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First Half FY2009 Results Presentation Period Ended 31 December 2008Paul O’Malley, Managing Director and Chief Executive OfficerCharlie Elias, Chief Financial Officer 23 February 2009
ASX Code: BSL
Page 2
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 3
Introduction and Introduction and HeadlinesHeadlines
Page 4
1.3
8.0
4.8
3.5
4.1
3.5
2.8
1.81.5
0.9 0.80.5
0.9 1.0
0
1
2
3
4
5
6
7
8
9
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1H2009
Lost
time i
njurie
s per
milli
on m
an-h
ours
worke
d
Medically Treated Injury Frequency RateLost Time Injury Frequency Rate47.1
29.1
22.4 21.9
17.0
12.4
9.48.0
9.3
6.5 6.6 6.58.2
5.0
0
5
10
15
20
25
30
35
40
45
50
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1H2009
Medic
ally t
reate
d inju
ries p
er m
illion
man
-hou
rs wo
rked
Includes Butler acquisition from May 2004Performance if IMSA & Smorgon acquisitions’ incl. for FY 2008
Includes Contractors from 2004Includes Butler acquisition from May 2004Performance if IMSA & Smorgon acquisitions’ incl. for FY 2008
Safety – Our target remains Zero Harm
Reported performance for WorldSteel member companies (employees & contractors)
NSW Manufacturing
2005 –
27.9
2006 –
24.4
2007 –
23.8
Fiscal Years Fiscal Years
Page 5
Six months ended 31 December Variance2009 2008 %
Revenue A$6,156M A$4,734M Up 30% External despatches 3.2M tonnes 4.0M tonnes Down 19%EBITDA –
Reported A$857M A$502M -–
Underlying A$946M A$668M Up 42%EBIT –
Reported A$665M A$328M -–
Underlying A$753M A$494M Up 52%NPAT – Reported A$407M A$116M -
– Underlying A$479M A$305M Up 57%EPS – Reported 52.7¢ 15.7¢ -
– Underlying 62.0¢ 41.4¢ Up 50%After Tax Return on Invested Capital* 13.3% (15.5%) 5.8% (12.6%) -Return on Equity* 18.5% (21.8%) 6.0% (15.9%) -Net Operating Cashflow-
From operating activities A$63 M A$600M Down 90%-
After capex
/ investments A$(224)M A$116M Down 293%Interim ordinary dividend (fully franked) 5cps 22cps Down 77%Gearing (net debt) 35.9% 31.8% -
Group financial headlines 1H FY2009 vs. 1H FY2008
* ( ) Underlying Returns
Page 6
Strong first half result – mainly Q1, weaker demand and pricing in Q2Managing production across the group’s footprint to more closely align with reduced demand −shut Blast Furnace No. 5 on January 18
Closed No. 1 paint line and packaging cold mill at Port Kembla Business improvement initiatives – target savings increased to A$150M (previously A$100M) by 30 June 2009Capital expenditure – focus on BF No. 5 reline and sinter plant upgrade Taharoa Iron Sands Sale – Cheung Kong Infrastructure purported to cancel sale & purchase agreement. BlueScope is taking action to enforce its rights.
Business Headlines
Page 7
Working capital increased $863M, principally inventory $836MRecognised $204M in inventory realisable value adjustments in 1H results due to current assessment of actual weaker price and demandAsset impairments −Suzhou coating lines, China $25M –
mid-stream market demand remains soft
−Langfang
panels facility, China $11M –
non-performing business Raised equity (net) A$400M Debt −US$125M Bridge facility rolled; and − termed out A$350M Working Capital facilities due October 2009
Defined benefit and pension shortfall −provision of A$463M, an increase of A$259M since 30 June 2008
Business Headlines (cont…)
Page 8
Monthly changes in economic forecasts highlight uncertainty in outlook
0.4
0.90.9
1.8
2.5
0.3
0.91.1
1.7
2.1
-0.7
1.61.6
2.02.0
-0.8
-0.4
0.0
0.4
0.8
1.2
1.6
2.0
2.4
2.8Changes in Australia’s GDP Forecasts for Calendar 2009
Feb-09Oct-08 Nov-08 Dec-08 Jan-09
Source: Access Economics Quarterly ‘Business Outlook’, Consensus Economics ‘Consensus Forecasts’, Westpac ‘Market Insights’
0.5
2.22.2
3.0
0.2
0.7
2.0
2.6
0.0
0.4
0.8
1.2
1.6
2.0
2.4
2.8
3.2
IMF*
Nov-08Oct-08
EIU*
Jan-09Dec-08
Changes in the Global GDP Forecasts for Calendar 2009
Source: IMF ‘www.imf.org’, EIU Viewswire ‘www.viewswire.com’
Notes: * Based on purchasing power parity weightings
3.25
4.254.25
6.00
5.25
0.250.25
1.001.00
1.50
5.315.315.58
6.66
2.00
2.502.50
3.25
4.25
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Feb-09Jan-09Dec-08Nov-08Oct-08
Source: Datastream, IMA Asia
Global Interest Rate Trends
European Central Bank
China PBC 1 Yr Lending Rate
Australia RBA Cash Rate
USA Fed Funds Rate
-2.1
-1.8
-1.3
-0.6
0.0
-2.0-2.0
-0.4-0.2
0.6
-2.7-2.5
-1.8
-1.0
0.2
-2.8
-2.4
-2.0
-1.6
-1.2
-0.8
-0.4
0.0
0.4
0.8
Global InsightEIU
Oct-08 Nov-08
Consensus Economics
Dec-08 Feb-09Jan-09
Source: Consensus Economics ‘Consensus Forecasts’, EIU Viewswire ‘www.viewswire.com’
Changes in the USA’s GDP Forecasts for Calendar 2009
Page 9
Outlook – challenging market conditions continue to be driven by global economic conditions in FY2009
GLOBAL STEEL PRICES
Price fall evident from Sept 2008. More pronounced in Nov & Dec.
Current indicative market spot prices recently published:−
Slab US$400/t FOB−
HRC US$520/t FOBHowever, China domestic prices increased on −
Improved demand /low inventories −
Due to fiscal stimulus initiatives, earthquake rebuilding and significant increase in bank lending.
Weaker export demand Australian demand weaker in 2H
DEMANDExport market limited & prices lowAustralasia – demand weaker than expectedNorth America – demand “stalls”Asia – demand “stalls” apart from China
December 2008 Update February 2009 Update
Page 10
So what does this mean for 2H FY2009?expecting a negative underlying NPAT contribution. Extent dependent upon:−demand; and −spread
earnings will remain depressed until we see an improvement in steel demand globally. Currently the effect of global stimulus packages on steel demand is unclear. global steel industry has surprised market commentators with larger than expected production cuts.
Outlook –challenging market conditions continue to be driven by global economic conditions in FY2009 (cont…)
Page 11
FY 2009 interim dividend 5cps vs 22cps 1H FY2008
In December 2008 market update I confirmed (and Chairman reconfirmed in his Share Purchase Plan letter in January 2009): Decision will be made by the Board in February 2009, taking into
account:−
business outlook and demand at the time February update - demand and pricing outlook weaker, expectation of a loss in the second half
−
credit markets at the time February update - tighter conditions
−
additional shares on issue as a result of the institutional and SPP equity raising
February update – shares increased in total from 773.1m to 906.3m.
Interim
Final
Special
Decision is prudent in terms of outlook and consistent with other initiatives being taken by management.
12 20 22
24 24 26 27
710
20
912 18
1813
0
10
20
30
40
50
60
70
22 / 7¢
30 / 10¢
42 / 20¢
44 / 0¢ 47 / 0¢ 49 / 0¢
5
Page 12
0
100
200
300
400
500
600
700
800
900
1000
December 07HY
Coated &Industrial
Products Aust
Aust Distrib &Solutions
NZ & Pacif icSteel Products
Coated & BldgProducts Asia
Hot RolledProducts Nth
America
Coated & BldgProducts Nth
Am
Corporate &Group
December 08HY
Underlying EBIT variance 1H FY 2008 to 1H FY 2009 by business segment
EBIT
A$ M
illion
s
$494m
$155m
$753m$42m $73m
($1m)($42m)
$53m
($21m)
EBIT Movements
From 1H 2008 $398M $22M $36M $26M $36M $38M $(62)MTo 1H 2009 $553M $75M $78M $(16)M $15M $37M $11MCore Reasons: Improved spread
Favourable FXPartly offset by:
−Lower volumes −higher
conversion costs (lower volumes)
−NRV provisions
Improved spreadPartly offset by:
− lower volumes
−higher costs
Improved spreadFavourable FXPartly offset by:
−higher conversion costs (lower volumes)
Improved spreadMore than offset by:
− lower volumes−higher
conversion costs
−NRV provisions
Favourable spread North StarMore than offset by:
− lower volumes−NRV
provisions
IMSA Steel acquisitionImproved spread for BuildingsOffset by:
− lower volumes
−NRV provisions
Lower Profit in stock eliminationsPartly offset by:
− unfavourable FX on US$ loans
Note:
detailed segment variance analysis and commentary contained in “Supporting Information”
section.
