113
Page 1 FY2011 Results and Business Update Presentation Paul O’Malley, Managing Director and Chief Executive Officer Charlie Elias, Chief Financial Officer 22 August 2011 ASX Code: BSL
Page 1
FY2011 Results and Business Update Presentation Paul O’Malley, Managing Director and Chief Executive OfficerCharlie Elias, Chief Financial Officer 22 August 2011
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.
THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS “MAY”, “WILL”, “SHOULD”, “EXPECT”, “INTEND”, “ANTICIPATE”, “ESTIMATE”, “CONTINUE”, “ASSUME” OR “FORECAST” OR THE NEGATIVE THEREOF OR COMPARABLE TERMINOLOGY. THESE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCES OR ACHIEVEMENTS, OR INDUSTRY RESULTS, EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
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
16.0
14.0
8.0
4.8
3.54.1
3.52.8
1.8 1.60.9 0.8 0.9 0.60.9
0.6 0.9
0
2
4
6
8
10
12
14
16
18
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011FY
Safety – our target remains Zero HarmLo
st tim
e inju
ries p
er m
illion
man
-hou
rs wo
rked
Medically Treated Injury Frequency RateLost Time Injury Frequency Rate
60.0
52.2
47.1
29.1
22.4 21.9
17.0
12.49.4 8.3 9.3
6.65.0 4.45.76.8 6.4
0
10
20
30
40
50
60
70
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011FY
Medic
ally t
reate
d inju
ries p
er m
illion
man
-hou
rs wo
rked
Includes Contractors from 1996Includes Butler from May 2004Includes 2007/8 acquisitions
Includes Contractors from 2004Includes Butler from May 2004Includes 2007/8 acquisitions
Reported performance for World Steel member companies
(employees & contractors)
Page 4
Introduction – Business performance
• Structural change in macro-economic factors have driven an unacceptable result from our Australian business, leading to today's announcement
In addition asset carrying value assessments resulted in net impairment write downs of $922m (principally Australian assets).
• Another strong Asian performance, with further growth expected
• 50% interest in North Star BlueScope Steel’s mini-mill, USA, had a strong second half
• New Zealand continues to deliver solid results supported by iron sands sales.
• Significant work has been undertaken to improve the earnings potential of the Coated North American business
• Maintained the cost reductions achieved in prior years
Significant structural changes in the steel industry and Australian economy drive need to exit the Australian steel export business. We remain committed to steel
production for the domestic market.
Page 5
$0
$100
$200
$300
$400
$500
$600
$700
$800
Jan-11Jan-10Jan-09Jan-08Jan-07Jan-06Jan-05Jan-04Jan-03Jan-02Jan-01Jan-00
Indicative Steelmaker HRC Spread (A$/t)SBB East Asia HRC price less cost of 1.5t iron ore fines and 0.71t hard coking coal
A$/t
Source: SBB, CRU, Platts, TSI, Reserve Bank of Australia, BlueScope Steel calculations
Note:• ‘Indicative steelmaker HRC spread’ representation based on simple input blend of 1.5t iron ore fines and 0.71t hard coking coal per output tonne of steel. Chart is not a
specific representation of BSL realised export HRC spread (eg does not account for iron ore blends, realised steel prices etc), but rather is shown primarily to demonstrate movements from period to period arising from the prices / currency involved.
• Re iron ore pricing used: 62% Fe iron ore fines price assumed. Industry annual benchmark prices up to March 2010. Quarterly index average prices from April 2010, lagged by one quarter; FOB estimate deducts appropriate freight cost from CFR China price.
• Re hard coking coal price used: industry annual benchmark prices up to March 2010; quarterly industry prices thereafter.
Steel spread – rising raw material costs and highly volatile steel prices
Page 6
Annualised Monthly World Crude Steel Production^(M Tonnes)
-Source: WSA ^ Based on the daily production rate for the month-Data to July 2011
Tonnes (M’s)
Monthly Crude Steel Capacity Utilisation*
Utilisation (%)
* Notes – Crude steel capacity utilisation is calculated based on the WSA 66 reporting countries, representing approx 96% of global crude steel capacity; At 85% pricing power shifts towards supplier; *Year to date annualised
Steel spread - global steel market dynamics remain challenging oversupply, China is operating at around 700mt p.a., however ROW utilisation remains subdued…
1,501
698803
0100200300400500600700800900
1,0001,1001,2001,3001,4001,5001,600
Jan 11Jan 10Jan 09Jan 08Jan 07Jan 06Jan 05Jan 04Jan 03Jan 02Jan 01Jan 00 Jan 12
80
87
75
50%
55%60%
65%70%
75%
80%85%
90%
95%100%
105%110%
115%
Jan 01Jan 00
85%
Jan 12Jan 11Jan 10Jan 09Jan 08Jan 07Jan 06Jan 05Jan 04Jan 03Jan 02
World (Excl China)ChinaWorld World (Excl China)World China
Page 7
… with a quantum jump in iron ore and coal prices over the last three years when price setting also moved from annual to quarterly
Note:• Iron ore pricing used: 62% Fe iron ore fines price assumed. Industry annual benchmark prices up to March 2010. Quarterly index average prices from April 2010, lagged
by one quarter; FOB estimate deducts appropriate freight cost from CFR China price.• Hard coking coal price used: industry annual benchmark prices up to March 2010; quarterly industry prices thereafter. FOB Australia
Source: CRU, Platts, TSI, BlueScope Steel
Iron Ore Coking coal
Page 8
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
Jan-95Jan-94Jan-93Jan-92Jan-91
Avg, 0.88
1.10 (01-Aug)
Avg, 0.69
USD/AUD
Jan-90 Jan-12Jan-11Jan-10Jan-09Jan-08Jan-07Jan-06Jan-05Jan-04Jan-03Jan-02Jan-01Jan-00Jan-99Jan-98Jan-97Jan-96
Monthly Foreign Exchange Rate1st July 1990 – 1st August 2011
Start: $0.79End: $0.79High: $0.83Low: $0.49
Start: $0.79End: $1.10High: $1.10Low: $0.63
Foreign Exchange – stronger A$ exacerbates the contraction of USD spread and leads to increased import competition in Australia
Page 9
21%
38%4%
9%
12%
4%
12%
Exports25%
(1,492kt)
5,986kt 7,155kt
Exports - Americas
Exports - Asia
Exports – Europe/Med/Middle East/India Australia
NA (HRPNA + C&BPNA) New Zealand/Pacific
Asia
KeyDomestic sales (produced and sold within country)
FY2009
… and our export mix has grown off soft Australian sales
20%
37%4%
6%
17%
4%
12%
FY2010
Exports27%
(1,931kt)
7,790kt 20% increase 9% increase
Note: Percentages have been rounded.
FY2011
20%
30%
3%
11%
16%
6%
14%
Exports33%
(2,579kt)
Total External Sales
Total BlueScope Group External Despatches
Page 10
... with Australian external sales volumes falling 11% (FY2011 on FY 2010)
Notes: (1) Percentages have been rounded. (2) Normalised despatches exclude third party sourced products, incl long products.(3) Engineering includes infrastructure such as roads, power, rail, water, pipes, communications and some mining-linked use(4) The work to get closer to our customers has resulted in greater insight on how our domestic sales are being converted into end use sales
‘000 t
onne
s
1H FY20092H FY2008 2H FY2009 1H FY2010EXTERNAL DESPATCH VOLUMES(1)
GrossDespatches 1,614kt (9%) 1,466kt (44%) 824kt 51% 1,243kt 11% 1,381kt (15%) 1,168kt 3% 1,198kt
Less(2) (246kt) (192kt) (140kt) (164kt) (166kt) (161kt) (160kt)NormalisedDespatches 1,368kt (7%) 1,274kt (46%) 684kt 58% 1,079kt 13% 1,215kt(4) (17%) 1,007kt 3% 1,038kt
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Auto & transportAgri & miningManufacturingEngineering
Dwelling
Non-dwelling
2H FY201063%
13% (208kt)
15% (239kt)
9% (144kt)
14% (212kt)
13% (192kt)
14% (202kt)
9% (130kt)
29% (236kt)
28% (235kt)
13% (109kt)11% (90kt)11% (92kt)8% (62kt)
13% (161kt)
13% (160kt)
13% (156kt)8% (105kt)
14% (187kt)
11% (152kt)
14% (198kt)
10% (134kt)
Construction65%
66%
70%
64%27% (436kt)
21% (344kt)
15% (243kt)
27% (389kt)
23% (341kt)
28% (349kt)
25% (312kt)
28% (391kt)
23% (320kt)
(3)
1H FY2011
11% (133kt)
11% (123kt)
13% (157kt)9% (102kt)
67%
29% (340kt)
27% (313kt)
12% (154kt)
10% (124kt)
14% (164kt)9% (106kt)
67%
29% (344kt)
26% (308kt)
2H FY2011(4)
FY20091,958kt
FY20112,045kt
FY20102,294kt
17% (11%)-- -- -- --
(Blast furnace No. 5 Reline)
Page 11
Decision to balance Australian steelmaking production capacity with Australian demand
• Today we announced our decision to exit the business of exporting steel manufactured at Port Kembla, whilst remaining fully committed to our Australian domestic business
This decision to exit exports will involve the shut down of No. 6 Blast Furnace and closure of other assets, including one coke oven, and the Hot Strip Mill at Western Port. The restructure is expected to deliver approximately A$225M EBIT improvement , based on pro-forma adjustments to FY2011 results.Anticipate restructure costs will be in the order of A$400-500M (funded by an equivalent working capital release).
• We will engage with our employees, customers, suppliers, unions, communities, and government to ensure an effective outcome
• BlueScope has also obtained lender support to implement this value-adding restructure.
