Half Year 2025 BlueScope Steel Ltd Earnings Presentation Transcript

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

Question: Peter Steyn - Macquarie Securities Ltd. - Analyst : Congrats on a lot of good detail in your pack. Particularly want to focus on your FY30, numbers, if I'm correct, that tallies to a number of somewhere between $1.6 billion and $2.1 billion depending on the adventure you tune FX. Maybe you can just confirm that's mentally the correct arithmetic. But -- and then could I ask a detailed question around the costs, and particularly the efficiency gains. You've mentioned the '26, you want to achieve that. Where's that run rate today and is that the full $200 million in FY26 from an efficiency point of view?

Question: Peter Steyn - Macquarie Securities Ltd. - Analyst : And then if I may just extend that on the CapEx front for that growth, looks like you're sort of talking about $1.3 billion. Again, it's stuff we all know about after the, deferral of the midstream investments. So, very clearly a very strong return on invested capital, impact there. Could you give us a sense of how you're thinking about the midstream investments in the US, given the policy environment that's evolving so fast, under what conditions does that come back and would that factor in FY30 potentially as an uplift at some point in the future? Sure.

Question: Lee Power - UBS Investment Bank - Analyst : Just following on from Pete's question around the 2030 growth targets. So as you mentioned, CapEx associated with that's largely unchanged. The bulk of that is complete in FY27, so it's obviously well ahead of the 2030 target. Any color on how you think we should bridge. To the $500 million EBIT target given that backdrop with the bulk of the CapEx almost done in the next 12 months.

Question: Lee Power - UBS Investment Bank - Analyst : Yeah, I appreciate what you have given us. It's been good. And then a second question. I mean, I feel for you having to put assumptions out there around spreads, given there's obviously a lot of moving data, particularly in the US where we're tracking well ahead of the $340 million that you talk to. I see the sensitivities around North Star are unchanged, but sorry, they're slightly lifted, which makes sense. I'd just be keen on any color around like price realization or channel inventories like it's. Obviously tariffs are important, but it'd just be interesting. Is there any other reason of what you're seeing on the ground as to why, we shouldn't be kind of still just looking at that spread data as it moves and thinking that that's pretty sensible for tracking your earnings in the near term. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 16, 2025 / 11:00PM, BSL.AX - Half Year 2025 BlueScope Steel Ltd Earnings Presentation

Question: Ramoun Lazar - Jefferies - Analyst : Just a couple of questions for me. Just your comments around the higher domestic, volumes at ASP in the second half. Sounds like you've probably seen the low for resi demand. Is that the way I should be reading that?

Question: Ramoun Lazar - Jefferies - Analyst : Yeah, okay, great. And Mark, just on North America, I mean, the downstream businesses there look like, weaker, kind of guidance relative to expectations. I mean, you've called out the coded. Business, just on the steel scape and the other sort of coded products business, just wondering there, the lags in passing on sort of higher price increases, is that, is the high price changes, sorry, is that what's driving some of the margin weakness in those downstream businesses and should we expect that to reverse maybe from the first half '26 if if the current pricing environment holds? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 16, 2025 / 11:00PM, BSL.AX - Half Year 2025 BlueScope Steel Ltd Earnings Presentation

Question: Ramoun Lazar - Jefferies - Analyst : Okay, great. And just one more for me, just on the Daptorei development there, I mean, how should we think about the costs of getting those sites ready to bring to market?

Question: Daniel Kang - CLSA Australia Pty Ltd - Analyst : Just want to clarify with the target of $200 million in terms of cost and productivity improvements. Does that include inflationary costs and what is your, I guess your expectation of annualized inflationary or cost escalations for the group now?

Question: Daniel Kang - CLSA Australia Pty Ltd - Analyst : And the expectations of inflationary costs on an annualized basis. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 16, 2025 / 11:00PM, BSL.AX - Half Year 2025 BlueScope Steel Ltd Earnings Presentation

Question: Daniel Kang - CLSA Australia Pty Ltd - Analyst : Got it. And if you can just provide some color on how the BCP or core coatings transformation program is progressing.