Page 13
0
200
400
600
800
1000
1200
1400
1600
1800
2000
December 07HY
Export Prices DomesticPrices
Raw MaterialCosts
Volume/Mix North Star Conversion &Oth Costs
ExchangeRates
Other December 08HY
$494m
$331m$753m
$109m
($92m)
($140m)($23m)
$911m
($634m)
($204m)
Underlying EBIT variance 1H FY2008 to 1H FY2009 by major itemUn
derly
ing
EBIT
A$ M
illion
s
Net spread improvement A$608M
Coal (464)Iron ore (267)Ext Steel Feed (273)Scrap (59)Alloys (22)NZS (mainly coal) (21)Op Stock Adj
* 419Coating Metals 54
NRV provisions:Australia
(155)Nth Amer
(23)Asia
(25)NZ
(1)
Volume impact (62)Aust (38)NZ (13)Asia (9)Nth Am (2)
R & M (29)Freight (16)Utilities (12)Other (21)
Revenues 86Debtors Restatement 131Costs (84)USD interco
loans (26)Translation Gain 2
Australia
(88)Asia
(12)NZ
( 3)Nth Am
11
*
Relates to the benefit of lower cost opening inventory
consumed in the manufacturing process during H1 2009, which partly offsets the unfavourable raw material purchase price variances.
Mainly NRV provision (26)
Page 14
Our markets – external sales despatches by destination down 19% on 1H FY 2008, primarily export reduction
1H-FY2008 1H-FY2009
15%[569kt]
37%[1,487kt]
4%
12%
9%
11%[437kt]
Australia
NZ
AsiaExports
AmericasExports ROW
NorthAmerica
Exports Asia22%
[714kt]
45% [1,466kt]5%
8%
6% 3%
11%[360kt]
AustraliaNZ
Asia
Exp ROWAsia
North America
Exp Americas
Exports 33%[1,352kt]
Exports 17%[558kt]
3,990kt 3,244kt
Note: Percentages have been rounded
Reduction mainly in export markets
Also evident in Asia −
political uncertainly Thailand
North America improvement −
IMSA acquisition (Feb 2008)
Australian domestic market −
Q1 substantially better than Q2 in 1H FY09.
(inc. 195kt long product sales principally into Australia (191) from Smorgon
Distribution not previously included)
(inc. 196kt long product sales principally into Australia (193) from BlueScope Distribution)
Exports -
Americas
Exports -
Europe/Med/Middle East/India AustraliaNA (HRPNA + C&BPNA) New Zealand/Pacific
Asia
KeyDomestic sales (produced and sold within country)
Exports -
Asia
12%
Page 15
SALES TONNES
Total Australian despatches by segment – flat, but largely due to very strong first 4 months
Construction60%
1H FY2008(1) 1H FY2009(1)
Non-dwelling 25%
Dwelling 23%
Engineering 13%
Manufacturing 19%
Agriculture & Mining 11%
Auto & Transport 10%
Desp
atch
es ‘0
00 to
nnes
200
400
600
800
1,000
1,200
1,400
1,600
Notes: (1)
Percentages have been rounded and worked off Gross Domestic Despatches
(2)
Additional one month of sales in 1H09 from acquisition of Distribution on 3 Aug 2007
(3)
1H08 & 1H09 long products sales from BlueScope Steel Distribution
Non-dwelling 26%
Dwelling 22%
Engineering 12%
Manufacturing 19%
Agriculture & Mining 11%
Auto & Transport 9%
61%
1,487kt -1.4% 1,466kt(2)
(191kt)(3) (193kt)(2)(3)
1,296kt -1.8% 1,273kt(2)
Gross DespatchesLessNormalised Despatches
Principal variances:
Strong demand in first four months, but slowed in Nov/Dec.Non-dwelling despatches declined as a result of reduced Commercial & Industrial activity in Q2 (delayed projects etc).Dwelling despatches increased marginally supported by continued growth of TRUECORE®steel.Engineering despatches increased marginally due to project sales to fabricators for windfarmprojects.Auto & transport despatches declined due to reduced industry sales and declining activity in the truck and trailer segment.
Page 16
Earnings initiatives on track to deliver target savings of approx. $150m by 30 June 2009 to partly mitigate current market conditions
Working Capital Production scheduling aligned to demand to manage inventory levels.
Labour Cost Reduction in overtime, casual & contractor hours and introduction of flexi leave. Ongoing productivity improvements. Substitution of contractors, vacancies not filled and redundancies.
Significant reduction / slow down & deferral with focus on maintaining operational performance. Stopped all non-essential capital. Approved scope of steam asset replacement program being reviewed. Capital limited to reline, sinter plant upgrade and delivery of acquisition synergies and operational integrity and safety.
R&M & Capex
Discretionary Spend Reduce consultants, travel, marketing/advertising & promotion and IT spend.
Key Action Items
Conversion/Operating Manufacturing production scheduled to minimise cash costs and meet market demand. BF No. 5 shut 18 Jan 2009 (ahead of previously scheduled 1 March date).
Page 17
No. 5 Blast Furnace reline & Sinter Plant project update
Page 18
Port Kembla Steelworks – Blast Furnace No. 5 and Sinter Plant update
Blast Furnace No. 5 reline −BF No. 5 shut early on 18 January (originally March)
Softer demand Some reline activity commenced early
−Currently the main reline construction activity will be undertaken between March – June 2009
−Start up mid June but retain option to delay if demand outlook 1H FY2010 not improved.
−Reduction in steel make and raw material requirements (refer Supporting Information)−Remains on budget A$370M.
Sinter Plant Upgrade −Remains on schedule April –
May 2009 (approx 35 days) and budget (A$134M)
−Cost benefits from FY2010.
Page 19
Federal Government’s Carbon Pollution Reduction Scheme (CPRS)
We have a corporate objective to reduce CO2 emissions We support government’s economic and environmental objectives in relation to climate change.But cumulative cost of White Paper proposal is too high, putting jobs and investment at risk:
−
Headline rate of assistance for integrated iron and steelmaking is 90% -
but effective rate could be only about 75% (of total BSL emissions) due to exclusion of some activities
−
1.3% decay in assistance p.a. will compound this shortfall−
Scope 3 costs from suppliers –
government has recognised issue but no solution in White Paper−
Renewable Energy Target scheme will impose higher electricity costs in addition to CPRS costs
CPRS risks imposing higher costs on Australian industry than foreign competitors facee.g. EU Emissions Trading Scheme provides 100% free permits for European steelmakers’
direct emissions until at least 2012; no comparable carbon costs likely in China, India and Brazil in short to medium-term
CPRS needs an effective transition plan and acknowledgement of the cost effects on individual businesses:
−
Including an effective transitional plan to minimise the financial impact in the early years and minimise competitive disadvantage to Australian industry until major competitors are carbon constrained.
We are continuing to engage with government on the CPRS and have constructive ideas to discuss.
Page 20
““Industry OverviewIndustry Overview””
Page 21
Global Steel Industry
Global steel industry acts decisively in cutting production
Destocking in North America
Raw material (coal and iron ore) costs to fall
China’s domestic demand for steel increases...but supply/demand balance could be volatile leading into next growth phase
World stimulus packages need to translate into increased steel demand
Page 22
BlueScope SteelBlueScope Steel’’ssFinancial ResultsFinancial Results
Page 23
Earnings performance leveraged to steel price spreads
(1)
Includes EBITDA & EBIT for North Star BlueScope Steel but not revenue, which was A$448M (1H 09) vs. A$310M (1H 08)
(2)
Includes two months of BlueScope Butler financial results.(3)
Underlying numbers represent Reported numbers adjusted for unusual or non-recurring events to reflect underlying financial performance from ongoing operations
(4)
Includes five months of BlueScope (ex-Smorgon) Distribution financial results.(5)
Includes six months of IMSA financial results.
