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Baoshan Iron & Steel Co.,Ltd.
2011 Full Year Results
April 2012
Disclaimer
The following presentation distributed herewith includes forward-looking statements. All statements, other than statements of historical facts, that address activities, events
or developments that Baoshan Iron & Steel Co.,Ltd.(Baosteel) expects or anticipates will or may occur in the future are forward-looking statements.
Baosteel’s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to price fluctuations, actual demand, exchange rate fluctuations, competition and other risks and factors beyond our control.
I. Operation Results
II. Industry Dynamics
III.Company Outlook
� Production and Sales
unit::::million tons 2009 2010 2011 YoY
Crude steel output 23.86 26.45 26.64 0.72%
Sales of finished products 22.43 25.26 25.80 2.14%
including::::domestic 20.72 22.93 23.06 0.57%
export 1.71 2.33 2.74 17.60%
� Sales Breakdown of Finished Products
Note:BNA included,unit:million tons
unit::::million tons
billion YuanSales Revenue YoY Cost YoY
Gross
marginYoY
CRC 9.53 59.0 3.5% 51.7 18.3% 12.33% ↓↓↓↓11.02 ppts
HRC 8.30 38.8 11.4% 34.6 19.4% 10.86% ↓↓↓↓6.04 ppts
Plate 2.32 11.7 16.4% 12.8 25.0% -8.86% ↓↓↓↓7.48 ppts
Tube 1.50 10.8 6.7% 9.8 7.7% 9.45% ↓↓↓↓0.82 ppts
Stainless steel 1.35 18.0 2.0% 17.8 3.5% 1.37% ↓↓↓↓1.40 ppts
Special steel 0.96 11.2 14.4% 11.3 15.1% -0.91% ↓↓↓↓0.68 ppts
Others 1.84 8.8 12.9% 8.8 13.9% 0.00% ↓↓↓↓0.86 ppts
Total 25.80 158.4 7.5% 146.8 15.8% 7.33% ↓↓↓↓6.67 ppts
� Gross Profit--Products
� Domestic Market Share
50%
39%
29%26% 26%
24%22%
19%17%
6%
0%
10%
20%
30%
40%
50%
60%
Auto sheet
High-strength machinery steel
Home appliances sheet
Tin plate
Packaging steel
Oil exploration tube
Boiler tube
Silicon steel
HFW pipe
Ship plate
� Income Statement Summary
unit::::billion Yuan 2009 2010 2011 YoY
Revenue 148.53 202.41 222.86 10.10%
Cost 142.12 186.59 214.64 15.03%
Gross profit 14.07 24.33 19.61
Gross margin%%%% 9.47 12.02 8.80 ↓↓↓↓3.22 ppts
Operating profit 7.25 16.67 8.84
Operating margin%%%% 4.88 8.24 3.97 ↓↓↓↓4.27 ppts
Net profit 5.82 12.89 7.36
Net profit margin%%%% 3.92 6.37 3.30 ↓↓↓↓3.07 ppts
� Dividend Distribution
unit 2008 2009 2010 2011
Dividend per share Yuan 0.18 0.20 0.30 0.20
Dividend/Unconsolidated net income % 62.1 69.0 45.8 69.2
Dividend/Consolidated net income % 46.0 60.2 40.8 47.6
Note: 2011 dividend is subject to approval of shareholders’ meeting.
unit::::Yuan 2009 2010 2011 YoY
EPS 0.33 0.74 0.42 -43.24%
BVPS 5.43 5.98 6.08 1.67%
Net CFO per share 1.37 1.08 0.69 -36.11%
Gross margin% 9.43 13.25 8.75 ↓↓↓↓4.50 ppts
ROE (weighted)% 6.27 12.95 7.02 ↓↓↓↓5.93 ppts
� Financial Highlights
Financial index unit 2010-12-31 2011-12-31 Change
Solvency
Total debts/
total assets%%%% 48.47 50.89 ↑↑↑↑2.42 ppts
Current ratio 0.94 0.80 ↓↓↓↓0.14
Quick ratio 0.42 0.42 0
Financial index unit 2010-12-31 2011-12-31 Change
Liquidity
Days of receivables day 5.6 8.4 50.0%
Days of inventories day 70.7 74.9 5.9%
Cash conversion
cycleday 41.4 51.1 23.4%
� Solvency and Liquidity
� 2011 Accomplishments
Improve Product Profitability
• Auto sheet sales 4.55 million tons, maintaining market share of 50%.