Question: Paul Young - Goldman Sachs Australia Pty Ltd - Analyst : Morning, Michael and David. Hope you're well. Great to see the details on the cost of program and also the 2030 targets. Mark, the first question is on the Australian, steel products business, and, great that you've caught out effectively the bottom of the housing cycle. I just want to, dig into those longer term targets, that you presented, which looked pretty compelling, the 2.7 million tons of domestic buying for FY30. Can I just confirm that, sort of what goes into those assumptions is that you just operating at full capacity. On metal coating and painted or is that what you think the, I guess the contestable market is that you can sell into?

Question: Paul Young - Goldman Sachs Australia Pty Ltd - Analyst : Yeah, okay. That all makes sense. Thank you. And then back to the US and, looking at cool coatings and again just on those, FY30, that FY30 target of 600,000 tons. So, I think that's excluding, steelscape. That number does seem a little bit conservative, seeing as the install capacity is, I think 900,000 tons or so, and just noting that, some of your peers in the US who are obviously got, better market penetration at the moment are, have sort of come out with sort of some pretty positive sort of growth numbers in the next 12 months for painted steel demand growth and also margins. So I just want to just again step through, what's the underlying assumption with the 600,000 tons because it doesn't seem pretty conservative. So assumptions with respect to, utilization or or more, I should say, market penetration.

Question: Paul Young - Goldman Sachs Australia Pty Ltd - Analyst : That's understood. And then just lastly on West Dapta, I might have missed this, Mark, I mean it was a good pitch as far as the quality of that land, but just, what's your expectation of potentially a range on on value for West Apta?

Question: Brook Campbell Crawford - Barrenjoey Pty Ltd - Analyst : Just first one on the buyback, just to clarify, should we assume that the buyback is effectively on hold, in the second half based on your earnings guidance and and cap backs and basically buyback will be, active if there's proceeds from land or if there's improvements in spreads, is that the right way to think about it?

Question: Brook Campbell Crawford - Barrenjoey Pty Ltd - Analyst : Understood. And just second question around North Star, I think in the past you talked to [$3.5 million] times. I think that was changed last year, but just to clarify, is $3.5 million as a target sort of off the table, no longer likely, or is that, potential upside that you could look to execute some further initiatives at some point between now and FY30?

Question: Owen Birrell - RBC Capital Markets - Analyst : Just, a quick one just delving into that steel scape, increase to 51%. Can you just confirm whether or not, there was any additional, investment that you had to basically pay for that additional call at 1%. And then just secondly, just confirming that Steelscape was not consolidated in the first half and will be consolidated at 100% in the second half.

Question: Owen Birrell - RBC Capital Markets - Analyst : Okay. And just a second question for me with regards to, the New Zealand, business. I recall the previous guidance was for a fairly in line result, there. Just wondering what changed so materially and when, to see the result land effectively at a break even result.

Question: Owen Birrell - RBC Capital Markets - Analyst : You mentioned just the swinging energy costs. The new EAF I would imagine would be more, I guess, energy intensive than the previous, mill. I'm just wondering whether there's any sort of protections that you've got there, or are we likely to see, I guess more exposure to, I guess, spot energy costs.

Question: Harry Saunders - Evans & Partners Pty Ltd - Analyst : Firstly, could you just give us a sense of the, maybe the net realization you're seeing in the mid single-digit, February price increasing in color bonds and, customer feedback and volume impact, please?

Question: Harry Saunders - Evans & Partners Pty Ltd - Analyst : Okay, thank you. And maybe just on the cost out, how much is actually anticipated in that guidance for the second half that you're realizing of the $200 million, please?

Question: Harry Saunders - Evans & Partners Pty Ltd - Analyst : Thank you. Just, wondering as well in cod products as we've talked a bit about this, but could you quantify the upside there and then, perhaps, therefore, what is the balance of the $200 million please?

Question: Harry Saunders - Evans & Partners Pty Ltd - Analyst : Great, thank you. And, on in the New Zealand business, just wondering if you have a view on the mid-cycle EBIT post the opening, and where you could take that by 2030 given, the $75 million upside implied.

Question: Harry Saunders - Evans & Partners Pty Ltd - Analyst : Thank you. Just finally, wondering if you have an initial sort of ballpark view of the surplus land, valuation perhaps at the time frame to realize that.

Question: Lyndon Fagan - JPMorgan Securities Australia Ltd - Analyst : My first question is just back on North Star. So the non-spread costs, just wondering if you can give us a medium-term guide on that. It looks like we're sort of hovering around the 300 mark per to in FY23, a bit lower than that in FY24, and it's coming in at around the 240 mark. Just, trying to delve into that again and looking for a medium-term guide. Thanks.