A$ Millions FY2004 (2) FY2005 FY2006 FY2007 FY2008 2008-1H(4) 2009-1H(5)
Revenue 5,770 7,964 8,031 8,913 10,495 4,734 6,156
EBITDA (1) 1,104 1,655 850 1,423 1,420 502 857
EBIT (1) –
Reported 818 1,358 556 1,099 1,063 328 665
–
Underlying (3) 1,559 840 1,057 1,273 494 753
NPAT –
Reported 584 982 338 686 596 116 407
–
Underlying (3) 1,129 555 643 816 305 479
EPS (cps) –
Reported 77.8 134.0 47.9 95.3 80.1 15.7 52.7
–
Underlying (3) 154.0 80.0 89.3 109.6 41.4 62.0
Page 24
High level reconciliation between Reported and Underlying NPAT
EBIT ($M) NPAT ($M) EPS (cps)
1H 2009 1H 2008 1H 2009 1H 2008 1H 2009 1H 2008
Reported 665 328 407 116 52.7 15.7
Unusual or non-recurring events:
Asset impairments(1) 36 251 36 247 4.7 33.6
Profit on sale of Smorgon shares - (128) (2) - (90) - (12.2)
Restructure & redundancy costs(3) 39 24 26 17 3.3 2.3
Write off feasibility costs on capital projects(4) 22 - 15 - 1.9 -
Integration of Smorgon Steel’s distribution business(5)
- 26 - 18 - 2.5
Integration of IMSA businesses(6) 3 - 2 - 0.3 -
Other (12) (7) (7) (3) (0.9) (0.5)
Underlying Operational Earnings 753 494 479 305 62.0 41.4
(1)
Asset Impairments:1H 2009 -
China -
Metal Coating & Painting Line, Suzhou ($25m) and Lysaght
Panels, Langfang
($11m) –
lower than expected volumes and margins1H 2008 -
China ($190m) –
outlook for coated margins remains very tightVietnam ($35m) –
no resolution to the tariff statusLysaght
Australia ($23m) and Lysaght
Fiji ($3m) –
systems write-off and under performing assets resulting in a reassessment of the future cash flows and requirement to impair the assets
(2)
Profit on sale of 19.9% shareholding in Smorgon
Steel associated with the acquisition of Smorgon
Distribution(
3
)
Restructure & redundancy costs:1H 2009 –
Cold Mill closure at Port Kembla ($22m), IMSA plant rationalisation costs ($12m), and restructure costs in Nth America ($3m) and Australia ($2m)1H 2008 -
Redundancy costs associated with closure Port Kembla No. 1 paint line ($11m) and internal restructuring costs ($13m).(
4
)
Feasibility costs associated with optimisation studies in NZ on hold ($22m)(
5
)
Integration of SSX Distribution ($7m) and recognised inter-company profit eliminations in inventory ($19m)(
6
)
Integration and accounting entries relating to IMSA Steel Corp ($3m).
Page 25
Cash – strong operating cash flows have been reinvested in the business
(1)
Purchased 19.9% shareholding in Smorgon
Steel in August 2006, disposal in August 2007. (2)
Reflects shares issued under the shareholder dividend reinvestment plan ($60M) and general employee share plan ($5m).(3)
Includes shares issued under the shareholder dividend reinvestment plan ($58m), net cash from institutional investor investor placement ($291M) and general employee share plan ($6m).(4)
Reflects capital injection by minority interests in subsidiaries.(5)
All periods normalised to reflect sale of receivables program cash flow movements as debt.
A$ millions 2004 2005 2006 2007 2008 2008-1H 2009-1HCash from operations 1,012 1,671 901 1,364 1,579 617 926Working Capital Movement (94) (432) (98) (21) 69 (17) (863)Net operating cash flow 918 1,239 803 1,343 1,648 600 63Net investing cash flows- Capital & investment
expenditure(585) (663) (816) (493) (1,979) (934) (298)
-
Smorgon
shareholding(1) - - - (319) 447 447 --
Other 7 41 23 271 22 3 11Net cash flow before
financing & tax340 617 10 802 138 116 (224)
Net financing cash flow 309 348 870 (506) 195 142 301Payment of income tax (119) (312) (356) (229) (208) (139) (242)Share buy-back (259) (327) (96) - - - -Share issues - - - 221 229 65 (2) 355 (3)
Dividends- Ordinary (191) (273) (314) (321) (357) (191) (208)- Special (53) (75) (142) - - - -Other (4) - - 2 2 - - -Net increase in cash held 27 (22) (25) (31) (3) (7) (18)
Page 47
As atA$ Millions 30 June 2008 31 December 2008
AssetsCash 44 35Receivables 1,537 1,323Inventory 1,660 2,815Other Assets 1,418 1,768Net Fixed Assets 3,807 4,140
Total Assets 8,466 10,081
LiabilitiesCreditors 1,290 1,059Interest Bearing Liabilities 1,766 2,675Provisions & other Liabilities 1,468 1,624
Total Liabilities 4,524 5,358
Net Assets 3,942 4,723
Balance sheet
Reflect lower sales levels partly offset by exchange increases
Lower payables for capital, timing of purchases and lower purchases due to
economic slowdown, partly offset by exchange increases
35.9%30.4%Net Debt / (Net Debt + Equity)
Next few slides
Next few slides
Higher defined benefits super provision and deferred income,
partly offset by lower provisions for income tax and employee bonus
Largely reflects exchange movements in Asia and North
America
Page 27
Balance Sheet – Net equity reconciliation
0
1000
2000
3000
4000
5000
6000
June 2008 Profits ExchangeFluctuationReserveAccount
IncreasedShare Capital
MinorityInterests
Dividends Paid DB Super &Pension Plan
Shortfalls
Other December2008
$3,942m
$4,723m
($128m)
$382m
($208m) ($9m)
$25m
$407m$312m
Capital Raising 291DRP 58LTIP / GESP 30Other 3
Defined Benefits super fund actuarial adjustments:Pre-tax (251)Tax 123
Mainly exchange movementsA$M
Page 28
Balance Sheet – Inventory reconciliation
0
400
800
1200
1600
2000
2400
2800
3200
June 2008 Price Volume FX Impact NRVAdjustments
December2008
$1,660m
$2,815m
($204m)
$319m
$385m
$655m
Raw Materials 546Work In Progress (30)Finished Goods 110Other 29
Nth Am 184Asia 130NZ 5
Aust (155)Nth Am (23)Asia (25)NZ (1)
A$M
Page 29
0
500
1000
1500
2000
2500
3000
3500
Net Debt June2008
Net CashMovement in
period
FX Translation Net Debt Dec2008
Balance Sheet – Gearing
A$M
$1,722m
$2,640m
$392m
$526m
30.4% 35.9%
FX:Debt 543Cash (17)
Cash flows before financing and tax 224Tax repayments 242Dividends paid 208Borrowing costs
73Share issues (355)
Page 30
Commitment to balance sheet strength
Balance sheet metrics
(A$m, except for percentages)
Net drawn debt Gearing
EBITDA / Interest
expense(1)Net Debt /
LTM EBITDA
30 June 2008 ($1,722) 30% 10.8x 1.2x
Net cash used during period ($392)
FX Translation of US$1.2 bn of debt(2) ($526)
31 December 08 ($2,640) 36% 11.0x 1.37x
31 December 08 - Adjusted for SPP ($113 million) ($2,527) 35% 11.0x 1.31x
Note:
1 AUD = 0.9621 USD (30 June 2008); 1 AUD = 0.6912 (31 December 2008). Gearing calculated as Net debt / (Net debt + book value of
equity (including minority interests))(1)
EBITDA and interest expense based on the last twelve months to 30 June 2008 and 31 December 2008 respectively.(2)
Includes $19 million for changes in THB borrowings.
Cash working profits:
$926Inventory:
($836)Tax, dividends, interest, other
($482)
Page 31
Notes:1 AUD = 0.9621 USD (30 June 2008); 1 AUD = 0.912 (31 December 2008); 1 AUD = 0.6516 (31 January 2009) (1)
Includes cash balance(2)
Note that as at 31 January 2009, A$27M of SPP proceeds had been received. (3)
Includes US$75M Bilateral Loan Agreement established in February
2009.