Reduce Cost
• Optimize coal mix and alloy mix to reduce the cost.
Improve Customer Service Ability
• Build customer-oriented sales mechanism.
• Strengthen customer technical support and cooperation.
� 2011 Accomplishments
Environment Protection
• Issue the first 《Green Purchasing Guideline》 in domestic steel industry.
Capex
• Capex is 16.6 billion Yuan in 2011.
I. Operation Results
II. Industry Dynamics
III.Company Outlook
� Macro Economy-International
2011:
• Developed economies still shadowed in the crisis.
• Domestic demand of emerging economies grew fast.
• Development of main emerging economies slowed down.
2012:
• High possibility of sovereign debt degrading in euro-zone.
• Risk of double-dip recession increases.
• Global economy growth slows down to about 3%.
� Macro Economy-Domestic
• GDP up 9.2% in 2011, down 1.2 ppts
YoY due to government macro control.
• GDP growth target is 7.5% in 2012.
Data source: wind
• CPI up 5.4% in 2011, 1.4 ppts above
the target.
• 2H2011 CPI slowed down, targeting 4%
in 2012.
GDP growth, YoY(%)
8.3
9.1
10 10.1
11.3
12.7
14.2
9.69.2
10.4
9.2
7.56810121416
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012(E)
CPI growth, YoY(%)
4.9 4.9
5.4 5.35.5
6.4 6.56.2 6.1
5.5
4.2 4.1
3
4
5
6
7
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
� Demand and Supply Analysis--Supply(Crude Steel)
• Crude steel output still grew fast in 2011.
• Daily output peaked nearly 2 million tons in June, while gradually decreased in H2. The lowest level was 1.66 million tons in November.
• 28 million tons capacity was eliminated in 2011, environment compliance will be the main criteria in 2012.
• Output growth is expected to slow down to 6% in 2012.
Data resource: CISA
Unit: million tons 2009 2010 2011 YoY 2012E
Output 568568568568 627627627627 683683683683 8.9%8.9%8.9%8.9% 720720720720
Net export 3333 27272727 35353535 22.2%22.2%22.2%22.2% 35353535
Apparent
Consumption 565565565565 599599599599 648648648648 5.5%5.5%5.5%5.5% 690690690690
� Demand and Supply Analysis--Import & Export
• Export 48.9 million tons in 2011, up 15.1% YoY.
• Export and import are expected 50 and 15 million tons respectively in 2012.
Data resource: Wind, MIIT
Monthly net export
24.5
45.843.8
7.0
26.1
33.335.0
5
15
25
35
45
2006 2007 2008 2009 2010 2011 2012((((E))))
million tons ..
� Demand and Supply Analysis--Demand(Infrastructure)
• FAI 30.2 trillion Yuan in 2011, up 23.8% YoY, growth is expected to slow down
in the future.
• Ministry of railways plans 500 billion Yuan FAI in 2012.
FAIFAIFAIFAI
14.4
18.3
29.1 28.8
27.2
24.3
26.6
30.4
24.523.8
25.8
0
5000
10000
15000
20000
25000
30000
35000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
billion yuan
10
15
20
25
30
35
Year YoY(%)
Data source: wind
� Demand and Supply Analysis--Demand(Real Estate)
• Due to government policy, growth in housing investment, new start area and
sales slowed down.
• Major loosening is unlikely for real estate and monetary policy in 2012.
• 7 million set social housing project forms the major source of demand.
Investment
500
1500
2500
3500
4500
5500
6500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
billion yuan ..
0
0.5
1
1.5
2
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
billion square m
eters ...
New start area Sales area
Data source: wind
� Demand and Supply Analysis—Demand(Automobile)
• Growth significantly slowed down in 2011.
• Growth will be lower than previous years, expected 8% in 2012.
• Smaller size, lightweight cars, and rigid demand in second and third tier cities
still ensure room for growth, but at a lower rate.
