Full Year 2024 BlueScope Steel Ltd Earnings Call Transcript

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

Question: Rohan Gallagher - Jarden Limited - Analyst : Good morning, Mark. Good morning, David. Good morning all. The question in relation to North Star, if I may, can you unpack the North Star obviously we suffered from declining steel spreads late in the half. But in terms of was there any increased costs or any structured costs continuing in terms of conversion that is keeping the cost base at elevated levels?

Question: Rohan Gallagher - Jarden Limited - Analyst : Yeah, I was just curious as to any disruption, as I said, of retail de-bottlenecking and expansion -- say 3.4 million tonne sort of target?

Question: Rohan Gallagher - Jarden Limited - Analyst : It was a full question on my behalf. Just a follow-up associated with a big picture, if I may. Despite the relatively stable demand you're seeing in the US, steel spreads have almost half in the last 12-months. Can you sort of help us unpack that as to why you haven't seen any sort of supply side responses? Or is there anything structurally that we need to sort of take into consideration or it's just the market? 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 19, 2024 / 12:00AM, BSL.AX - Full Year 2024 BlueScope Steel Ltd Earnings Call

Question: Rohan Gallagher - Jarden Limited - Analyst : Thank you very much. And just follow on a final one, David, I'm just I noticed your working capital levels have been close to [7%, 9%] of our sales from historically 14%, 15%. Is that just purely timing or is there a buildup in inventories that with certain market softening, et cetera? Thank you.

Question: Rohan Gallagher - Jarden Limited - Analyst : Thank you.

Question: Lyndon Fagan - JPMorgan Chase & Co - Analyst : Good morning, guys. Thanks for the call. Look, the first one was just on [notes] expansion. The previous guide was guiding to 3.5 million tons. So that de-bottleneck it looks like today it's 3.3 million. Just wondering if you can talk through that and whether there's another target to get up to 3.5 million. And then the second one I had is really just about the cash conservation situation. I guess the first half CapEx guide is above the first half EBIT guide. So that implies the businesses free cash flow negative. And I guess I'm just wondering what can you actually do to restructure the [theology] business given that it's already well run. Thanks. 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 19, 2024 / 12:00AM, BSL.AX - Full Year 2024 BlueScope Steel Ltd Earnings Call

Question: Lyndon Fagan - JPMorgan Chase & Co - Analyst : Thanks, Mark. Quick follow up. Why not pause the buyback $270 million obviously a good outcome to buy the stock under $20, but perhaps the balance sheets at this point in the cycle could do with that on there?

Question: Lyndon Fagan - JPMorgan Chase & Co - Analyst : Great. Thanks a lot.

Question: Paul Young - Goldman Sachs Group, Inc. - Analyst : Thanks. Morning, Mark and David. Mark just sticking with the topic of CapEx that you talked about phasing, CapEx and dividends is actually executing on all projects. A couple of questions on the $800 million guide for the second half of '25. Would you say that in that case, just based on your comments that is peak CapEx for half ?

Question: Paul Young - Goldman Sachs Group, Inc. - Analyst : Yes, understood Mark. And then maybe leading onto the US midstream, I don't really -- don't have CapEx. You've outlined to that [$275 million] project on the three different stages there, that seems a little bit higher when you benchmark against other projects in the US is that because of the Greenfields components that buying land, establishing utilities and also -- it's probably a little bit -- it's probably little more advanced than what or when are you expecting to go to a potential [FID] on this project?

Question: Paul Young - Goldman Sachs Group, Inc. - Analyst : Thanks, Mark. Just last one on turning to the Aussie business, and I'll say just on domestic volumes that you're within your guidance, you're assuming flat volumes versus the June half, yet you just note that you did push some [painted] and -- painted coated, et cetera, into the export market that increase that also your volumes are back to sort of 2019 levels, understand the mix better than what it was in 2019. But what gives you the confidence that the domestic volumes won't go down further in the December.