(A$m)Net drawn
debt
Available committed
funding
Available undrawn
funding(1)
30 June 2008 $1,722 $2,973 $1,25131 December 2008 $2,640 $3,505 $86531 December 2008 - Adjusted for SPP $113m $2,527 $3,505 $97831 January 2009 - Adjusted for SPP $113m(2) $2,637 $3,469 $83231 January 2009 - Adjusted for SPP $113m(2) + US$75m Bilateral $2,637 $3,584(3) $947
Liquidity available
Page 32
Capital Initiatives – since December 2008 update
364 day USD $275m 364 day USD $75m364 day USD $25m Existing facilities USD$25M
REFINANCING OF USD400M BRIDGE
TERMING OUT FACILITIES
$350M Working Capital facility was due in October 2009Now:
−
$100m Jan 2010−
$125m Jan 2011−
$125m Jan 2012
SUPPLY CHAIN FINANCE
EQUITY $300m (gross proceeds) Dec 08 Institutional $113m (gross proceeds) Feb 09 SPP
In various stages of negotiation
Page 33
0
100
200
300
400
500
600
700
800
900
FY2009FY2010FY2011FY2012FY2013FY2014FY2015FY2016FY2017FY2018FY2019FY2020
AU
D$M
Current Debt maturity profile (as at 23 February 2009)
Note: USPP and US bridge facility converted to AUD using 0.6912
USD:AUD exchange rate (31 Dec 08).
Working Cap 5 yr LNF 3 yr LNF364 day USPPBilateral Facilities
Page 34
In view of the material changes to export and domestic demand in FY2009 it would be misleading to include the normal sensitivities. We have included FY08 as a reference point for subsequent years
(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$.
(3)
Broadly assumes Port Kembla
Steelworks raw steel production of 5.3mtpa and an Australian domestic: export (external and internal) sales volume mix of 55:45.
Estimated impact on forecast EBIT
(A$mil)Assumption
+/– US$25 / tonne movement in BlueScope’s
average realised export HRC price (1)1¢
movement in Australian dollar / US dollar exchange rate (2)
US$10 / tonne movement in NSBSL HRC price to scrap spread2% movement in slab production in Australia, New Zealand & USAUS$10 / tonne movement in coal costs
+/– US$10 / tonne movement in iron ore costs
14
11 28 45 90
FY 2008
85
+/–
+/–+/–+/–
Page 35
SummarySummary
Page 36
Summary
An excellent start to FY 2009 overtaken by global economic recession.
Very challenging market conditions with soft demand, low prices and high raw
material prices until mid CY 2009.
Managing our production to more closely align with reduced demand.
Focus on cost reductions and minimising capital expenditure.
Funding – refinancings completed for FY2009 and October working capital
facility rolled.
BlueScope is taking a number of initiatives to maximise cashflow, maintain a
strong balance sheet and improve earnings.
Page 37
Questions & AnswersQuestions & Answers
First Half FY2009 Results Presentation Period Ended 31 December 2008Paul O’Malley, Managing Director and Chief Executive OfficerCharlie Elias, Chief Financial Officer 23 February 2009
ASX Code: BSL
Page 39
Supporting InformationSupporting Information
Page 40
Reporting SegmentsReporting SegmentsAdditional InformationAdditional Information
Page 41
Reporting segmentsCorporate / Group
Coated & Industrial Products Australia
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, NSWSpringhill, NSWWestern Port, VICWestern Sydney Colorbond facility, NSWNorth America, Europe & Asia Export trading offices
New Zealand & Pacific Islands
Products
Only fully integrated flat steel maker in New ZealandLeading domestic market share of flat products
Glenbrook, NZPacific Islands
Pre-eminent global designer / supplier Pre-engineered buildingsNo 2 position in North America and no. 1 in ChinaIMSA assets (from Feb 2008)
Butler buildingsVarco Pruden BuildingsMetlSpanASC ProfilesSteelscapeHCI
Coated & Building Products
North America
Australia New Zealand Asia North America
Hot Rolled Products
North America
50:50 joint venture with Cargill Inc.Again voted no. 1 flat rolled steel supplier in North America (Jacobson Survey)
Delta, Ohio
Coated & Building Products
Asia
Pre-eminent seller of branded steel in AsiaLower cost “backward integration” growth strategy
Indonesian, Malaysian, Thailand and Vietnamese operationsChina, including ButlerLysaght AsiaIndia – Tata BlueScope JV
Leading supplier of flat steel solutions in Australia
BlueScope Steel DistributionLysaght RollformingBlueScope WaterServices CentresBlueScope Buildings
Australian Distribution & Solutions
Page 42
Australia Australia Coated & Industrial ProductsCoated & Industrial Products
Distribution & Solutions Distribution & Solutions
Page 43
428
766
398
602
1000
553
338
0
200
400
600
800
1000
1200
FY07-1H FY07-2H FY07 FY08-1H FY08-2H FY08 FY09
MarketsDomestic−
Strong sales July –
Oct−
Moderated Nov & Dec Exports −
Record demand Q1−
Dramatic fall in steel prices & demand in Q2
Underlying performance – 1H FY2009 vs 1H FY 2008EBIT improvement largely due to −
improved spread, principally Q1−
favourable FX movement (AUD:USD) −
lower labour costs −
partly offset by:higher inventory net realisable value provisionslower sales volumes Q2lower fixed conversion cost absorption
Reduced iron make in Nov & Dec, given reduced demand (mainly export)Closed BF No. 5 Jan 18 2009. Reline still March – June 2009 and Sinter Plant Upgrade April – May 2009. Closed No. 1 paint line and packaging cold mill at Port Kembla.
Coated & Industrial Products Australia
EBIT
A$ M
illion
s
Underlying EBIT
1H 07 2H 07 FY 07 1H 08 2H 08 FY 08 1H 19Underlying 428 338 766 398 602 1,000 553Reported 456 343 799 384 602 986 644
Page 44
-100
100
300
500
700
900
1100
1300
December 07HY
Export Prices DomesticPrices
Raw MaterialCosts
Volume Mix Conversion &Oth Costs
ExchangeRates
Other December 08HY
Coated & Industrial Products Australia – underlying EBIT variance analysis ( 1H FY2009 vs 1H FY 2008)
Volume (38)R&M (17)Freight (11)Labour 14Other ( 3)
Coal (464)Iron ore (267)Scrap (59)Alloys (22)IC Stl
Fd
(17)Op Stock Adj
419Coating Metals 39
Net spread increase A$304M
Export Revenues 99Debtors Restatement 116Costs (89)AUD translation 1
NRV writedowns
(155)Depreciation (2)
Assets Sales
(1)
$398m
$265m
$553m
$127m
($52m)($55m) ($158m)
$411m
($372m)($11m)
December 07HY
Export Prices Domestic Prices Raw Material Costs
Volume Mix Conversion & Oth
CostsExchange
RatesOther December 08
HY
Page 45
Notes:(1)
The difference between slab production of 2,400kt and steel despatches of 2,117kt represents a build in inventories on hand and yield losses during the period. (2)
See Coated Australia Material Flow slide for Western Port Works capacities(3)
Domestic HRC ex Port Kembla Steelworks only; ie
excludes export HRC despatches from Western Port when reconciling from the ASX Release attachment 1(4)
Export HRC ex Port Kembla Steelworks only; ie
excludes export HRC despatches from Western Port when reconciling from the ASX Release attachment 1(5)
See Coated Australia Material Flow slide for Springhill Works capacities (6)
Includes internal sales to BlueScope’s Thailand operations (0.078mt in 1H09, 0.135mt in 1H08) and internal sales to Steelscape NA (0.218mt in 1H09)
PKS - material flow (1H 09 & 1H 08)
Export161 462
Port Kembla SteelworksSlab Production
1H 091 1H 082,400 2,632
Domestic3143 316
Interco561 566
Domestic502 554
Export884 353
Interco798 689
HRC1,200 1,358
Export296 135
Domestic51 41
Interco51 41
Export18 23
Domestic126 150
Plate195 214
Western Port2
Springhill5 / Distribution
Asia/Nth Am6
Distribution
Slab 722 1,028
Hot Strip Mill
Plate Mill
Product / Dest1H 09 kt 1H 08 kt
Legend:
Page 46
Hot Strip Mill1,430
Port Kembla Steelworks
Metal Coating Lines 830
Cold Mill1,000
HRC
Pickle Line1,150
Coated Australia - material flow (annual capacities)
Paint Lines330
HRC
CRC
Painted Strip
Metal Coated Strip
Western Port
Notes:(1)
Numbers reflect capacities in kt.
