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2nd Annual Goldman Sachs JB Were Australasian Investment Forum, New YorkKirby Adams, Managing Director and Chief Executive OfficerMarch, 2006
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
IntroductionIntroduction
Page 4
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 5
Our Customers – serving them in over 20 countries
• Over 30,000 customers using BlueScope Steel products with confidence
Australia34%
New Zealand/Pacific4%
Asia8%
Asia14%
North America-NSBSS + C&BPNA16%
Americas21%
Europe/Africa3%
Exports38%
PRODUCT OFFER
• Services
• Solutions
• Technical support
• Warranty
• Just In Time Delivery
• Transport & Logistics
• Design / Build / Install
• Information systems- web based- connectivity
PEB/Roll formed28%
Slab9%
HRC23%
Plate6%CRC
3%Metal Coated18%
Painted13%
Global Product Mix($ Revenue)
First Half FY06
Geographic markets (tonnes by destination)
First Half FY06
Indicative3.545 million tonnes
Page 6
Zero harm is our goal for our team and communities
8.0
4.83.4 4.1 3.4 2.8 1.8 1.5 0.8 0.9
1416
29
35
0
5
10
15
20
25
30
35
40
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20061H
Injur
ies re
sultin
g in l
ost ti
me pe
r milli
on m
an-h
ours
worke
d
** Includes Butler performance from May 2004
Medically Treated Injury Frequency RateLost Time Injury Frequency Rate
17,500 Employees, 75 manufacturing sites, 17 countries
52.247.1
29.122.4 21.9
12.2 9.3 9.2 7.0
17
8.2
60
68
80
0
10
20
30
40
50
60
70
80
90
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20061H
Medic
ally t
reate
d inju
ries p
er m
illion
man
-hou
rs wo
rked
* Includes Butler performance from May 2004
Reported performance for IISI member companies
Page 7
Our shareholders – continuing to reward shareholders as we grow
• Share Buybacks – Public Listing to 31 December 2005- Purchased and cancelled 113m shares
* on market – 87m shares* off market – 26m shares
• Dividends - All Fully Franked
Total return to shareholders since BSL’spublic listing (July 2002):
• Share buybacks $ 687m• Dividends paid $ 970m• Interim dividend
(to be paid April 06) $ 140m$ 1,797m
$2.39 share or 77% payout ratio
9 13 1218 18
24 207
10
20
05
101520253035404550
FY2003-1H
FY2003-2H
FY2004-1H
FY2004-2H
FY2005-1H
FY2005-2H
FY2006-1H
¢
¢¢
Cent
s Per
Sha
re
¢
29¢
40¢
¢
¢
¢
SpecialOrdinary:- Interim- Final
62¢
¢
¢ ¢
Page 8
Unique and valuable franchise in world’s largest and fastest growing markets
IndonesiaMC 100kt +205kt
Painting 50kt +75kt
Western PortHot Rolling 1.43mtCold Rolling 1.0mt
MC (3 lines) 830kt +Painting (2 lines) 330kt +
BrisbanePainting 88kt
New Zealand / PacificIron sand MiningRaw Steel 625ktHot Rolling 750ktCold Rolling360kt
MC 230kt +Painting 60kt
Hollow Sections 45ktPacific BlueScope Buildings
sites 3
VietnamMC 125kt
Painting 50kt
ChinaMC 250kt
Painting 150kt3 Butler PEB
SydneyPainting (1 line) 120 kt
• Coated and Building Products North America
• North Star JVHot Rolling 1.80mt (100%)
• Castrip JV
Asia & China20 BlueScope Buildings Sites
India50:50 JV with Tata
SteelMC 250kt
Painting 150kt2 BlueScope
Buildings sites1 Butler PEB
Port Kembla / SpringhillRaw Steel 5.1mt
Hot Rolling 2.4mt +400ktPlate 360kt
Cold Rolling 1,180kt Tinplate/Black plate 200kt
MC (3 lines) 750kt +PL (2 lines) 207kt +
ThailandCold Rolling 300kt
MC 375kt Painting 90kt
PEB
MalaysiaMC 160kt
Painting 70kt
Australia7 Service Centres
34 BlueScope Buildings sites
7 BlueScope Water
Page 9
Upstream – Steel Making
Capability Products StatisticsSlab • 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 (1H-06)- PKSW A$1,900m- NS (50%) US$243m
• Customers- Internal mid-stream- Pipe & Tube- Fabrication / manufacturing- Ship building (Korea)- Distribution
• Markets- Australia, NZ, Americas, Asia
Port Kembla Steelworks
NSW, Australia
Hot Rolled Coil
New Zealand Steel
Plate
North Star BlueScopeOhio, USA
Page 10
Midstream – Metallic Coating and Coil Coating Network
Capability Products Statistics
• Capacity (ktpa) growing
• Asia FY05 FY09- Cold Rolled Coil 300 300+- Metallic Coating 430 1,460- Painting 210 635
