia Coating / Painting (3) (deferred in April 2006) 116 Actual FY2006 FY2007 FY2008 FY2009 145-10 - - - China - Coating and Painting Facility (3) 280 155 101 24 - - - Guangzhou Butler / Lysaght (4) 33 India - Butler / Lysaght facilities (3)(5) 44 11 21 12 - - - Coating / Painting (3)(5) Western Sydney Colorbond 130 12 65 53 - - Port Kembla: - HSM expansion 100 60 38 2 - - - Blast Furnace No. 5 Reline (6) 300 (4) 4 52 244 - Total spending on major projects 133 1,381 6-442 2 20 25-334 - - - - 2 - - 20 67 46 470 over 3 years - - (1) Key variation from total estimate to actual capex is currency movements. Original approved capital cost was $160m (2) Capital spent from approval to 30/06/06. (3) Estimated capital costs based on forecast exchange rate assumptions at time of project approval. (4) Key variation from total estimate to actual cost is better cost performance. Original approved capital cost was $35m (5) India developments represent BlueScope s 50% interest, noting these developments will be funded by the BlueScope Steel and Tata Steel joint venture. (6) Indicative, based on project study. Final cost and phasing confirmed later in CY2006 Page 47
India Pune Project operational ahead of schedule BUTLER PEB facility and Design Centre LYSAGHT rollforming facility Original scheduled completion second half CY2006 Commissioning commenced April 2006 First order despatched May 2006 Page 48
BlueScope Steel a global leader in adding value to hot rolled coil 51 56 52 49 Will increase to 56% with recently announced CAPEX (India) 45 42 40 40 37 35 33 32 VALUE-ADDING CAPABILITY (Metal Coating Capacity as % of HRC Capacity) A similarly strong downstream position in Painting #4 worldwide Rollforming #1 worldwide Pre Engineered Buildings #1 worldwide 29 29 28 25 25 25 24 23 22 22 20 20 16 15 15 15 15 13 13 13 10 10 10 8 7 7 7 5 4 3 BlueScope TKS AK Steel Kobe Steel Stelco Salzgitter Rautaruukki Arcelor Dofasco CSN Duferco Nisshin USS Sumitomo Handan Riva Tata Voestalpine ISG JFE USIMINAS Nippon SSAB Mittal Nucor NOTE: Compiled from the largest 60 steelmakers (excluding those who do not have flat steel metal coating capacity) Corus Panzhihua Techint POSCO Baosteel Severstal Magnitogorsk Novolipetsk NISCO Benxi Erdimir China Steel SAIL Ilyich Anshan Wuhan Source: IISI World Steel in Figures 2005, CRU Steel Sheet Quarterly April 2005 Page 49
Continued focus on branding of products and the provision of solutions PRODUCT Market leading differentiated coated steel and building solutions POSITIONING Market leading steel inspired solutions provider PRICE Commands premium in targeted segments BLUESCOPE STEEL PEOPLE Quality and diverse talents across the region focus in-country & across Divisions PROMOTION PLACE Corporate and product brand leadership Multi segment with selected channels to market Page 50
Value-added solutions Graffiti Remover Page 51
Value added PEB solutions - speed, cost effectiveness, broad application Example: 110,000m 2 facility, erected in 28 working days Wal*Mart Stores Distribution Centre (Arkansas) 1 July 9 July 23 2 3 July 30 August 6 4 Page 52
Metallic coated and painted value added products Framework for the future TRUECORE steel launched to market in July 2005. Product designed specifically for use in the Residential Framing market TRUECORE steel will become synonymous with the compelling value proposition for steel house frames. Page 53
Ongoing growth is also expected in South East Asia, supported by improving domestic demand, growing intra-asian trade and strong foreign investment 12 8 GDP - Thailand F cast 12 8 GDP - Malaysia F cast Annual % Change 4 0-4 -8 Annual % Change 4 0-4 -8 Annual % Change -12 95 96 97 98 99 00 01 02 03 04 05 06 07 12 8 4 0-4 -8-12 GDP - Indonesia and Vietnam Vietnam F cast Indonesia 95 96 97 98 99 00 01 02 03 04 05 06 07 US$billion -12 18 16 14 12 10 8 6 4 2 0 95 96 97 98 99 00 01 02 03 04 05 06 07 Inward Foreign Direct Investment [Thailand, Malaysia, Indonesia, and Vietnam] F cast 01 02 03 04 05e 06 07 Sources: EIU, BlueScope Steel Economics. Notes: All charts include calendar year data Page 54