Slab
Springhill
HRC
Packaging Cold Mill135
Coupled Pickled Cold Mill990
Metal Coating Lines 790
Paint Lines200
CRC
CRC
Metal Coated Strip
Painted Strip
Page 47
Port Kembla Steelworks - despatches by half year
External Product Sales Mix
0200400600800
10001200140016001800200022002400260028003000
FY06-1H FY06-2H FY07-1H FY07-2H FY08-1H FY08-2H FY09-1HInternal Customers* Domestic Customers Export Customers
(kto
nnes
)
2,6892,579
43% 45%
16% 15%
40%41%
2,600
47%
21%
32%
50% 50%
18% 18%
32% 32%
2,609 2,608
78% sold domestically and 22% exported, with geographic split being:
Asia 30%Italy 70%
100% exported, with geographic sales split
Asia 96%
USA 4%
Other 0%
Slab 54% 42% 31% 29% 36% 30% 23%HRC 35% 45% 53% 55% 51% 54% 57%Plate/Other 11% 13% 16% 16% 13% 16% 20%
62%
18%
20%
2602
67%
20%13%
2118
*Internal Customers include both domestic and export despatches. (Previously reported internal export despatches with export customers).
Page 48
Port Kembla Steelworks – relentless cost control
Total cost $
FY2003 FY2004 FY2005 FY2006 FY2007 FY2008
S&A Conversion Costs Despatch & Freight Raw Materials
(1)
Raw material includes iron ore, coal, scrap and alloys but not scrap purchased on behalf of OneSteel.
(1)
$
Page 49
Prod
uctiv
ity (C
rude
Ste
el Ou
tput
, Ton
nes/E
mpl
oyee
/Yea
r)
0
2,000
4,000
6,000
8,000
10,000
99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/080
250
500
750
1,000
1,250
1,500
1,750
2,000
Employees Productivity (Tonnes per person per year)
Port Kembla Steelworks productivityEm
ploy
ee N
umb e
rs
Page 50
Slab and HRC price benchmarks for Asia & Australian sales
The following Steel Business Briefing prices continue to be a reasonable public benchmark for BlueScope’s domestic and Asian HRC prices (noting this can change over time).
HRCSteel Business BriefingHRC East Asia Import CFR
SLAB Steel Business Briefing Slab East Asia Import CFR
Asian HRC Benchmark Price
$0
$200
$400
$600
$800
$1,000
$1,200
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
US$
/mt
SBB HRC East Asia Import CFR
Source: Steel Business Briefing
Page 51
Port Kembla Steelworks – Blast Furnace No. 5 reline update
Project status and duration−
BF No 5 was shut approximately 6 weeks earlier than planned on 18 January−
Shut down went well and preliminary reline work has progressed in line with the revised plan−
Majority of work will be completed within the original window of
March to June−
Project is on track for completion and start-up in mid June as planned−
Full project duration from shut down to start up will now be approximately 145 days−
Total project capital cost is in line with budget of A$370m ($172m spent up to 31/12/08)The early shut plus the reline and reduced iron make from BF No. 6 (expected to operate at 2.46mt (annualised) in 2H09 vs 2.76mt in FY08) have the following implications for production and raw materials in FY 2009:−
iron make ↓
approx 1,260kt−
raw steel make ↓
approx 1,355kt−
coking coal ↓
approx 990kt, including lower export coke than planned (no penalty)−
PCI coal (semi soft) ↓
300kt (no penalty)−
iron ore ↓
approx 2,050kt, applied across all product types, but with proportionately higher reduction in lump ores and pellets; the reductions have been applied to all suppliers, but the treatment is different under each contract and remains the subject of on-going discussions
−
scrap ↓
approx 250kt
Page 52
Port Kembla Steelworks – No. 5 Blast Furnace - Reline experience
Many of the Project Team and Key personnel have been key resources in :−1996 No.6 BF construction−1993 No.4 BF Reline−1991 No.5 BF Reline−1989 No.2 BF Reline −1987 No.4 BF Reline−1978 No.5 BF Reline−1976 No.3 BF Reline
Technical collaboration with Nippon Steel Corporation - design and operational issuesTechnical collaboration with Posco on blow-in & uprating plansMany overseas steel plant and equipment supplier visits by several key personnel on design, operational and equipment performance issues.Several hundreds of years combined blast furnace related team experience
Page 53
Port Kembla Steelworks Activities during the No. 5 Blast Furnace reline
Operation continues until the raw materials inside the furnace are consumed. Furnace is shutdown and isolated from rest of the plant *
5 days
Holes are cut in the shell to gain access to rake out remaining material and refractory lining including cooling staves *
16 days
Install protection and working platforms inside furnace; clean out hearth * 12 daysInstall taphole shell plate; Install hearth plug refractory 17 daysRemove & replace bosh shellplate; install bosh staves; install tuyere staves 28 daysInstall hearth sidewall, tuyere and bosh area refractories 25 daysRemove platforms and close up furnace; pressure test 12 daysCharge raw materials, heat up hot blast main; blow-in 9 days
Additional activities; Repair /Replace/Upgrade ancillary equipment:-
Furnace Top, Downcomer, Dustcatcher, Gas Cleaning Plant, Water Treatment Plant, Hot Blast & Bustle main rebrick, Casthouse
Floor structural and refractory rebrick, Slag
Granulation system, Electrical and Control systemsNB: Some activities are in parallel * Activities undertaken / in progress due to early shut (to date)
Page 54
Port Kembla Steelworks - Cut in - access through shell (No.5 BF reline 1991)
Page 55
Port Kembla Steelworks - Hearth demolition (No.5 BF reline 1991)
Page 56
Port Kembla Steelworks - Internal working & protection platforms (No.5 BF reline 1991)
Page 57
Port Kembla Steelworks - Installation hot blast main refractory (No.5 BF reline 1991)
Page 58
Port Kembla Steelworks - Granulator stack & downcomer installation (No.5 BF reline 1991)
Page 59
Port Kembla Steelworks - Reline Complete (No.5 BF reline 1991)
Page 60
Port Kembla Steelworks - No. 5 BF ramp up plan [if market conditions improve otherwise start up could be delayed]
5 BF Uprate Plan
0
1000
2000
3000
4000
5000
6000
7000
8000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
Days
Tonn
es/d
ay
6BF Plan 5BF Plan Actual 6BF
Note: 7000 tonnes per day by day 11 and 7700 tonnes per day by day 44
this is equal to an annual capacity of 2.8mtpa however this will be reduced to 2.6mtpa (nameplate capacity) due
to standard scheduled maintenance.
First servicepost reline
Page 61
Port Kembla Steelworks - No. 5 BF reline implementation risks
Two major unknown conditions at blow-out(1) : (a) Remaining untapped liquid hot metal (salamander) requiring blasting (b) Condition of the bosh shellplate, can add additional time to scheduleSkilled labour and contracting firms to undertake this intense activity with many interface challenges (peak 1200 personnel on site)Efficient and safe use of very large cranes on a complex and vertically intense siteComplex commissioning activities Industrial collaboration between several different unions and many contractorsEfficiency of labour force over 3 months Commissioning and uprating performance
(1) Blow-out -
terminology to indicate a halt in blowing "hot blast”
(the wind that is blown through the furnace that creates the conditions for the reduction process) through the blast furnace (see supporting information for further details pg 64).
Current assessment is positive regarding these risks, reflecting good shutdown and effectiveness of long term asset maintenance strategy
Page 62
Port Kembla Steelworks – Sinter Plant upgrade
Main shutdown is planned for April – May 2009, target duration of 35 daysTo coincide with No.5 BF reline (start-up planned for June 2009), when demand for sinter is reducedTotal project capital cost A$134m, on trackNo.3 Sinter machine at PKSW−
is single source of 5.3 mtpa
of sinter for No. 5 & No. 6 blast furnaces−
the typical blast furnace burden mix is 57% sinter (fines based), 25% pellets, 18% lump Outcome post upgrade from Q2 FY2010 onwards:−
increased sinter production by 1.1 mtpa
to 6.6 mtpa
(nameplate capacity is currently 5.5 mtpa)−
this will require + 1.1 mtpa
of fines BUT
would displace 1.0 mtpa
of pellets (Presently benchmark fines to pellet price differential is approx US$50/t)
−
Increased Pulverized Coal injection rates (cost saving as use more semi soft coal and less coking coal) due to blast furnace permeability being improved by higher
quality sinter
Page 63
What is sinter?