• Australia- Cold Rolled Coil 1,930 2,180- Metallic Coating 1,580 1,580- Painting 625 745
• NZ- Cold Rolled Coil 360 360- Metallic Coating 230 230- Painting 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
COLORBOND®
ZINCALUME®
CLEAN COLORBOND®
GALVASPAN®
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
Page 11
Downstream - Metal Building Products and Solutions
Capability Products Statistics
• Market leader in- Australia- China- South East Asia- 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
Butler Pre-Engineered Buildings (PEB)
BlueScope Water
Lysaght roll formed steel components
Australia
New Zealand & Pacific
Asia
North America
Page 12
Current and expected market conditions confirm our strategic direction
Downstream
Midstream
Upstream
FUTURE GROWTH PROJECTSFY2007 - 2009FY2006–2H
Australia- 400kt HSM expansion (1Qtr 07)- BF No. 5 reline (expected FY08)
New Zealand Steel- Front end study underwayUSA- North Star BlueScope new bag house- Castrip
Australia- 120kt Colorbond® plant start up (1H-CY07)China- 250kt Metal Coating and 150kt Paint
lines start up (1Q-FY07 & 2H-FY06 respectively)
India- 250kt Metal Coating & 150kt Paint
lines start up (mid CY08)Indonesia- 205kt Metal Coating & 75kt Paint
lines start up (early CY08)
Vietnam- Ramp-up 125kt Metal Coating and 50kt
Paint LinesThailand- Ramp-up 200kt Metal Coating
expansion
India- New PEB and Lysaght plants openChina- New PEB and Lysaght plants open
Australia- Water and new building productsThailand- First pre-engineered building (PEB)China- New panels, residential plants and new
beam facility
Page 13
Pricing over the cycle
Indicative
Time
Selli
ng P
rice
$
PEBPaintZALGalvCRCHRCSlab
Page 14
FY2006FY2006IN REVIEWIN REVIEW
Page 15
Our record since public listing – Revenue & EBITDA
0400800
1,2001,6002,0002,4002,8003,2003,6004,0004,400
1H-03 2H-03 1H-04 2H-04 1H-05 2H-05 1H-060100200300400500600700800900100011001200
Revenue EBITDA
EBIT
DA (A
$ Milli
ons)
Reve
nue (
A$ B
illion
s)
Despatches (net) 3.35 3.41 3.24 3.69 3.46 3.70 3.55Revenue (A$m) 2,590(1) 2,712(1) 2,619(1) 3,151(1) 3,881 4,084 3,892 EBITDA (A$m) 464(1) 417(1) 440 (1) 665(1) 837 818 593
(1) AGAAP
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Calendar Year Earnings
A$ Millions CY2003 CY2004(2) CY2005
Revenue 5,328 7,029 7,980
EBITDA(1) 857 1,501 1,411
EBIT(1) 581 1,212 1,111
Net Profit 436 859 792
EPS (¢) 56 116 110
(1) Includes EBITDA & EBIT for North Star BlueScope Steel but not revenue.(2) Includes eight months of BlueScope Butler financial results.
Page 17
Group headlines First Half FY2006 vs. First Half FY2005
• Revenue A$3,892 million Constant
• External despatches 3.5 million metric tonnes Up 3%
• EBITDA A$593 million Down 29%
• EBIT A$449 million Down 35%
• NPAT A$312 million Down 38%
• EPS 44¢ Down from 68¢
• After tax Return on Invested Capital 14.6% Down from 27%
• After tax Return on Equity 18.9% Down from 32%
• Net operating Cashflow - after capital / investments ($19 million) Down 108% - before capital $347million Down 33%
• Interim Ordinary Dividend 20¢ per share Increased 2¢ per share (11%)(fully franked)
• Gearing (net debt) 33.2% 22.2% (June 05) – including SOR
Page 18
+5
Coated and Building Products Asia – unexpected market weakness
Markets> Lower despatches / weaker markets > Heightened import competition> Customers high inventories / destocking> China – credit controls delayed projects
Performance• First half
> higher feed costs fully utilised in half> +$11m in pre-operating and business
development costs vs. 1H-05 (gross $18m)> unfavourable FX - A$ stronger > growth projects on schedule, apart from
China metal coating line (+1-3 months)• Second half
> improving margins, higher production and increased sales volumes
> competitive market offers> project delivery / start-up
45 37
-4-20
0
20
40
60
80
100
120
FY05-1H FY05-2H FY06-1H
EBIT
A$ M
illion
s
BlueScope Butler
9 8
• Sales revenue down 7% to A$485m, including A$117m from BlueScope Butler China
• 1H-FY2006 return on net assets annualised (pre-tax) (1%)
Page 19
Continued GDP growth expected in South East Asia
GDP - Malaysia