Industrial production growth in China and India has stabilised at a high level, maintaining pressure on demand for commodities and metals Annual % Change 12 10 8 6 4 2 India China GDP F cast Annual % Change 20 15 10 5 China India Industrial Production F cast Annual % Change 0 0 95 96 97 98 99 00 01 02 03 04 05 06 07 95 96 97 98 99 00 01 02 03 04 05 06 07 24 20 16 12 8 4 0 Gross Fixed Investment F cast China India Inward Foreign Direct Investment 95 96 97 98 99 00 01 02 03 04 05 06 07 01 02 03 04 05 06 07 Sources: EIU, Consensus Economics, BlueScope Steel Economics. Notes: Data is calendar year for China, and fiscal yr beginning April for India. Year 05 data for India are estimates US$billion 90 80 70 60 50 40 30 F cast India (RHS) China (LHS) 12 10 8 6 4 2 0 Page 55
Indonesia Our markets Construction sector accounts for 99% of sales Approximately 50/50 split between industrial & commercial and residential segments Market share is growing through industry leadership in intermaterial growth, ie steel replacing timber trusses and concrete roof tiles. Inter-material Share Construction Segment 2005 Construction Investment - Constant US$ Million Other 7% Steel 8% 10000 9000 Residential Non-Residential Civil Engineering 8000 7000 Timber 25% 6000 5000 4000 Concrete 60% 3000 2000 1000 0 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 Includes roof cladding, purlins, walling, partitions, cable tray, decking, frames, door/window frame, walling etc. Source: BlueScope Steel Economics Source: extrapolated from PT. Data Consult report Page 56
Thailand Our markets BlueScope Steel Thailand principally targets the industrial / commercial construction segment In FY05 approximately 55 % of domestic prime sales went to this segment, with the balance spread between manufacturing (30%) and residential (15%). This segment is expected to continue to grow in the medium term Area in '000m2 12,000 10,000 8,000 6,000 4,000 Approved Commercial and Industrial construction (Thailand Municipal Zone) F Cast Inter Material share (FY04/05) Roofing and walling for industrial / commercial construction Concrete 30% Steel 40% 2,000 0 1996 1998 2000 2002 2004 2006 2008 2010 Calendar Year Source: BIS Shrapnel Report Building and Construction in Asia 2005/06-2010 Asbestos Compressed Sheet 30% Page 57
Vietnam Our markets Vietnam Construction Growth 20% 17.9% 17.9% 15.4% 15% 12.9% 11.0% 9.2% 10% 5% 0% 2002 2003 2004 2005 2006e 2007f'cast Source: General Statistics Office & Shrapnel Inter-material Share FY06 - Roofing & Walling Market Tiles, 5% Principally a residential (60%) and industrial / commercial /Govt (30%) construction market in Vietnam. Estimated FY 06 sales mix residential (55%) and industrial/commercial/govt (45%). Coated steel market is forecast to grow at 6.5% to 7% pa over coming decade. High steel share of cladding market (59%) with users very familiar with steel solutions. Increasing proportion of painted product, although unpainted products will continue to dominate the market. Expanding sales into residential markets through increasing penetration of steel truss and metal tiles solutions. Concrete, 20% Others, 16% (Asbestos/ Fibre Cement, Leaf) Steel, 59% Domestic Sourcing: Imports (1) Metal coated 80% 20% (2) Painted 70% 30% Source: Mekong Research, BlueScope Steel Vietnam estimates Page 58
India Our markets % GDP Rea 25 20 15 10 5 Construction Sector Growth - India Asbestos Sheet 21% Others 5% Intermaterial Share* 2003/4 Reinforced Concrete 45% 0 June Q'04 Sep Q'04 Dec Q'04 Mar Q'04 June Q'05 Sep Q'05 Source: Reserve Bank of India Dec Q'05 Steel 29% * Industrial Building, Roofing and Walling (Source: Tata BlueScope Steel analysis) Industrial / commercial construction segment is the fastest growing but residential remains the biggest Industrial construction while only 10% of total construction investment, is expected to grow at CAGR of 33% over the next 5 years (source: CRIS Infac) Page 59