Page 64
Exit EndRebuild coolerIncrease WidthIncrease Fan Power Relocate Lowering wheel and extendbuildingNew cooler feed chute
Entry EndNew Ignition FurnaceNew Strand Feeder
PrecipitatorsRefurbish zones 2, 3 & 4 -R&MNew Zone 1 Modern ElectricsStrand
Increase HeightIncrease Length
Port Kembla Steelworks – Sinter Plant upgrade
Two new major conveyor systems and several chute modifications will be installed in raw materials handling yards
Page 65
11 622
64
8675
-5-20
0
20
40
60
80
100
120
FY07-1H FY07-2H FY07 FY08-1HFY08-2H FY08 FY09-1H
Australian Distribution & Solutions
EBIT
A$ M
illion
s
Notes:(1) Smorgon
Distribution was acquired 3 August 2007.
Underlying EBIT
1H 07 2H 07 FY 07 1H 08 2H 08 FY 08 1H 09Underlying 11 (5) 6 22 64 86 75Reported 17 (5) 12 (8) 53 45 74
Underlying performance – 1H FY 2009 vs 1H FY 2008EBIT improvement largely due to −
improved spread −
full half year benefit SSX distribution business partly offset by lower despatches in 2Q
Distribution −
lower 2Q sales volumes across all market segments
Lysaght−
lower 2Q sales Water −
higher steel feed costs and competitive market reduced margins.
Integration of Distribution, Lysaght, Service Centres, Water and Buildings going well.
Page 66
Australian Distribution & Solutions – underlying EBIT variance (1H FY 2009 vs 1H FY 2008)
0
50
100
150
200
250
300
350
December 07HY
DomesticPrices
Raw MaterialCosts
Volume Conversion &Oth Costs
ExchangeRates
Other December 08HY
$22m
$75m
($1m)($25m)
($22m) ($1m)
$257m
($155m)
Spread improvement $102m
Page 67
Australian Distribution & Solutions
Steel Plate
Tube
Structural Steel
Merchant Bar
Reinforcing Steels
Processing Services
Pipeline Supplies
Valves
Fittings
Hot Rolled coil
Cold Rolled strip
Plate
Stainless steel
Aluminium
Processing / Slitting
RoofingWallingGutteringRainwater GoodsFencingMobile Roll forming
Tanks
Irrigation
Installation
BlueScope Buildings
Facades
Design & Construct
Solar
Slitting
Shearing
Warehousing & Despatch
Contract Services (predominantly for internal customers)
Sheet & Coil Processing
Services
The Distribution and Solutions division brings together BlueScope Steel’s Australian-based Downstream businesses
and Emerging Businesses
Page 68
Australian Distribution & Solutions - Network (as at 31 December 2008)
Sites 150Employees 4,100Active Customers >20,000
Lysaght
Sheet & Coil Processing Services
Sheet Metal Supplies
Regional DistributionMetro Distribution
KEY
Acacia Ridge
Eagle Farm
DandenongSunshine
Forrestfield
Bluescope Water
KeysboroughSurrey HillsTullamarine
St MarysTaren PointWollongong
KawanaOrmeau
Excludes- Lysaght Solutions- Head Offices- R & D Facilities- Bluescope Buildings- Licensed Distributors
West GosfordPadstow
Chullora
Bellevue
Acacia RidgeCapalabaEagle FarmGold CoastKawanaNorthgateOxleyWoodridge
Albany
Albury
ArcherfieldCarole ParkChinderahCoolumRocklea
Armidale
Arndell ParkCardiffChulloraEmu PlainsSmithfield
AuburnCardiffPenrith
BalcattaKewdaleRockingham
Ballarat
Bathurst
Bendigo
BraesideSunshine
Burnie
Bunbury
Bundaberg
Cairns
CampbellfieldGeelongLyndhurst
Charters Towers
Coffs Harbour
DandenongGeelongSunshineWestall
Darwin
Dubbo
Elizabeth Ottoway
Emerald
Esperance
Forrestfield
Geraldton
Gillman
Gladstone
Hobart
Horsham
Kalgoorie
Kingaroy
Launceston
Laverton
Lismore
Mackay
Mareeba
Mildura
Morwell
Motto Farm
Mount Isa
Orange
Port Macquarie
Portland
Queanbeyan
Rockhampton
Roma
Shepparton
Tamworth
Toowoomba
Townsville
Traralgon
Wagga Wagga
Warrnambool
Warwick
Wingfield
Wodonga
Page 69
BlueScope Distribution – Overview
BlueScope Distribution:
Operates an integrated network of more than 85 metropolitan and regional sites around AustraliaProvides over 15,000 customers with steel in the form they needOffers our customers a diverse range of steel products including plate, tube, hot & cold-rolled coil, metallic coated sheet, painted sheet, structural, merchant bar, reinforcing, engineering steels, pipes, valves and other specialty steel productsOffers quality processing solutions which range from simple cutting, slitting, stamping of coil to complex multiple-precision processing of plate and beams. These solutions help to reduce customers costs by reducing fabrication times, stock holdings and waste; therefore, improving our customers’ profitability and market success
Page 70
Manufacture41%
Mining3%
Other7%Other
Distributor7%
Building & Construction
42%
Distribution - Market structure in Australia (1H FY 2009)
Merchant Bar10%
Structural14%
Tubular16%
Sheet & Coil27%
Plate20%
Reinforcing5%
Other8%
Indicative product mix (volumes) Indicative sales volumes by sector
Page 71
New Zealand New Zealand New Zealand & Pacific Steel Products New Zealand & Pacific Steel Products
Page 72
New Zealand and Pacific Steel Products
43 4736
49
8578
90
0
25
50
75
100
FY07-1H FY07-2H FY07 FY08-1H FY08-2H FY08 FY09-1HEB
IT A
$ Milli
ons
Underlying EBIT
1H 07 2H 07 FY 07 1H 08 2H 08 FY 08 1H 09(1)
Underlying 43 47 90 36 49 85 78Reported 43 47 90 44 49 93 56
Notes:(1)
Difference between underlying and reported reflects write-off of feasibility costs associated with growth options $22M.
Markets Domestic – mixed, with residential sales lower and stronger commercial Export – market conditions strong in Q1.
Underlying performance – 1H FY 2009 vs 1H FY 2008EBIT up 117%, largely due to −
higher spread −
favourable FX−
higher iron sands export prices −
partly offset byhigher repairs & maintenance (inc. melter issue in July)
Signed new thermal coal contract with Solid EnergyAll optimisation projects on holdTaharoa iron sands asset sale
−
BSL considering its position.
Page 73
New Zealand and Pacific Islands Products – underlying EBIT variance analysis (1H FY 2009 vs 1H FY 2008)
0
20
40
60
80
100
120
December 07HY
Export Prices DomesticPrices
Raw MaterialCosts
Mix Conversion &Oth Costs
ExchangeRates
Other December 08HY
$36m
$36m
$78m$16m
($22m)
($2m)
($3m)
$35m
($18m)
Net spread increase A$53M
Page 74
Operations – New Zealand
Glenbrook
Waikato North HeadTaharoa
Auckland
TaurangaWharf
GlenbrookIron and Steel productionHot and Cold Rolling MillsDual Pot Metal Coating LinePaint LinePlate LineHollow sections plant
Waikato North Head MineConcentrated iron sand slurry pumped to Glenbrook
Taharoa MineApproximately 1mt concentrated iron sand shipped to Asia annually
AucklandStructural Beam plant
Tauranga WharfDeep sea export facilities
Page 75
Export 1.0mt
Domestic 6%NZS Slab 0.6mt
Export 19%
Interco (Export)75%
HRC 36%
New Zealand Steel – nominal product flow (annual)
Export 40%
Domestic 60%Plate 10%
Mine SitesIron Sands
2.3mt
Pipe 4% Domestic 100%
Cold Mill 50% Domestic 15%
Export 2%
Interco (Export) 13%
Coating Lines 70% Domestic Metal Coated 60%
Export Metal Coated 9%
Interco Metal Coated (Export) 4%
Domestic Painted 20%
Export Painted 5%
Interco Painted (Export) 2%
Export Vanadium Slag 14kt
Page 76
Asia Asia Coated & Building Products AsiaCoated & Building Products Asia
Page 77
36
826
50
76
-16
44
-40
-20
0
20
40
60
80
100
FY07-1H FY07-2H FY07 FY08-1H FY08-2H FY08 FY09-1H
Coated and Building Products Asia
EBIT
A$ M
illion
s
Underlying EBIT
1H 07 2H 07 FY 07 1H 08 2H 08 FY 08 1H 09(1)
Underlying 36 8 44 26 50 76 (16)Reported 28 6 34 (199) 50 (148) (75)
MarketsStrong Q1 sales in Indonesia and MalaysiaThailand’s political situation worsened in 1HAll regional markets softer in Q2
Underlying performance – FY2008 vs FY 2007EBIT down 162% largely due to
−
higher inventory net realisable value provisions ($24M)
−
lower sales volumes −
lower conversion cost recoveries due to lower production
−
partly offset by−
improved margins−
lower metal coating costs Growth projects:
−
second metal coating line in Indonesia on hold −
coating line in India project financed.