Data source: wind
Output
35.20
14.1112.56
27.32
22.02
5.21
48.30
32.44
0.84
0.00
5.00
10.00
15.00
20.00
2003 2005 2007 2009 2011
million
0.00
10.00
20.00
30.00
40.00
50.00
output YoY%
Sales
34.21
15.5013.54
25.1321.84
6.70
46.15
32.37
2.45
0.00
5.00
10.00
15.00
20.00
2003 2005 2007 2009 2011
million
0.00
10.00
20.00
30.00
40.00
50.00
sales YoY%
� Demand and Supply Analysis--Demand(Home Appliance)
• Industry growth is stable.
• Demand growth is expected to slow down in 2012 with expiration of subsidy
policies .
• Air-conditioner is expected to grow 10%, refrigerator and washing machine
0-5% in 2012.
Output
0
50
100
150
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
In millions
washing machine refrigerator air-conditioner TV
Data source: wind
� Demand and Supply Analysis--Demand(Machinery)
• Machinery industry has peaked out.
• In the sub-industries:construction machinery and railway equipment
downward, ship building in deep recession, import substitution and nuclear
power equipment upward, coal mining equipment flat.
• Growth rate is expected 15% in 2012.
Machinery industry growth,YoY
26.21% 25.93% 25.62%25.06%
26.42%26.43%27.08%26.95%27.71%29.11%
29.07%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Jan-Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2009 2010 2011
Data source: CMIF
� Demand and Supply Analysis--Demand(Ship Building)
• Completion, new order and carrying order were :77, 36 and 150
million tonnages respectively in 2011, new order down 52% YoY,
carrying order down 24% YoY.
• Over-supply in ship plates will continue. Industry still in
depression, growth rate is expected -5% in 2012.
Data source: wind
Ship-building completion
6.15
3.08
7.40
5.99
7.147.87
8.62
5.53
10.14
6.507.23
14.90
0
2
4
6
8
10
12
14
16
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
In million tonnage
2006 2007 2008
2009 2010 2011
� Steel Inventory
• Year end inventory down 2.6% YoY.
• Inventory climbed to historical peak of 19 million tons in Feb. 2012, mostly
long product.
• Downward trend in the end of Q1.
Unit:
million tons
3-30-
2012
2-24-
2012
1-29-
2012
12-30-
2011
YoY
Change %
Rebar 8.07 8.45 6.66 4.86 0.45 10.2%
Wire 2.19 2.51 1.78 1.12 -0.08 -3.9%
HRC 4.42 4.66 4.30 4.03 -0.78 -16.3%
CRC 1.70 1.71 1.58 1.49 0.02 1.5%
Plate 1.51 1.60 1.52 1.39 0.02 1.3%
Long product 10.26 10.96 8.44 5.98 0.40 7.2%
Flat product 7.63 7.98 7.40 6.91 -0.74 -9.7%
Total 17.89 18.94 15.84 12.90 -0.34 -2.6%
Data source: Mysteel
� Iron Ore Inventory
• Iron ore port inventory up 29.3% in 2011.
• Inventory remains a high level in 2012, 98 million tons in 25 main ports
by 30th Mar.
Data source: Mysteel
Iron ore port inventory
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
Jan-10 Mar-10 May-10 Jul-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12
million tons
Australian Brazil India
� Raw Material Cost
• Iron ore price peaked at 190 USD/ton in 3Q2011, dropped to 120 USD/ton in Q4.
• In 2011, import 686 million tons, average price 164 USD/ton.
• Iron ore price is expected lower in 2012.
62%粉矿62%粉矿62%粉矿62%粉矿PlattsPlattsPlattsPlatts价格指数价格指数价格指数价格指数((((美元/干吨美元/干吨美元/干吨美元/干吨))))
2010-7-16, 1162010-7-16, 1162010-7-16, 1162010-7-16, 116
2010-4-20, 1862010-4-20, 1862010-4-20, 1862010-4-20, 186
2011-10-27,2011-10-27,2011-10-27,2011-10-27,120120120120
2011-9-7, 1832011-9-7, 1832011-9-7, 1832011-9-7, 1832011-3-15, 1652011-3-15, 1652011-3-15, 1652011-3-15, 1652011-2-15, 1932011-2-15, 1932011-2-15, 1932011-2-15, 193
100
110
120
130
140
150
160
170
180
190
200
1
月
2
月
3
月
4
月
5
月
6
月7
月8
月9
月1
0月1
1月1
2月2010年2011年
焦炭价格焦炭价格焦炭价格焦炭价格1500
1600
1700
1800
1900
2000
2100
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
Data source: Mysteel
Coke price
废钢价格废钢价格废钢价格废钢价格
2700
2900
3100
3300
3500
3700
3900
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12Scrap price
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010
2011
Platts(62%Fe)
� Steel Price
Unit:
Yuan/ton30-Mar MoM% YoY%
Average
2011YoY%
HRC 4330 0.7 -7.1 4718 9.6
CRC 5240 -0.2 -5.1 5467 -2.7
Plate 4440 2.1 -8.5 4803 9.9
Wire 4180 4.8 -8.5 4699 11.8
Rebar 4350 0.2 -11.0 4919 15.0
Data source: Mysteel
• In 2011, steel price declined after rise at first, with more fluctuation of long
product.