Our record since public listing revenue & EBITDA Revenue (A$ Billions) 8,800 8,000 7,200 6,400 5,600 4,800 4,000 3,200 2,400 1,600 800 0 Revenue (A$m) EBITDA (A$m) FY2003 FY2004 FY2005 FY2006 Despatches (net) 6.76 6.93 7.16 7.59 Revenue (A$m) 5,302 5,770 7,965 8,031 EBITDA (A$m) 881 1,104 1,655 850 1800 1600 1400 1200 1000 800 600 400 200 0 EBITDA (A$ Millions) Page 60
Australian despatches decline on weak manufacturing / strong A$ mt 3.0 2.0 1.0 0 FY2005 52% Non-dwelling 22% (0.652) Dwelling 18% (0.534) Engineering 12% Manufacturing 16% Agriculture & Mining 12% Auto & Transport 11% Packaging 9% Sales Tonnes Construction FY2006 57% Non-dwelling 23% (0.546) Dwelling 22% (0.523) Engineering 12% Manufacturing 15% Agriculture & Mining 11% Auto & Transport 11% Packaging 6% Australian sales tonnes lower across all segments in FY2006 to varying degree. Western Port fire affected year. In sales volume terms: Dwelling (down 2%) Housing slower in NSW & Vic BSL sales tonnes down marginally on 2005 but o Colorbond sales strong o residential framing growth exceeding expectations Non-dwelling (down 16%) Steel demand remains strong BSL sales tonnes decline on galvanised imports Manufacturing (down 25%) Industry closures / off shoring Imports of tinned food by grocers 2.965 mt Despatches 2.375mt Page 61
Huge increase in FY2006 Zinc and Aluminium costs Tonnes Zinc Aluminium AUSTRALIA Springhill 21,250 10,000 Western Port 17,500 9,500 Sub-total 38,750 19,500 NEW ZEALAND 6,500 3,500 NORTH AMERICA Vistawall - 30,000 ASIA 12,250 11,250 TOTAL 57,500 64,250 Note: In future years BSL Asia s usage will increase as new mid-stream projects come into operation and ramp-up to capacity Page 62
Port Kembla Steelworks despatches stronger production Australian external demand lower (ktonnes) External Product Sales Mix 2800 2600 2400 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0 2,332 23% 2,589 32% 23% 20% 2,579 41% 16% 2,723 40% 15% 54% 48% 43% 45% FY05-1H FY05-2H FY06-1H FY06-2H Internal Domestic Exports * * Including BlueScope Steel Asia feed Slab 34% 51% 54% 42% HRC 48% 36% 35% 45% Plate/Other 18% 13% 11% 13% Page 63
EBIT remains sensitive to realised hot rolled coil prices and raw material costs both were adverse in FY2006 Estimated impact on forecast EBIT (A$mil) Assumption Full Year (current) Full Year (previous) +/ US$25 / tonne movement in BlueScope s average realised export 86 76 HRC price (1) +/ 1 movement in Australian dollar / US dollar exchange rate (2) 10 7 +/ US$10 / tonne movement in NSBSL HRC price to scrap spread +/ 2% movement in slab production in Australia, New Zealand & USA +/ US$10 / tonne movement in coal costs (3) 50 13 13 17 17 +/ US$10 / tonne movement in iron ore costs (3) 100 100 (1) The change in export HRC price assumes proportional effect on export slab, and flow on to domestic pipe and tube market and to other export products. This does not include the potential impact on Australian domestic coated product prices, as the flow on effect in the short term is less certain. (2) The movement in the Australian dollar/us dollar exchange rate includes the restatement of US dollar denominated receivables and payables and the impact of translating the earnings of offshore operations to A$. (3) Coal and iron ore US dollar prices are predominantly locked in for FY2007. 50 Page 64
Improved disclosure new Slab and HRC price benchmarks Previously recommended the Japan to Korea HRC price as being a reasonable public benchmark for BlueScope s domestic and Asian HRC sales still valid and Continue to recommend the following better benchmarks HRC Steel Business Briefing HRC East Asia Import CFR $700 $600 Asian HRC Benchmark Price SBB HRC East Asia Import CFR $500 $400 SLAB Steel Business Briefing Slab East Asia Import CFR US$/mt $300 $200 $100 Source: Steel Business Briefing $0 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Page 65
The 11 th Annual JP Morgan Asia Pacific Conference, New York Kirby Adams, Managing Director and Chief Executive Officer 25 to 27 September 2006 ASX Code: BSL