Steel - Australian Securities Exchange · Steel tonnes produced (Mt) 1.99 . 2.00 - 1 The 2012...

Steel Steve Hamer, Chief Executive Steel

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This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of Arrium and

certain plans and objectives of the management of Arrium. Forward-looking statements can generally be identified by the use of words such as ‘project’,

‘foresee’, ‘plan’, ‘expect’, ‘aim’, ‘intend’, ‘anticipate’, ‘believe’, ‘estimate’, ‘may’, ‘should’, ‘will’ or similar expressions. All such forward looking statements

involve known and unknown risks, significant uncertainties, assumptions, contingencies and other factors, many of which are outside the control of

Arrium, which may cause the actual results or performance of Arrium to be materially different from any future results or performance expressed or

implied by such forward looking statements. Such forward-looking statements speak only as of the date of this presentation. Factors that could cause

actual results or performance to differ materially include without limitation the following: risks and uncertainties associated with the Australian and global

economic environment and capital market conditions, the cyclical nature of the steel industry, the level of activity in the construction, manufacturing,

mining, agricultural and automotive industries in Australia and North and South America and, to a lesser extent, the same industries in Asia and New

Zealand, mining activity in the Americas, commodity price fluctuations, fluctuations in foreign currency exchange and interest rates, competition, Arrium's

relationships with, and the financial condition of, its suppliers and customers, legislative changes, regulatory changes or other changes in the laws which

affect Arrium's business, including environmental laws, a carbon tax, mining tax and operational risk. The foregoing list of important factors is not

exhaustive. There can be no assurance that actual outcomes will not differ materially from these statements.

All balance sheet items are based on statutory financial information. Except as otherwise expressed, references in this document to net profit/loss after

tax refer to net profit/loss attributable to equity holders of the parent. Segment results referred to throughout this presentation are those reported in the

2013 Full Financial Report. They are equivalent to segment underlying results.

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Steel Overview 4

Steel Performance 23

Steel Outlook 29

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STEEL: OVERVIEW

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Arrium business structure F

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Integrated Australian steel operations • Scrap/iron ore → Manufacturing → Distribution

Australia’s only manufacturer of steel long products • EAF & integrated blast furnace production flexibility • Steelmake capacity ~2.6Mt pa • Large product range – structural, reinforcing, rail, wire, fencing and strand products

and solutions The leading distributor of metal products in Australia

• National footprint • #1 in general Australian steel distribution • #1 in Australian reinforcing • #1 in Australian wire

“We use our expertise in steel manufacturing, sales, logistics, supply chain and processing to

deliver a safe, fast, flexible and reliable product to all Australian customers”

Steel – What are We F

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We employ approximately 5,700 Australians directly or indirectly

We trade with over 27,000 customers a year

We schedule, cut and bend over 100 million lengths of rebar a year

We make and handle over 7 million sheets of mesh a year

We despatch over 1400 trucks and train wagons every day. That’s almost 400,000 a year

Interesting facts F

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Iron Making Processing & Distribution Product Mills Steel Making & Casting

Whyalla BOS

Combi Caster

Whyalla Billet

Caster

Laverton EAF and Billet Caster

Sydney EAF and Billet Caster

Whyalla Structural &

Rail Mill

Laverton Bar

Laverton Rod

Sydney Bar Mill

Newcastle Rod Mill

OneSteel Wire

OneSteel Reinforcing

ARC

OneSteel Metalcentre

Whyalla

Blast Furnace

Our integrated value chain F

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BRISBANE

DARWIN

Adelaide

Launceston

Cairns

Mackay Townsville

Port Macquarie Newcastle

Orange Wagga

Central Coast

Toowoomba Gold Coast

Wollongong

Geelong

Rockhampton

SYDNEY

Maroochydore

Hobart

PERTH

MELBOURNE

“Australia’s largest reinforcing provider focussed on top-tier projects and helping

customers with their construction risks”

800+ $600m+

Sites People Revenue1

1 Revenue based on FY13 sales and includes sales within the Arrium group

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Horsham Canberra Albury F

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39 800+ $500m+

Sites People

“The leading provider of reinforcing products to the mid-tier and smaller project markets”