-12
-8
-4
0
4
8
12
95 96 97 98 99 00 01 02 03 04 05e 06 07
Annu
al %
Cha
nge
ConsensusEIUIMA Asia
F’cast
Foreign Direct Investment[Thailand, Malaysia, Indonesia, and Vietnam]
0
2
4
6
8
10
12
01 02 03 04 05e 06 07 08 09 10
US$b
illio
n
F’cast
GDP - Thailand
-12
-8
-4
0
4
8
12
95 96 97 98 99 00 01 02 03 04 05e 06 07
Annu
al %
Cha
nge
ConsensusEIUIMA Asia
F’cast
GDP - Indonesia and Vietnam
-12
-8
-4
0
4
8
12
95 96 97 98 99 00 01 02 03 04 05e 06 07
Annu
al %
Cha
nge
ConsensusEIUIMA Asia
F’cast
Source: EIU, Consensus Economics, IMA Asia, BSL EconomicsNotes: All charts include calendar year data
Vietnam
Indonesia
Page 20
China and India expected to maintain strong growth momentum
GDP
0
2
4
6
8
10
12
95 96 97 98 99 00 01 02 03 04 05e 06 07
Annu
al %
Cha
nge
ConsensusEIUIMA Asia
Source: EIU, Consensus Economics, IMA Asia, BSL EconomicsNotes: All charts include calendar year data
China
India
F’cast
Industrial Production
0
5
10
15
20
25
30
95 96 97 98 99 00 01 02 03 04 05e 06 07
Annu
al %
Cha
nge
ConsensusEIU
China
India
F’cast
Gross Fixed Investment
0
4
8
12
16
20
24
95 96 97 98 99 00 01 02 03 04 05e 06 07
Annu
al %
Cha
nge
ConsensusEIUIMA Asia
China
India
F’cast
Foreign Direct Investment
0
10
20
30
40
50
60
01 02 03 04 05e 06 07
US$b
illio
n
0
2
4
6
8
10
12
EIU
China (LHS)
India (RHS)
F’cast
Page 21
Our Asian Coating / Painting / Roll-Forming / PEB Capacity to Triple
By Region
430
210
1460
635
0200400600800
1000120014001600
FY2005 FY2006 FY2007 FY2008 FY2009
Metal Coating Painting
(k to
nnes
)
x 3.4
x 3.0
Page 22
Coated & Building Products Australia – Challenged again
Markets> Lower production & export volumes due to Western Port fire> Lower domestic demand for Australian canned goods > Lower domestic demand in manufacturing and
distribution for “bare” galvanised > Increased “bare” product import offers > Strong domestic demand for higher quality construction
products> Higher domestic prices50
100
150
200
250
Milli
ons
• Sales revenue of A$1,429m, down 5%
• 1H-FY2006 return on net assets annualised (pre-tax) (5%)
* Excludes Packaging Products impairment write-down of $82million
-84
-15 -30
-150
-100
-50
0
FY05-1H FY05-2H FY06-1H
EBIT
A$
Performance• First half
> significantly higher feed costs (HRC & slab)> Western Port HSM fire August 2005 reduced production
capacity – fully operational November 2005> Higher zinc and aluminium costs> Increased metal coating and paint capacity> Western Sydney Colorbond® Centre on schedule
• Second half> Improved sales and production> More competitive market offers> Lower “bare” product prices
*
Page 23
Coated and Building Products North America – Back in the black
Markets> Improved non-residential market but not as strong
as the previous corresponding period> Good order bookings leading into the second halfPerformance• First half
> Overall continued improvement> Buildings
- Jackson Tennessee specialty plant into full production
- But, despatches down 7.5% due to delayed start-up
- Sold Galesburg, Illinois facility> Vistawall
- Tennessee extrusion expansion completed- Weekly order intake ($ terms) up 21%- Cost increases – aluminium and energy
• Second half> Continued improvement
1
-19
2
-30
-20
-10
0
10
20
30
FY05-1H FY05-2H FY06-1H
EBIT
A$ M
illion
s
• Sales revenue = A$607m down 4%
• 1H – FY2006 return on net assets annualised (pre-tax) 1%
Page 24
New Zealand and Pacific Steel Products – still delivering
Performance• First half
> Higher costs, including maintenance, unit costs and coal / electricity
> Paint line production up due to FY05 upgrade> Regrettably had a fatality in July> Front end studies underway – steel make and
iron sands conversion• Second half
> Lower steel prices> Flat sales volumes
93 9666
0
25
50
75
100
125
150
175
200
225
FY05-1H FY05-2H FY06-1H
EBIT
A$ M
illion
s
• Sales revenue down 8% to A$359m
Markets> Lower domestic sales (softer residential) > Higher domestic prices> Lower prices on export HRC sales> Higher average vanadium prices
• 1H-FY2006 return on net assets annualised (pre-tax) 42%
Page 25
Hot Rolled Products – excellence across the board
698 653479
0
