bluescope steel (thailand) analyst presentation

BlueScope Steel (Thailand) Analyst PresentationSimon Smart,PresidentSomkiat Pintatham, President Lysaght Thailand

November 20, 2006

Important notice

THIS PRESENTATION IS NOT AND DOES NOT FORM PART OF ANY OFFER, INVITATION OR RECOMMENDATION IN RESPECT OF SECURITIES. ANY DECISION TO BUY OR SELL BLUESCOPE STEEL LIMITED SECURITIES OR OTHER PRODUCTS SHOULD BE MADE ONLY AFTER SEEKING APPROPRIATE FINANCIAL ADVICE. RELIANCE SHOULD NOT BE PLACED ON INFORMATION OR OPINIONS CONTAINED IN THIS PRESENTATION AND, SUBJECT ONLY TO ANY LEGAL OBLIGATION TO DO SO, BLUESCOPE STEEL DOES NOT ACCEPT ANY OBLIGATION TO CORRECT OR UPDATE THEM. THIS PRESENTATION DOES NOT TAKE INTO CONSIDERATION THE INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY PARTICULAR INVESTOR.

TO THE FULLEST EXTENT PERMITTED BY LAW, BLUESCOPE STEEL AND ITS AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, ACCEPT NO RESPONSIBILITY FOR ANY INFORMATION PROVIDED IN THIS PRESENTATION, INCLUDING ANY FORWARD LOOKING INFORMATION, AND DISCLAIM ANY LIABILITY WHATSOEVER (INCLUDING FOR NEGLIGENCE) FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS PRESENTATION OR RELIANCE ON ANYTHING CONTAINED IN OR OMITTED FROM IT OR OTHERWISE ARISING IN CONNECTION WITH THIS.

Thailand Facilities

History of BlueScope Steel Thailand

Largest investment of any Australian company in Thailand

1988 - BlueScope Lysaght (Thailand) Limited was founded as a joint venture between BlueScope Steel Limited and Loxley public Company Limited, Thailand’s leading trading company

1995 - BlueScope Steel (Thailand) Limited was founded as a a joint venture between BlueScope Steel Limited and Loxley public Company Limited

1997 - Commissioning of new Lysaght factory at Khon Kaen (North East)

1998 – Commissioning of the Coated steel facility at Maptaput

2002 - Commissioning of Lysaght Smartruss factory at Maptaput

2005 – Metal coating capacity at Maptaput doubled with commissioning of MCL2 in September

2006 – Beam fabrication facility commissioned in July

BlueScope Steel Thailand

• Locations:– Coated Steel Facility Map Ta Phut– Marketing Office Bangkok– Lysaght Sales Office Chiang Mai / Songkla– Lysaght Factory Rangsit / Khon Khen– Smartruss/Butler/Purlin Map Ta Phut

• Employees: 876

• Comprises two principal businesses:– BlueScope Steel (Thailand) Limited; and– BlueScope Steel Lysaght (Thailand) Limited

Direct Reports to President Thailand

Richard TurnerVice President

OHS&EThailand & Vietnam

Gregory John MoffittVice President

Marketing & Business Development

Thailand

Voraphol AngsulapiwatVice President Sales

Simon SmartPresident

BlueScope Steel Thailand

Somkiat PintathamPresident

BlueScope Lysaght

Peter WilsonPresident Thailand

Geoffrey KernickVice President

Finance

BlueScope Steel (Thailand) Limited

Simon Smart, President

BlueScope Steel (Thailand) Limited

• Locations:– Coated Facility Map Ta Put– Marketing Office Bangkok

• Shareholders: Ordinary Incl. Pref’s– BlueScope 75% 87.5%– Loxley Public Company 25% 12.5%

• Capability:– Pickle Line 400,000 tpa– Cold Rolling Mill 350,000 tpa– Metallic Coating Lines 375,000 tpa– Paint Line 90,000 tpa

• Commissioned: February 1998• Employees: 547• Competitors:

– Bangkok Steel Industries, Korean, Japanese, Taiwanese and Chinese Imports, Local Galvanising Operators