Sadfasd


Revenue1

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70+ 900+ $700m+

Sites People

“The leading distributor of steel and metal products leveraging scale in market coverage, product range, operations and supply chain”


Revenue1

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3 400+ $300m+

Sites People

“The largest processor and distributor of wire products into rural and construction markets”

Wire: • Newcastle Wire Mills • Geelong Wire Mill • Jindera

Products: • Manufacturing wire • Rural posts and fencing • Wire ropes feed • Steel in Concrete wire

Revenue1


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5 800+ $1.3bn

Sites People

“Flexible and reliable supplier of rebar, rod and mebar into our chosen distributor channels”

Rod & Bar Facilities: • Sydney EAF • Laverton EaAF • Sydney Bar Mill • Newcastle Rod Mill • Laverton Bar Mill • Laverton Rod Mill • Newcastle Conti-Stretch

Products: • Billets • Merchant bar (rounds,

angles, channels, flats, squares)

• Reinforcing bar • Conti-Stretch bar coils • Roof bolt • Reinforcing rod, • Rod for wire

Revenue1


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2 1100+ $0.95bn+

Sites People

“Reliable supplier of billet in our integrated channel with rail and structurals into our chosen distributor channels” “Integrated steelworks with internally sourced iron ore with a capacity of ~1.2 -1.3Mt”

Products: • Slabs • Billets (including specials) • Hot rolled structurals • Rail – head hardened, plain carbon • Rail sleepers

Whyalla Key Equipment: • Blast Furnace • Basic Oxygen Steelmake (BOS) • Combi-Caster – slabs/billets • Structural and Rail Mill

Revenue1


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Approximately 75% of Steel revenue is driven by construction

Residential, non-residential and engineering construction (including mining investment) drives demand for reinforcing bar and wire, rod for mesh, hot rolled structurals, merchant bar and rail

Agriculture drives demand for rural wire, rural posts and rural pipe products

Mining production drives demand for grinding bar which is feed for grinding media

Manufacturing has limited exposure to automotive and manufacturing segments

Approximate FY13 Steel Domestic Sales by Market Segment

Key market segments F

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QUALITY

• ‘Safety’ is a Core Value

• Meet standards and certification

• In-house engineering to optimise design

• Core metallurgical expertise

PREDICTABLE

• Do what we say we will

• Reliable

• Product consistency

• Scale through integrated supply chain

from raw materials to sales

FLEXIBLE TO MARKET DYNAMICS

• Variety of business models enacted through

locally empowered leaders

• “Sprint” capacity to match market needs

• Extensive national footprint

• Local and ready to listen

UNDERSTAND MARKETS’ NEEDS

• Knowledgeable of products, their

applications, end-use markets and global

trends

• Innovative solutions to solve customer

problems

• Manufacture or import supply solutions to

deliver meaningful products and services

CUSTOMERS’ RISKS MITIGATED

• ‘Customer’ is respected and a Core Value

• Full control of our end-to-end integrated

manufacturing processes and transparent

supply chain

• Long-term industry involvement with shared

benefit and risk of local industry success

VALUE FOR MONEY

• “Straight forward” commercial relationships

that make business easy

• Relentless focus on costs

Our value proposition to our customers F

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Main drivers of volume: Market conditions in Construction – non-residential, engineering,

home-improvement, residential Rural Mining Manufacturing (including automotive)

These are impacted by Government funded infrastructure Resource investment Private development Availability of cash and credit Population growth Seasonal impacts Unemployment rates and trends Interest rates Freight costs

Main drivers of pricing: Input costs Scrap Coal Iron ore Alloys Electricity Natural gas

FX

Import pricing Competitive pricing offer to customers International market conditions and steel supply/ availability especially in SE Asia

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Key external drivers of our performance F

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Impact of change in FX and scrap prices on domestic wholesale pricing - ~3 months lag depending on product

Majority of steel product range competes with South East Asian scrap fed Electric Arc Furnaces

Local wholesale and retail premiums driven by level of service required and unique market offers

