Analysts Site Visit Malaysia Business 25 June 2007
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Welcome to Malaysia Malaysia is a multi-racial & multi-cultural nation It has a population of 26 million people comprising Malays, Chinese, Indians, Ibans and Kadazans. The dance performance to welcome you is an example of the rich and diverse culture in Malaysia Malaysia is celebrating its 50 th year of independence this year 2007 is also Visit Malaysia Year Let us welcome you by saying Selamat Datang ke Malaysia Fkdf khfkl Page 3
BlueScope Steel in Malaysian Region Building solutions facility, BlueScope Lysaght Metallic coating and painting facility, BlueScope Steel BlueScope Steel is a leading player in the building and construction industry Only zinc/aluminium alloy-coated steel producer in the country Broad network of downstream businesses We have been present in the Malaysia region since 1965 BlueScope Lysaght Singapore (1965) BlueScope Lysaght Malaysia (1968) BlueScope Lysaght Sabah (1975) BlueScope Lysaght Sarawak (1978) BlueScope Lysaght Brunei (1993) BlueScope Steel (Malaysia) Sdn Bhd (1996) Employs 552 local people Page 4
Business Context - Midstream Recovering to former levels, but on a sounder footing Location: Ownership: Kapar 60% BSL 40% PNB Equity Capability : - Metallic Coating Line up to 160,000mt/annum - Paint Line up to 70,000mt/annum Commissioned : - Paint Line 1996 - Metal Coating Line 1997 Manufactures : Page 5
Business Context - Downstream Extensive Downstream network undertaking transformation From 1965-2002 25,000 tpa Losses across the portfolio Rollforming Building components 30,000 tpa To 2003 2007 All businesses profitable Building components and solutions: Components Residential PEB Multi-Story High End roofing solutions (Singapore) Page 1
Malaysian Economy - Stable & Steady Growth Economy Steady GDP growth of ~6.0% Inflation of ~3% Recovery in Foreign Direct Investment Well developed with modern infrastructure Population 26 million Young population with 53% under the age of 25 years Relative high GDP per capita of US$5,300 Political Very stable government Ruling party in power at federal level since independence Steel Market High end quality focused, price sensitive High steel consumption levels Page 7
SINDOMALAY Management Team President Indonesia & Malaysia Rob Crawford Personal Assistant Murtafiah VP Health, Safety & Environment Hanim Abu Bakar President Lysaght Indonesia Willius S. President BSI Steel Coated Sulfianda S. Vice President Finance Mike Mulcahy Vice President Information System Yulianto R. Vice President Marketing & Solution Lucia Karina President Coated Steel Malaysia Simon Linge President Lysaght Malaysian Region Chua Soo Keng Manager Technical Service Gary Newby Page 8
Malaysia - Midstream Management Team President Coated Steel Malaysia Simon Linge Administration Manager Emelyn Low VP Commercial Michael Ladd VP Human Resource Jasmin Yoong VP Manufacturing Bruno Marot VP Sales Sim Ooi VP Strategy & External Affairs Gan Wee Choong VP Marketing & Business Development Edward Choo VP Customer Service & Supply Chain Koh Boon Hong Safety Professional Chan Wai Yip Page 9
Malaysia Downstream Management Team President (Lysaght Malaysian Region) Chua Soo Keng President Lysaght Singapore Cheong Ku Wei President Lysaght Malaysia David Surveyor President Lysaght Sabah Roger Tan President Lysaght Brunei Selvarajah Navalingam President President Lysaght Sarawak Spore Service Centre Heon Chee Shyong Sam Yap Vice President Commercial Goh Kah Im Vice President Operations Manager Michael Hua Vice President Marketing-Downstream Euan Lay Page 10
Malaysian Business Performance External Despatches (tonnes000 s) FY2003 FY2004 FY2005 FY2006 Domestic 58 87 103 95 58 Export 30 44 53 44 19 Total 88 131 156 139 77 External Sales Revenue (A$m) Total Sales $125.9m $147.1m $177.4m $180.2m $106.6m EBIT (A$m) $22.3m $21.2m $9.3m $3.3m $6.3m Net Operating Assets (pre-tax A$m) $109m $131m $155m $142m $133m Business development and pre-operating costs included in EBIT 1HFY2007 - - - $1.1m $0.5m Page 11
Midstream Business Page 12