Note: (1) Based on management’s internal assessment
(1)
(1)
Page 12
Growth focus
• Delivering on our investment in Asia
Restructured the business
Now delivering strong returns
With material upside as we grow sales from our existing investments
• Continue to grow our global presence in building construction markets
In particular steel Pre-Engineered Buildings
• Continue to focus capability in Australia on our domestic market and coated steel product development
• North America business
Expansion opportunity at North Star
Buildings restructured - material earnings upside when US economy recovers
• Cash release and redeployment program to capture growth opportunities
Page 13
FY 2011 Headlines
Page 14
Twelve MONTHS ENDED 30 June VARIANCE2010 2011 %
Revenue 8,624M 9,153M +6% External despatches 7.2M tonnes 7.8M tonnes +9% EBITDA − Reported 590M (687M) -
− Underlying 605M 254M -58%EBIT − Reported 240M (1,043M) -
− Underlying 255M (101M) -140%NPAT − Reported 126M (1,054M) -
− Underlying 113M (118M) -204 %EPS − Reported 6.9¢ (57.4¢) -
− Underlying 6.2¢ (6.4¢) -204%EBIT Return on Invested Capital 3.8%/4.0%* (16.2%)/(1.6%)* -Return on Equity 2.3%/2.0%* (19.6%)/(2.2%)* -Net Operating Cashflow− From operating activities A$463M A$142M -69%− After capex / investments A$136M (A$218M) -260%Final ordinary dividend (fully franked) 5cps 0cpsGearing (net debt) 11.4% 19.5% Below 25-30% target & 16.7% pre-
impairment
Group financial headlines FY2011 vs. FY2010
Note: * Underlying Returns
Page 15
Reconciliation between FY2011 reported NLAT and underlying NLAT
FY2011NLAT A$M
Reported (1,054)Net (gains) / losses from discontinued businesses (1)Reported earnings from continuing businesses (1,055)Restructuring & redundancy costs 10Asset impairment 922Business development costs 5Underlying operational NLAT (118)
Note: Please refer to Table 2b of the ASX Earnings Release for twelve months ended 30 June 2011 (document under listing rule 4.3a)
Page 16
FY2010 FY2011 1H FY2011 2H FY2011 2H FY2011 (vs 1H)
Coated & Industrial Products Australia 108 (258) (97) (161) Further spread contraction; soft domestic
demand and prices; NRV adjustments
- Indicative HRC Spread (US$/tonne) 365 269 252 286
- Indicative HRC Spread (A$/tonne) 414 273 266 279
- A$ / US$ FX 0.88 0.99 0.95 1.03
Australia Distribution & Solutions 2 (34) (15) (19) Import competition & margin contraction
New Zealand Steel and Pacific Steel Prod. 73 82 49 33 Reduced spread in 2H; lower iron sands
despatch timing
Coated & Building Products Asia 116 108 46 62 Good performance notwithstanding weak 1H
in Thailand and FX translation.
Coated & Building Products North America (16) (20) (16) (4) Modest improvement in market conditions
Hot Rolled Products North America 61 72 8 64 Improved spreads
Corporate & inter-segment (89) (51) (16) (35) Slightly lower corporate costs in 2H, but profit
in stock adjustment greater in 1H
TOTAL GROUP 255 (101) (41) (60)
Segment EBIT summary
Underlying EBIT, A$M Comments
Note: * see footnotes concerning indicative Asian steelmaker spread on a subsequent page
*
*
Page 17
Spread: drives over 90% of the decline in performance of Coated & Industrial Products Australia FY2011 vs. FY2010
+487
+108
FY 2011
-258
Other
-33
Raw Material Costs
-820
PricesFY 2010
Net Spread Reduction $333m
Coated & Industrial Products Australia – Underlying EBIT
$333M unfavourable net spread movement in FY2011 vs. FY2010 driven by:
Iron ore costs $480M unfavourable: trailing quarter index average fines price moved up from average US$95/t in FY2010 to US$158/t in FY2011 (CFR China (62% Fe)
Coal costs $428M unfavourable: market coal price averaged US$147/t in FY2010 vs. US$248/t in FY2011
Partly offset by stronger slab & HRC prices
Increase in lower margin export despatches
Page 18
$0
$100
$200
$300
$400
$500
$600
$700
$800
Jan-11Jan-10Jan-09Jan-08Jan-07Jan-06Jan-05Jan-04Jan-03Jan-02Jan-01Jan-00
Indicative Steelmaker HRC Spread (A$/t)SBB East Asia HRC price less cost of 1.5t iron ore fines and 0.71t hard coking coal
A$/t
Source: SBB, CRU, Platts, TSI, Reserve Bank of Australia, BlueScope Steel calculations
Note:• ‘Indicative steelmaker HRC spread’ representation based on simple input blend of 1.5t iron ore fines and 0.71t hard coking coal per output tonne of steel. Chart is not a
specific representation of BSL realised export HRC spread (eg does not account for iron ore blends, realised steel prices etc), but rather is shown primarily to demonstrate movements from period to period arising from the prices / currency involved.
• Re iron ore pricing used: 62% Fe iron ore fines price assumed. Industry annual benchmark prices up to March 2010. Quarterly index average prices from April 2010, lagged by one quarter; FOB estimate deducts appropriate freight cost from CFR China price.
• Re hard coking coal price used: industry annual benchmark prices up to March 2010; quarterly industry prices thereafter.
Export losses – since 2000 BlueScope’s export sales have made a strong contribution to profits in only two years
Page 19
Background• BlueScope operates 2 blast furnaces (No. 5 and No. 6) at Port Kembla, New South Wales• Each has a capacity of approximately 2.6mtpa or 5.3mtpa in total• Assets form part of the Coated & Industrial Products (CIPA) reporting segment•Pre-Global Financial Crisis, CIPA’s sales despatch mix was approximately 50% Australia : 50%
export markets
Focusing our Australian steelmaking to support the
domestic market
Page 20
Indicative historical CIPA Export underlying EBIT (pre-NRV charge) (A$m)
Indicative Raw Steel Spread (*)
-191
224
1,000766
569
1,236
697546
35
Historical CIPA total segment underlying EBIT (pre-NRV charge) (A$m)
Macro environment and poor returns are driving this decision
-487
-189-246
20276
-97
367
6976
FY2011FY2010FY2009FY2008FY2007FY2006FY2005FY2004FY2003
$0$200$400
$600$800
Jan-12Jan-11Jan-10Jan-09Jan-08Jan-07Jan-06Jan-05Jan-04Jan-03Jan-02
Note: (*) Please refer to “Notes” supporting Indicative Steelmaker HRC Spread chart on earlier page
Page 21
-191
Revised Pro-Forma FY2011 EBIT for CIPA’s
domestic busines
+34
Fixed costs retained (Production reduced
more than fixed costs)
-182
Loss retained on some exports
-80
Add back Export loss
+487
FY2011 Actual CIPA
Underlying EBIT A$ (Pre-NRV charge)
BlueScope is better off under this restructure by an estimated $225M (pro-forma impact on FY 2011)
+ $225M improvement
(1)
(1)
(1)
Note: (1) Based on management’s internal assessment
Page 22
Proforma impact of restructure on 2011 CIPA income statement
A$m; year to 30 June 2011AImpact of
restructure
2011proforma for restructure
Revenue 5,196 (1,550) 3,646
Variable cost (3,696) +1,410 (2,286)
Variable contribution 1,500 (140) 1,360
Fixed cost & other (1,490) +315 (1,175)
EBITDA (pre NRV charge) 10 +175 185
Depreciation & amortisation (202) +50 (152)
EBIT (pre NRV charge) (191) +225 34
Net realisable value charge (67) +65 (2)
EBIT (underlying) (258) +290 32
Domestic tonnes (kt) 2,013 - 2,013
Export tonnes (kt) 2,666 (2,271) 395
Comprised of:• Loss of $170m export sales contribution• Favourable domestic contribution estimate of $30m predominantly
from improvement in raw materials blend
Comprised of reduction in:• Utilities & services• Repairs & maintenance• Direct labour• Refractories & consumables• Overheads• SG&A & other
Comprised of:• Raw materials, including assumption of raw materials mix
improvement to lower price (greater proportional utilisation of iron fines to use latent capacity created at sinter plant
• Variable conversion costs
Note: Despatch figures represent internal and external prime tonnes and exclude non-prime sales and tonnage sold on behalf of other business units
(1)
Note: (1) Based on management’s internal assessment
Page 23
Indicative EBIT sensitivities for FY2012 (reflecting FY2011 CIPA asset base) compared to FY2012 (reflecting the one Blast Furnace announcement)
(1) - Full year base exchange rate is US$1.02.- Sensitivities assume respective 2BF or 1BF operations annualised
(2) The change in export HRC price assumes proportional effect on export slab, and flow on to domestic pipe and tube market and to other export products. This does not include the potential impact on Australian domestic coated product prices, as the flow on effect in the short term is less certain.
(3) The movement in the Australian dollar/US dollar exchange rate includes the restatement of US dollar denominated receivables and payables and the impact of translating the earnings of offshore operations to A$. Does not reflect impact on Australian domestic pricing.
(4) 1 blast furnace sensitivities assume raw material consumption at a rate of 50% of 2 blast furnaces
Estimated impact on FY2012 EBIT A$m
Assumption
+/– US$25 / tonne movement in BlueScope’s average realised export HRC price(2)
1¢ movement in Australian dollar / US dollar exchange rate(3)
US$10 / tonne movement in coal costs
+/ – US$10 / tonne movement in iron ore costs
2 Blast Furnaces
110+/–+/–
72979
1 Blast Furnace
422
1439
(4)
(4)
(1)
CONFIDENTIAL DRAFT FOR DISCUSSION
5.3mtpa asset base 2.6mtpa asset base
Port Kembla
Cokemaking Operating 4 batteries Operate 3 batteries (closing No. 4) and 21/22 Blowers
Sinter Plant Full Capacity Reduce production through reduced shifts to 5day/week
Blast Furnaces Two: No. 5 and No. 6 Shut down No. 6; potential rationalisation of raw materials handling
BOS All 3 Vessels operating Operate 2 vessels (Close No. 3)
Steel Treatment Normal shift Reduced shifts
Slab Casting Operate three continuous casters Operate 2 casters (Close No.1)
Hot Strip Mill At full capacity Reduced shift operation
Skin Mill At full capacity Reduced shift operation
Plate Mill No change No change
SpringhillCold Rolling No change Reduced load (no export)
MCL’s Full capacity (3 lines) No change
Western Port
Hot Strip Mill Operates at reduced capacity (normal) Closed
Cold Rolling At full capacity Reduced load
MCL’s Operate 3 metal coating lines Mothball MCL5 and transfer domestic production to MCL 1 and 3 (Springhill)
Fixed cost reductions will be achieved through the closure of certain assets
Page 25
At 2.6mtpa, capacity sufficient to meet all domestic demand, with continued investment in next generation Zincalume and Colorbond (in JV with Nippon Steel)
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2011
2.045
2010
2.294
2009
1.958
2008
2.663
2007
2.472
2006
2.236
2005
2.699
2004
2.597
2003
2.468
Fiscal Years
Historical Australian External Salesfrom both CIPA and Australian Distribution & Solutions
Mtpa
Note: External sales EXCLUDE long products sourced from OneSteel by Australian Distribution & Solutions reporting segment
Page 26
1. What is the expected cost to transition to one blast furnace (2.6mtpa) and how will it be funded?
•The bulk of the transition activity will take place between now and March 2012.