Direct Reports to President BlueScope Steel (Thailand) Limited

Pongsak PadungkarnUncoated Manufacturing

Manager

Simon SmartPresident BlueScope Steel Thailand

Greg Harris Coated Manufacturing

Manager

Soonthorn TharnpipitchaiCommercial Manager Teerapong Raksasang

Safety Health & Environment ManagerThailand

Watcharin SubannaratActing Information Systems

Manager

Peter De GruyterPlant Service & ProjectsEngineering Manager

Warren RitchiBeam Fabrication

Manufacturing Manager

Chanigarn SampattagulHuman Resource Manager

Craig Parker Acting Vice President

Logistics & Supply Chain

BlueScope Steel Thailand - Maptaput site today

Safety – Significant achievement

18 Million Hours LTI Free on August 200618 Million Hours LTI Free on August 2006

Last LTI on 29 October 1996Last LTI on 29 October 1996

Safety – Lagging indicators

6 5

1413

22

9 9 10

3 3 2

0

5

10

15

20

25

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

WI FREQUENCY RATE

20

10

3

11

3 32 1 1

2

0

5

10

15

20

25

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

MTI FREQUENCY RATE

Per million hours

Safety – Leading indicator (Zero harm)

69

53

65

43

68

4654 54

66

80

48 51 48

3236

60

0

25

50

75

100

Jul-0

5

Aug

-05

Sep

-05

Oct

-05

Nov

-05

Dec

-05

Jan-

06

Feb-

06

Mar

-06

Apr

-06

May

-06

Jun-

06

Jul-0

6

Aug

-06

Sep

-06

Oct

-06

Nov

-06

Dec

-06

Jan-

07

Feb-

07

Mar

-07

Apr

-07

May

-07

Jun-

07

Danger Zone

Alert Zone

Caution Zone

Safe Zone

Safety – Our improvement plan

Compliance with BlueScope Steel Code of PracticeSafety Leadership ProgramContractor ManagementSafety Audit ImprovementDriver safety

Environment

ISO 14001:2004 Accreditation by Lloyds

BlueScope Steel Environment Compliance Register

Environmental Monitoring Program

Employee Physical Checkup

Energy Saving Program

BlueScope Steel Plant Material Flow

Hot Rolled CoilHot Rolled Coil

Pickle Line 400 Kt/a

Pickle Line 400 Kt/a

Cold Mill350 Kt/aCold Mill350 Kt/a

Metal Coating Lines375 Kt/a

Metal Coating Lines375 Kt/a

Paint Line90 Kt/a

Paint Line90 Kt/a

Hot Rolled Pickled StripHot Rolled Pickled Strip

Uncoated StripUncoated Strip

Metal Coated StripMetal Coated Strip

Painted StripPainted Strip

BlueScope Steel plant raw material sources

Major input costs are hot rolled coil, coating metals and paint.

1. Hot Rolled CoilThe majority of BlueScope Steel Thailand’s hot rolled coil requirements are sourced from the Sahaviriya Steel Company (SSI) and BlueScope Steel’s operations in Australia.SSI purchases some raw slab from BlueScope Steel’s manufacturing operations in Australia. This raw slab is converted by SSI into hot rolled coil.

2. Other major raw materials such as coating metals (zinc and aluminium) and paint are secured on supply contracts that cover much of the needs of the wider Asia Building and Manufacturing businesses.

Production Lines - Overview

Production Line - Pickle Line

Process : Hot Rolled Coil is processed through hydrochloric acidtanks to clean scale from the strip and is then sidetrimmed to the required width

Output : Further processed at the Cold Rolling Mill orsold as hot rolled pickled and oiled coil

Capacity: 400 Kt/a

Production Line - Pickle Line tension leveller

• Tension leveller installed during 2006 and commissioned in October• Key benefits are

• Improved strip shape to increase yield and throughput on Cold Rolling Mill• Enable access to 2nd tier hot rolled coil (Lower quality , lower price)

• Ability to process light gauge Hot Rolled Coil to further increase Cold Rolling Mill throughput

Production Line - Cold Rolling Mill

Process : Pickled Hot Rolled Coil is fed into the Cold Rolling Mill (Reversing Mill) which applies roll force (600-900t) and tension to the total strip, reducing the thickness of the strip by up to 91 %

Output : further processed at the Metallic Coating Lines, orsold as cold reduced uncoated steel

