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Arrium
PresentationAndrew Roberts, Deputy Managing Director
Macquarie Australia Conference
1 May 2013
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Contents
2
Company overview 3
Business segments 7
1H13 results overview 20
2H13 update 23
Appendix 25
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Company overview
3
� Arrium is an international mining and materials company• Sales revenue FY12: A$7.59bn
• Total assets as at 31 Dec 2012: A$8.36bn
• Employees as at 31 Dec 2012: ~10,000
• ASX top 100 company
-
2,000
4,000
6,000
8,000
FY10 FY11 FY12
Sales revenue ($m)
-
2,000
4,000
6,000
8,000
10,000
FY10 FY11 FY12
Assets ($m)
0
150
300
450
600
FY10 FY11 FY12
EBITDA ($m)
4,000
6,000
8,000
10,000
12,000
FY10 FY11 FY12
Employees (no.)
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Arrium business segments
4
Recycling
Manufacturing
Distribution
Moly-Cop International
AltaSteel
Moly-Cop Australasia
Middleback Ranges
Southern Iron
Port Operations
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International footprint
5
� Arrium operates from ~250 locations across North and South America, Australia and Asia
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Strategic focus
� Has been on growing Mining and Mining Consumables businesses and cash generation for the steel businesses
� Current focus:
• Reducing level of debt (reflects investments to significantly grow Mining and Mining Consumables)- Cash benefits from Mining and Mining Consumables growth
- Steel divestments (non-integrated and property)
• Growth opportunities from current projects in Mining and Mining Consumables - Capturing at least our share of expected strong growth in grinding media
- Utilising full capacity of expanded Whyalla Port (~13Mtpa)
• Cash generation and further cost and operational improvements in Steel –benefits to date helped deliver positive underlying EBITDA and cash outcome in 1H13 & 2H12 for Manufacturing and Distribution despite difficult external environment- Significant leverage to modest improvement in demand and lower AUD
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Business
segmentsMining Consumables
Mining
Steel & Recycling
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Business segments1
8
MiningMining Consumables Steel & Recycling
� Grinding media• Global leader (Moly-Cop)
• Strong earnings and cash generation
• Stable margins
• Strong growth profile
• Positioned in key growth and low cost regions
• Sustainable competitive advantage
� Mine ropes – global leader in dragline ropes
� Rail wheels – #1 in Australia
� Business to double in size by mid 2013 – Australia’s 4th largest iron ore producer• Export sales rate of ~12Mtpa by
mid 2013
• Port capacity of ~13Mtpa by mid 2013
� Port owned and operated by Arrium
� Reasonable aspirations for ~12Mtpa x 10 years at least2
� Ferrous and non ferrous exploration
� Leading market positions in Australia
� Historically (pre GFC) good cash generators
� Difficult external environment but substantial cost and operational improvements achieved• Manufacturing/Distribution
EBITDA and cash positive in 1H13 & 2H12
� Well positioned with significant leverage to modest improvement in demand and lower AUD
2 See slide 28 in the Appendix to this presentation.
FY12 Mining Consumables
$ millions
Revenue 1,541
EBITDA 172
Assets 2,310
Employees 1,973
FY12 Mining
$ millions
Revenue 819
EBITDA 344
Assets 1,686
Employees 532
FY12 MAN DIST REC
$ millions
Revenue 2,598 2,436 1,590
EBITDA 45 18 24
Assets 2,323 1,305 675
Employees 3,106 3,058 973
1 Unless otherwise stated, certain financial measures referred to in this document, including underlying results and ratios based on underlying results are non-statutory financial measures,which have not been audited or reviewed as part of KPMG’s audit report on the 2012 Full Year Financial Report or review report on the 2013 Half Year Financial Report. However, KPMG haveundertaken a set of procedures to agree the financial information in this document to underlying information supplied by the Company. The Directors believe that using these non-statutoryfinancial measures appropriately represents the financial performance of the Group’s total operations including continuing and discontinued operations. Details of the reconciliation of non-statutory to statutory results can be found in the Appendix to this document. All balance sheet items are based on statutory financial information.