Retail Margin

Retail Sell Price

Retail Conversion Costs and

Freight

Local Premium

Wholesale Sell Price

FX

Manufacturer Import Margin

Freight to Australia

Asian Conversion

Costs

Asian Raw Material Prices

USD AUD

Domestic Steel pricing structures F

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Pricing Update January to June 2013 Prices flat or declining slowly due to:

• FX rates at or above parity • Declining US$ scrap prices in SE Asia

July to September 2013 Import prices started to increase with FX decline

SE Asian scrap price remains stable in US$

Announced a 1.65% increase in OneSteel Metalcentre, ARC and OneSteel Reinforcing effective July across product range - recover general increases in cost to serve

Announced 5% wholesale price increase across product range – effective September

OneSteel Metalcentre, ARC and OneSteel Reinforcing announced increases effective September 13 based on input cost increases

Short Term Outlook Expectations for FX rates to remain at lower levels with potential to fall further

Potential for SE Asian $US scrap prices to gradually increase

Potential for further price increases with sustained lower AUD

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Cost reductions - ~$40m annualised savings expected1

Operational improvements: • Managed by a single Chief

Executive – faster decision making • Improved efficiency and

effectiveness of supply chain • Reduce complexity and duplication • Better working capital management • Increased flexibility

Increased responsiveness to customers

Lower breakeven point

1 ~$30m in FY14

Opportunities from a single Steel business F

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Business knowledge – products, markets and customers

Integrated footprint Timely and flexible delivery of

products, service and solution offers Competitive cost position - labour

productivity, overhead management, R&M, sourcing and procurement strategies

Operational excellence – throughput rates, reliability/availability and yields

Strong leadership and management - execution of business models

Key competencies that drive performance

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Labour Scrap Externally purchased finished product Freight Pellet and lump ore Coal Utilities Repairs and maintenance Operating materials Contractors

FY13 - top 10 costs (descending order) F

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STEEL: PERFORMANCE

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Construction Activity by Sector

Source: Australian Industry Group

Market Conditions & External Factors Residential and non-residential construction

weak due to relatively tight credit conditions, low consumer & business confidence and economic uncertainty globally and in Australia

Engineering construction affected by some project delays or cancellations in coal, gas and iron ore

Over capacity and weak demand in international steel markets led to lower international prices

Australian dollar remained high despite fall below parity in Q413

“Arrium has significant leverage to even modest improvement in demand and lower AUD”

FY13 Steel Results F

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FY13

$m FY121

$m % change

Total revenue/income 3,486 4,059 (14)

EBITDA 76 66 15

EBIT (43) (56) 23

Sales margin (1.2%) (1.4%) 0.2 pp

Assets 2,506 3,535 (29)

Funds employed 1,778 2,822 (37)

Return on funds employed (1.9%) (1.9%) - -

Employees (number) 5,946 6,164 (4)

External steel despatches (Mt) 2.36 2.57 (8)

Steel tonnes produced (Mt) 1.99 2.00 -

1 The 2012 comparatives have been restated to reflect the change in segment structure and formation of the Steel segment as announced on 30 May 2013. Except as otherwise noted, the Steel segment total results in this presentation include continuing and discontinued businesses (including those held for sale).


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EBITDA $76 million, up 15% pcp • Includes cost reductions and operational

improvements Cash positive Revenue down 14% pcp – lower prices and 8% decrease

in sales volumes • Impact of completion of major rail contract in 1H13 • Some further weakness in domestic demand

Domestic prices adversely affected in 1H13, with modest recovery in 2H13

• Falling international steel prices and high FX Single Steel business announced end May

• Focus on cost reductions and improved earnings

Significant leverage to improvement in external environment

• Generally low volumes/low EAF capacity utilisation

• Significantly lower breakeven point • Will benefit from recent fall in AUD


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5,400

5,500

5,600

5,700

5,800

5,900

6,000

6,100

FTE

Co

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ONESTEEL FTE COUNT NET OF STEEL SYNERGIES

FTE NET OF STEEL SYNERGIES

Total delivered cost per tonne reductions excluding raw material price movements down approximately 3% pcp, after absorbing CPI

