AGM Presentation - Managing Director & CEO Update Paul O Malley, Managing Director and Chief Executive Officer 13 November 28 ASX Code: BSL
Safety Our target remains Zero Harm Lost time injuries per million man-hours worked 16 14 12 1 8 6 4 2 14 8 Lost Time Injury Frequency Rate 4.8 3.5 4.1 3.5 2.8 1.8 NSW Manufacturing 1.5 25 27.9 26 24.4 27 23.8 Reported performance for IISI member companies (employees & contractors).9.8.5.6.8 Medically treated injuries per million man-hours worked 6 5 4 3 2 1 52 Medically Treated Injury Frequency Rate 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 (3) (1) Fiscal Years (2) (3) (1)&(2) Notes: Notes: (1) Includes contractors from 1996 (1) Includes contractors from 24 (2) Includes Butler from 24 (2) Includes Butler from 24 (3) Excludes SSX Distribution & IMSA acquisitions (3) Excludes SSX Distribution & IMSA acquisitions Includes acquisitions 47 29 22 22 17 Includes acquisitions 12 9 8.2 9.3 6.5 6.6 4. 6.2 Page 2
Extent of our Zero Harm Challenge 5 4 3 2 1 Injury Performance 7/8.6 LTIFR 4.4 3 25 2 15 1 5 4. BlueScope Steel Acquisitions MTIFR 29.3 We are urgently leveraging BlueScope s safety capabilities across our recent acquisitions. 25% increase in new employees; and 9% increase in number of stand-alone manufacturing or distribution sites. Number of Employees & stand-alone Sites Asia 12 16 1 8 12 6 8 4 2 4 Jun 7 Jun 8 Jun 7 Jun 8 Australia & New Zealand 12 16 1 8 12 6 8 4 2 4 Jun 7 Jun 8 Jun 7 Jun 8 North America 12 16 1 8 12 6 8 4 4 2 Jun 7 Jun 8 Jun 7 Jun 8 No. of employees No. of sites Page 3
Environment Page 4
Water conservation programs Water an important element in steelmaking Major recycled water initiatives in place at Port Kembla and Western Port Steelworks Port Kembla reaches 1 billionth litre milestone Page 5
Water conservation programs BlueScope Steel in partnership with Victorian government and South East Water undertaking major water recycling project at Western Port Will cut fresh water use by 6% Project completion by end 29 Page 6
Carbon Pollution Reduction Scheme Federal government proposed a CPRS Policy detail needs refining Assistance to be set to address competitiveness Effective and enforceable international action to cut emissions is required Continue engaging with government on scheme design Draft legislation due in December 28 Expected passage of legislation by mid-29 Page 7
Looking beyond the short term Page 8
From the October 3 th market update Expected strong first half result based on $43 million 1Q profit but second half challenging Blueprint initiatives and momentum already paying off Strong balance sheet Solid cash position and gearing Positive long term outlook driven by global steel demand Page 9
BlueScope is an outstanding business Corporate / Group Australia New Zealand Asia North America Coated & Industrial Products Australia Australian Distribution & Solutions New Zealand & Pacific Islands Products Coated & Building Products Asia Hot Rolled Products North America Coated & Building Products North America Leading supplier of flat steel products in Australia Global scale steel works Largest supplier of metal coated and painted steel in Australia Port Kembla Steelworks, NSW Springhill, NSW Western Port, VIC Western Sydney Colorbond facility, NSW North America, Europe & Asia Export trading offices Leading supplier of flat steel solutions in Australia BlueScope Steel Distribution Lysaght Rollforming BlueScope Water Services Centres BlueScope Buildings Only fully integrated flat steel maker in New Zealand Leading domestic market share of flat products Glenbrook, NZ Pacific Islands Pre-eminent seller of branded steel in Asia Lower cost backward integration growth strategy 5:5 joint venture with Cargill Inc. Again voted no. 1 flat rolled steel supplier in Indonesian, Malaysian, Thailand and Vietnamese Delta, Ohio operations China, including Butler Lysaght Asia India Tata BlueScope JV North America (Jacobson Survey) Pre-eminent global designer / supplier Pre-engineered buildings No. 2 position in North America and no. 1 in China IMSA assets (from Feb 28) Butler Buildings Varco Pruden Buildings MetlSpan ASC Profiles Steelscape HCI Page 1
BlueScope continues to pursue a strategy to maximise value and preserve financial flexibility Page 11
The Blueprint is our tool for focusing on the key performance drivers KPI Extract: Australia/New Zealand Blueprint Basic Rationale 1. Increase Customer and Market Focus Key controllable drivers of revenue 2. Improve Productivity Year on Year 3. Optimise Return on Capital Remaining competitive with off-shore steel producers requires lowest possible cost base and full utilisation of capital assets, with maintained or improved service levels Minimising unproductive capital adds shareholder value and frees resources for productive investments Page 12