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Mining
Consumables
Global leader in grinding media
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Grinding media� A business of scale with relatively stable
margins and a strong growth profile • Strong earnings growth since Moly-Cop
acquisition
• EBITDA $200m (1H13 annualised)
• Grinding media sales ~1Mtpa, capacity ~1.3Mtpa
• Deteriorating head grades
• Good visibility of new projects and mine expansions (copper, gold, iron ore)
• Estimated volume growth of grinding media markets
– South America ~ 11% CAGR FY12 – FY16
– North America ~ 9% CAGR FY12 – FY16
• High quality customer base − Long-term contracts
− Prices adjusted to reflect movement in bar raw material costs
Mining Consumables – strong growth
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Grinding media (cont.)
� Strategy includes keeping capacity ahead of regional demand
• Peru and Indonesia expansions progressing well (90kt/$36m)
• Further expansion over medium term expected (Canada, South America)
� A strong cash generator after funding own growth
Mining Consumables – strong growth
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Mining Consumables – grinding media
Moly-Cop Chile
Talcahuano
Grinding MediaMoly-Cop Australia
Newcastle, Australia
Grinding Media &
Grinding Bar
Moly-Cop Indonesia
Cilegon, Indonesia
Grinding Media
Moly-Cop Peru
Arequipa
Grinding Media
Moly-Cop
South American
Regional Office
Santiago
Moly-Cop Mexico
El-Salto
Grinding Media
Moly-Cop Canada
Kamloops
Grinding Media
AltaSteel
Edmonton, Canada
EAF, Bar Mill
Grinding Bar & RebarMoly-Cop USA
Kansas City
Grinding Media
Moly-Cop Chile
Mejillones
Grinding Media
Moly-Cop Peru
Lima
Grinding Media
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Mining Consumables – competitive advantage
Quality
Supply assurance
Technicalsupport
3 Key
Purchasing Criteria
1
2
3
Certainty of supply:
� Moly-Cop is located close to its customers, assuring timely and flexible delivery of products
� Moly-Cop is the only grinding media supplier able to offer global customers the benefit of its global network
Quality of ball:
� Moly-Cop is recognised for its superior ball performance • Wear performance reduces rate of ball replacement
• Minimises risk of interruption to milling process from ball breakage/fractures
Technical support:
� Moly-Cop is recognised for its unparalleled technical expertise and capability to provide tailored customer support
Moly-Cop maintains its competitive advantage through:
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Mining Existing business to double to ~12Mtpa rate
of export iron ore sales by mid 2013
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Mining – overview
� Established track record in mining, developing and ramping up mining operations via Middleback Ranges (MBR), South Australia
� Very close to completing Southern Iron (SI) and Whyalla Port expansions to double size of business• Export iron ore sales to double to rate of
~11Mtpa June, and then 12Mtpa by July/August 2013
• Port capacity to double to ~13Mtpa
• First ore from Southern Iron sold October 2012 -recently made first sale to customer ex-China
• Average Fe grade expected to be ~60%
• Total average loaded cost for MBR & SI operations expected to be ~A$50/wmt1 when at rate of ~12Mtpa
� Reasonable aspirations for sales of at least 12Mtpa for 10 years2
South Australia
1 Includes mining, crushing, beneficiation, rail, road haulage and transshipping costs. Excludes capitalised costs (infrastructure, pre-stripping and mining licences) and depreciation and amortisation charges in respect of those costs, royalties, sales and marketing and corporate costs.2 See slide 28 in the Appendix to this presentation.
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Mining – Whyalla Port expansion
� Arrium owns and operates the Whyalla Port: • Transshipping operation to capes
• An inner harbour servicing the Steelworks
� Expansion to double capacity to 13Mtpa on time and budget for completion July/August 2013• Loaded first cape from expanded Port January 2013 (5th cape about to be loaded)
• Ramp-up continuing to progress well
Newly completed twin gauge rail
turning loop at inner harbour
Inner harbour
Newly completed storage shed & shiploader
Second shed in progress
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Steel &
Recycling
The OneSteel businesses
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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
� The leading distributor of metal products in Australia• National footprint
• #1 in general Australian steel distribution
• #1 in Australian reinforcing
• #1 in Australian wire
� Australian and international Recycling businesses• Operations in 9 countries (predominantly in Australia and
the USA)
• Ferrous and non ferrous businesses
Steel & Recycling
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� Recent steel business performance impacted by high AUD and generally weak demand compared to historical averages, particularly in construction
� Focus on cash generation including cost and operational improvements• Significantly lowered breakeven point
• Returned Manufacturing business to EBITDA positive in 2H12
• Maintained improvement in 1H13 despite some further weakening in external environment- Both Manufacturing and Distribution EBITDA and cash positive in 1H13
� Continuing to progress cost and operational improvements• Non-integrated businesses being considered for divestment or exiting
� Well positioned with significant leverage to modest improvement in demand or lower AUD
Steel & Recycling
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1H13 results
overview
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1H13 results
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� Underlying NPAT $51 million1 vs $77 million pcp• Strong earnings growth from Mining Consumables
• Strong contribution from Mining despite ~$75-852 million NPAT impact from lower iron ore price
• Steel businesses maintained improved performance from 2H12 despite further weakness in external environment
� Statutory NPAT loss of $447 million - includes intangible asset impairments of $474 million
� Solid statutory operating cash flow $128 million
� Statutory net debt $2,155 million – down 4% from 1H12 • Comfortably within covenant tests
� Statutory gearing 35.4% - up 1.6pts pcp – includes impact from asset impairments
� Interim dividend 2 cents per share (unfranked)
1 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.2 Based on average CFR prices for 1H12.