Approximately 380 FTE reductions July 11 to June 13

Major cost reduction areas included: • Labour • Operational cost and yield savings • Raw material usage and mix • Procurement and sourcing initiatives • Repairs and maintenance

“Our focus is to continue to lower our fixed cost base as well as move fixed costs to variable where practical”

Steel FTEs (Inc Contractors)

* All commentary and data relates to the continuing Steel business excluding ATM and Merchandising

FY13 Cost Reductions* F

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EAF steelmake was ~ 860 thousand tonnes for Sydney Steel Mill and Laverton (~60% utilisation)

Whyalla steelmake up to 1.12 million tonnes (1.11 million tonnes FY12) – 90+% utilisation

FY13 EAF Utilisation F

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STEEL: OUTLOOK

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Australian Performance of Construction Index (PCI)

Source: Australian Industry Group

Market conditions and external factors F

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Scrap price at low levels

Turkey scrap higher than South East Asian

Iron ore price holding in a range

Coal and coke price falling

Sustained lower AUD underpins uplift in raw

materials and import prices in AUD

Market conditions and external factors F

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Benchmark Comparative

Benchmark comparative line is based on average volumes for the period from Jul '07 to Mar '08 excluding Merchandising tonnes. Sales volume indexed to July 2008 excluding Merchandising.

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Steel Distribution (Retail)

Retail Indexed Sales Tonnes per Day

“Demand and sales weakened from February 2013”

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Generally weak domestic steel markets expected to continue in 1H FY14

Domestic construction markets expected to recover slowly in FY14 after experiencing impact of weaker activity in resource and non-residential construction markets in 2H FY13

Earnings in FY14 for Steel expected to benefit from further cost reductions and operational improvements, as well as impact of sustained lower AUD

• We expect full benefit of sustained lower AUD from 2Q FY14*

Over medium to longer term, we remain confident of improvements in fundamentals for key domestic and international steel markets as economic conditions improve

Outlook

*Assumes constant raw material prices and demand levels.

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Markets in which we have a sustainable competitive advantage

Capacity flexibility to meet demand cycles Pricing opportunities through a period of input

cost increases and a sustained lower AUD Improved earnings and cash generation Continuing to reduce cost to serve to ensure

competitiveness of offer Deliver expected synergy benefits from single

Steel business ~ $40m annualised cost savings (~$30m in FY14)

FY14 focus F

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Leading market positions Continued challenging external environment Cost reductions and operational improvements continue

• Further lowering of breakeven point Significant leverage to a modest improvement in demand and a

sustained lower AUD • Expect full benefit of sustained lower AUD from 2nd quarter of FY14* • Expect demand to recover slowly in FY14

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*Assumes constant raw material prices and demand levels.

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1 Steel historical information has been derived by adding together the Manufacturing and Distribution segments. Transactions between these segments have not been eliminated. 2 Steel information for FY11, FY12 & FY13 excludes transactions between entities previously in the Manufacturing and Distribution segments and includes discontinued operations.

FY132 FY122 FY112 FY101 FY091 FY081 FY071 FY061 FY051 FY041

$m $m $m $m $m $m $m $m $m $m

Total revenue/income 3,485.8 4,058.8 3,950.4 4,993.5 6,424.9 6,272.8 4,549.1 3,910.9 3,828.6 3,192.4

EBITDA 75.8 65.9 (37.1) 188.3 499.9 423.3 418.5 369.5 348.5 316.8

EBIT (43.0) (56.4) (164.6) 56.8 372.0 279.2 331.4 284.1 259.1 236.7

Sales Margin (1.2%) (1.4%) (4.2%) 1.1% 5.8% 4.5% 7.3% 7.3% 6.8% 7.4%

Assets 2,505.5 3,534.5 3,966.9 4,132.9 4,125.5 4,637.7 3,136.1 2,869.8 2,778.2 2,621.5

Funds Employed 1,778.2 2,821.8 3,171.9 3,183.0 3,326.5 3,429.8 2,364.9 2,208.8 2,052.0 2,031.4

