baoshan iron & steel co., ltd. 1h16 result briefing · gross margin % 11.5 14.0 ↑2.6ppts...
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August 2016
Baoshan Iron & Steel Co., Ltd.1H16 Result Briefing
The following presentation distributed herewith includes forward-looking statements. All statements,
other than statements of historical facts, that address activities, events or developments that Baoshan Iron
& Steel Co.,Ltd.(Baosteel) expects or anticipates will or may occur in the future are forward-looking
statements.
Baosteel’s actual results or developments may differ materially from those indicated by these forward-
looking statements as a result of various factors and uncertainties, including but not limited to price
fluctuations, actual demand, exchange rate fluctuations, competition and other risks and factors beyond
our control.
Disclaimer
1 1H Results
2 Industry Dynamics
Content
Unit 1H15 1H16 YoY
Sales Volume Million tons 10.70 11.85 ↑10.8%
Operating Income billion RMB 80.9 78.1 ↓3.5%
Gross Margin % 11.5 14.0 ↑2.6ppts
Total Profit billion RMB 4.40 5.02 ↑14.2%
CFO per share note RMB/share 0.49 0.69 ↑41.0%
EPS RMB/share 0.19 0.21 ↑9.3%
BVPS RMB/share 6.85 7.02 ↑2.5%
Cash Conversion Cycle days 31.9 14.8 ↓53.6%
Sales of Only one & NO.1 products 12%
Output of ultra-high strength auto sheet 60%
Note: The CFO does not contain that of the financial company.
Large and medium sized enterprises
40%BaosteelOthers
0
10
20
30
40
50
Bao
steel G
rou
p
Shagan
g Gro
up
Citic Steel
Jingxi G
rou
p
Xin
wu
an Stee
l
Fangd
a Steel
Zon
ghen
g Steel
HB
IS
Shih
eng Stee
l
WISC
O
Ba
os
tee
l
NO.1 among domestic steel players
Operation Overview
5
4
3
2
1
0
billion RMB
12.59 billion RMB
-100
0
100
200
300
400
Baosteel POSCO Nucor Hyundai MSSMC JFE
-10
0
10
20
30
40
50
Baosteel POSCO Nucor Hyundai NSSMC JFE
Most profitable among comparable global steel players
Profit before tax per ton
Profit before tax
Note: Translated at average exchange rate of 1H16.
RMB/ton
Billion RMB
5
4
3
2
1
0
-1
Contributing 43% for the reduction of operating cost per ton
2015
1H16
43%57%
Cost cut initiatives
Baoshan base
Production ramping up smoothly
Products development and certification go as planned
All manufacturing process under stable operation
Zhanjiang Project
1550 pickling line
hot load test
March 15
March 30
2030 hot dip galvanizing line
hot load test
3# converter system
hot load test
May 5
Heavy plate unit
hot load test
May 28
2# blast furnace of Zhanjiang
project ignition
July 15
Cost control of some units better than benchmarks
Technology Innovation
4# BNA hot dip galvanizing line fully achieved intended targets
Batch production of 1180Mpa Dual Phase steel for auto parts
Debut of new products
B27R080、B30R090High Efficiency Grain-oriented Electrical Steel
CT110For High Grade Coiled Tubing
High-end products
Intelligent Manufacturing
“Baosteel and Siemens Intelligent Manufacturing (Industry 4.0) Strategic Agreement”
Groundbreaking cooperation on 1580 hot rolling pilot project
Will jointly establish China Steel Industry 4.0 Standards
E-commerce in Progress
Operating income 8.68 billion RMB 14%
1000+ nationwide warehouses
5.2 billion RMB loans grantedmore than 1 billion RMB balance of loans
Ouyeel international officially launched
Sales volume 3.59 million tons 16%
OuyeelInternet + Steel
On-line Trading
Logistics
Finance
International on-line trading
Environment-friendly
Starting a new round of urban steel mill development plan (2016-2021)
To be the best practitioner of environmental friendliness
521 million RMB
expenditure on environmental projects
143,500 square meters of new green area
24,7000 tons of CO2 emission reduction per year
through Photovoltaic power units
Vision