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1H13 results
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� Total facilities as at end 1H13 A$3,373 million
� ~$1 billion available undrawn facilities at end 1H13
� Average interest rate for total drawn and undrawn funding ~4%
� Average tenor 3.8 years
� Next significant maturity FY15 – early refinancing well progressed
� Covenants for facilities include interest cover and gearing
Debt facilities
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2H13 update
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Mining – mining expansions progressing well � On track to achieve iron ore sales rate of ~11Mtpa by June, then increase to
~12Mtpa rate by July/August 2013
� FY13 sales expected to be between 8.2 – 8.4Mtpa
� 4th quarter expected to be ~2.8 – 3.0Mt
� Minimal capital expenditure risk for Southern Iron and Port expansions (remain on budget)
� Well progressed in marketing of additional ores – confident of placing all tonnes
Mining Consumables � The business is continuing to perform well and in-line with our expectations
Steel businesses� The benefits from ongoing cost and operational improvements are being offset
by some softening in demand and the impact on domestic prices of movements in raw material and international steel prices
� The falling commodity prices are also impacting the Recycling business For
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Summary
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� Strategy execution continuing to progress well
• Further growth opportunities from current projects in Mining Consumables and Mining
� Mining Consumables
• Now a business of scale
• Strong earnings growth and a sustainable competitive advantage
• Strong cash generator after funding own growth
� Mining
• Expansion to double size of business only weeks from completion
• Significant cash and earnings benefits expected
� Steel
• Continued focus on cash generation
• Cost and operational improvements have businesses well positioned with significant leverage to a lower dollar or improved demand
� Balance sheet
• Focus on reducing debtFor
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Appendix
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Mining – Middleback Ranges
� Located ~60kms from Whyalla
� Sales primarily hematite fines and lump
� Average grade ~60% as at 31 December 2012
� Established customer relationships in China
� Average loaded cost 1H13 ~$42/t (wmt, cash cost loaded on ship excluding deprecation and royalties)
� Magnetite ore converted to pellets to feed Steelworks
� Ferrous and non ferrous exploration
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Mining – Southern Iron
� Peculiar Knob • Located ~90kms from Coober Pedy, South
Australia and ~600kms from Whyalla
• High grade ore ~ 63% Fe – all fines
• Indicative post ramp up cost of ~$57/t (wmt, excluding depreciation and royalties)
• Blending – indicative program− Lower grade ores from MBR with PK
− LGO from stockpiles and future mining at MBR
− Target blending grade ~60% Fe (blending ratio 2:1)
− Increases sales from PK from 16Mt to 24Mt
− Lifts target additional annual sales from <4Mtpa to >5Mtpa
• First ore from Southern Iron sold in October 2012
� Other tenements• Hawks Nest
• Windy Valley
• Mount Brady
� Ferrous and non ferrous exploration For
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Exploration and development*
Work required to prove resource up to JORC standard, but reasonable aspirations for lifting iron ore sales to match capacity of the port
10yrs x 13Mtpa iron ore volume to be sourced from exploration & development:
Reserve 60.9Mt (44.4Mt MBR, 16.4Mt SI)
Total Resource 185.7Mt (153.2Mt MBR, 32.5Mt SI)
In essence we have 185.7-60.9 = 124.8Mt of opportunity
Of that opportunity, current targets:
Insitu (Resource within pit shells) 15Mt – 20Mt (Resource >50%Fe + inferred)
Excluded Resource 30Mt – 40Mt (key targets Hawks Nest & Cavalier)
LGO beneficiated (stocks + mining) 10Mt – 20Mt (20Mt feed in stock)
Combining Reserve and target opportunity 116Mt – 141Mt
*As at year ended 30 June 2012 (YEJ2012) Reserve / Resource reporting.Note: excludes any greenfield exploration.
