Full Year 2021 BlueScope Steel Ltd Earnings Presentation Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Lyndon Fagan - JPMorgan Chase & Co, Research Division - Analyst : So the first 1 is just on the capital management framework. If I look at next period for the half year, picking the midpoint of guidance, we're looking at free cash flow over $1.5 billion roughly just for the half versus an implied dividend based on $0.25 of, say, $115 million. So I'm just trying to figure out how to best think about that excess cash. I noticed you paid a special. Is there a way you'd like us to think about forecasting special dividends going forward? Just trying to get a better sense on how to think about all of that. And then the next question is, a lot of focus on emissions in this presentation, which is great. I'm just wondering if you could perhaps give us a sense of the actual emissions intensity at Port Kembla today, so 2.5 tonnes of CO2 per tonne of steel or something like that. I'm wondering if you could confirm what that is, and how that might look post the reline and the investment that you're making on carbon there? And if I could sneak a third 1 in, just with North Star Phase 2, great to see a bit more talk on the 500,000 tonne expansion. Wondering if you could give us a sense of when we could realistically expect first production from that?

Question: Lyndon Fagan - JPMorgan Chase & Co, Research Division - Analyst : Thanks, Tania. So just to clarify that. So the future investment profile is $1.5 billion to $1.6 billion out to FY '27, I guess you're funding that in the next 6 months based on free cash flow and where it could be against your guidance and certainly my numbers. So I'm just really trying to get a better sense of how to deal with the excess cash, which is a great problem to have, but the $100 million a half or $115 million a half dividend certainly leaves a lot of spare cash in the [Q]. So should we really just be directing that into a top-up of the buyback? Is that the best way to think about it?

Question: Lee Power - UBS Investment Bank, Research Division - Analyst : Just continuing on from Simon's question. You talked about adding metal coating capacity in Australia. Is there anything else limiting the upside you can get from here around domestic dispatches? I'm just interested to hear your thoughts around trade availability in logistics.

Question: Lee Power - UBS Investment Bank, Research Division - Analyst : Okay. And then you probably figured this question. But I mean, what do you think happens to tonnes on longer lags in -- around North Star when prices eventually roll and the benefit versus index pricing on the way down. I mean, it's pretty hard to think of a comparable period. But maybe can you talk about what you saw post the [232] bump in prices and when they rolled off. I mean the customers on those longer-term contracts, do they cancel and go to the spot market? Or is there -- is there something -- some proportion of that that's take or pay or something special around the specs of those tonnes that mean you kind of hold on to them?

Question: Peter Steyn - Macquarie Research - Analyst : Just wanted to very briefly go back to your capital management discussion, Tania, very well put out and very clear that there's a degree of prudence there. I was particularly interested in the word nuance around your buyback. How are you guys thinking about that? It sort of feels to me like you're going to be relatively price-sensitive in the application of capital in your buyback, just in the context of trying to be as capital efficient as you possibly can be?

Question: Peter Steyn - Macquarie Research - Analyst : And then perhaps related to that, a question for Mark. Just on M&A, if you've got any M&A intent, probably not the time to be buying stack right now. But just curious on your perspective there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 16, 2021 / NTS, BSL.AX - Full Year 2021 BlueScope Steel Ltd Earnings Presentation

Question: Peter Steyn - Macquarie Research - Analyst : Yes, yes. And then perhaps a further extension, just in terms of the investments that you've made on the -- or plan to make on the emissions side of things, you made the mention of looking at external party support for investments that may not meet your return requirements. But sort of more broadly, how you think about the return profile as it stands today in the current policy settings and how do you see that evolving over the course of time that you're going to take to apply their capital realistically. Would it be dilutionary or do you think it could be accretive to your returns on

Question: Peter Steyn - Macquarie Research - Analyst : Okay. And in terms of like how it -- in the half, just been how it is distributed across the segments. I mean in the North Star work forward, for instance, there's no mention of the profit share. So I'm just wondering, of that group increase, your profit share how that was distributed across the different segments?

Question: Peter Steyn - Macquarie Research - Analyst : Okay. And just so I understand, I mean, given North Star has had quite a strong half, why would there not be more coming through that? Because total conversion costs, I think, increased with $10 million to $15 million, so not particularly material. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 16, 2021 / NTS, BSL.AX - Full Year 2021 BlueScope Steel Ltd Earnings Presentation

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Can I just follow up on Paul's question there with regarding to blast furnace 6 and I guess, the adaptability of that to low carbon sort of adaptations and bolt-ons. The capital cost number of $700 million to $800 million, I'm just wondering how much of that is for just the reline and restoring the upstream/downstream connections to blast furnace 6? And how much have you allocated to, I guess, low carbon bolt-ons and initiatives.

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : So I just wanted to make sure that it included an allocation towards the additional (inaudible)?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : And can I ask, what do you think the indicative volume of blast furnace 6 will be now given that blast furnace 5 is running way above nameplate. What do you think you can get out of 6? Or what are you planning to get out of 6?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Okay. And can I just ask with the R&D that you're doing in terms of some of these initiatives. Are you primarily trying to do a large amount of that in-house? Or are you looking to partner with universities and offshore institutions?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Just finally on that. Just a question for Tania, I think. Ahead of the North Star expansion, you often talked about derisking the project by building up the capital on the balance sheet. I assume you're going to do a similar thing with blast furnace 6 reline given that it's quite imminent. What sort of net cash position are you sort of targeting out of that $700 million to $800 million by the end of the year?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : But it's fair to say your strategy of de-risking the project through the balance sheet is probably going to feel...