Question: Paul Young - Goldman Sachs Group, Inc. - Analyst : Yes, I agree with that. Thanks, Mark. Thanks, David.

Question: Simon Thackray - Jefferies LLC - Analyst : Thanks for that guys. Just want to unpack that previous question a little bit more just on balance of domestic versus export and how should we be thinking about the mix, the exports out of Australia and New Zealand? And at the same time, what's the outlook for the domestic pricing premium now given the full import parity pricing, I've called out. So that's the sort of first part of the question was I really want to understand how many days of risk left on pricing in this first half given the lags and given your comments that volumes are expected to be flat half-on-half. 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 19, 2024 / 12:00AM, BSL.AX - Full Year 2024 BlueScope Steel Ltd Earnings Call

Question: Simon Thackray - Jefferies LLC - Analyst : And just the expectation in terms of the pricing premier...

Question: Simon Thackray - Jefferies LLC - Analyst : Fair enough. If we can just stay with the sorry for the follow-up. Just given the state of steel markets globally and China capacity billet finding its way around the world everywhere it seems any comment on the state of well-known BlueScope's involvement there and possible future involvement given the progress in project IronFlame for DRI and the current sort of technological superiority of magnetite for DRI production?

Question: Simon Thackray - Jefferies LLC - Analyst : Thanks that's helpful. And then one final follow-up. Just in terms of [peak at five] at Port Kembla mainline flights to point out, you've been producing close near enough trade 3 million tons for a while. Will you throttle back the use of scrap to bring that production down to keep the export tons to minimum. Is that how we should be thinking about peak at five at the moment?

Question: Simon Thackray - Jefferies LLC - Analyst : Thanks, guys. Appreciate it.

Question: Andrew Scott - Morgan Stanley - Analyst : Thanks. Morning, Mark and David. I just a couple from me really around ASP. First of all, just want to understand your expectations that you put out there for Asian spreads. You've got a lot in the book. I know it's a volatile sort of time at the moment, but it seems to be looking at a bit of improvement from where we are here. I'm just wondering what's baked into that assumption?

Question: Andrew Scott - Morgan Stanley - Analyst : Okay. Thanks, David. And then I think it was at the half the ASP breakeven crept up, it looks more like [200 to 220]. Now I think you're calling out 25 million of electricity. Increased costs are not that falls into the steelmaking spread or other parts of the business. 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 19, 2024 / 12:00AM, BSL.AX - Full Year 2024 BlueScope Steel Ltd Earnings Call But Mark, more broadly, you alluded to other initiatives and levers you have to deal with the lower steel prices. I don't expect a full list, but can you just talk to us about what you're looking at there? And particularly the cost driven? Is it putting funding new home new domestic home for locally made steel so that you're exporting less? Just interested in any color there?

Question: Andrew Scott - Morgan Stanley - Analyst : Got it. Thanks. And just a last one. You've been pretty clear with the North American kind of business. The acquisition maybe hasn't been to plan so far on the commercial construction nonresi combined in the US looks pretty ugly looking forward, can you call it the trend has stabilized or even inflected? Or is it -- are you still heading downwards?

Question: Andrew Scott - Morgan Stanley - Analyst : Got it. Thanks, both.

Question: Owen Birrell - RBC Capital Markets - Analyst : Hi, guys. I'm just -- a couple of questions. Just I guess following on those questions around the Buildings and Coated Products North American business, your guidance sort of talks to what two-thirds the earnings from the last half. And you talk about sort of, I guess, easing of cyclically strong margins. I'm just wonder if you could provide a bit of color as to how that margin compression differs between the West Coast assets, Kolkata acquisition and the BlueScope Buildings business.

Question: Owen Birrell - RBC Capital Markets - Analyst : And so in terms of I guess, the [color coders] part of the business, I guess sort of the painting component. Have you stabilized your gross margins in that business into the next half? Do you expect or we going to see some possible improvement coming through?