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Steel & Recycling
Manufacturing� Includes an integrated steelworks at Whyalla, SA,
2 electric arc furnaces (EAFs), 2 bar mills, 2 wire mills and 2 rod mills
� Steelmake capacity ~2.6Mt
� Whyalla – manufactures semi-finished and finishedproducts
� EAFs – all have downstream facilities
Location Capacity Products
Sydney (Rooty Hill) ~630kt Rod, Mebar & Rebar
Melbourne (Laverton) ~700kt Rod & Rebar
Products End use
Billets OneSteel rolling mills
Bloom Rails & rail products, structurals
Slabs Structurals and flat steel product customers
Structural products Building and construction projects
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Steel & Recycling
DistributionThe leading distributor of metal products in Australia
� Metaland | Steel & Tube• A leader in steel distribution in Australia (~70 outlets)
• Processes and distributes broad range of structural steel and related products
� OneSteel Reinforcing and Australian Reinforcing Company (ARC)
• Leading suppliers of steel reinforcing products to the Australian building and construction industries (~75 service sites close to market)
� Merchandising • Includes Sheet and Coil, Aluminum, Fagersta, Coil Coaters
and Building Services (~20 outlets)
• Sources metal and related products from domestic and overseas manufacturers
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Steel & Recycling
Recycling� Includes Australian and international Recycling
businesses that trade, collect, process and sell ferrous and non ferrous scrap
� Operations in 9 countries, predominantly in Australia and the USA
� Recycling sources scrap metal from rural, mining, demolition and manufacturing industries, and from the general public. Scrap is processed and traded in Australia, Asia and the USA
� Scrap is supplied to steel mills (including OneSteel mills) and foundries primarily in Australia and Asia, as well as other parts of the world
� Non ferrous trading business run from Asia, operating in 4 countries
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1H13 safety performance
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3.7
3
3.5
1.8
2.6
1.71.6
0.9
1.8
1.6
1.4
1.9
1.7
1.2
0
0.5
1
1.5
2
2.5
3
3.5
4
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1H
13
Lost Time Injury Frequency Rate (LTIFR)
Per million hours worked
Medical Treatment Injury Frequency Rate (MTIFR)
Per million hours worked
*The FY11 figures have been restated to include Moly-Cop and AltaSteel businesses safety performance as if they were part of the Arrium Group from 1 July 2010.
A key element of our Safety effort has been improving our capability to recognise, assess and manage risk
29.6
24.5
21.5
15.8
14.2
12.111.7
8.1
11.3
9.1
7.45.9
7.0
8.3
0
5
10
15
20
25
30
35
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1H
13
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1H13 results - Arrium FX exposure
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Exposure to movements in AUD
� Direct impact: 1 cent increase in AUD v USD = approx. negative $10-$12 million
EBIT impact (full year impact)
� This applies to direct exposures only and does not include impact on Arrium’s
competitive position against imported steel
� Includes impact of translation on earnings of overseas businesses
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1H13 segment tonnage
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1 Tonnages for FY08 reported for raw steel production and steel despatches include the SSX businesses as if they were part of the Arrium Group from 1 July 2007. All other production and despatch statistics presented above are actual. Tonnages include Moly-Cop Group from 1 January 2011 only.2 Ore by products include dolomite, centrix, filter cake and pellet chips.