•Anticipate restructure cash costs will be met from release of working capital, both in the order of A$400-500m
•BlueScope will continue to operate at the site and will undertake appropriate make-safe and other requirements
Questions associated with the transition plan
(1)
Note: (1) Based on management’s internal assessment
Page 27
2. Will BlueScope be able to cost effectively restart BF No. 6?•Intention is to
Tap the salamander to drain the molten ironThen keep the BF on a basic “care and maintenance” mode
•The company will have the ability to restart BF No.6, however the time and cost will be dependent upon:
When a decision is taken to restart, noting a “later than sooner” decision may impact both cost and time due to the potential requirement for increased level of refurbishmentThe planned capacity for iron and steelmaking post starting No. 6 Blast Furnace
would also influence cost and time to complete•Currently, best estimate of time and cost would be in the order of 6-12 months and in range A$40-100m
Questions associated with the transition plan
Page 28
3. What is the Group’s ongoing “stay in business” capital expenditure after the restructure?
Previously reported annual “stay in business” capital for the BlueScope group was approximately 75% of group depreciation.
Over next few years expect this level will hold, ie. 75% of reduced group depreciation base after the impairment adjustment
Questions associated with the transition plan
Page 29
Safety, our people, community and our customers
• SafetyDuring the implementation process we will not compromise BlueScope’s focus on safety
• Our people and our communityTreat our employees, contractors, suppliers and our communities with respect
• CustomersDomestic customers− In the process of contacting customers to assure them of BlueScope’s increased
commitment to meet their requirements
Overseas customers− Working with them to enable a smooth transition to alternative suppliers
Overseas affiliates− Well advanced on investigating alternative steel feed suppliers
Page 30
BlueScope has lender support for the restructuring
• Discussions have been concluded with BlueScope’s principal lending groupsBank SyndicateUS Private Placement Noteholders
• BlueScope’s objective in these negotiations was to obtain lender support to implement this value-adding restructure. This has been achieved.
Page 31
Summary
• Restructuring is imperative given:Industry and macro economic structural changes Resulting in loss making export business; andHistory shows we are only giving up a small amount of upside whilst materially reducing the downside
• We have demonstrated an ability to deliver “change”, eg:Profitable turn around in AsiaBF No. 5 reline and sinter plant upgradeDelivered substantial cost savings, ie. A$696m by end of FY2011 (vs. FY08 cost base)Materially restructured the North American business
• Key benefits of restructure:Improved alignment between BlueScope’s Australian steelmaking production capacity and Australian demandRemoval of significant losses on export sales in the current environmentLower long-term capital investments at Port KemblaReduction in volatility of earnings through the cycle
Page 32
Additional financial information to assist understanding of the revised
CIPA steel market configuration
Page 33
A$m; year to 30 June 2011AImpact of
restructure
2011proforma for restructure
Revenue 5,196 (1,550) 3,646
Variable cost (3,696) +1,410 (2,286)
Variable contribution 1,500 (140) 1,360
Fixed cost & other (1,490) +315 (1,175)
EBITDA (pre NRV charge) 10 +175 185
Depreciation & amortisation (202) +50 (152)
EBIT (pre NRV charge) (191) +225 34
Net realisable value charge (67) +65 (2)
EBIT (underlying) (258) +290 32
Domestic tonnes (kt) 2,013 - 2,013
Export tonnes (kt) 2,666 (2,271) 395
Proforma impact of restructure on 2011A CIPA income statement
Comprised of:• Loss of $170m export sales contribution• Favourable domestic contribution estimate of $30m predominantly
from improvement in raw materials blend
Please refer to next slide
Comprised of:• Raw materials, including assumption of raw materials mix
improvement to lower price (greater proportional utilisation of iron fines to use latent capacity created at sinter plant
• Variable conversion costs
Note: Despatch figures represent internal and external prime tonnes and exclude non-prime sales and tonnage sold on behalf of other business units
(1)
Note: (1) Based on management’s internal assessment
Page 34
Components of fixed cost reduction estimate ($315M)
Utilities & services
• Utilities includes electricity, natural gas, internal gases, cryogenic gases, water, steam, compressed air and hot blast
• Includes contracted services for management of slag and other materials handling (movement of materials, waste streams), PCI plant and site rail services
Repairs & maintenance• Includes direct maintenance labour, contractors, materials / spares – considered highly fixed (~80%)• Key driver of reductions is shut down of BF No. 6 and closure of facilities – a coke battery, #3BOS and
no.1 slab caster
Direct labour • Includes direct labour from the plant areas that are closed and a portion of support and management labour from each plant area
Refractories & consumables
• Includes refractory materials & labour• Key driver of reductions is shut down of BF No. 6 and closure of facilities – a coke battery, #3BOS and
no.1 slab caster• Typically a variable cost but ~30% considered fixed due to wear & repair not aligned with production level
Overheads, SG&A & other
• Overheads include plant area support costs (labour & facilities) and sitewide allocated costs (eg security, rates, land taxes, fees, technical support, environment support, warehousing etc)
• SG&A: predominantly driven through removal of duplicated roles and costs, as an extension of the existing BlueScope ANZ restructure. Additional estimated savings are envisaged through simplification and standardisation of business processes
(1)
Note: (1) Based on management’s internal assessment
Page 35
Relevant factors for CIPA in FY2012
• When considering variable contribution, bear in mind:– Q1 FY11 benefited from domestic price (and spread) lag from strong Q4 FY10– FY2011 benefited from an opening stock adjustment (c.$100M)– Escalation of retained variable conversion costs
• Estimated fixed cost base to benefit from restructure:– ~$315M annualised savings rate from full restructure (pre-escalation)– ~$120M annualised savings rate from 80% (2BF) operating rate (pre-escalation)
• Depreciation reduction of $50M to apply throughout full year given impairment taken at 30 June 2011
(1)
(1)
(1)
Note: (1) Based on management’s internal assessment
Page 36
Working capital release and cost to achieve
We anticipate that restructure cash costs will be met through release of working capital; estimates only at this stage, but expect both will be in the order of $400-500M
Working capital release Cash costs (by estimated size)
• Redundancies and employee related costs (including payment of leave provisions)
• Operational changes / restructure costs
• Site closure and make-good costs
• Liquidation of export inventory
• Main working capital accounts were net ~$1bn in CIPA at 30 June 2011
• Balances will depend on embedded costs, but currently anticipate $400-500M drop from June 2011 level to June 2012, due to:
– Lower debtors. Domestic business WC slightly higher than export due to value of domestic debtors
– Lower inventory with expected pro-rata inventory volume reduction, but for assumption of some additional iron ore held as buffer
– Lower creditors given lower levels of raw materials purchases and other supply contracts
(1)
(1)
Note: (1) Based on management’s internal assessment
Page 37
Financial Results
Page 38
A$ Millions FY2007 FY2008(3) FY2009 FY2010 1H FY11 2H FY11 FY11
Revenue(1) 8,913 10,495 10,329 8,624 4,622 4,531 9,153
EBITDA – Reported(2) 1,423 1,420 380 590 127 (814) (687)
EBIT(2) – Reported 1,099 1,063 15 240 (48) (995) (1,043)
– Underlying(4) 1,057 1,273 171 255 (41) (60) (101)
NPAT – Reported 686 596 (66) 126 (55) (999) (1,054)
– Underlying(4) 643 816 56 113 (47) (71) (118)
EPS(5)(cps) – Reported 95.3 80.1 (7.1) 6.9 (3.0) (54.4) (57.4)
– Underlying(4) 89.3 109.6 6.1 6.2 (2.5) (3.9) (6.4)
Historical earnings performance
Notes:(1) Does not include North Star BlueScope Steel revenue, which was A$697M (FY2011) vs. A$626M (FY2010).(2) Includes 50% share of North Star BlueScope Steel net profit before tax.(3) Includes eleven months of BlueScope Distribution financial results and five months IMSA steel businesses financial results.(4) Underlying numbers represent Reported numbers adjusted for unusual or non-recurring events to reflect underlying financial performance from ongoing operations.(5) EPS for periods prior to the May / June 2009 entitlement offer have not been restated for the bonus element of the entitlement offer.(6) Includes asset impairment write downs:
1H 11 – $9M - Distribution $77M partly offset by China write-back of $68M.2H 11 – $913M CIPA $797M, Distribution $100M & Steelscape $16M
(6)
(6)
(6)
(6)
Page 39
Asset carrying value assessments result in net impairmentwrite downs of A$922m
• As a normal part of finalising its accounts each half year BlueScope reviews the carrying value of its non-current assets.
• Given ongoing macroeconomic challenges of high AUD:USD, low spreads (selling price less raw material cost) and low domestic demand, BlueScope made the following non-current asset impairment write downs during FY2011:
2H FY2011 (A$913m asset impairment write down)−Coated & Industrial Products Australia A$797m (of which $68m relates to goodwill)−BlueScope Distribution A$100m (all goodwill)−Steelscape, USA (part of Coated & Building Products, North America segment) A$16m (all goodwill).