• Macro economic growth slows down in 2012. Steel consumption growth is
expected low. High cost and low profit remain, industry gross margin is
expected 2-3%.
� Market Trend
3000
3400
3800
4200
4600
5000
5400
5800
6200
6600
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12热轧3.0冷轧1.0螺纹20Ⅲ级
Data source: Mysteel
300040005000600070008000900010000
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12冷轧1.0镀锌1.0彩涂0.476硅钢600HR3.0
CR1.0
Rebar20III
CR1.0
Galvanized1.0
Prepainted0.476
Silicon600
I. Operation Results
II. Industry Dynamics
III.Company Outlook
� 2012 Company Outlook
2012 Plan Highlights
• Production: iron -23.25 million tons,
steel-25.25 million tons;
• Sales: 24.25 million tons;
• Total revenue: 216 billion Yuan;
• Cost: 196 billion Yuan.
• Promote synergy of production, sales and
research;
• Optimize product inventory management;
• Improve manufacturing process to reduce
the cost;
• Promote customer technical service
system and customer oriented marketing.
• General operating target:sales revenue 216 billion Yuan; Number One
and Only One products sales 11.6 million tons ; maintain outperformance in
the sector.
Unit: million tons 2011 % 2012E %
HRC 6.82 26% 6.67 27%
Plate 2.32 9% 1.86 8%
CRC 11.38 44% 11.56 47%
Tube 1.50 6% 1.88 8%
Others 1.84 7% 2.06 9%
Stainless steel 1.35 5% 0.36 1%
Special steel 0.96 4% 0.24 1%
Total 26.18 100% 24.64 100%
� 2012 Planned Sales
Note:BNA included;
Main changes in 2012 planned sales:
(1)Stainless and special steel assets sale completed on 1st April,
which only includes Q1 sales;
(2)Increase from new production line in Meishan Iron&Steel.
� Stainless & Special Steel Asset Sale Impact
9.58Profit
22.69
22.50
Including::::Cash
Installment
billion Yuan
Base Price 45.19
Including::::land appreciation 7.54
• Asset sale profit 9.58 billion Yuan.
• Cash inflow and loan decrease will
reduce financial expenses by 1.4 billion
Yuan.
• Improve profitability of the company (sold
assets loss 1.54 billion Yuan in 2011).
Note:Since sale completed on 1st April, 2012, the impact won’t be reflected in 2011 full year
and 1Q2012 financial reports.
Before the sale
20.921.547.4Net Profit(((( billion Yuan))))
2011 Impact %
Output((((million tons)))) 26.0 -4.00 -15.38
Total Asset((((billion Yuan)))) 231.1 2.76 1.20
Revenue(((( billion Yuan)))) 222.9 -3.13 -1.40
� CAPEX
• Company CAPEX is planned 12.74 billion Yuan in 2012. Including: Meishan
Iron&Steel product and technical optimization, oriented silicon steel 2nd phase
project, new refining facility in steel making mill, etc.
13.9
18.2
22.5
28.7
17.8
14.0
16.6
12.74
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2005 2006 2007 2008 2009 2010 2011 2012E
billion Yuan
3Q20131.80.1Oriented silicon steel 2nd
phase project
4Q20141.0GI2030 GI unit project
2Q20130.70.2Silicon
steel
High standard non-oriented
silicon steel production line
4Q20121.1Power plant unit project
2H20124.90.5TubeLubao tube project
June/201211.54.0HRCMeishan product
optimization
CompletionInvestment
((((billion Yuan))))
Designed Capacity
((((million tons))))ProductProject
� Major Expansion Projects