Half year ended 31 December 1H13 1H12 1H11 1H10 1H09 1H081 1H07 1H06 1H05 1H04
Mt Mt Mt Mt Mt Mt Mt Mt Mt Mt
Iron Ore
Iron ore lump 1.42 1.29 1.52 1.50 0.77 1.32
Iron ore fines 2.00 1.84 1.54 1.68 1.41 0.57
Total lump & fines 3.42 3.13 3.06 3.18 2.18 1.89
Pellets - - 0.08 - 0.02 -
Ore by Products2 0.28 0.19 0.23 0.22 0.34 0.34
Recycling
Ferrous - external 0.40 0.44 0.51 0.36 0.39 0.39
Ferrous - internal 0.42 0.44 0.47 0.47 0.48 0.38
Total ferrous 0.82 0.88 0.98 0.83 0.87 0.77
Non-ferrous 0.12 0.12 0.13 0.08 0.08 0.08
Total Recycling 0.94 1.00 1.11 0.91 0.95 0.85
Despatches
Manufacturing - external 0.49 0.57 0.50 0.51 0.60 0.66 0.48 0.46 0.42 0.43
Manufacturing - internal 0.57 0.55 0.51 0.59 0.56 0.62 0.35 0.31 0.31 0.29
Total despatches - Manufacturing 1.06 1.12 1.01 1.10 1.16 1.28 0.83 0.77 0.73 0.73
Mining Consumables - external 0.60 0.55 0.19 0.19 0.17 0.14
Mining Consumables - internal 0.04 0.05 0.04 0.05 0.02 -
Total despatches - Mining Consumables 0.64 0.60 0.23 0.24 0.19 0.14 - - - -
Australian Distribution 0.70 0.72 0.66 0.65 0.81 0.83 0.66 0.64 0.68 0.63
Total despatches - external 1.79 1.84 1.35 1.35 1.58 1.63 1.14 1.10 1.11 1.07
Raw steel production
Whyalla 0.58 0.52 0.54 0.56 0.54 0.59 0.59 0.56 0.27 0.58
Sydney Steel Mill 0.17 0.17 0.20 0.21 0.26 0.31 0.28 0.24 0.27 0.24
Laverton 0.28 0.26 0.25 0.26 0.29 0.27 - - - -
Waratah 0.13 0.11 0.12 0.11 0.13 0.09 - - - -
AltaSteel 0.14 0.15
Total raw steel production 1.30 1.21 1.11 1.14 1.23 1.26 0.88 0.80 0.54 0.82 For
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Mining Tax
� Currently expect no MRRT liability in FY13 for either MBR or Southern Iron operations
• MBR – MRRT profit is expected to be more than offset by Alternative Valuation Method deductions and depreciation of the starting base
• Southern Iron – FY13 profit is expected to be more than offset by the starting base depreciation deductions
� Adjustment of $19 million made to net deferred asset taken up FY12 to reflect implementation of MRRT
• Deferred asset arises from MRRT starting base deduction
• Adjustment relates to impact on valuation from change in forecast iron ore prices –future balance date adjustments to reflect valuation changes expected
• Unrecognised deferred tax asset of $599 million at 1H13
1H13 Regulatory
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Carbon Tax
� FY13 unassisted emissions for scope 1 and 2 expected to be 700-800kt (FY13 carbon tax $23/t)
� First allocation of free carbon units received and sold during 1H13• Cash proceeds $65m (~2.9m units)
• Expect to buy back 75% of scope 1 liability in Q4 FY13 (estimated ~$50m)
� 1H13 P&L impact • Revenue and expense
− Free permits ~$40m (50% total FY13) – recorded as cost offset
− Accrued STP income ~$7m (12.5% x $53m (balance of STP))
− Scope 1 cost ~$34m1
− Scope 2 cost ~$15m1
1H13 Regulatory
1 Scope 1 and 2 costs are estimated based on current information. Costs do not include impacts associated with inventory movements.
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1H13 summary of facilities
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Maturity Type of Facility Facility Amount (AUD)*
Jun 13 US Note* 40
Jul 14 Syndicated loans* 197
Jul 14 Syndicated loans 231
Jul 14 Syndicated loans* 130
Jul 14 US Note* 30
Aug 14 Syndicated loans 295
Mar 15 Bi-laterals* 48
Apr 15 US Note* 98
Jun 15 US Note* 32
Jul 15 Syndicated loans* 197
Jul 15 US Note* 48
Jul 15 Finance Lease 13
Jul 15 Bi-laterals 50
Jul 15 Syndicated loans* 130
Jul 15 Syndicated loans* 193
Jul 15 Syndicated loans 231
Sep 15 Bi-laterals 24
Oct 15 Bi-laterals 150
Jul 16 Syndicated loans* 185
Jul 16 Syndicated loans* 318
Jul 16 Bi-laterals 50
Jul 16 Syndicated loans* 130
Jul 16 Syndicated loans 217
Jun 18 US Note* 48
Jul 18 US Note* 93
Jul 20 US Note* 51
Jun 21 US Note* 120
Jun 23 US Note* 24
Total 3373
1 As as 31 December 20121 As at 31 December 2012.*USD and CAD denominated facilities converted to AUD at closing rate of 1.0373 and 1.0341 respectively.