1H FY2011 (net A$9m asset impairment write down)−BlueScope Distribution A$77m (all goodwill)−Partly offset by China Metal Coating line write back of A$68m, as a result of improved earnings performance over the past two years
Page 40
Underlying EBIT variance FY2010 to FY2011 by major item
+184
+436
+255
FY 2011
-101
Other
-16
Exchange Rates
-12
Conversion Costs
-22
North Star
+12
Mix
-70
Volume
+76
Raw Material Costs
-944
Domestic Prices
Export Prices
FY 2010
Net Spread Reduction ($324m)Raw Materials:Coal (450)Iron ore (480)Scrap (55)Alloys (17)External steel feed (68)Net realisable value provisions (74)Coating metals (28)Opening stock adj 229Other (1)
Conversion & Other Costs :Cost improvement initiatives 38Volume 125Escalation (109)One-off / discretionary (43)Other (mainly freight) (33)
Note: 1) Opening stock adjustment reflects the net movement comparing: - the bleed-out of lower priced inventory at the start of FY2011 ; and
- the bleed-out of higher priced inventory at the start of FY20102) Volume impact on costs reflects the effect of lower unit costs as a result of higher production / sales volumes in FY2011.3) Volume / mix based on FY2010 margins
(3) (3)
Domestic Prices:C&IPA 63AD&S (61)NZPac 16C&PB Asia 39C&BP NA 96Other/InterSeg 31
Exchange Rates:Revenues (262)Costs 317Debtor Re-state (49)Translation (18)
(2)
(1)
Page 41
Underlying EBIT variance 2H FY2011 to 1H FY2011 by major item
Note:(1) Volume/mix impact based on 1H FY2011 margins.
-41
+55
Mix
+6
Volume
-7
Raw Material Costs
Export Prices
+131
1H 2011
-229
2H 2011
-60
Other
-4
Exchange Rates
+23
Conversion Costs
+11
North Star
-5
Domestic Prices
Net Spread Reduction ($103m)Raw Materials:Coal (107)Iron ore (77)Scrap (14)Alloys 3External steel feed (3)Net realisable value provisions (28)Coating metals (13)Opening stock adjustment 10Other -
Conversion & Other Costs:
Cost improvement Initiatives 47 Volume 12One-off / discretionary 11Escalation (46)Other (13)
(1) (1)
Domestic Prices:C&IPA (56)AD&S (15)NZPac 1C&PB Asia 30C&BP NA 37Other/InterSeg (2)
Page 42
Fixed cost and overhead reductions
During FY2011 an additional $38M reduction in the cost base was achieved, before escalation.
$696M cumulative savings were achieved by the end of FY2011 (vs. FY2008 cost base)$340M permanent savings $356M temporary savings
Cost reductions remain an ongoing focus
Notes:• Permanent savings are long-term structural cost reduction initiatives such as improved scheduling techniques, efficiency of supply chain & freight activities, consolidation of operating sites
(Australian Distribution and North America) and consolidation of support services.• Temporary savings are short-term ‘belt tightening’ initiatives (not including direct volume related variable costs) which may return as business conditions improve. Examples include reduced
use of contractors, consultants, travel, renegotiation of procurement of services and supplies spend, deferral of non-essential maintenance and engineering spend.• Excludes impact of cost escalation.
Page 43
Cashflow
A$ millions FY2007 FY2008 FY2009 FY2010 1H FY11 2H FY11 FY2011Cash from operations 1,364 1,579 534 596 166 142 308Working capital movement (21) 69 250 (133) (182) 16 (166)Net operating cash flow 1,343 1,648 784 463 (16) 158 142Net investing cash flows- Capital & investment exp (493) (1,979) (762) (375) (180) (217) (397)- Smorgon shareholding(1) (319) 447 - - - - -- Other 271 22 34 48 4 33 37Net cash flow before
financing & tax802 138 56 136 (192) (26) (218)
Financing costs (156) (143) (161) (102) (66) (49) (115)Interest received 6 7 6 9 5 2 7(Payment)/refund of income tax (229) (208) (205) 7 4 (16) (12)Net drawing / (repayment) of borrowings
(356) 331 (943) (155) 145 221 366
Equity issues 221 229 1,836 - - - -Dividends (321) (357) (253) (4) (51) (42) (93)Other 2 - - - - - -Net increase/(decrease) in cash held
(31) (3) 336 (109) (155) 90 (65)
Increase in WC: see balance sheet (next page)
Includes steam infrastructure, steel
injection, Indonesian expansion and stay in
business
Predominantly interest costs &
commitment fees. Lower 2H reflects lower spread and
fees
(1) Purchased 19.9% shareholding in Smorgon Steel in August 2006, disposal in August 2007.(2) The BlueScope Steel Australian tax consolidated group is estimated to have carried forward tax losses, as at 30 June 2011, in excess of $1.2b. There will be no
Australian income tax payments until these losses are recovered.
In general weaker steel spreads reduced cash from operations
Australian tax consolidated group has carried forward
tax losses (2)
Page 44
Higher than Dec 2010 largely due to higher
selling prices over first half.
Refer next slide
Balance Sheet
Further drawdowns on loan note facility
Refer previous slide
As at
A$ Millions 30 June 2010 31 Dec 2010 30 June 2011Assets Cash 251 86 172Receivables 1,199 987 1,050
Inventory 1,829 1,962 2,029
Other Assets 1,446 1,198 1,041
Net Fixed Assets 4,273 4,175 3,501
Total Assets 8,998 8,408 7,793
Liabilities
Creditors 1,120 973 1,163
Interest Bearing Liabilities 994 999 1,240
Provisions & other Liabilities 1,128 929 994
Total Liabilities 3,242 2,901 3,397
Net Assets 5,756 5,507 4,396
Net Debt / (Net Debt + Equity) 11.4% 14.2% 19.5%
Timing of raw material purchases
Largely actuarial review of super/pension fund
balances
Asset impairment write down
Page 45
Balance Sheet … $67M increase in inventory since December 2010 predominantly on account of prices and volumes at C&IPA, offset in part by foreign exchange benefits
Volume change from June 2008
+25%vs Jun-2008
-12%vs Jun-2008
+14%vs Jun-2008
-9%vs Jun-2008
+1,962+1,829
+1,587+1,702
+2,815
+1,660
Jun-11
+2,029
NRV adjustment movement
-28
FX
-31
VolumeDec 2009
+30
Dec 2008 Jun 2009 Rate / feed costs
+96
Jun 2008 Dec-10Jun 2010
-1%vs Jun-2008
Note: “RMS” – Raw Materials (including externally sourced steel feed to BSL businesses)“WIP” – Work in Progress“FGS” – Finished Goods
$73m CIPA
RMS $338MWIP 569FGS 498Other 182
RMS $397MWIP 639FGS 618Other 175
RMS $421MWIP 690FGS 679Other 172
+11%vs Jun-2008
RMS $388MWIP 750FGS 718Other 173
Page 46
Balance Sheet…keeping gearing below target levels
Gearing at 19.5% (ND/ND+E). Target range 25-30%
Net debt at 30 June 2011 of $1,068M (rounded), comprised of $1,240m of drawn debt less $172m cash
30 June total undrawn facilities and cash of A$1,137m vs. $A1,332m at 31 December 2011 and A$1,620m at 30 June 2010
Net Debt ($M)
+743
Net Debt June 2011
+1,068
FX translationNet Debt Dec 2010
+912
-34
FX movements Non-FX movements
+190-125
Net Debt June 2010
Non-FX movements
+294
11.4%
Foreign Exchange:Debt (134)Cash (9)
Foreign Exchange:Debt (38)Cash 4
14.2% 19.5% (16.7% pre impairment) Gearing(ND / ND+E)
Page 47
55 76
675675
94
187
76
228
Debt Facilities and Maturity Profile as at 30 June 2011
Notes:Assumes AUD/USD at 1.0693(1) USD$ 100m (A$94m) of USPP notes repaid 1st July 2011
A$M Cost of Debt
Effective average cost of drawn debt in FY2011 was 7.30%
Plus:
Commitment fees on undrawn bank facilities average 1.1%pa
other related costs
82 2HFY16+
903
1HFY16
2HFY15
1HFY15
2HFY14
751
1HFY14
2HFY13
1HFY13
2HFY12
1HFY12
OtherSyndicated Loan Note FacilityUS Private Placement
Refinanced the Syndicated Facility in December 2010 to improve debt maturity profile and reduce financing costs
(1)
149
Page 48
Indicative EBIT sensitivities for FY2012 (reflecting FY2011 CIPA asset base) compared to FY2012 (reflecting the one Blast Furnace announcement)
Estimated impact on FY2012 EBIT A$m
Assumption
+/– US$25 / tonne movement in BlueScope’s average realised export HRC price(2)
1¢ movement in Australian dollar / US dollar exchange rate(3)
US$10 / tonne movement in coal costs
+/ – US$10 / tonne movement in iron ore costs
2 Blast Furnaces
110+/–+/–
72979
1 Blast Furnace
422
1439
(4)
(4)
(1)
(1) - Full year base exchange rate is US$1.02.- Sensitivities assume respective 2BF or 1BF operations annualised
(2) The change in export HRC price assumes proportional effect on export slab, and flow on to domestic pipe and tube market and to other export products. This does not include the potential impact on Australian domestic coated product prices, as the flow on effect in the short term is less certain.
(3) The movement in the Australian dollar/US dollar exchange rate includes the restatement of US dollar denominated receivables and payables and the impact of translating the earnings of offshore operations to A$. Does not reflect impact on Australian domestic pricing.
(4) 1 blast furnace sensitivities assume raw material consumption at a rate of 50% of 2 blast furnaces
Page 49
Outlook
Page 50
First half FY 2012 outlook
• Three key drivers will continue to have a material influence on our 1H12 financial performance:
A$/US$Steel spread (function of HRC and raw material prices)Demand
• Restructure costs will also have a material impact on financial performance in this half
• We expect continued good performance from Asia, New Zealand and our 50% interest in North Star
• Currently we expect:A significant reported NLAT including restructuring costs (excluding NRV’s and/or impairments)A small underlying NLAT (excluding restructure costs, NRV’s and/or impairments)
• We will update the market at the AGM in November.