Zero Harm Achievements 1374 days since last Lost Time Injury 275 days since last Medical Treated Injury 275 days since last Work Injury 5 years ago, we had 14 Work Injuries p.a. Today, we have a record 9 continuous months of Work Injury Free Page 13
Midstream Recovery to Former Levels But on A Sounder footing The midstream business historically has achieved strong revenue and profit growth Only in country zinc/aluminium alloycoated steel producer 2005 & 2006 were aberrations due to the Perfect Storm Falling steel prices with high stocks Paintline fire Slowdown in construction sector Market share push by competitors (e) The business has recovered, aided by a 3-year Business Plan 2006: Turning around the business 2007: Building a solid foundation 2008: Building sustainable growth Page 14
Demand Fast Approaching Capacity Status Paint line full on several months this year with exports More new products filling up MCL capacity Challenges More light gauge production at paint line Paint line capacity constrained Further improvement in prime first time MCL performance Production outside design parameters at MCL Initiatives to improve performance Increasing line speeds Reduction of quality losses Scheduling efficiencies New products Page 15
Midstream Midstream Vision Vision One One passionate passionate team team taking taking pride pride in in delivering delivering solutions solutions to to our our customers customers and and making making us us the the leading leading coater coater in in Malaysia Malaysia Mission Mission Being Being our our customers customers 1 1 st st choice choice for for delivering delivering great great innovative innovative products products and and service service through through people people who who are are safe, safe, engaged engaged and and well-rewarded well-rewarded Strategic Themes Zero Harm Customers & Markets Manufacturing Excellence Supply Chain Excellence People & Leadership Commercial & IS Management KEY FOCUS AREAS Zero injuries Zero environment incidents Grow Domestic market and Sales Support & grow core export markets Margin management Operating discipline Asset Utilisation Uptime Yield / PFT Increase local & regional sourcing Reduce lead time High performance teams Engagement Rewards & recognition Value creation Working capital reductions Superior customer service Page 16
The Value Chain Hardware (awnings, thin gauge) Imported CRC ex- BSL Australia Locally Produced CRC Regional Produced CRC ex PT KS Metal Coating Painting Domestic Customers (incl Lysaght) Industrial & Commercial (Roofing/Walling) Residential (Doors/Windows, Trusses & Framing) Export Customers (incl Lysaght Sing.) Manufacturing (shutters, TV components) Page 17
Predominately Foreign Sourced Feed Current Source 1. CRC from: 55% from BSL Australia 35% regionally (e.g. PT KS) 10% local Previously from 11 suppliers 2. Other materials Zinc from Korea Zinc (Korea) Aluminium from Comalco (Australia) Paint from Akzo Nobel Other Influences Tariff regime Currently - 0% CRC, 50% coated steel/rollformed, 0% coated steel intra-asean Page 18
Market Overview MIDSTREAM COATING PLANT, KAPAR 160,000 TONNES OF COATED STEEL CAPACITY DOMESTIC 60% (Malaysian Region Pen. M sia, Sarawak, Sabah, Brunei, Singapore) EXPORT 40% Building & Construction 75% (Industrial, Commercial, Residential) Hardware 15% (roofing sheet, awning, door/window frame) Manufacturing (10%) Roofing & Walling 70% Trusses, Door/Window Frame, RWG 30% Shutters, TV Band, Paneling Page 19
Industry Structure Note: Quantity in 000mt Source: Business Times, SEAISI, Metal Bulletin Note: Data in Brackets = Nameplate capacity not actual production, thousand tonnes * Based on Domestic capacity and domestic production only Page 20
Domestic Sales Growth - New Products & Customer Focus Record domestic volume achieved in 2007 Launched new products; CoolZal 0.20mm TrueCore PrimaMaju Improved Zincalume Chrome free To be launched 4 new products in the next 12 months Improved quality & delivery service Improved reliability and lead times Page 21