Action
and better urban steel mill for better life
million tons 1H2016 YoY HoH
Crude Steel Output 13.27 ↑ 20.7% ↑ 13.9%
10.99 11.65
13.27
0
2
4
6
8
10
12
14
1H2015 2H2015 1H2016
10.70 11.45 11.85
1.15 1.48 1.67
0
2
4
6
8
10
12
14
1H2015 2H2015 1H2016
million tons 1H2016 YoY HoH
Sales of Finished Products 11.85 ↑ 10.7% ↑ 3.5%
including:export 1.67 ↑45.2% ↑12.9%
Output & Sales
billion RMB 1H16 YoY HoH
Operating Income 780 ↓3.44% ↓6.05%
Operating Cost 671 ↓6.23% ↓13.72%
80.8 83.0 78.0
71.5 77.7
67.1
0
20
40
60
80
100
1H2015 2H2015 1H2016
Operating imcome Operating cost
Operating Income and Cost
17.7%17.0%
0.35%
3.7%
24.4%
19.7%
0.3%
13.4%
-5%
0%
5%
10%
15%
20%
25%
CRC HRC Tube Others
1H2015 1H2016
CRC 42%
HRC 40%
Tube 6%
Others 12%
Gross Margins & Sales Breakdown
Sales BreakdownGross Margins
billion RMB 1H16 YoY Gross Margins
YoY
Steel Making 48.5 ↓ 5.8% 17.7% ↑5.4ppts
Distribution 66.9 ↓ 8.1% 3.6% ↑0.4ppts
51.4
72.8
48.5
66.9
0
20
40
60
80
Steel Making Distribution
1H2015 1H2016
billion RMB 1H16 YoY Gross Margins
YoY
E-commerce 11.98 ↑55.5% 0.2% ↑0.2 ppts
IT 1.72 ↑6.7% 28.6% ↑2.2 ppts
Chemicals 3.57 ↓8.4% 6.5% ↑0.3 ppts
Finance 0.25 ↓23.2% 50.2% ↓3.0 ppts
7.71
1.61
3.90
0.32
11.98
1.72
3.57
0.25 0
2
4
6
8
10
12
E-commerce IT Chemicals Finance
1H2015 1H2016
Segment Report
1 1H Results
2 Industry Dynamics
Content
9.5%
7.7% 7.7%7.4%
6.9%6.7%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
2011 2012 2013 2014 2015 2016
GDP
5.4%
2.6% 2.6%
2.0%
1.4%
2.1%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2011 2012 2013 2014 2015 2016
GDP CPI
• GDP was down to 6.7% in 1H. • CPI growth was up to 2.1% in 1H.
• Prudent monetary policy is expected to continue.
1H2016 1H2016
Economy outlook
Date source:Wind
Crude steel output and Apparent consumption
Unit: million tons 1H16 YoY
Crude steel output 399 ↓ 1.1%
Net export 49 ↑ 10.7%
Apparent consumption 346 ↓ 2.7%
• Crude steel output was 399mn tons in 1H,down
1.1% YoY. Net export increased 10.7% YoY. And
apparent consumption continued to decline.
• Industry FAI increased slightly in 1H, but growth
rate declined for several months.
816 823 804
399
765 739 698
346
0
200
400
600
800
2013 2014 2015 2016
Crude steel output Apparent consumption
411.8
505.5 506478.9
425.7
194.6
14.60%
-2.04% -2.06%
-5.90%
-11%
1.90%
-15%
-10%
-5%
0%
5%
10%
15%
20%
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 20161H20161H2016
Steel industry outlook
Date source:National Bureau of Statistics, Steelhome, Wind
Unit: million tons
Unit: billion RMB
Steel industry FAI
Social inventory Steel mill inventory
• Inventory maintained a relatively low level.
9.27
5.274.00
12.06
0
500
1000
1500
2000
2500
2014年1月 2014年7月 2015年1月 2015年7月 2016年1月 2016年7月
库存总量 长材 板材
0
500
1000
1500
2000
2500
2014年1月 2014年7月 2015年1月 2015年7月 2016年1月 2016年7月
Steel inventory
Date source:Wind
Unit: million tons Unit: million tons
2014 2015 2016 2014 2015 2016
CSPI Prices
• After strong rally and sharp correction in 1H, steel prices continued rising.
74.33
2470
3320
2850
50
60
70
80
90
100
110
2014年1月 2014年7月 2015年1月 2015年7月 2016年1月 2016年7月
1500
2000
2500
3000
3500
4000
4500
2014年1月 2014年7月 2015年1月 2015年7月 2016年1月 2016年7月
价格:热轧板卷:3.0mm:上海 价格:冷轧板卷:1.0mm:上海
价格:螺纹钢:HRB400 20mm:上海
Steel market
Date source:Wind
2014 2015 2016 2014 2015 2016
Unit: RMB/ton
FAI
20.6%19.6%
15.7%
• Total FAI was 25.8 trillion RMB in 1H, up 9% YoY. Growth rate was down slightly.
36.543.6
50.255.2
25.8
20.6%19.6%
15.7%
10.0%9.0%
8%
10%
12%
14%
16%
18%
20%
22%
0
20
40
60
2012 2013 2014 2015 2016
Infrastructure FAI
7.79.4
11.2
13.1
6.4
13.7%
21.2%20.3%
17.3%
20.3%
10%
12%
14%
16%
18%
20%
22%
24%
0.0
5.0
10.0
15.0
2012 2013 2014 2015 2016
• Infrastructure FAI was 6.4 trillion RMB in 1H, up 20.3% YoY.