Notes: (1) Difference between Underlying and Reported reflects asset impairments
at China Metal Coating and Painting Line and at Lysaght
Panels, Langfang
along with higher inventory net realisable value provisions/profit in stock elimination offset with C&IP Australia.
Page 78
-75
-50
-25
0
25
50
75
100
125
150
175
200
225
250
275
December07 HY
ExportPrices
DomesticPrices
RawMaterialCosts
Volume Mix Conversion& OthCosts
ExchangeRates
Other December08 HY
$26m
$43m
($16m)($5m)
($22m)
($33m) ($20m)
$10m
$158m
($173m)
Net spread increase A$28M
Coated and Building Products Asia – underlying EBIT variance analysis (1H FY 2009 vs 1H FY 2008)
NRV writedowns
(25)Depn
/ Amort
5
Ext Steel Feed (147)IC Steel Feed (35)Coating Metals 9
Thailand (8)China (8)Vietnam (3) Indonesia (3)
China (10)India (6)Malaysia (6) Vietnam (4) Indonesia (4)Thailand (3)
Page 79
North America North America Hot Rolled Products Hot Rolled Products
Coated & Building Products Coated & Building Products
Page 80
101
54
155
36
69
105
15
0
30
60
90
120
150
180
FY07-1H FY07 - 2H FY07 FY08-1H FY08-2H FY08 FY09-1H
Hot Rolled Products North America
EBIT
A$ M
illion
s
Underlying EBIT
1H 07 2H 07 FY 07 1H 08 2H 08 FY 08 1H 09Underlying 101 54 155 36 69 105 15Reported 101 54 155 36 69 105 15
This segment includes:North Star BlueScope Steel (50% interest)
−
HRC produced from an electric arc furnace Castrip LLC
−
Thin strip casting Markets (North Star)
Despatches decreased 19% on 1H FY 2008Demand weakness in core mid-west and wider domestic USA markets.
Underlying performance – 1H FY 2009 vs 1H FY 2008North Star BlueScope−
58% EBIT reduction to A$15m due to higher net realisable value provisions for inventory higher gas and alloy prices lower despatches partly offset by
•
spread (principally in 1Q)higher HRC prices more than offsetting higher scrap costs
•
and favourable A$:US$ movements vs
1H08−
No dividends paid during halfCastrip (thin strip casting technology)−
Nucor’s second facility nearing completion.
Page 81
Coated and Building Products North America
2314
37 38
61
99
37
0
20
40
60
80
100
120
FY07-1H FY07-2H FY07 FY08-1H FY08-2H FY08 FY09-1H
EBIT
A$ M
illion
s
Notes: (1)
All EBIT numbers normalised to exclude Vistawall
business which was sold in June 2007.(2)
1H FY08 difference represents write back of over provided liabilities re Butler’s UK pension fund.(3)
2H FY08 difference represents IMSA integration costs and accounting adjustments. (4)
IMSA 5 month underlying EBIT contribution $34m. (5)
1H FY09 difference reflects inventory net realisable value adjustments/profit in stock elimination offset in C&IP Australia and plant rationalisation, integration and restructuring costs and partly offset by write back of over provided liabilities re general insurance and NA pension fund.
1H 07 2H 07 FY 07 1H 08 2H 08 FY 08 1H 09Underlying 23 14 37 38 61 99 37(5)
Reported 23 14 37 43 47 90 (55)
Underlying EBIT
(4)
(3)
(2)
Segment comprises:BlueScope Buildings (PEB);IMSA Steel Corp
Underlying performance – 1H FY 2009 vs 1H FY 2008EBIT down 3% largely due to −
inventory net realisable value provision−
lower sales volumes −
higher unit costs −
Partly offset byIMSA acquisition 6 months vs 5 months contribution Favourable FX movement
Buildings −
Closed 3 facilities −
Sales volumes up 24% due to Varco
Pruden
and HCI acquisitions
−
PEB market share 28.7% vs
17.4% in 1HFY08 (due to addition of Varco
Pruden)IMSA
−
Integration process continues Markets
−
Non-residential market slowed.
Page 82
-10
10
30
50
70
90
110
130
150
December 07HY
DomesticPrices
Raw MaterialCosts
Volume Conversion &Oth Costs
ExchangeRates
Other December 08HY
Coated and Building Products North America – underlying EBIT variance analysis (1H FY 2009 vs 1H FY 2008)
Comprises:Butler BuildingsHCI IMSA
EBIT
A$ M
illion
s
$38m $37m($1m)
$11m
($6m)
($19m)
$67m
($53m)
Net spread increase A$14M
Butler (18)IMSA Acqn
29
Page 83
Other Supporting Other Supporting InformationInformation
Page 84
Production footprint and annual capacities (as at 31 December 2008)
IndonesiaMetal Coating 100kt (+165kt)
Painting 40kt
(+120kt)
Western PortHot Rollling
1.43mtCold Rolling 1.0mtMC (3 lines) 830kt
Painting (2 lines) 310kt
SydneyPaint Line (1 Line) 120kt
New Zealand/PacificIron Sand MiningRaw Steel 625ktHot Rolling 750ktCold Rolling 360kt
Metal Coating 230kt Painting 65kt
Hollow Sections 45ktPacific Roll forming sites 3
Port Kembla/IllawaraRaw Steel 5.3mt
Hot Rolling 2.9mt Plate 400kt
Cold Rolling 990ktMC (3 lines) 825kt PL (1 line) 200kt
Australia7 Service Centres41 Lysaght Sites
9 BlueScope Water92 Distribution Sites
VietnamMC 125ktPainting 50kt
ChinaMC 250ktPainting 150kt
ThailandCold Rolling 350kt
Metal Coating 375ktPainting 90kt
MalaysiaMetal Coating 160kt
Painting 70kt
BrisbanePainting 90kt
Asia24 Lysaght and
PEB Sites
IndiaMetal Coating 250kt
Painting 150kt
• Coated and Building Products North America
• North Star BlueScope JVHot Rolling 1.90mt (100%)
• Castrip JV
Australia6 Service Centres41 Lysaght Sites
9 BlueScope Water Sites86 Distribution Sites
(1)
(1)
Indonesian coating project (expansion) on hold pending improvement in global economic / financial conditions.
Page 85
BlueScope Steel China footprint
BlueScope Steel in China1 Metal Coating/Painting Line Facility5 Lysaght
Manufacturing Facilities3 Butler PEB Manufacturing Facilities50 Butler/Lysaght/CSC Sales Offices24 Butler District Offices/Sales Office
SUZHOU
GUANGZHOU
1H FY 2009
REVENUE:
A$ 266M
EBITDA:
(A$39M )
EBITDA –
Underlying:
(A$3M)
EMPLOYEES:
2,109
INVESTED CAPITAL:
A$90M
Page 86
BlueScope Steel North American footprint
MI
FL
DEMD
KY
ME
NY
PA
VT
RI
VAWV
OHINIL
NCTN
SC
ALMS
WI
NJ
GA
NM
TX
OK
NE
SD
NDMT
WY
COUT
ID
AZ
NV
WA
CA
OR
AR
LA
MO
IA
MNMACT
NH
KS
MI
FL
DEMD
KY
ME
NY
PA
VT
RI
VAWV
OHINIL
NCTN
SC
ALMS
WI
NJ
GA
NM
TX
OK
NE
SD
NDMT
WY
COUT
ID
AZ
NV
WA
CA
OR
AR
LA
MO
IA
MNMACT
NH
KS
Mexico
Key
BlueScope BuildingsBSL Steel Sales Offices
SteelscapeMetlSpanASC
NorthStar
BlueScope
1H FY 2009
REVENUE:
A$1,315M
EBITDA (reported):
(A$12M)
EBITDA –
Underlying:
A$80M
EMPLOYEES:
4,780 incl. North Star
INVESTED CAPITAL:
A$1,034M
NB: Revenue excludes BSL’s
50% interest in North Star BlueScope Steel.