Question: Owen Birrell - RBC Capital Markets - Analyst : I just, I guess, a follow-up question for this market. The -- you provide a little bit more color around your coating line proposal. Can I just confirm the $800 million CapEx, that's the guide for that first phase. The pecan and coating lines that you're going to put in with I have 550,000 tons of capacity and therefore restricted by the one metal coating line of [275,000]? 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 19, 2024 / 12:00AM, BSL.AX - Full Year 2024 BlueScope Steel Ltd Earnings Call

Question: Owen Birrell - RBC Capital Markets - Analyst : And kind of what been confirming, why the $800 million versus the [$1.2 billion] only half the capacity is a large amount of that just associated with the fact that you've got a greenfield site, and there's a lot of, I guess the operating structure that's required is that where the additional CapEx comes from.

Question: Owen Birrell - RBC Capital Markets - Analyst : And do you have a location. (inaudible)

Question: Owen Birrell - RBC Capital Markets - Analyst : Okay, that's great. Thank you.

Question: Lee Power - UBS Investment Bank - Analyst : Hi, Mark. Hi, David. Mark, just your comments around the similar domestic volumes, can you just give us an idea, the high-value products, COLORBOND, TRUECORE, are you saying they're flat or is the further declines in that space?

Question: Lee Power - UBS Investment Bank - Analyst : Excellent Thanks for that. And then the US BCP business, can you actually give us an idea of what contributed in the second half. And I get part of that, that turnaround is you need the market to help you but kind of wondering around some of the timing of that help the self-help initiatives that you've talked to as well.

Question: Lee Power - UBS Investment Bank - Analyst : Cool, thanks for that. And then just one final one, Asia. I mean, it doesn't get they apply that it kind of once did. China is obviously a pretty large part of that division, domestic environment. We know it's tough, it sounds like given you guys pay comments, you don't expect that to improve anytime soon. How does that kind of change your medium term outlook and thinking around that division?

Question: Lee Power - UBS Investment Bank - Analyst : Thank you. I appreciate the color as always. 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 19, 2024 / 12:00AM, BSL.AX - Full Year 2024 BlueScope Steel Ltd Earnings Call

Question: Paul McTaggart - Citigroup Inc. - Analyst : Well, you'll come so one of the few benefits of low prices, of course, is working capital kind of release. So we did touch on that. And obviously it gives us some confidence around the balance sheet. Could you give us a sense of what you think you might be able to release in the year ahead.

Question: Paul McTaggart - Citigroup Inc. - Analyst : And in the year ahead, Mark, suffice to say, I thought (inaudible) might come down circa $400 million. You might release that given a lot prices, would that be out of the ballpark.

Question: Paul McTaggart - Citigroup Inc. - Analyst : Okay. All right. And just one quick question. Exporting product out of Australia to the US. You can caught up with any kind of tariffs now in terms of that product?

Question: Paul McTaggart - Citigroup Inc. - Analyst : Thank you.

Question: Daniel Kang - CLSA Limited - Analyst : Morning, guys. Most of my questions have been asked, but just a couple of quick ones. On BCP and core coatings. You spoke about the same targeting external customers beyond the foundation customer. Just wondering if you can provide an update on the competitive landscape there and maybe some color on the initiatives that you're putting through to reclaim share and increasing utilization rates. Thanks.

Question: Daniel Kang - CLSA Limited - Analyst : Got it. Thanks, Mark. And just secondly, just with regards to the premium products COLORBOND, TRUECORE, criteria that you make gaining share in a soft market. Can you talk about any competitors that may be coming through to challenge that? And just remind us of the aspirational target that you're aiming for in terms of market share? 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 19, 2024 / 12:00AM, BSL.AX - Full Year 2024 BlueScope Steel Ltd Earnings Call

Question: Daniel Kang - CLSA Limited - Analyst : Many thanks, guys.

Question: Peter Steyn - Macquarie - Analyst : Thanks, Mark and David. All my questions are actually been asked. Thanks.