With further detailed initiatives to improve cashflow & earnings Key Action Item R&M & Capex Significant reduction / slow down & deferral with focus on maintaining operational performance. Constrain growth capital. Working capital Labour cost Production scheduling Relentless focus on Blueprint KPI basics of inventory, creditor and debtor days. Reduction in overtime, casual & contractor hours. Ongoing business improvements. Manufacturing production scheduled to minimise cash costs. Plant rationalisations Fast tracking US manufacturing footprint rationalisation. Discretionary spend Reduce consultants, travel, marketing/advertising & promotion. Page 13
Balance Sheet Gearing (net debt to net debt + equity) remains strong 5% 4% 35% 3% 32% 4% 3% Target Range Currently expect gearing to be within target range as at 31 December 28 2% 1% Dec 31 27 Feb 1 28 June 3 28 Page 14
AUD$M FY219 FY22 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 Debt maturity profile significantly improved with sizeable committed and undrawn lines available PRE REFINANCING POST REFINANCING 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 Working Cap Bridge 5 yr LNF 3 yr LNF 364 day USPP 1 AUD =.7991 USD (3 September 28) Page 15 AUD$M FY215 FY214 FY213 FY212 FY211 FY21 FY29 FY22 FY219 FY218 FY217 FY216 FY216 FY215 FY214 FY213 FY212 FY211 FY21 FY29 FY218 FY217
Industry Overview Page 16
Long term growth in steel demand APPARENT CRUDE STEEL CONSUMPTION (mtonnes) +57% 1,4 1,3 1,2 1,1 1, 9 8 7 6 5 4 3 18 847 29 3 138 133 162 8 +17% +115% -1% 2 1,74 33 37 297 124 166 81 +47% +44% +3% 1,33 24 53 55 428 114 185 85 Brazil Russia India China US West n Eur (EU15) Japan RoW 2 1 257 +24% 318 +21% 386 Source: IISI Steel Statistical Yearbook 28. 2 24 27 Year Page 17
with demand underpinned by urbanisation in China... 1,5, Rural population (thousands) Urban population (thousands) China : Total Population ( s) 1,25, 1,, 75, 5, 25, Urbanisation % 195 1955 196 1965 197 1975 198 1985 199 1995 2 25 21 215 22 225 23 235 24 245 25 13% 14% 16% 17% 17% 17% 19% 23% 27% 31% 35% 4% 45% 49% 53% 56% 6% 63% 66% 7% 73% Source : United Nations 28 Page 18
and steel intensity likely to increase CRUDE STEEL INTENSITY Kg/capita 1,2 1, 8 6 4 2 India (1994 25) South Korea (197 26) China (197 26) 5, 1, 15, 2, 25, 3, 35, 4, Developing Asia (1994 25) Taiwan (197 26) Japan (1955 26) USA (19 26) GDP at 2 PPP/capita USD/capita 1 to 15 more years of strong growth in China until steel intensity curve flattens China and India are at a very low point on thier steel intensity curve providing significant upside potential driven by industrialisation and urbanisation Source: Global Insight; IMF; OECD; IISI; USGS; JFK Page 19
Business Update and Outlook Page 2
NPAT A$ Millions BlueScope Steel Underlying Consolidated Net Profit After Tax (NPAT) - a strong first quarter / challenging second half 1Q FY 29 (vs 2H FY8) 6 5 4 Underlying NPAT 511 Approx 43 Principal drivers: Higher global US$ export steel prices Improved earnings contribution from recent acquisitions (Distribution and IMSA) Stronger external Australian sales 3 35 (Unaudited) 2Q FY 29 (vs 1Q 29) Result will be lower than 1Q largely due to: 2 higher raw material costs (vs lower cost c/f into 1Q) 1 softer export steel prices for some despatches reduced external export (principally slab) despatches FY8-1H FY8-2H FY9-1Q commenced slab inventory build to meet customer needs during reline in 3Q and 4Q lower contribution from North Star - reduced spread and despatches 1H 8 2H 8 Asia - continued political issues in Thailand Underlying 35 511 Partly offset by: Reported 116 48 continued solid Australian earnings. Page 21
Business outlook - 2H FY9 & FY21 onwards 2H FY29 Lower steel spread (vs 1H9) BF No.5 reline and sinter plant upgrade will proceed on schedule (March June 29) Delivery of synergy benefits from FY8 acquisitions Challenging market conditions, particularly in USA & Asia Acceleration of Blueprint initiatives Maintain close relationships with customers FY21 Onwards Expected improvement in spread due to: higher steel prices and demand relative to 2H FY29; and Expected lower raw material costs Long term cost benefit from sinter plant upgrade (less pellets/more fines) and blast furnace reline Continued delivery of Acquisition synergy benefits plus Blueprint initiatives Introduction of Emissions Trading Scheme. Page 22
Summary Page 23
Summary BlueScope is an outstanding company diversified business low cost producer strong brand & customer reach Operating today in a challenging environment Well positioned to be successful beyond the short term on the back of renewed growth in the developing world With a focus on cashflow and balance sheet strength And improving cost competitiveness Page 24
AGM Presentation - Managing Director & CEO Update Paul O Malley, Managing Director and Chief Executive Officer 13 November 28 ASX Code: BSL