Return on funds employed (1.9%) (1.9%) (5.2%) 1.7% 11.0% 9.6% 14.5% 13.3% 12.7% 11.8%

Employees (number) 5,946 6,164 6,922 7,020 7,408 8,211 6,292 6,396 6,391 6,263

External tonnes despatched (Mt) 2.36 2.57 2.44 2.36 2.43 3.18 2.28 2.27 2.26 2.15

Steel tonnes produced (Mt) 1.99 2.00 1.92 1.91 1.79 2.44 1.73 1.63 1.35 1.62

Historical data - Steel

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* The Manufacturing segment has been combined with the Distribution segment since 1 July 2013. The combined historical data for the restructured segment is shown on the preceding slide under Steel.

1 The FY08-FY10 results have been restated to reflect changes in organisation structure following the formation of the new Mining Consumables segment as a result of the acquisition of the Moly-Cop Group. The Waratah, Newcastle facilities, which include the grinding media and rail wheel businesses, The grinding media businesses in the United States and Indonesia, and the wire ropery business at Newcastle previously reported as part of the Manufacturing segment now form part of the Mining Consumables segment. 2 Assets and funds employed comprised of balances of continuing operations only. 3 Pre-2003 historical information can be found on Arrium's website.

FY13 FY122 FY11 FY101 FY091 FY081 FY07 FY06 FY05 FY04$m $m $m $m $m $m $m $m $m $m

Revenue/Income 2,232.1 2,597.6 2,425.9 2,472.9 3,100.5 3,128.1 2,155.7 1,560.0 1,548.4 1,250.1

EBITDA 43.0 45.1 (86.6) 96.5 282.4 243.5 216.4 158.8 144.6 155.9

EBIT (50.6) (49.9) (184.6) (3.4) 187.5 133.3 158.3 103.2 84.4 110.1

Sales Margin (2.3%) (1.9%) (7.6%) 0% 6.0% 4.3% 7.3% 6.6% 5.4% 8.8%

Assets 1,553.4 2,323.0 2,594.5 2,623.9 2,600.8 2,880.8 1,929.6 1,603.8 1,419.0 1,329.4

Funds Employed 1,091.6 1,822.4 2,042.1 2,054.5 2,150.3 2,202.3 1,518.0 1,268.4 1,074.8 1,056.1

Return on funds employed (3.5%) (2.6%) (9.0%) (0.2%) 8.6% 6.1% 11.4% 8.8% 7.9% 10.2%



Steel tonnes produced (Mt) 1.99 2.00 1.92 1.92 1.78 2.44 1.73 1.63 1.35 1.62

Historical data - Manufacturing*

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* The Manufacturing segment has been combined with the Distribution segment since 1 July 2013. The combined historical data for the restructured segment is shown

on the preceding slide under Steel. 1 Assets and funds employed comprised of balances of continuing operations only. 2 Pre-2003 historical information can be found on Arrium's website.

FY13 FY121 FY11 FY10 FY09 FY08 FY07 FY06 FY05 FY04$m $m $m $m $m $m $m $m $m $m

Revenue/Income 2,159.7 2,435.6 2,438.6 2,520.6 3,324.4 3,144.7 2,393.4 2,350.9 2,280.2 1,942.3

EBITDA 32.5 17.8 39.6 91.8 217.5 179.8 202.1 210.7 203.9 160.9

EBIT 7.3 (9.9) 10.2 60.2 184.5 145.9 173.1 180.9 174.7 126.6

Sales Margin 0.3% (0.4%) 0.4% 2.4% 5.5% 4.6% 7.2% 7.7% 7.7% 6.5%

Assets 1,038.5 1,305.2 1,485.1 1,509.0 1,524.7 1,756.9 1,206.5 1,266.0 1,359.1 1,292.1

Funds Employed 686.5 988.9 1,133.6 1,128.5 1,176.2 1,227.5 846.9 940.4 977.2 975.3

Return on funds employed 0.9% (0.9%) 0.9% 5.2% 15.4% 11.9% 19.4% 18.9% 17.9% 13.8%