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1H13 financial overview
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1H13 financial overview
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Historical data – profit and loss underlying*
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*Historical statutory profit information can be found in the Financial Ratios attached to the 1H13 Review of Operations.Pre-2003 results can be found on Arrium's website.
Reconciliation of underlying NPAT to statutory NPAT:
Half-year ended 31 December 2012 2011 2010 2009 2008 20076 2006 2005 2004 2003
$m $m $m $m $m $m $m $m $m $m
Net prof it after tax - underlying 51.4 76.9 124.2 119.0 215.1 93.4 98.2 84.1 70.3 55.8
Non-trading items, net of tax
- Restructuring costs (9.6) (16.0) - (1.6) (1.8) (26.3) - - - -
- Impairment (474.0) (129.5) - - - (3.5) - - - -
- Tax adjustments (16.3) 9.0 - - 15.0 - - - - -
- Transaction costs - (14.0) (8.0) - - - - - - -
- Goodw ill amortisation - - - - - - - - - (10.3)
- Other items 1.3 - - - - - - - - -
Net prof it after tax - statutory (447.2) (73.6) 116.2 117.4 228.3 63.6 98.2 84.1 70.3 45.5
Half Year ended 31 December 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
$m $m $m $m $m $m $m $m $m $m
Sales revenue 3,404.4 3,797.1 3,315.1 2,973.6 4,127.6 3,218.3 2,134.3 1,988.8 1,890.5 1,566.7
EBITDA 242.8 238.6 315.3 297.8 498.5 288.4 218.0 203.5 173.7 146.9
Depreciation, amortisation and impairment (123.4) (102.6) (100.6) (98.7) (98.0) (86.1) (48.1) (47.4) (45.0) (43.1)
EBIT 119.4 136.0 214.7 199.1 400.5 202.3 169.9 156.1 128.7 103.8
Finance costs (57.4) (62.2) (46.0) (44.6) (101.6) (67.0) (26.3) (29.4) (23.9) (20.8)
Profit before tax 62.0 73.8 168.7 154.5 298.9 135.3 143.6 126.7 104.8 83.0
Tax (expense)/benefit (8.8) 6.0 (41.2) (34.3) (75.1) (37.6) (39.2) (34.5) (25.5) (22.0)
Net profit after tax 51.4 76.9 124.2 119.0 215.1 93.4 98.2 84.1 70.3 55.8
EPS (cents) - weighted average 4.0 5.8 9.4 9.0 22.6 11.8 17.3 15.0 12.7 8.3
ROFE (%) 3.8% 4.2% 7.3% 7.3% 14.1% 7.6% 15.3% 15.1% 12.4% 10.2%
Dividend (cents/share) 2.0 3.0 6.0 5.0 6.0 8.0 8.0 7.0 6.0 5.0
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Historical data – key balance sheet items
41
* Dec 04 and Dec 03 figures have been presented under previous AGAAP and have been adjusted to include securitisation. Pre 2003 financial information can be found on Arrium's website.
As at 31 December 2012 2011 2010 2009 2008 2007 2006 2005 2004* 2003*
$m $m $m $m $m $m $m $m $m $m
Assets 8,358.5 8,665.1 8,195.1 6,729.5 7,520.7 6,999.2 3,375.3 3,058.3 2,748.1 2,609.6
Liabilities 4,427.8 4,267.5 3,715.5 2,347.3 3,864.2 3,636.4 1,804.1 1,619.9 1,465.9 1,305.5
Net Assets 3,930.7 4,397.6 4,479.6 4,382.2 3,656.5 3,362.8 1,571.2 1,438.4 1,282.2 1,304.1
Net Debt 2,154.7 2,241.9 1,891.6 969.9 2,269.8 1,985.6 753.1 660.0 709.0 696.9
Inventories 1,489.9 1,524.3 1,687.1 1,270.4 1,727.7 1,308.5 888.8 840.2 758.8 646.5
Receivables 743.3 817.1 753.7 695.1 851.3 925.2 605.3 559.0 517.4 437.8
Payables 935.0 898.8 847.0 596.4 832.0 883.7 586.9 503.7 601.0 453.2
Funds Employed 6,085.4 6,639.5 6,371.2 5,352.1 5,926.3 5,348.4 2,324.3 2,098.4 1,991.2 2,001.0
Gearing % 35.4% 33.8% 29.7% 18.1% 38.3% 37.1% 32.4% 31.5% 35.6% 34.8%
Interest cover (times EBITDA, 12m rolling basis) 5.0 4.8 7.0 4.0 5.2 5.3 7.7 7.0 7.8 6.8
NTA/Share $ 1.2 1.1 1.3 1.7 1.7 1.4 2.3 2.0 1.8 1.8
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Historical data – statutory cash flow*
42
* The financial measures displayed in this table are based on statutory results.