Question: Lyndon Fagan - JPMorgan Securities Australia Ltd - Analyst : Okay, thanks. And just to confirm that number includes operating the scrap facility there.

Question: Lyndon Fagan - JPMorgan Securities Australia Ltd - Analyst : Yeah. Thanks. And the next question is just a bit more strategic. So the deferral of the $1.2 billion downstream investment in the US, obviously a big thing, wondering if we can maybe run through that in a bit more detail. So is that related to, I guess the free cash flow. Position of the business today. I mean, we're sort of cyclically low type numbers there, and is there an inability to kind of execute that in the near term given balance sheet constraints, or is this more around just not seeing the opportunities? I mean, I think some of it, there was a build versus buyer question that we were running through in the last few results. Yeah, just wondering if you can shed more color there cause it seems like a fairly big strategic move. And is it now a post FY20-'30 thing?

Question: Lyndon Fagan - JPMorgan Securities Australia Ltd - Analyst : Yeah, that's good color, Mark. So I'm guessing that is a post FY20-'30 strategy now.

Question: Rohan Gallagher - Jarden Australia Pty Ltd - Analyst : Hopefully, I'm the last, maybe the least, important, but, most questions surprisingly, not surprisingly have been, asked and answered. So thank you for the increased disclosure and credits to the Australian team to, whether the structurally. Energy costs we're going through at the moment. Just to clarify with your second half guidance, the costs you had did '25 in the first half. David, is that the ballpark you're looking at for the second half in terms of what's insumed in as part of your guidance?

Question: Rohan Gallagher - Jarden Australia Pty Ltd - Analyst : Okay, and just associated with the cost saving program and thank you for the added details. Normally when you did a material cost out like this, last cycle, it led to significant item charges, conscious of the cost saving program and also, some of the asset values and the current earnings profiles, should we be seeing any significant item charges expected in the not too distant future associated with those two projects? Yeah.

Question: Rohan Gallagher - Jarden Australia Pty Ltd - Analyst : And just, David, in terms of the, performance, well, specifically the US coded, acquisition price US 500, therefore you'd be targeting something in the order of US 75 sustainable ly but are you still comfortable with the carrying value of that asset at this particular point in time?

Question: Rohan Gallagher - Jarden Australia Pty Ltd - Analyst : Yeah, thank you. And finally, guys, just for clarity, the guidance that you've provided for the second half and and I share the thoughts of a previous question and the views on having to do that, but, is West included or excluded from your guidance for the second half, please?

Question: Keith Chau - MST Financial Services Pty Ltd. - Analyst : First question, on the US, maybe this is a bit of a nuanced point, but, Mark, you mentioned you've recently been over there. It's in terminal. I think a lot of corporates are, I guess, pausing on their investment decisions at this point in time. So it doesn't sound like supply demand has moved that materially in the last few weeks, but Can you help me understand what you think has been driving the steel prices and steel spreads higher? I know it sounds like a bit of an obvious question, but is the industry discipline improved that much in recent weeks, or, is it the tariffs do you think have helped the market to start to really lean into those price increases that we started to see basically at the end of last year?

Question: Keith Chau - MST Financial Services Pty Ltd. - Analyst : Okay, thank you, Mark. And then, a couple of questions, David, for you. First one, with respect to the CapEx that was spent in the first half and also into the second half, it looks like numbers have actually come in, slightly below prior guidance. Only very marginally for sustaining, but with respect to growth, the numbers are lower. So can you help us understand whether that is timing, whether you're doing those projects more efficiently? Are there any other movements in there that we should be considering?

Question: Keith Chau - MST Financial Services Pty Ltd. - Analyst : Okay, thank you. Maybe a follow on for that, David. I think in prior guidance you've talked about, reducing working capital, particularly at the August result last year, but it doesn't look like when capital has moved too much. In fact, it's probably gone up a little bit because of payables. So what are your expectations in respect to working capital going forward, please? Thank you.

Question: Scott Ryall - Rimor Equity Research - Analyst : Thank you very much. Thanks for the medium to long term, information as well. I've two questions, both are on coded products, one in the US and one in Australia. So in the US, You've had John in there for the best part of six months now. I'm wondering if you can. Give us a little bit more color around what he's found so far in his review that's going to enable, I think he termed it immediate response or, very short-term turnaround in that business. And I guess the second one is, what is the prospect for growing that business if you don't have, a colorbond style product, As opposed to a product that looks pretty similar to to what's offered by a lot of competitors.