Page 51
Questions & Answers
Page 52
FY2011 Results and Business Update Presentation Paul O’Malley, Managing Director and Chief Executive OfficerCharlie Elias, Chief Financial Officer 22 August 2011
ASX Code: BSL
Page 53
Other Supporting Information
Page 54
Reporting SegmentsAdditional Information
Page 55
Reporting Segments Corporate / 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 (NSW) and Acacia Ridge (Qld) Colorbond® facilitiesNorth America, Europe & Asia Export trading offices
New Zealand & Pacific Steel
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 China
BlueScope Buildings North America (pre-engineered buildings)SteelscapeMetl-SpanASC Profiles
Coated & Building Products
North America
Australia New Zealand Asia North America
HotRolled
ProductsNorth 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 Rollforming BlueScope WaterService CentresBlueScope Buildings
Australia Distribution
&Solutions
Page 56
Segment business drivers Corporate / Group
Coated & Industrial Products Australia
• Selling prices of steel
• Material costs –including iron ore, coal, fluxes, alloys, and coating substances
• Conversion costs• Foreign exchange
(eg AUD/USD)• Despatch
volumes• Domestic / export
and product mix
New Zealand & Pacific Steel
Products
Coated & Building Products
North America
Australia New Zealand Asia North America
HotRolled
ProductsNorth America
Coated & Building Products
Asia
Australia Distribution
&Solutions
• Despatch volumes
• Product mix• Margins• Foreign exchange
(eg AUD/USD)
• Selling prices of steel• Material costs – mainly
coal, fluxes, alloys, and coating substances
• We own our iron sands resource, so just an extraction cost applies
• Conversion costs• Foreign exchange• Despatch volumes• Domestic / export and
product mix • Iron sands and
vanadium revenue
• Despatch volume• Margins• Political
developments• Foreign exchange
(USD, Thai baht, RMB, MYR)
• Selling prices of steel
• Material costs –including scrap steel, pig iron, fluxes and alloys
• Conversion costs• Foreign exchange
(eg AUD/USD)• Despatch volume• Energy costs
• Despatch volumes
• Margins• Foreign exchange
(eg AUD/USD)
Page 57
Australia Coated & Industrial Products
Distribution & Solutions
Page 58
Coated & Industrial Products Australia – underlying EBIT variance analysis (FY2011 vs. FY2010)
EBIT
A$M
+63
+424
+108
FY2011
-258
Other
-8
Exchange Rates
+27
Conversion Costs
-6
Mix
-82
Volume
+36
Raw Material Costs
-820
Domestic Prices
Export PricesFY2010
Net Spread Reduction ($333m)
Conversion & Other Costs:Cost improvement initiatives 11Volume 79Escalation (43)One-off / discretionary (22)Other (principally freight) (31)
Raw Material Costs:Coal (428)Iron ore (480)Scrap (40)Alloys (17)Net realisable value provisions (67)Opening stock adjustment 229Coating metals (17)Other -
Page 59
Coated & Industrial Products Australia – underlying EBIT variance analysis (1H FY2011 vs. 2H FY2011)
EBIT
A$M
-97
2H 2011
-161
Other
-1
Exchange Rates
+39
Conversion & Other Costs
+10
Mix
-3
Volume
+2
Raw Material Costs
-207
Domestic Prices
-56
Export Prices
+152
1H 2011
Net Spread Reduction ($111m)
Raw Material Costs:Coal (98)Iron ore (77)Scrap (12)Alloys & coating metals 3Net realisable value provisions (26)Opening stock adjustment 10Coating Metals (7)Other -
Conversion & Other Costs:Cost improvement initiatives 23Volume 6Escalation (22)One-off / discretionary (mainly volume) 12Other (principally freight) (9)
Note: (1) Opening stock adjustment predominantly reflects the net movement comparing: - the bleed-out of lower priced inventory at the start of 1H FY2011
(1)
Page 60
BlueScope Steel – Key drivers of Coated & Industrial Products Australia FY2011 result
Notes: (1) Average of monthly Steel Business Briefing East Asia HRC US$/t CFR price.(2) Iron ore fines benchmark price, US$/t FOB Port Hedland.(3) Average of Platts, The Steel Index and Metal Bulletin indexes, CFR China ports, US$/t 62% Fe. Average for the period, lagged by one quarter.(4) Average of Platts, The Steel Index and Metal Bulletin indexes, CFR China ports, US$/t 62% Fe.(5) Benchmark prices for 30 June fiscal year; does not reflect BSL’s coal price averaging arrangement for 15 months to 30 June 2010.(6) Coated & Industrial Products Australia division.(7) Includes despatches to parties external to BSL, and despatches to other BSL divisions (eg C&BP Asia, C&BP North America and Aust. Distribution & Solutions).(8) Despatches to parties external to BSL.
2H 2009 1H 2010 2H 2010 1H 2011 2H 2011
East Asia HRC price1, US$/t 452 536 633 611 722
IO fines, benchmark2 91 61 n/a n/a n/a
IO fines index avg, one qtr lag3 71 76 114 147 169
IO fines index avg4 68 92 145 147 178
Coking coal5, US$/wmt 300 129 165 217 278
Average AUD 0.712 0.872 0.894 0.945 1.033
End of period AUD 0.810 0.895 0.850 1.017 1.069
PKSW slab production, kt 1,117 2,187 2,537 2,643 2,530
C&IPA6 total despatches7, kt 1,430 2,007 2,510 2,406 2,467
C&IPA6 ext despatches8, kt 1,201 1,517 1,929 1,902 1,892
Production adjusted, together with BF No. 5 reline, to reduce inventory
PKSW blast furnace #5 restarted and ramped-up during this half
Page 61
Coated & Industrial Products Australia – Despatch Mix
441771
635
229
581 503 575
490
Domestic external
Export external
BSL internal
Jun-2010
2,510
1,003
926
Dec-2009
2,007
867
650
Jun-2009
1,430
509
692
Dec-2008
2,051
1,026
390
Jun-2008
2,626
1,101
755
Dec-2007
2,577
1,040
1,096
Jun-2011Dec-2010
1,075
817
2,406
Smorgon Distribution consolidated from Aug
2007 – increases internal despatches, decreases
domestic external
IMSA consolidated from Feb 2008. Internal despatches
increase and external despatches decrease due to Steelscape coming ‘in house’
Chart shows despatch volume, kt
Depth of GFC; Blast Furnace
No. 5 offline for most of this half
Strong 1Q, weaker 2Q as markets
started to turn down2,467
1,105
798
Blast Furnace No. 5 restarted during this half
Both PKSW furnaces operable
during the half
Both PKSW furnaces operable
during the half
Both PKSW furnaces operable
during the half
Page 62
Notes:(1) Slab, HRC and plate. Variance of total from sum of constituents is due to rounding.(2) See Coated Australia Annual Capacities 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 Annual Capacities slide for Springhill Works capacities (6) See ASX Release, Attachment 1 for detail
PKSW – Production & Despatch Flow
Port Kembla SteelworksSlab Production
FY 2011 FY 20105,173 4,724
Plate Mill
Product / DestFY 11 kt FY 10 kt
Legend:
Port Kembla SteelworksDespatches (1)
FY 2011 FY 20104,915 4,636
Inventory movements& yield losses
Domestic0 21
Domestic430(3) 555
Interco968 985
Domestic1,041 1,011
Export698(4) 535
Interco1,607 1,558
HRC2,735 2,648
Export566 547
Domestic82 85
Interco82 85
Export85 43
Domestic192 183
Plate359 311
Western Port (2)
Springhill(5) / DistributionAsia / Nth
Am(6)
Distribution
Slab 1,821 1,678
Hot Strip Mill
Export853 672
Page 63
Hot Strip Mill1,400
Port Kembla Steelworks
Metal Coating Lines 830
Cold Mill1,000
HRC
Pickle Line1,100
Coated Australia – Annual Capacities
Paint Lines330
HRC
CRC
Painted Strip
Metal Coated Strip
Western Port
Note:Numbers reflect mill capacity in kilotonnes
Slab
Springhill
HRC
Coupled Pickled Cold Mill990
Metal Coating Lines 825
Paint Lines200
CRC
Metal Coated Strip
Painted Strip
Page 64
466 466 479 440159
338 422 296 326
782 838526
267
490
540
710 876 761
1,361 1,2951,606
1,411
699
1,203
1,423 1,3221334
Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11
Port Kembla Steelworks – despatches by half year
External Product Sales Mix
48% sold domestically and 52% exported, with geographic split being:Asia 21%Europe 51%Americas 19%Other 9%
100% exported, with geographic sales split being:Asia 71%Other 29%
Note: *Internal Customers include both domestic and export despatches(1) Increase in slab was principally due to a major schedule Hot Strip Mill R&M outage in February 2011
2,609 2,599 2,611
2,118
1,348
2,081
2,555 2,494 2,421
BSL internal*
Export external
Domestic external
Slab 30% 36% 30% 23% 22% 43% 28% 30% 46%HRC 54% 51% 54% 57% 66% 47% 60% 58% 41%Plate/Other 16% 13% 16% 20% 12% 10% 12% 12% 13%
(1)
Page 65
4705
4049
37833662 3610 3567
3406
3146 3171 3087 3,123
0
250
500
750
1,000
1,250
1,500
1,750
2,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Employees Productivity (Tonnes per person per year)
Prod
uctiv
ity (C
rude
Ste
el Ou
tput
, Ton
nes/E
mpl
oyee
/Yea
r)
Port Kembla Steelworks productivity
Note:*2009 employees – includes 69 transfers in due to internal restructure
*
Page 66
Port Kembla Steelworks – cost profile
Notes:(1) Chart shows cost of despatches(2) Conversion costs include depreciation (3) Raw material includes iron ore, coal, scrap and alloys but not scrap purchased on behalf of OneSteel
FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
S&A Conversion Costs Despatch & Freight Raw Materials
Total cost A$m
Page 67
Consumption of primary raw materials at Port Kembla Steelworks
Note: (1) coking coal volumes shown are dry tonnes; market pricing is typically for wet tonnes, 8% moisture content difference to dry tonnes.(2) measure shows tonnage rate used in steel making, and excludes coal used for export coke making.(3) 40% of scrap feed is sourced externally; balance, internally sourced scrap.