Malaysia Our Products & Mix Product Mix (Domestic) - indicative YTD FY06/07 Premium Quality Range 75% Mid Range 15% Economy Range 10% Page 22
Commercial Projects Bus Station Jabatan Audit Negara Sirim Putrajaya Page 23
Residential Projects Kemensah Heights Bungalow in Kuching Bungalow in Kuching Bungalow in Kuching Page 24
Metal Coating Line: Yields Up and Product Complaints Down Achievements Line stop per shift reducing (39 Shifts without unplanned Line Stop) 56% from 0.50 to 0.22. Yield trending up from 89 to 96% Increased line flexibility and to be more responsive to market requirements Customer Complaints reduced by 60% in past 12 months Capability to run 0.2 light gauge from plant designed of 0.25. Forward Focus ONE BEST WAY culture to produce Zincalume Focus on uptime & PFT / Yield performance. Statistical Process Control. Page 25
Paint Line: World Class Performance Achievements High PFT levels Minimal line stops per shift (downtime) Production record: 4 days of 100% PFT 40% reduction of entry scrap Customer complaints reduced by 85% Uptime improved from 70 to 75% Justified Complaints (mt) against Target Forward Focus Uptime focus Support product development Team development and training Page 26
People & Leadership - Key Part of Our Success High Performance Culture Clear Business Strategy, Direction & Ownership Work Force Engagement Rewards and Recognition Systems Page 27
Midstream Summary - Recovery to Former Levels but on a Sounder Footing Historically sound business Turbulent years for 2005 and 2006 Business has now achieved a solid turn around All business metrics are improving Strong position to take this business forward Page 28
Downstream Businesses - BlueScope Lysaght BlueScope Lysaght Sabah BlueScope Lysaght Malaysia BlueScope Lysaght Brunei BlueScope Lysaght Singapore BlueScope Lysaght Sarawak 6 rollforming & business solutions manufacturing facilities in Malaysia Region 5 sales offices across the Malaysia Region 320 employees across the region 40 years of history in Asia Manufacturing Facility Sales Office Page 29
Downstream Businesses - BlueScope Lysaght Building Products Residential Solutions Pre-Engineered Buildings Structural Decking Value-added coated, prepainted and rollformed branded products, solutions and services Extensive Network of distribution channels Largest distributor of premium brands Differentiated by providing solutions for highend projects Creates pull through for midstream business (~30% pull through) Transforming from building material supplier to building solution provider Page 30
Zero Harm Achievements Lysaght Brunei 13 years Lost Time Injury Free Lysaght Sabah 13 years Lost Time Injury Free Singapore Service Centre 8 years Lost Time Injury Free Lysaght Singapore 8 years Lost Time Injury Free Lysaght Singapore Outstanding Safety Award by Singapore government Lysaght Malaysia 5 years Lost Time Injury Free Lysaght Sarawak 3 years Lost Time Injury Free Page 31
Volumes Increasing Page 32
Downstream Progress Into Business Solutions Page 33
Solutions Provider for High End Projects Changi Airport Terminal 3 Abbott Plant Economic growth and increasing affluence has increased demand for high end projects These projects are largely concentrated in Singapore and in urban areas of Malaysia Our transformation to provide solutions high end projects in response to demands of the market Esplanade Theatres by the Bay Page 34
Solutions Provider for High End Projects Semi-D Development, Malaysia Singapore National Library Ministry of Environment, Malaysia Singapore Exposition Halls 7-10 Guest House, Malaysia Singapore Management University Page 35
Downstream Summary Growth vehicle Pull through demand Ensure BlueScope Steel Brands Market Leadership Set The Standard Provider of Engineered Solutions Page 36
Overall Malaysia Summary Core Asian market with strong economic growth Infrastructure development High GDP growth Steel intensity increasing Increasing Foreign Investment BlueScope Steel is growing profitably in Malaysia ability to leverage value chain ranging from coated products to building solutions differentiated products new markets and products customer service excellence Page 37