Historical data – Distribution*

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Announced Steel and Recycling asset impairments and restructuring costs (1H13 $474 million, 2H13 $480 million)

• Asset impairments − Non-integrated Steel businesses and US Recycling held for sale − Impairment testing for continuing businesses (based on value in use cash flows) − Rationalisation of Recycling footprint

• Restructuring − Formation of single Steel business (expected annualised cost savings ~$40 million1) − Recycling – operational improvements including exiting/closure of some sites − Exiting non-integrated Steel businesses

1 ~$30m savings in FY14

Impairment & Restructuring Costs F

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Recycling Geoff Feurtado, Chief Executive Recycling

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Recycling Overview 4

Recycling Performance 23

Recycling Outlook 29

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OVERVIEW

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Arrium business structure

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We trade products and waste containing steel, stainless steel, copper, aluminium, lead, zinc, brass, bronze etc...

…And process it for reuse then trade into local and global metals markets.

OneSteel Recycling

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Collection of scrap metals Smelting Primary

separation Process, sort & pack Logistics

A full recycling value chain

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Baler Materials Handling

Shears

Shredder

Heavy Melt

Steelmaking

Shred

Bales

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Ferrous scrap flows F

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Million tonnes Change: % 2012/2011 Source: World Steel

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Scrap steel flow

OSR is positioned to capitalise on Australian & Asian demand

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Trading and processing of ferrous and non ferrous scrap metals Provide cost effective supply of ferrous scrap to Arrium/OneSteel EAFs Leverage our trading capability and Asian trading platform for Arrium

Del

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Recycling focus F

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Core Flex Export Trading Office

Australia / Asia Focus

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Recycling portfolio aligned to integrated value chain

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Board announced US Recycling to be “held for sale” 4 July 13. • Sale process underway

Not integrated into Arrium Steel value chain EBITDA positive FY13 US Recycling well positioned

• USA will remain the #1 source of deep sea traded scrap • Regionally focused player with leading market positions • Leveraged to US economic recovery • Non ferrous exposure has upside as global economic recovery

Operating on “business as usual” basis • US Recycling continues to seek out opportunities to develop this business

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US Recycling F

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Australia Asia USA

Ferrous

Shredders x4 x1

Local Customers Steel Mills Steel Mills Steel Mills Recyclers

Export Customers

SE Asia - Turkey & Asia

Export Method Bulk Ship Containers

- Bulk Ship

Non Ferrous

Products All* SS & Cu All*

Export Method Containers Containers Containers

Trading Hedged Brokerage

* Including Zorba / non ferrous shred recovered from the Ferrous stream 12

Product and market exposure F

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Sales Revenue Source

Australia Asia

Sales Revenue Destination

Australia Asia

Alignment to key markets • Australia Asia • Australia Downstream Mills

• Global trading presence • Asian trading hub • Asian physical presence

Excludes US businesses

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Revenue source and destination F

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Yard Rationalisation

VIC Mildura

Corowa

Thomastown

Kilsyth

NSW Padstow

Wagga Wagga

QLD Oxley

Geebung

Cairns

WA Kewdale

Kwinana

TAS Bell Bay

Hobart

Burnie

Townsville

Mackay

Gladstone

Hemmant, Wacol & Gold Coast

Hexham

Taree

Gosford

Chipping Norton, Botany, Caringbah, Wetherill Park, Minto

Unanderra

Port Adelaide, Gillman

Ballarat, Bendigo Laverton, Brooklyn, Somerton, Coolaroo Dandenong

Shredder

Steel Mill

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Australian footprint aligned to Steel F

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Macro Chinese sentiment mixed, with growth c7.5%pa Excess metals capacity EU in recession in FY13 Unsteady and weak US growth Major shifts in currency relativities – Yen, USD, Euro Australian economy – weak sentiment, reduced investment, manufacturing sector weakness

Industry Excess shredder and recycling capacity Containerisation of scrap Emergent recycling industries in China & Turkey Excess capacity in the steel, aluminium and stainless steel industries A depreciated Yen eroded ferrous scrap prices as buyers looked to Japan ahead of the US Weak scrap flows