FY2008 FY2009 FY2010 FY FY11 Indicitave use rate per slab tonneIron Ore (Assuming 2 blast furnaces running at capacity)
Fines 4.0 2.9 4.0 4.4 0.97tLump 1.6 1.0 1.5 1.8 0.31tPellets 2.3 1.6 1.5 1.3 0.24tTotal 7.9 5.5 7.0 7.5 1.51t
CoalCoking (1) 3.0 2.2 2.7 2.8 0.49tPCI 0.6 0.4 0.7 0.7 0.14tAnthracite 0.1 0.0 0.0 0.1 0.02tTotal 3.7 2.6 3.4 3.6 0.65t
Scrap (3) 1.0 0.7 0.9 0.9 0.2t
Raw Steel Production 5.3 3.5 4.7 5.2Export Coke Despatches 264kt 282kt 175kt 172kt
Volume consumed in production (dry mt)
Reflects mix shift from sinter plant
upgrade (+1.1mtpa fines, -1.0mtpa pellets)Includes
around 300kt consumed for export
coke despatches
(2)
Page 68
Historical global iron ore fines, coking coal and semi soft coal benchmark prices 2002 – 2010 inclusive
2002 2003 2004 2005 2006 2007 2008 2009 2010
Iron Ore FinesUS$/dmt $17.97 $17.54 $19.12 $22.68 $38.88 $46.27 $50.66 $91.14 $61.061
% change 4.3% -2.4% 9.0% 18.6% 71.5% 19.0% 9.5% 79.9% -33%
Hard Coking CoalUS$/wmt $42.75 $48.10 $46.20 $57.20 $101.00 $116.00 $98.00 $300.00 $129.002
% change 7.5% 12.5% -4.0% 23.8% 76.6% 14.9% -15.5% 206% -57%
Semi-soft CoalUS$/wmt $35.15 $32.80 $30.80 $40.00 $80.00 $59.00 $65.00 $240.00 $85.003
% change -6.7% -6.1% 29.9% 100% -26.2% 10.2% 269% -64.6%
Notes:(1) Based on Australian iron ore fines settlement with Japan at 62.5% Fe; Brazilian fines settlement was -28% at 66% Fe. Pricing under the new iron ore contract with
BHP Billiton (effective from 1 July 2009) is reviewed quarterly and linked to movements in iron ore prices paid by BHP Billiton’s other customers in Asia. Refer to earlier page for further detail.
(2) Benchmark price settlement. Does not reflect BlueScope price averaging arrangement for April 2009 through to June 2010.(3) Benchmark price settlement.
Page 69
$1,200
$1,100
$1,000
$900
$800
$700
$600
$400
$300$0
Jan-10Jul-09Jan-06Jul-05Jan-05 Jul-08Jan-08 Jan-09Jul-07
$500
Jan-07Jul-06 Jul-10 Jan-11 Jul-11
Slab and HRC price benchmarks for Asia & Australian sales
• The following Steel Business Briefing prices continue to be a reasonable public benchmark for BlueScope’s domestic and Asian HRC prices (noting this can change over time).
Asian HRC & Slab Benchmark Price(SBB East Asia Import CFR: US$/t)US$/t
Source: SBB
SlabHRC
Page 70
What is sinter?
SinterPellets
FINE ORES
LUMP ORES
PREPARED BURDENS
Blended and Fluxed in Sinter Machine to
Produce Sinter
BLAST FURNACE
PELLETS
Lump
Page 71
Australia Distribution & Solutions – underlying EBIT variance analysis (FY2011 vs. FY2010)
EBIT
A$M
+2
FY 2011
-34
Other
-2
Exchange Rates
+1
Conversion & Other Costs
-5
Mix
+4
Volume
-8
Raw Material Costs
+35
Domestic Prices
-61
Export Prices
0
FY 2010
Net Spread Reduction ($26m)
Page 72
Australia Distribution & Solutions – underlying EBIT variance analysis (1H FY2011 vs. 2H FY2011)
EBIT
A$M
-15
2H 2011
-19
OtherVolume/Mix
0-6
Conversion CostsRaw Material Costs
+4
1H 2011
+13
Domestic Prices
-15
Net Spread Reduction ($2m)
Page 73
Plate
Tube
Structural Steel
Merchant Bar
Reinforcing Steels
Rural Products
Pipes, Valves & Fittings
Specialty steels
Processing Services
Hot Rolled coil
Cold Rolled strip
Plate
Stainless steel
Aluminium
Processing / Slitting/Shearing
RoofingWallingGutteringRainwater GoodsFencingMobile Roll formingSupply / install
Residential and Commercial WaterTanks
Pre-Engineering Buildings
Facades
Remote Buildings
Harsh Environment Solutions
Slitting
Shearing
Warehousing & Despatch
Contract Services (predominantly for internal customers)
The Distribution and Solutions division brings together BlueScope Steel’s Australian-based downstream businesses
EmergingBusinessSheet & Coil
ProcessingServices
Australia Distribution & Solutions
Sheet Metal Supplies
Page 74
Australia Distribution and Solutions – Overview
Sites (incl 2 U.S.) 127Employees 3,100Active Customers >18,000
Page 75
New Zealand & Pacific Islands
Page 76
New Zealand and Pacific Steel Products – underlying EBIT variance analysis (FY2011 vs. FY2010)
EBIT
A$M +6
+16
+59
+73
FY2011
+82
Other
-5
Exchange Rates
-17
Conversion Costs
Mix
0
Volume
-7
Raw Material Costs
-43
Domestic Prices
Export PricesFY2010
Net Spread Improvement $32m
Raw Material Costs:Coal (22)Scrap (15)Coating Metals (5)NRV’s / Other Adjustments (1)
Conversion & Other Costs:Cost improvement initiatives 8Volume 33Escalation (20)One-off / Discretionary (14)Other (1)
Exchange rate:Export revenues (18)Other 1
Page 77
New Zealand and Pacific Steel Products – underlying EBIT variance analysis (1H FY2011 vs. 2H FY2011)
EBIT
A$M
+11+49
2H 2011
+33
Other
-3
Exchange Rates
-7
Conversion & Other Costs
0
Mix
+1
Volume
-4
Raw Material Costs
-15
Domestic Prices
+1
Export Prices1H 2011
Net Spread Reduction ($3m)
Raw Material Costs:Coal (9)Scrap (2)Coating Metals (3)NRV’s / Other Adj. (1)
Conversion & Other Costs:Cost improvement initiatives 7Volume 5Escalation (6)One-off / Discretionary (5)Other (1)
Page 78
New Zealand - unique direct reduction process
Page 79
Iron Sand Concentrate (Waikato North Head Mine)Iron sand mined and concentrated on site – 58.5% FeSufficient resource for long term steel making operationsConcentrate is slurry pumped 18km underground to Glenbrook
Thermal Coal Predominantly sourced from Solid Energy in NZ Approximately 0.8mt transported by rail to Glenbrook each year
Lime (McDonalds Lime - 28% NZS owned)34ktpa lime (oxide and chip) quarried and processed at OtorohangaRailed and trucked to Glenbrook
New Zealand – raw materials
Export Iron Sand Concentrate (Taharoa Mine)Iron sand mined and concentrated on site - 57% FeApproximately 1mt per annum of concentrate is slurry pumped to a buoy 2.5km offshore to a dedicated slurry vessel and shipped to China and Japan.
Page 80
Export 0.82mtDomestic 6%NZS Slab 0.61
mt Export 31%
Interco (Export) 63%
HRC 36%
New Zealand Steel – FY2011 product flow
Export 56%
Domestic 44%Plate 12%
Mine SitesIron Sands
2.15mt
Pipe 4% Domestic 98%
Cold Mill 48% Domestic 9%
Export 11%
Interco (Export) 3%
Coating Lines 77% Domestic Metal Coated 55%
Export Metal Coated 10%
Interco Metal Coated (Export) 11%
Domestic Painted 18%
Export Painted 2%
Interco Painted (Export) 4%
Export Vanadium Slag 15.6kt
Export 2%
Page 81
New Zealand – FY2011 product distribution (external and internal)
Indicative Product Mix (t) Indicative Sales by Region (t)
Metal Coated28%
Hot Rolled48%
Pipe4%
Cold Rolled11%
Painted9% Australia
12%
Asia14%
Other1%
New Zealand44%
Americas23%
Pacific Islands
6%
Distribution15%
Indirect Export
6%
Building & Construction
18%
Manufacturing4%
Export57%
Indicative Sales by Sector (t)
* External & Internal prime product sales
(incl. plate 12%)
Page 82
New Zealand – FY2011 Non steel product sales
Iron Sand Iron sands exports from Taharoa down at 819kt in FY2011 vs 927k in FY2010 due to shipping schedule constraintsHigher prices were achieved for FY2011 compared to FY2010
Ferrous Scrap Volumes: FY2011 33kt vs. FY2010 52kt.Greater internal utilisation of scrap
Iron & Steelmaking SlagsVolumes: FY2011 148kt vs. FY2010 217kt.Challenging construction environment within New Zealand
Vanadium SlagVanadium volumes were up 35% on FY2010 due to increased steel production and process improvement initiatives.FY2011 contained V2O5 at 4.62m lbs vs. FY2010 3.42m lbs
Page 83
Asia Coated & Building Products Asia
Page 84
Coated & Building Products Asia – underlying EBIT variance analysis (FY2011 vs. FY2010)
EBIT
A$M
+7
+45
+39
+116
-2
Exchange Rates
-27
Conversion & Other Costs
-5
MixVolumeRaw Material Costs
-68
Domestic Prices
Export Prices
+3
FY2010 FY2011
+108
Other
Net Spread Reduction ($26m)
Raw Material Costs:Steel feed (70)Coating metals -Other / net realisable value provision 2
Conversion & Other Costs:Cost improvement initiatives 5Volume 13Escalation (17)One off / discretionary (6)Other -
Exchange rates:Translation (14)Other (13)
Page 85
Coated & Building Products Asia – underlying EBIT variance analysis (1H FY2011 vs. 2H FY2011)
EBIT
A$M
+7
+5+30
+46
Raw Material Costs
-18
Domestic Prices
Export Prices
0
1H 2011 2H 2011
+62
OtherExchange Rates
0-6
Conversion & Other Costs
-2
MixVolume
Net Spread Improvement $12m
Raw Material Costs:Steel Feed (18)Coating Metals 1Other (1)
Conversion & Other Costs:Cost improvement initiatives 5Volume -Escalation (8)One-off / discretionary 1Other -
Exchange rates:Translation (5)Other (1)
Page 86
North America Coated & Building Products
Page 87
Coated & Building Products North America – underlying EBIT variance analysis (FY2011 vs. FY2010)
EBIT
A$M
-16+1
FY 2010 FY 2011
-20
Other
0
Exchange Rates
+1
Conversion Costs
Raw Material Costs
-10
Mix
-105
+2
Domestic Prices
Volume
+96
+11
Export Prices
Net Spread Reduction ($8m)
Net Margin Reduction ($18m)
Page 88