1H2016 1H2016
Infrastructure
Date source:Wind
Unit: trillion RMB Unit: trillion RMB
Real estate FAI
20.6%19.6%
15.7%
• Real estate FAI was 6.15 trillion RMB in 1H, up 7.2% YoY. Real estate picked up in 1H remarkably.
New start and Sales growth
7.2
8.6
9.5 9.6
6.15
16.2%
19.8%
10.5%
1.0%
7.2%
0%
5%
10%
15%
20%
0
5
10
2012 2013 2014 2015 2016
• New construction was up 14.9% YoY. Sales was up 42.1%. Real estate market experienced an impressive growth.
-7.3%
13.5%
-10.7%-14.0%
14.90%
1.8%
17.3%
-7.6%
6.5%
42.1%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2012 2013 2014 2015 2016
New Start Sales Growth
1H2016 1H2016
Real estate
Date source:Wind
Unit: trillion RMB
Output Sales
19.27
22.12 23.72 24.50
12.89
4.6%
14.8%
7.3%
3.3%
6.5%
0%
5%
10%
15%
20%
-
5.00
10.00
15.00
20.00
25.00
2012 2013 2014 2015 2016
19.31 21.98
23.49 24.60
12.83
4.3%
14.0%
6.9%
4.7%8.1%
0%
5%
10%
15%
20%
-
5.00
10.00
15.00
20.00
25.00
2012 2013 2014 2015 20161H2016 1H2016
Auto
Date source:CAAM
Unit: million units Unit: million units
• Output and sales were up 6.5% and 8.1% YoY respectively in 1H.
• Passenger car sales was up 9.2% YoY, outperforming commercial car(up 1.9% YoY).
• The demand is expected to be strong in 2H.
Washing Machine Refrigerator
67.42 72.02 71.14 72.75
36.81
1.4%
8.2%
-3.3%
0.7%
6.5%
-5%
0%
5%
10%
0
10
20
30
40
50
60
70
2012 2013 2014 2015 2016
84.2793.41
87.96 89.93
46.99
-3.1%
10.6%
-1.0%-1.9%
-3.9%
-5%
0%
5%
10%
0102030405060708090
100
2012 2013 2014 2015 2016
Air-conditioner
• Washing machine output grew fast in 1H, while refrigerator and air-conditioner output decreased.
• The demand is expected to revive in 2H.
132.81 143.33
144.63 156.50
84.03 4.9%
11.6%11.5%
0.0%
-4.9%-5%
0%
5%
10%
15%
0
20
40
60
80
100
120
140
160
2012 2013 2014 2015 20161H2016 1H2016 1H2016
Home appliances
Date source:Wind
Unit: million units Unit: million units Unit: million units
Machinery value added growth
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
20
13年
3月
20
13年
6月
20
13年
9月
20
13年
12月
20
14年
5月
20
14年
8月
20
14年
11月
20
15年
4月
20
15年
7月
20
15年
10月
20
16年
3月
20
16年
6月
General Equipment Special Equipment
Electrical Equipment Transportation Equipment
2013 2014 2015 2016
60.21
45.34 39.05 41.84
17.15 20.41
69.84
59.95
31.26
16.20
106.95
131.00
148.90
123.04 119.26
0
50
100
150
0
20
40
60
80
2012 2013 2014 2015 2016
Completion New Orders Carrying Orders(right)
Ship building
• The downturn continued in the shipbuilding industry, while the machinery industry growth increased slightly.
• The shipbuilding industry is expected to remain sluggish.
1H2016
Ship building & machinery
Date source:Wind
Unit: million units
Platts(62% Fe) Port inventory
• Iron ore price rebounded sharply in 2016, and iron ore port inventories rose to over 100 million tons.
61.65
10641
0
20
40
60
80
100
120
140
160
2014年1月 2014年7月 2015年1月 2015年7月 2016年1月 2016年7月6000
7000
8000
9000
10000
11000
12000
2014年1月 2014年7月 2015年1月 2015年7月 2016年1月 2016年7月
Raw Material
Date source:Wind
Unit: USD/ ton Unit: million tons
2014 2015 2016 2014 2015 2016
Coking coal(from Australia) First-grade metallurgical coke
• Coking coal and coal prices continue recovering to the level at the beginning of 2015。
865 1210
500
600
700
800
900
1000
1100
2014年1月 2014年7月 2015年1月 2015年7月 2016年1月 2016年7月500
700
900
1100
1300
1500
1700
2014年1月 2014年7月 2015年1月 2015年7月 2016年1月 2016年7月
Raw Material
Date source:Wind
Unit: RMB/ton
2014 2015 2016
Unit: RMB/ton
2014 2015 2016
With good demand, supply control and low inventory levels, the steel price is expected to rise steadily in 2H.
De-capacity of steel industry and mining industry is expected to be reinforced.
The steel demand of infrastructure, real estate, automobile and house appliance is expected to maintain a good momentum.
Outlook for 2H2016
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