Half Year ended 31 December 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
$m $m $m $m $m $m $m $m $m $m
Profit after tax (445.4) (70.7) 119.5 118.6 237.0 67.9 104.4 92.2 79.3 61.0
Depreciation, amortisation and impairment 597.4 232.2 100.6 98.7 96.2 91.1 48.1 47.4 45.0 43.1
Non-cash items (9.7) 21.0 (7.4) (8.2) (22.2) 12.9 (2.4) 0.2 (1.0) (7.6)
Working capital movements (14.5) 4.7 (55.9) 114.5 (273.4) (25.6) (59.3) (46.1) (67.2) (40.5)
Capital & investment expenditure (258.8) (483.7) (1,091.7) (71.1) (105.5) (585.8) (177.0) (114.9) (63.6) (45.0)
Asset sales 76.0 1.4 0.9 0.5 32.3 1.0 3.9 0.5 3.6 5.0
Other - - - - - - (0.4) 1.9 0.7 6.0
Operating and investing cash flows (55.0) (295.1) (934.0) 253.0 (35.6) (438.5) (82.7) (18.8) (3.2) 22.0
Free Cash Flow (131.0) 20.7 58.0 253.4 (65.0) (14.5) (84.1) (17.2) (7.5) 11.2
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1 The December 09 results have been restated to reflect changes in organisation structure announced in February 2010 effective 1 July 2009. The pellet plantoperations previously reported as part of the Manufacturing segment are now reported as part of the Mining segment.2 Ore by products include dolomite, centrix, filter cake and pellet chips.
Historical data – Mining
43
Half Year ended 31 December 2012 2011 2010 20091
2008 2007
$m $m $m $m $m $m
Total Revenue/Income 372.5 421.0 465.3 331.1 291.7 222.3
EBITDA 118.4 186.3 289.7 126.1 68.9 92.1
EBIT 88.4 170.7 275.5 113.0 56.6 89.1
Sales Margin 23.7% 40.5% 59.2% 34.1% 19.4% 40.1%
Assets 1,955.9 1,427.8 849.6 794.8 713.3 479.2
Funds Employed 1,631.4 1,196.1 735.7 708.0 620.8 427.0
Return on funds employed 11.7% 34.6% 75.8% 32.4% 20.9% 41.7%
Employees (number) 565 504 338 352 334 128
Total lump & fines (Mt) 3.42 3.13 3.06 3.18 2.18 1.89
Pellet & Ore by products (Mt)2 0.28 0.19 0.31 0.22 0.36 0.34
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Historical data – Mining Consumables
44
1 The December 2010 results for the Manufacturing and Mining Consumables segments have been restated to reflect changes in organisation structure following theformation of the new Mining Consumables segment as a result of the acquisition of the Moly-Cop Group on 31 December 2010. Arrium's existing Waratah, Newcastlefacilities, which include the grinding media and rail wheel businesses, Arrium's grinding media businesses in the United States and Indonesia, and the Wire Ropesbusiness at Newcastle previously reported as part of the Manufacturing segment now form part of the Mining Consumables segment.2 Excludes scrap sales.