Coated & Building Products North America – underlying EBIT variance analysis (1H FY2011 vs. 2H FY2011)
EBIT
A$M
-16
2H 2011
-4
OtherExchange Rates
0
Mix
0
Volume
-5
Conversion & Other Costs
-5
Raw Material Costs
-15
Domestic Prices
+37
Export Prices
0
1H 2011
0
Net Spread Improvement $22m
Net Margin Improvement $17m
Page 89
BlueScope Buildings North America (pre-engineered buildings) –commercial, community and industrial are traditional markets
Service
DistributionRetail
Healthcare
Manufacturing
Page 90
Buildings North America: 1.2 million square foot distribution facility erected in 28 days for major retailer
Page 91
Other
Page 92
In FY2010 we revisited our strategic direction
Reinvigorate. Products, channels and markets, cost base
Secure cost-effective supply of raw materials
Australian, New Zealand and U.S. steel businesses
Extract maximum value from our Asian footprint
Extract value from our optimised North American footprint, and assess possible bolt-on acquisitions
Consider expansion into large, high growth regions leveraging existing capability in steel building and construction market
Global building products & solutions businessGrow participation in building and construction markets with premium sustainable steel products and solutions
Continue to pursue maximum asset utilisation, structural cost reductions and manage to strict financial targets
Balance sheet strength to manage through the cycleFundamentals
Page 93
Strategy – globally our focus is primarily on building products and solutions (indicative FY2010)
15%
15%
10%60% Building & construction
Ag & mining
ManufacturingAuto
40%
35%25%
Australia New Zealand
10%
35%30%
25%
North Star USA
1%
99%
China
10%
90%
ASEAN
100%
Coated & Building NA
Page 94
Strategy – We will grow participation in building and construction markets globally with premium sustainable steel products and solutions
• Expand our portfolio of products and solutions with focus on construction and energy efficiency including:
Pre-engineered buildings:
− Leverage existing positions in high growth Asian market and large North America market
Expand components product offer (roof and wall, insulated panels and facades)
Expand capability in light weight steel structures across broader building market segments
• Develop next generation of coated products
Page 95
• Construction remains the largest consumer of steel and the most valuable market segment to BSL • Focus on large, high growth markets - must meet risk criteria and have material earnings potential• Leverage existing capability in premium flat steel products and pre-engineered building solutions• Asset-light basis to enter new markets• Understanding of economic, construction and steel cycles in determining entry points
1
3
4
5
9
17
28
31
61
68
161
Bolivia
Uruguay
Panama
Costa Rica
Ecuador
Peru
Chile
Colombia
Venezuela
Argentina
Brazil
6
6
7
9
11
17
18
41
52
56
70
88
Bahrain
Tunisia
Kuwait
Qatar
Jordan
Egypt
United Arab Emirates
South Africa
Iran
Saudi Arabia
Turkey
Israel
8
9
9
10
12
12
15
70
96
143
360
527
Japan
China
Thailand
Vietnam
Malaysia
Hong Kong
Philippines
Singapore
Korea
Indonesia
India
Taiwan
Source: 1) IMA Asia, June 2011 Update: Asia (Billions of Current US$). 2) Global Insight, May 2011 Update: South America and Middle East (Billions of Current US$) – Construction gross output measured as total value of sales by producing enterprises
before subtracting the value of intermediate goods used up in production.
Middle East / AfricaSouth America
Strategy – Our capabilities fit well in large, developing steel building and construction markets both within and outside of our current footprint (eg Sth America)
Asia
Regional Construction MarketsContribution to GDP of Construction Sector(1)
(Current US$bn 2011f)Total Construction Market Gross Output(2)
(Current US$bn 2011f)
Page 96
BlueScope Steel’s global footprint and capacities as at 30 June 2011
Western Port• Hot Rolling 1.4mt• Cold Rolling 1.0mt• Metal Coating (3 lines) 830kt • Painting (2 lines) 330kt
Sydney• Painting (1 line) 120kt
New Zealand/Pacific Islands• Iron Sands Mining sites 2• Raw Steel 615kt• Hot Rolling 610kt• Cold Rolling 280kt• Metal Coating 220kt • Painting 60kt• Hollow Sections 45kt• Lysaght sites 4
China• Metal Coating 250kt• Painting 150kt• Lysaght sites 4• PEB sites 3
Brisbane• Painting 95kt
Notes: (1) Tata BlueScope Steel is a 50:50 JV between BlueScope Steel and Tata Steel – MC line & Paint line under
construction.(2) North Star is a 50:50 JV between BlueScope Steel and North Star Steel (subsidiary of Cargill Inc.); BSL equity
share 1.0mt.(3) Indonesia – the expansion (new metal coating line with inline painting) will allow another 120kt of painted capacity
North America• BlueScope Buildings
sites 10• ASC Profiles sites 9• Metl-Span sites 5• BlueScope Water sites 3
Port Kembla• Raw Steel 5.3mt• Hot Rolling 2.9mt • Plate 450kt• Cold Rolling 990kt• Metal Coating (3 lines) 825kt • Painting (1 line) 200kt
North Star (2)
• Raw Steel 2.3mt • Hot Rolling 2.1mt
Australia• Distribution sites 72• Lysaght sites 37• Service Centres 6• Design, Manufacture,
Construct (formerly Emerging Bus.) 12
Fairfield• Painting 110kt
Rancho Cucamonga• Metal Coating 220kt• Painting 100kt
Kalama• Cold Rolling 455kt• Metal Coating 235kt• Painting 110kt
India (1)
• Metal Coating (+250kt)• Painting (+150kt)• Lysaght / PEB Sites 4
Thailand• Cold Rolling 360kt• Metal Coating 324kt• Painting 75kt• Lysaght sites 4• PEB sites 1• Ranbuild outlets
Malaysia / Singapore• Metal Coating 168kt• Painting 75kt• Lysaght sites 5• PEB sites 2• Ranbuild outlet Indonesia
• Metal Coating 273kt• Painting 40kt (3)
• Lysaght sites 4 (+1)• PEB sites 1• Ranbuild outlets
Vietnam• Metal Coating 130kt• Painting 50kt• Lysaght sites 1• PEB sites 1• Ranbuild outlets
Page 97
BlueScope Steel China footprint
SUZHOU
SUZHOU
BlueScope Steel in China1 Metal Coating/Painting Line Facility4 Lysaght Manufacturing Facilities3 Butler PEB Manufacturing Facilities32 BlueScope Steel China Sales OfficesGUANGZHOU
Site of Xi’an Butler/Lysaght development
FY2011
REVENUE: A$591M
EBITDA – Reported: A$118M
EBITDA – Underlying: A$50M
EMPLOYEES: 2,089
NET OPERATING ASSETS (PRE-TAX): A$149M
Page 98
Development of new combined Butler PEB and Lysaght rollforming facility in Xi’an due to strong growth outlook in central China
• To pursue construction of a new joint Butler and Lysaght plant in Xi’an. The plant will be similar to existing plant in Guangzhou
• Plant expected to be operational by end of CY2012• Expected capital cost approximately A$60M
800 KM
800 KM
800 KM
800 KM
Page 99
BlueScope Steel North America footprint
ASC
Mexico
Key
BlueScope Buildings
BSL Steel Sales Offices
Steelscape
Metl-Span
ASC
North Star BlueScope
HQ
FY2011REVENUE: A$1,312MEBITDA (reported): A$76MEMPLOYEES: 3,803 incl. North Star NET OPERATING ASSETS (PRE-TAX): A$772M
NB: Revenue excludes BSL’s 50% interest in North Star BlueScope Steel of A$697M.
Page 100
Calendar year earnings
A$ Millions CY2003 CY2004(3) CY2005 CY2006 CY2007 CY2008(4) CY2009 CY2010
Revenue(1) 5,328 7,029 7,980 8,693 9,333 11,926 8,283 9,148
EBITDA(2) 857 1,501 1,411 1,052 1,130 1,775 (324) 563
EBIT(2)
- reported 581 1,212 1,111 742 792 1,399 (673) 215- underlying - - 1,308 966 924 1,532 (604) 236
Net profit- reported 436 859 792 413 414 887 (502) 100- underlying - - 943 586 563 989 (476) 120
EPS (¢) - reported 56 116 110 59 56 116 (34) 5
Notes:(1) Excludes revenue of equity accounted associates, e.g. North Star.(2) Includes share of North Star’s equity accounted net profit before tax and share of other associates’ NPAT. (3) Includes eight months of BlueScope Butler financial results.(4) Includes eleven months of Smorgon Distribution financial results and five months of IMSA Steel financial results.
Page 101
Dividend history
9 1218 20 21 22
5Interim
Final 13
7
2
Special
FY2011FY2010
5
FY2009FY2008
27
FY2007
26
FY2006
24
FY2005
24
20
FY2004
18
10
FY2003
22 / 7¢
30 / 10¢
42 / 20¢
44 / 0¢47 / 0¢
49 / 0¢
5 / 0¢ 5 / 0¢ 2¢
Page 102
Reported Corporate and Group Costs – impacted each half by profit in stock elimination and foreign exchange movements
-51-35
-16
-90
-49-41
-3-9
6
-105
-135
30
1H FY08 2H FY08 FY08 2H FY101H FY10
A$M
2H FY11FY09 1H FY112H FY09 FY10 FY111H FY09
(58) (43) (101) (61) (35) (96) (31) (41) (72) (37) (34) (71)
(28) (88) (116) (93) (33) 126 (10) (9) (19) 18 (2) 16
5 15 20 (22) (4) (26) - 1 1 3 - 3
111 (19) 92 (4) (3) (7) - - - - - -
30 (35) (105) 6 (9) (3) (41) (49) (90) (16) (36) (52)
Comprised of:
Corporate Costs
Profit in stock adj
FX
Other
Total
(1) (2)
Notes: (1) Profit from realisation of Smorgon Steel shares ($128m), net of Distribution integration, restructuring and M&A costs.(2) IMSA integration costs.