200
400
600
800
1000
1200
1400
FY05-1H FY05-2H FY06-1H
Performance• First half
> Dramatically higher iron ore and coal costs, partly offset by lower priced iron ore inventory
> Excellent operations / marketing effort post Western Port fire
> Record 6 month iron make and slab production> Enterprise Bargaining Agreement extended
to 2009> PKSW Hot Strip Mill expansion on schedule> North Star BlueScope – record half year
production and paid US$50m (100%) dividend • Second half
> Full impact of 71% higher iron ore costs> Flat steel volumes; weaker prices overall> More normal product mix; improved market offer
• 1H-FY2006 return on net assets annualised (pre-tax) 44%
EBIT
A$ M
illion
s 104
North Star BlueScope Steel
Port Kembla Steelworks
90
• PKSW sales revenue up 2% to A$1,900m
• NSBSS revenue US$243m (50%), down 17%
Markets> Increased export (principally slab) sales> Higher domestic prices; lower export prices> Strong USA HRC price / scrap spread
62
Page 26
Earnings guidance for FY2006 – implies a more challenging second half
Downstream
Midstream
Upstream
FY2006 – 2H vs. 1H
• Full affect of higher iron ore (PKSW)• Scrap – free market linked to HRC• Further softening in Asian export steel prices • Flat sales volumes• More normal product / geographical mix
Australia• Improved sales & production • Displace imports• Lower “bare” product pricesAsia• Improved margins• Higher production & sales volumes• Competition • Vietnam project start up
• Lower “bare” feed costs• Higher sales volumes• Greater competition
• FY2006 after tax earnings outlook now expected to be in the range of A$0.65 – $0.75 EPS on an AIFRS basis
Page 27
Global steel industry currently squeezed by China’s increased steel making capacity and higher raw material costs
15
20
25
30
35
40
45
50
55
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
US$ / DMT. Lump iron ore indicative of all iron ore types. JSM Benchmark Pricing.
Lump Iron Ore Extreme Deviation
0
50
100
150
200
250
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06
Japan to Korea HRC US Midw est HRC Latin America SlabUS$ / Tonne. Indexed, Jan 98 = 100. (CRU)
Raw Steel Prices
Sources: IISI, BSL Research
93 95 101 109 115 124 127151
182
222
280
349
0
50
100
150
200
250
300
350
400
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
China Crude Steel Production
Millio
n to
nnes
Page 28
World crude steel production - 1950 to 2004
0
200
400
600
800
1000
1200
1950 1960 1970 1980 1990 2000
Millio
n To
nnes
6.0%
3.1%
0.3%
4.0%Average Annual Growth Rates
Source: IISI
Page 29
Global steel industry – our long term view has not changed
Current industry issues:
• China’s capacity growth / fragmentation
• Lower Asian steel prices
• Higher raw material costs
• Scrap / iron ore differential
• Higher energy and other costs
• Increased competition
Rest of steel world
• Continued discipline
Likely industry outcomes long term:
• China – steel reform initiatives taken / exports discouraged
• China – increased demand / steel displaces inter-material
• Prices improve and then stabilise
• Raw material costs moderate
• Other costs remain high
• Competition BUT on increased demand
• Expansion programs being re-evaluated
• Continued industry consolidation
• India – increased steel requirements (3 - 5 years)
Page 30
Questions and Answers
Dynamic Global Steel
Market
Dynamic Global Steel
Market
Profitable Through the
Cycle
Profitable Through the
Cycle
Geographic and Product
Diversity
Geographic and Product
Diversity
Strong and Flexible Capital
Structure
Strong and Flexible Capital
Structure
Consistently Strong Cash
Flows
Consistently Strong Cash
Flows
Strong Board & Management
Team
Strong Board & Management
Team
Value Added Branded Products
Value Added Branded Products
Growth Opportunities in
Asia
Growth Opportunities in
Asia
Low Cost Producer
Low Cost Producer
Strong Operating
Track Record
Strong Operating
Track Record
A VERY DIFFERENT KIND OF STEEL
COMPANY
2nd Annual Goldman Sachs JB Were Australasian Investment Forum, New YorkKirby Adams, Managing Director and Chief Executive OfficerMarch, 2006
ASX Code: BSL