Capacity: Currently 350 Kt/a

Production lines – Cold Rolling Mill

Improved Overall Equipment Effectiveness (OEE) from 50% to 68% with target of 75%

Current capacity 350,000 tpa and target is 400,000 tpa

A program to increase cold roll mill capacity to best practice for a reversing mill at minimal capital cost is being undertaken

Use of uptime methodology

Preventative maintenance practices

High performance work teams

De-bottlenecking initiatives to improve throughput have created minor issues with coil shape on light gauge material causing increased non-prime output – that is now resolved

Cold rolled short fall in the short term to be sourced from suppliers in Thailand while capacity increase work is performed

Production Line - Cold Rolling Mill – Overall Equipment Effectiveness

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06

OEE Transition Dow ntime Unscheduled Dow ntime Quality Loss Speed Loss

Production Line - Metal Coating Line (No. 1 and No. 2)

Process : Cold reduced coils are hot dipped coated with ZINCALUME ®coating or galvanised (Zinc) coating to provide corrosionprotection

Output : Sold as ZINCALUME ® coil or Truzinc ® galvanised coilto building, manufacturing and industry or use as feed forour Paint Line

Capacity: 375 Kt/a

Production lines – Metal coating lines

2 Lines

MCL1 – capacity 175,000tpa

MCL2 – capacity 200,000tpa, but in ramp-up mode

Produce a range of products, ZINCALUME®, Truzinc® (thickness 0.23-1.6 mm)

MCL2

On Asia Day we advised of technical issues, including spangle variation, equipment reliability and strip creasing

These Technical Issues are mostly behind us, and yield has improved substantially

MCL1

In Line Painting – Final equipments installation program for November 2006

Paint on strip scheduled for December 2006

Production Line – No. 2 Metal coating line production capacity

0

50

100

150

200

250

FY2006 FY2007 FY2008 FY2009

Prime Product Non-PrimeNAMEPLATE CAPACITY 200,000tpa

000’s Tonnes

MCL2 Process Capability (Non Prime First Time)

MCL2 NPFT %

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Year

2005

Wk 2-

06Wk

3-06

Wk 5-

06Wk

6-06

Wk 7-

06Wk

8-06

Wk 9-

06Wk

10-06

Wk 11

-06Wk

12-06

Wk 13

-06Wk

14-06

Wk 15

-06Wk

16-06

Wk 17

-06Wk

18-06

Wk 19

-06Wk

20-06

Wk 21

-06Wk

22-06

Wk 23

-06Wk

24-06

Wk 25

-06Wk

26-06

Wk 27

-06Wk

28-06

Wk 29

-06Wk

30-06

Wk 31

-06Wk

32-06

Wk 33

-06Wk

34-06

Wk 35

-06Wk

36-06

Wk 37

-06Wk

38-06

Wk 39

-06Wk

40-06

Wk 41

-06Wk

42-06

Wk 43

-06Wk

44-06

Wk 45

-06

Year 2005 NPFT% 13 Moving Average

Improved yield with resolution of key technical issues

Yield impacted as product range extended to full specified thickness range

Yield impacted by start stop operations due to lack of demand

Production Line - Paint Line

Process : Metal coated strip is thoroughly cleaned and chemicallytreated to provide best surface to apply a primer coat followed by a finish coat of paint, via roller application, which is then oven cured

Output : Building, packaging and manufacturing marketsCOLORBOND®, Prima®, P-Zacs®, PPGI, CRP

Capacity: 90 Kt/a

Production lines – capacity utilization

Facilities Capacity (lt)Avg FY2003 - 2005 FY2006 Future

Cold Rolled Coil 350,000 225,000 232,375 400,000

Metallic CoatingNumber 1 Line 175,000 178,000 147,277 175,000Number 2 Line 200,000 NA 68,907 200,000

375,000 178,000 216,184 375,000

Paint Line 90,000 55,000 51,791 90,000

Steel Trusses 15,500 2,900* 3,437 15,500

Beam fabrication facility 12,000 NA NA 12,000

Production

Note: Number 2 Metal Coating line production commenced in September 2005 . *Average for FY2004-2005 shown for Steel Truss

Going forward, sales volumes are expected to increase as new facilities come on line and markets for products from existing facilities are expanded.