Page 87
Calendar year earnings
A$ Millions CY2003 CY2004(2) CY2005 CY2006 CY2007(3) CY2008(4)
Revenue 5,328 7,029 7,980 8,693 9,333 11,926
EBITDA(1) 857 1,501 1,411 1,052 1,130 1,775
EBIT(1)
-
reported 581 1,212 1,111 742 792 1,399-
operational - - 1,308 966 924 1,532
Net profit-
reported 436 859 792 413 414 887
-
operational - - 943 586 563 989EPS (¢) -
reported 56 116 110 59 56 116
(1)
Includes EBITDA & EBIT for North Star BlueScope Steel but not revenue(2)
Includes eight months of BlueScope Butler financial results(3)
Includes five months of Smorgon
Distribution financial results(4)
Includes eleven months of IMSA Steel financial results
Page 88
Shares on issue – historical movements
Million
Shares on issue at listing (July 2002) 793
Share buy-backs to 31/12/08 (av. Price A$6.10 / share) (116)
Dividend reinvestment scheme to 31/12/08 +62
Employee share plan issues to 31/12/08 +34
Institutional share placement (Dec 08) +96.8
Share Purchase Plan (Feb 09) +36.4
Shares on issue 20/2/09 906.3
Page 89
Equity capital raisings in December 2008 / February 2009
Decision in early December 2008 to raise equity
−
Proactive strengthening of balance sheet in light of weaker industry conditions/outlook, increased credit market uncertainty and the Taharoa
Iron Sands situation
−
Total of $413 million has been raised (net $400M)
Institutional placement raised A$300 million in early December 2008, through the issue of c.96.8 million shares at A$3.10 per share
−
Offering was well supported in difficult market conditions
Share purchase plan, targeted at retail shareholders, closed on 6 February 2009 and raised $113 million. Also well supported. 36.4 million shares issued at A$3.10 per share
Page 90
Indicative FY2009 Zinc and Aluminium usage vs FY2008
Note:(1)
In future years BSL Asia’s usage will increase as new mid-stream projects ramp-up to full capacity(2)
Av 1H FY 2009 Zinc price was US$1,493 per tonne vs
av
1H FY 2008 price of US$2,939 per tonne, with spot price of US$1,150 per tonne 22 January 2009.
(3)
Both Zinc & Aluminium usage could be lower in FY2009 due to lower global steel product demand and company’s decision to manage production assets to align with demand.
Tonnes Zinc Aluminium
FY2009(E) FY2008(A) FY2009(E) FY2008(A)
AUSTRALIA
Springhill 18,627 22,711 9,716 10,595
Western Port 14,910 21,954 10,276 10,590
Sub-total 33,537 44,665 19,992 21,185
NEW ZEALAND 6,478 6,831 3,528 3,619
ASIA 16,318 16,672 14,572 16,571
TOTAL 56,333 68,168 38,092 41,375
Page 91
Major approved capital projects and investment summary (noting “Stay in Business” capital is approx. 75% of depreciation)
PROJECTSAll in A$million
Total Est. Capex / Cost
Actual to 31/12/08
2H FY2009 FY2010 FY2011
Projects completedThailand –
Coating expansion 80 80 - - -
Vietnam –
Coating / Painting 136 136 - - -China
-
Coating and Painting Facility-
Guangzhou Butler / Lysaght27433
27433
--
--
--
India -
Butler / Lysaght
facilities (50% interest) 44 44 - - -AustraliaPort Kembla (PKSW) - HSM expansion
- Sinter Plant EmissionsWA Service Centre
10210021
10210021
---
---
---
Western Sydney Colorbond® 150 150 - - -
Projects to be completed
India -
Coating / Painting (50% interest)(1) 135 30 39 55 11
Indonesia –
Coating / Painting(2) 134 67 -(2) -(2) -
PKSW –
Blast Furnace No. 5 Reline –
Sinter plant upgrade 370134
17294
18634
126
--
INVESTMENTSIMSA North American businesses Smorgon
Steel’s Distribution businessButler Manufacturing(4)
Lysaght
and water acquisitions
807700277129
807572(3)
277129
---
----
----
Total capital spending 3,626 3,088 259 73 11
Notes: (1) India project funded under project financing. (2) Indonesian project –
work on hold pending improved demand. Will update remaining capital project when project restarts. (3) Gross cost of $700m less pre-tax profit on SSX shares of $128M leaves $572M. (4) US$190M (A$226M) recovered following the sale of Vistawall
in June 2007. (5) PK cogeneration plant –
to now focus on boiler replacement program (the timing of which
has not been fiinalised).
Page 92
IndustryIndustry
Page 93
386
257
2000 2007
ROW
Source: WSA Statistical Yearbook 2008
Long term growth in global steel demand…
APPARENT CRUDE STEEL CONSUMPTION
(M’s tonnes)
138
428
5429
1830
215
2000
2455
560
2007
ChinaRussiaBrazilIndia
133 114
80 85
Europe (EU15) 162
375
2000
185
384
2007
Japan
US
17%7%
BRIC’s Rest of World Large Developed Countries
CAGR
<1%
Page 94
…with demand underpinned by urbanisation in China...
0
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000Urban population (thousands)Rural population (thousands)
20502045204020352030202520202015201020052000199519901985198019751970196519601955195013% 14% 16% 17% 17%17% 19% 23% 27% 31% 35% 40% 45% 49% 53% 56% 60% 63% 66% 70% 73%Urbanisation %
Source : Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Urbanization Prospects: The 2007 Revision, http://esa.un.org/unup
13%13%
Chin
a : T
otal
Popu
latio
n (0
00’s)
Page 95
1998199920002001200220032004200520062007
1990
Net ExportsInventories
Investment
Consumption
0 1991199219931994199519961997
12
18
24
30
6
(RMB
Trill
ions)
2008f
Domestic demand is a key to GDP growth in China
CY 2008 could be viewed as “PAUSE” as
opposed to a “CLIFF”
−
credit tightening to reduce inflation
−
Olympics –
material driver of economic
slowdown
Government Nov 08 fiscal stimulus
package getting traction
Government confirmed approx 8% GDP
growth required just to meet growth in
domestic demand.
Composition of GDP
Sources: Datastream, EIU Forecast
Page 96
…and steel intensity in China likely to increase
Source:Worldsteel, International Monetary Fund, World Economic Outlook Database, October 2008
10 to 15 more years of strong growth in China until steel intensity curve flattens
0
200
400
600
800
1,000
1,200
0 10,000 20,000 30,000 40,000 50,000GDP per Capita at PPPCurrent International Dollars
China
Taiwan
USA
Japan
South Korea
India
CRUDE STEEL INTENSITY Kg/capita
1980-2007
China and India are at a very low point on their steel intensity
curve providing significant upside potential driven by industrialisation and urbanisation
Page 97
Consolidation has significantly altered the make-up of the Top 10 Global steel producers, with greater Chinese presence
4328 22 20 18 18 16 16 1328
0
20
40
60
Arcelor Nippon Steel Posco Ispat Corus Baosteel ThyssenKrupp NKK Riva Kawasaki
118
32 31 30 29 27 25 24 22330
20406080
100120140
Arcelor Mittal Nippon Steel Baosteel JFE Hebei I&S Posco US Steel Wuhan Tata Corus Gerdau
CY2000 Crude Steel Production
CY2008 Crude Steel Production* Arcelor-Mittal, Hebei
I&S (Tangshan-Handan), US Steel–Stelco, Wuhan-Liuzhou, Tata-Corus
Top 10 producers = 286mt
Source: Company Websites, WSA
Top 10 producers = 371mt
*Note –
CY08 crude steel estimates based on Q3 2008 production annualised
Tonn
es (M
illion
s)To
nnes
(Milli
ons)
First Half FY2009 Results Presentation Period Ended 31 December 2008Paul O’Malley, Managing Director and Chief Executive OfficerCharlie Elias, Chief Financial Officer 23 February 2009
ASX Code: BSL