“The recycling sector is now removing costs and consolidating”

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Challenging external environment F

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Scrap demand remains weak Depreciation of the Yen has been used to

drive scrap prices down in Asia over 2H FY13

US supply challenged by the Japanese in north Asian markets & by European suppliers selling into Turkey

Turkish buyers have further disrupted scrap markets by switching to semi -finished product, eg billets, in lieu of melting scrap

Benefit from depreciation of AUD starting to impact

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External factors

Source: Tex Report

Source: Reserve Bank of Australia

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Non ferrous represents over half of OSR’s revenue

Segment margins impacted by weakening

prices and intense competition for source tonnes

Nickel:

• The nickel / stainless sectors are in oversupply from Chinese investment. POSCO continues to invest - other players are carrying the brunt of restructuring. Ni prices are likely to remain volatile

Copper:

• Copper remains a bellwether of Asia’s economic condition. Supply and demand are reasonably balanced but capacity expansion plans remain significant

Aluminium:

• The aluminium sector suffers a significant overhang of latent capacity that caps price

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External factors

Source: Metal bulletin / LME

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Business right sized and focussed – a simpler business model Margin Invested new yards at Wacol(Qld) & Somerton(Vic) Expanded the customer base in Asia Invested to improve metal recovery from waste streams

• Additional 2% of waste stream recovered Cost and cash Costs pared – headcount reduced by 124 (down 13% pcp) Focus on cash flow management – eg new shipping models to improve stock turn Rationalisation Yards closed: Cairns(Qld), Geebung(Qld), Oxley(Qld), Padstow(NSW), Thomastown(VIC) Malaysia exited, shredder JV in Thailand exited Western Australia and Tasmania to be exited (Q1F14) New Zealand exited

Portfolio US Recycling held for sale

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Invested in technology to improve metal recovery from the shredder waste streams – recovering additional 2% of the waste stream as metals. Hemmant – sensor sort technology and batch

feeding Laverton – sensor sort technology and batch

feeding Tampa – sensor sort technology, insulated

copper wire recovery and fine particle screening

Now at the point of diminishing incremental benefits from investment but landfill remains a significant issue for the recycling industry

Hemmant downstream

Zero Waste technologies have succeeded

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The customer experience is being enhanced

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FY13 Recycling Results

FY13

$m FY12

$m % change

Total revenue/income 1,350 1,590 (15)

EBITDA 8 24 (67)

EBIT (8) 7 (214)

Sales margin (0.6%) 0.4% (1.0) pp

Assets 480 675 (29)

Funds employed 365 567 (36)

Return on funds employed (1.8%) 1.2% (3.0) pp

Employees (number) 849 973 (13)

Total scrap recycling tonnes (Mt) 1.89 2.11 (10)

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FY13 Recycling Results Sales revenue down 15% vs pcp due to

lower volumes and prices • Average ferrous price down 15% vs pcp • Average nickel price down 15% vs pcp

Australian business affected by prices and volumes – more than offset cost and operational improvements

US business continued to perform well, but down pcp due to fall in ferrous and non ferrous prices

Restructuring continuing - cost and operational improvements underpinned breakeven 2H13 EBIT

Cash positive Significant leverage to improvement in

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Significant negative external forces Excludes benefit of

closing loss making businesses

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Drivers of FY13 EBITDA Result

H2 H1

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OUTLOOK

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Earnings improvement through cost reductions and operating improvements

Significant leverage to even modest improvement in demand and lower AUD

Generally weak domestic and international metals markets expected to continue in 1H FY14

Over the medium term we remain confident of improvements in fundamentals for key domestic and international metals markets as economic conditions improve

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Summary

Transformation; a robust, simpler, focussed business • Rationalisation of Recycling footprint

Continued challenging external environment 2HFY13 breakeven EBIT Cost reductions and operational improvements

continue Key part of Steel long products value chain Significant leverage to improvement in external

environment

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Steel - Australian Securities Exchange · Steel tonnes produced (Mt) 1.99 . 2.00 - 1 The 2012...

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