Question: Scott Ryall - Rimor Equity Research - Analyst : Okay, thank you. And then in Australia, I think you've mentioned, well, you mentioned during your prepared remarks that cladding is an opportunity you're looking at. Could you just talk through the enabling steps that that you think you guys need to deliver on before you can actually get a a product that can be utilized more broadly in the market, and does that require the, investment that you mentioned was coming out in 2027, I think you said was the finish date, for MCL7, is that necessary for for looking at the cladding opportunity, what else do you need to do product development to really go after that? Yeah.

Question: Scott Ryall - Rimor Equity Research - Analyst : Okay, great, but the capacity obviously helps in if it if the.

Question: Paul McTaggart - Citigroup Global Markets - Analyst : Oh, golly, you must be a bit bored answering all these questions by now I reckon, but just, I never.

Question: Paul McTaggart - Citigroup Global Markets - Analyst : Yeah, eventually. So look, with the US business, right, you export out of Australia into that West Coast market. I mean, I'm talking the West Coast business, let's assume tariffs come through, we don't get an exemption. You know how much domestically in that West Coast market do you think prices move up? I mean, there's quite a lot of imports going to that west coast of. Do you think you get it all back via increased pricing, or do you think you wear the tariff impact?

Question: Paul McTaggart - Citigroup Global Markets - Analyst : Okay, and with the economics of trucking in the US, it, it's still, I mean, you should still think of it as a kind of a discrete market that's, separated from that East Coast production.

Question: Chen Jiang - BofA Securities - Analyst : A lot of questions got asked, but I still, have to follow up, please. So, firstly, on your, second half '25, Outlook. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 16, 2025 / 11:00PM, BSL.AX - Half Year 2025 BlueScope Steel Ltd Earnings Presentation So if I sum up the business segments, you provided, excluding North Star, it looks like they are probably flat, half over half by excluding North Star. So does that mean the main earnings driver, if I compare half over half for eBay for the second half, the main driver is just from North Star. Is that a fair assumption?

Question: Chen Jiang - BofA Securities - Analyst : Yeah, thanks for that. And then, so the North Star you provided the spread, assumption, to drive your eit outlook. So a spread half over half improvement under your assumption is US $25 per ton. But the eBay from NorthStar is expected to double. So I'm wondering what else is driving the the doubling eBay from North Star or mainly because of the $25 per ton of US bread. Thank you.

Question: Chen Jiang - BofA Securities - Analyst : Okay, so there are some cost benefits coming through.

Question: Chen Jiang - BofA Securities - Analyst : Okay, all right, and then maybe last question, understand all of the questions could ask and then, mark, as well as say that you provided very good color on the cost initiative of $200 million, annualized to delivery in F126. Does that mean we are expecting incremental $200 million improvement in eBay level from 127. How, if you can give us some confidence or conviction, how are you going to deliver this because on the current environment to drive cost initiative is very hard for steel or industrial companies.

Question: Chen Jiang - BofA Securities - Analyst : Yes, thanks for that. And I guess that's at the end of '26, right, as a run rate, the full benefits should be in FY27.

Question: Chen Jiang - BofA Securities - Analyst : Right, and we are six months away or five months away from FY26, and then you're happy with the progress so far. Okay, it's especially from Australia steel products. I there there's a pie chart on page 11 appreciate that you will have raw material and energy cost. You are happy with where you're tracking and you're confident that, you can achieve by two.

Question: Peter Steyn - Macquarie Securities Ltd. - Analyst : Hi, Mark. Apologies. I don't want to extend it too much longer. I just wanted to clarify something you said about steelscape. My, well, the working assumption is that you've got raw materials going into steelscape that you'd pay a 25% tariff on, but your selling price is obviously a value added one. So is it correct to to assume that there's some nuance there in terms of price position? Or you're saying that the entire or the rest of the market is going to be a full value added imports and therefore price needs to adjust to that extent.

Question: Peter Steyn - Macquarie Securities Ltd. - Analyst : Gotcha. That makes that makes sense. I just wanted to make sure that we didn't get that wrong. 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. FEBRUARY 16, 2025 / 11:00PM, BSL.AX - Half Year 2025 BlueScope Steel Ltd Earnings Presentation