Manufacturing Excellence Umbrella – Core focus

Manufacturing Excellence is a common framework used across BlueScope Steel

to extract maximum value from our facilities

Key Improvement Activities

MCL Common• HMS compliance• Hold coil time monitoring• Power thread unit• Cost N2 sink roll• F2 conversion

Plant Common• Non prime selling strategy• Visual factory• Green zone generation• Decision making training• Contractor management

CPL / RSL• Uptime increase• Stack emission control• Restricted access packing area• Paint thickness control• Slitting line upgrade

MCL1• Processing 0.20 product• Inline painting capability• Reduction of metal overcoat• Edge buildup control• Chemical coater installation

MCL 2• DAK operation• Elimination of furnace scale• Reduction of metal overcoat• Edge buildup control• Pot pump out capability

Plus equipment vendor Sign Off• Spangle variation / micro

spangle• Furnace brick work• Hot bridle roll replacement• Upleg cooler / treatment

flutter• Tension meter roll

replacement• Elrad cabling overheat

CRM• Uptime increase• Throughput increase• New Rolling oil• Light gauge capability• Off gauge reduction

PKL• Uptime increase• Tension leveler optimize• Thinner HRC running• Side trimmer optimize• Automatic process control

Manufacturing ProjectsPlant common

Operational security• PKL AC Drive upgrade• CRM New Shape control system• CRM new Strip centering system• Coated DC Drive upgrade•Crane Drive upgrade

Delivery Performance

Delivery Perfomance chart

85%

55%

98%97%92%91%

0%

20%

40%

60%

80%

100%

120%

01/02 02/03 03/04 04/05 05/06 YTD 06/07

05/06 Delivery performance deteriorated due to excessive demand and poor plant reliability

05/06 Delivery performance improving with plant reliability and improvement made to supply management

processes

Despatch volume of 22574T in May 2006

A celebration of a record prime domesticdespatch volume of 22,574t in May 2006.

Working Capital……Days of Inventory (DOI) focus

Days of Inventory

107109119

8980

64

0

20

40

60

80

100

120

140

01/02 02/03 03/04 04/05 05/06 YTD06/07

Day

sInventory

increase to support MCL2

start up• Inventory

impacted by slow domestic market

• Plans being action to reduce all stock

Conversion cost

Raw Materials Conversion

Raw materials cost impact driven by Hot Rolled Coil and Coating Metal

market price movements

Conversion cost maintained despite input cost increases

Our people

Our People

Employees as of October 2006

Male77%

Female23%

IA1%

Casual17%

Permanent82%

Master's Degree7.68%

Primary School1.51% Bachelor's

Degree39.31%

High Vocational

Diploma

Vocational Certificate

2.71%

Secondary School6.02%

High School0.30%

Diploma's Degree0.30%

Turnover Rate 1998 to October 2006

25.56%

17.73%

14.85%

11.47%

5.38% 4.20%

9.34% 11.11%9.43%

0%

5%

10%

15%

20%

25%

30%

1998 1999 2000 2001 2002 2003 2004 2005 2006

HR Initiatives

1. Recruitment - Graduate Program 2 years program- 0-1 yrs. 5 people- > 1 yrs. 6 people - Recruiting 3 people

2. Remuneration - To attract & retain high calibre employees, the newsalary structure was introduced mid year 06, salary adjustment on 1 Jul 06.

- Other benefit will be reviewed beginning 07.

3. Training & - Professional Sales Skill Training (2 years program)Development - Team Leadership & Performance skills workshop

- Creating value for Leadership Training- Technical Training- Safety Training

Our people – Our community

As one aspect of our Bond focuses on Community, Human Resources Department coordinates organising lunch for HIV victims at CamillianSocial Center Rayong on 3 March 2006.

Our people – Our community

Blood donation for Red Cross on 31 March & 26 September 2006

Our people - Songkarn Festival in April 2006

Summary

• We have world class assets

• We have ramped up throughput

• We are on track to close out all major technical issues

• We have detailed plans for further improvement and optimization

and

• We have a strong management teams and great people with demonstrated ability to deliver

BlueScope Steel (Thailand) Analyst PresentationNovember 20, 2006

bluescope steel (thailand) analyst presentation

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