Question: Nicole Penny - Rimor Equity Research - Analyst : Good morning. It's Nicole from Rommel Equity Research. Thanks for taking my question. If we could and focus on the midterm earnings contribution and outlook of some of the key strategic initiatives mentioned for Australia and the US specifically, and beyond operating cost control. What would you summarize as the two or three key strategic steps that would deliver the most meaningful contribution to earnings in the medium term, please?

Question: Nicole Penny - Rimor Equity Research - Analyst : Thanks.

Question: Chen Jiang - BofA Securities - Analyst : Good morning, Mark and David. Thank you for taking my questions. Well, a lot of questions got asked already, just a few follow up, please. I'm So firstly, for the building and coated products from the US, you guided around two-thirds of that, of the second half, [eBay] asked the first half FY25. I'm wondering, is that mainly due to margin or volume, are you be able to provide any color on the quantum of that business? And also to Mark's comment, the [Cornerstone] acquisition, understand that it's a long game and then it's not fully integrated into the business, but again, I'm wondering how should we think about the volume. Because you already mentioned the margin compression and extension? I have a few after this. Thank you.

Question: Chen Jiang - BofA Securities - Analyst : Is the cornerstone and the acquisition -- years ago, we haven't seen either volume or margin expansion into the business. So how should we think about it in regards to time being?

Question: Chen Jiang - BofA Securities - Analyst : Sure. Thanks for that. And then I'm coming back to Australia, good to hear COLORBOND to have price increase. And now given China keep exporting this steel into Asian market or into the global market. For your premium products, what gives you the confidence that you will have a flat half-over-half volume given -- and also, if you can remind us your market share and for COLORBONDS and other premium products in Australia. Thank you.

Question: Chen Jiang - BofA Securities - Analyst : Sure, sure. Thanks for that. I will upgrade. And then just on the guidance or on the assumption you factored in improving Asia HRC price which are above spot. However, your US spread assumption seems like a spot US spread assumption. I'm just wondering what is the thinking behind that? Does that mean you have more visibility into your Australia business than the US?

Question: Chen Jiang - BofA Securities - Analyst : Yeah, sure. So maybe last one. Just your market share for color band and to coal and other premium products in the domestic market, given those building material products company, Kendall provided a weak volume guidance, I'm wondering, is your guidance implying or increasing volume in that or increasing market share domestically? Thank you.

Question: Chen Jiang - BofA Securities - Analyst : Great. Thank you, Mark and David. I'll pass it on. Thanks.

Question: Keith Chau - MST Marquee - Analyst : Good morning, Mark and Dave. Thanks for taking my question late in the morning. So first one, just a follow-up on COLORBOND, things like you're holding. Are you run with respect to COLORBOND and as you pointed out, Mark TRUECORE is doing a bit better. Can you help us understand where the market share gains have accelerated or not? And the reason why I ask is it is a key competitor website that went into administration a few months ago. So just to understand whether you've seen some benefit of that. And then secondly, in TRUECORE and periods gone by, there's been discussion that's a homebuilder are more willing to test out new products when the market is a bit slower. Obviously, we've been through a period of rapid growth to detached housing construction but we are going through the quiet period. So kind to understand when you've had some traction with homebuilders in Australia to some of the product to (multiple speakers) a bit more.

Question: Keith Chau - MST Marquee - Analyst : Okay. Thank you. And then a follow-up question actually brought back to Ron's question at the starting. Maybe I'm just asking the same quick question, but the other way, but obviously in the last couple of periods at North Star, the unit conversion costs would have been relatively high given the inefficiencies as you ramp up that asset or the expansion of volumes at that asset. Can you help us understand, notwithstanding the guidance that has been provided with? It is a quantifiable unit efficiency, the committed conversion costs at North Star in the upcoming periods?

Question: Keith Chau - MST Marquee - Analyst : Great. Thanks very much.