Page 103
Supporting information explaining the movement in total Australian external despatches FY2011 vs. FY 2010
Building construction• Dwelling investment flat in FY2011, affected by weaker building
approvals, higher interest rates and delays to the rebuilding of natural disaster affected QLD and VIC
• Non-dwelling construction remained suppressed as BER wound up and developers remain risk-averse
• Sales assisted by import replacement initiatives and price driven indirect channel restocking
Engineering construction• Sales were boosted in 2H FY2011 from indirect channel restocking
but there continues to be declining underlying demand as existing projects wrap up (Victorian desalination plant, QSN3 pipeline)
• Long term outlook for projects looks healthy, but import competition on high A$ is a concern
Agriculture & Mining• Overall growth in Australian mining segment, but mining
investment has limited flat steel intensity, and strong competition from imported pre-fabricated goods, particularly in WA
• Indirect channel stock cycles drove 2H FY2011 sales increase
Manufacturing, Auto & Transport• With strong exposure to high AUD, manufacturing continued to
struggle on the back of poor consumer confidence and high levels of import competition
• Direct sales to Auto OEMs remained steady in 1H FY2011, with an increase in distribution channel sales
1H FY2011
867
1,003
798
817
376
378
370
3802H FY2011 1,197
2H FY2010 1,381
1H FY2010 1,243
1,168
Coated & Industrial Products Aus (CIPA)Aus Distribution & Solutions (AD&S)
Total Australian External Gross Despatches by Reporting Segment (kt), last four half years
• AD&S volumes continue to be steady across the last four halves, albeit 20% below pre-GFC levels due to: (i) reduced market; and (ii) increased imports
• CIPA marginally up in 2H FY2011 - Following destocking in 1H FY2011, there was some restocking of volumes to distribution channel customers in 2H FY2011 but this was in competition with lower priced imports facilitated by high global steel availability and a strong A$
Page 104
Major approved capital projects and investment summary(in addition “Stay in Business” capital is approx. 75% of depreciation)
Notes: (1) India project funded under project financing within JV. Project remains on budget at approximately A$270M. (2) Gross cost of $700m less pre-tax profit on SSX shares of $128M leaves $572M.(3) Excludes working capital adjustment and pre-acquisition costs of $50M.(4) US$190M (A$226M) recovered following the sale of Vistawall in June 2007.
$A MillionsTotal Est.
Capex / CostActual to 30 Jun 11 FY2012 FY2013 FY2014
Projects completedThailand – Coating expansion 80 80 - -Vietnam – Coating / Painting 136 136 - -China- Coating and Painting Facility- Guangzhou Butler / Lysaght
27433
27433
--
--
India - Butler / Lysaght facilities (50% interest) 44 44 - -
Australia: - PKSW - HSM expansion - Sinter Plant Emissions- No. 5 Blast Furnace Reline- Sinter Plant Upgrade
- WA Service Centre
10210036214221
10210036214221
-----
-----
Western Sydney Colorbond® Steel Facility 150 150 - -Projects to be completed(1)
Indonesia – Coating / Painting 167 160 7 -
China – Xi’an Butler / Lysaght facility 60 - 50 10Australia – Steam Infrastructure spend
– Steel Injection Station5136
4321
815
--
InvestmentsIMSA North American businesses Smorgon Steel’s Distribution business(3)
Butler Manufacturing(4)
Lysaght and water acquisitions
807700277129
807572 (2)
277129
----
----
Total capital spending 3,671 3,453 80 10
Page 105
Committed Debt Facilities as at 30 June 2011
Maturity DrawnUS$ / THBm / MYRm A$m A$m
Syndicated FacilityTranche 1 Dec-13 675 479Tranche 2 Dec-15 675 02004 US Private Placement NotesSeries A (1) Jul-11 US$100 94 94Series B Jul-14 US$200 187 1872008 US Private Placement NotesSeries A Jun-15 US$81 76 76Series B Jun-18 US$204 191 191Series C Jun-20 US$40 37 37Other FacilitiesSale and leaseback Aug-11 55 55Subsidiary loan - Thailand Jul-13 THB 2,500 76 16Subsidiary loan - Malaysia Various MYR 100 31 11US Facilities (2) Sep-11 US$14.5 14 0Finance leases Various Various 103 103
2,214 1,249
Notes: (1) US$100m (A$94m) of USPP Notes repaid 1st July 2011(2) Comprises US$14.5m Line of Credit
Committed
Page 106
Shares on issue – no material change
Million (rounded)
Shares on issue at listing, July 2002 793Share buy-backs (116)Dividend reinvestment scheme issues +67Employee share plan issues +34Institutional share placement, Dec 2008 +97Share purchase plan issue, Feb 2009 +36Entitlement offer 2009 – institutional tranche (May 09) +515Entitlement offer 2009 – retail tranche (June 09) +397Shares on issue at 30 June 2010 1,823Dividend reinvestment scheme (18.8m); employee share issues (0.05m) +19Shares on issue at 30 June 2011 1,842
Page 107
Australian Governments climate change plan - “Securing a Clean Energy Future”
On 10 July 2011, the Australian government released its climate change plan: Securing a Clean Energy Future. • The plan aims to reduce carbon emissions to at least 5% below 2000 levels by 2020, which requires
reducing projected emissions by at least 23%. 2050 target has increased from 60% to 80%
• The main features of the plan are:A tax on carbon pollution to be introduced in July 2012 in a transition to a flexible “cap and trade” scheme in July 2015;A $1.2 billion Clean Technology Program will help directly improve energy efficiency in manufacturing industries and support research and development in low-pollution technologies.Increased investment in renewable energy via the establishment of a new Government body, as well as a new fund to close inefficient coal-burning power stations by 2020;Compensation for the carbon tax for most families and business (petrol bought by households and small business will be exempt, although some large businesses will face a reduction in their fuel tax credits); andThe establishment of a Climate Change Authority to provide independent advice to the Government on climate change.
Page 108
The Australian Federal Government’s Proposed Carbon Pricing Mechanism
• The mechanism is scheduled to commence on 1 July 2012• BlueScope Steel will be a liable entity under the scheme• The “fixed price” phase will be for three years
“Fixed Price” means the price is set by the Government and not the market. Prices are $23 in 2012/13; $24.15 in 2013/14; $25.40 in 2014/15During the fixed price phase, liable parties will not be entitled to use international emissions units for compliance
• At the end of the fixed price period, the scheme will convert to a flexible price cap-and-trade emissions trading scheme. Treasury forecast price in year 4 as $29/t
In the flexible phase 50% of liability can be met with international emissions units• A Jobs and Competitiveness Program will provide some free permits to emissions-intensive trade-exposed
activities, including integrated iron and steelmaking. Permit allocation will be similar to the CPRS and will include:
Allocation of free permits at the maximum rate (94.5% in Year 1) to iron and steelmaking activities up to and including hot rollingPermit allocation decreases by 1.3% per annum thereafter Productivity Commission review of EITE arrangements in 2014/15 with minimum three year’s notice of any changes. Review will take into account a range of factors, including whether 70% of international sectoral competitors face comparable carbon constraints
Page 109
Steel Transformation Plan (STP)
A Steel Transformation Plan will materially reduce the impact of the carbon pricing mechanism on BSL for the first four years.
The STP will provide $300M of funding to the steel industry:
• provides $75M per year for four years to minimise the impact of the carbon tax on Australian steelmakers (BlueScope expects to receive approximately 60% of this funding)
• provides an independent review mechanism to monitor the impact of the carbon pricing mechanism and other factors on the economic circumstances of the steel industry
• signals the Government’s intention to limit the potential pass-through of carbon emission costs from coal miners onto steelmakers
The STP will commence when the Government’s carbon price mechanism commences. In addition, the Government will provide BlueScope with a 10% increase in permit allocation relating to slab production commencing in 2016/17 for a minimum of two years.
The STP is a pragmatic outcome for BlueScope after four years of negotiation. It is a substantially better outcome than was likely under the Government’s previous CPRS proposal. While the carbon tax legislation is still to be passed by Parliament, we believe that if the STP is passed in the form the government has announced it will materially reduce the overall cost of the carbon tax to BlueScope.
Page 110
Some context - who are the global “big polluters”?
7,707
5,425
1,591 1,557 1,098
766 541 529 528 520 451 444 438 425 418 415
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Millio
n Me
tric T
onne
s
Total Carbon Dioxide Emissions from the Consumption of Energy 2009
Source : US Government, Energy Information Agency, http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=90&pid=44&aid=8
Page 111
Some context - Off shoring emissions
-100 -50 0 50 100 150 200
Russia*Germany
UKEU-6
FranceSouth Africa**
JapanItaly
NetherlandsUSA
CanadaMexico
AustraliaSpainBrazil
TurkeySouth Korea
IndiaChina
Percentage change in GHG Emissions 1990-2006Emissions Produced and Consumed
ProductionConsumption
Source: Consumption‐based accounting for international carbon emissions, Research Note, Policy Exchange, Dec 2010http://www.policyexchange.org.uk/publications/publication.cgi?id=215
*percentage change from 1992 ‐2006** percentage change from 1998 ‐ 2006
Page 112
Some context – BlueScope’s Port Kembla Steelworks ranks in the top third of carbon efficiency.
• Port Kembla Steelworks is in the top third of carbon efficiency among 84 global integrated steelworks, as surveyed by the World Steel Association (2008 data)
2.11
2.3
2
2.05
2.1
2.15
2.2
2.25
2.3
2.35
PKSW Global average
T Co
2-e/t
Co2-e/t crude steel(using worldsteel methodology)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1990 2010
Millio
n to
nnes
Crude Steel Production
AustraliaChinaROW
0.9%16.5%
82.6%
0.6%
44.3%
55.2%
Page 113
FY2011 Results and Business Update Presentation Paul O’Malley, Managing Director and Chief Executive OfficerCharlie Elias, Chief Financial Officer 22 August 2011
ASX Code: BSL