Half Year ended 31 December 2012 2011 20101
$m $m $m
Total Revenue/Income 794.1 768.4 338.9
EBITDA 99.6 81.3 31.2
EBIT 80.3 65.2 21.1
Sales Margin 10.1% 8.5% 6.2%
Assets 2,295.3 2,312.8 2,421.0
Funds Employed 1,936.3 1,975.0 2,052.2
Return on funds employed 8.3% 6.7% 2.7%
Employees (number) 1,994 1,976 1,836
External tonnes despatched (Mt)2 0.57 0.53 0.19
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Historical data - Manufacturing
45
1 The December 2009 results have been restated to reflect changes in organisation structure announced in February 2010 effective 1 July 2009. The pellet plantoperations previously reported as part of the Manufacturing segment are now reported as part of the Mining segment.2 The December 2010 results for the Manufacturing and Mining Consumables segments have been restated to reflect changes in organisation structure following theformation of the new Mining Consumables segment as a result of the acquisition of the Moly-Cop Group on 31 December 2010. Arrium's existing Waratah, Newcastlefacilities, which include the grinding media and rail wheel businesses, Arrium's grinding media businesses in the United States and Indonesia, and the Wire Ropesbusiness at Newcastle previously reported as part of the Manufacturing segment now form part of the Mining Consumables segment.3 The December 2011 and December 2010 results have been re-presented to reflect the total results from continuing and discontinued operations.
Half Year ended 31 December 2012 20113
20102,3
20091
2008 2007 2006 2005 2004 2003 2002 2001
$m $m $m $m $m $m $m $m $m $m $m $m
Total Revenue/Income 1,156.7 1,267.5 1,138.9 1,478.5 2,165.9 1,516.0 1,051.0 893.5 872.2 686.9 688.0 630.2
EBITDA 21.7 (47.3) (43.1) 130.1 296.4 120.1 109.4 82.7 56.7 66.3 84.4 59.3
EBIT (26.7) (93.5) (92.4) 72.0 240.7 62.8 81.2 53.9 30.2 43.3 62.3 35.6
Sales Margin -2.3% -7.4% -8.1% 4.9% 11.1% 4.1% 7.7% 6.0% 3.5% 6.3% 9.1% 5.7%
Assets 1,728.4 2,268.0 2,555.8 3,583.2 3,830.8 3,802.2 1,829.6 1,502.6 1,271.8 1,318.7 1,273.8 1,288.7
Funds Employed 1,267.4 1,876.7 2,073.2 3,057.7 3,269.1 3,163.1 1,443.5 1,164.7 977.3 1,071.6 1,061.6 1,062.8
Return on funds employed -3.5% -9.5% -9.0% 5.5% 17.6% 5.4% 12.0% 9.6% 5.9% 8.0% 11.7% 6.7%
Employees (number) 3,006 3,233 3,451 4,300 4,789 4,687 3,213 2,986 2,951 2,943 3,016 3,113
External tonnes despatched (Mt) 0.49 0.57 0.50 0.51 0.60 0.66 0.48 0.46 0.42 0.43 0.49 0.49
Internal tonnes despatched (Mt) 0.57 0.55 0.51 0.59 0.56 0.62 0.35 0.31 0.31 0.29 0.27 0.25
Steel tonnes produced (Mt) 1.03 0.95 0.99 1.03 1.09 1.17 0.88 0.80 0.54 0.82 0.83 0.79
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Historical data - Distribution
46
1 The December 2011 and December 2010 results have been re-presented to reflect the total results from continuing and discontinued operations.
Half Year ended 31 December 2012 20111
20101
2009 2008 2007 2006 2005 2004 2003 2002 2001
$m $m $m $m $m $m $m $m $m $m $m $m
Total Revenue/Income 1,149.9 1,271.1 1,257.5 1,295.7 1,914.0 1,437.2 1,224.6 1,177.9 1,106.3 955.4 896.3 897.0
EBITDA 13.1 3.9 24.8 66.6 177.6 74.2 108.2 105.4 103.0 72.8 84.7 67.7
EBIT 1.2 (10.2) 10.2 51.0 161.0 57.7 92.8 90.8 88.6 56.0 65.8 50.7
Sales Margin 0.1% -0.8% 0.8% 3.9% 8.4% 4.0% 7.6% 7.7% 8.0% 5.9% 7.3% 5.7%
Assets 1,194.4 1,448.3 1,457.7 1,481.4 1,859.8 1,564.6 1,270.7 1,276.1 1,326.3 1,203.8 1,196.2 1,183.5
Funds Employed 918.8 1,026.2 1,147.9 1,180.5 1,469.0 1,136.0 946.1 997.1 1,012.5 957.6 891.7 873.1
Return on funds employed 0.3% -1.9% 1.8% 8.7% 23.9% 11.6% 19.7% 18.4% 17.8% 12.3% 14.6% 11.6%
Employees (number) 3,063 3,348 3,491 3,637 4,246 4,384 3,286 3,267 3,296 3,172 3,091 3,209
External tonnes despatched (Mt) 0.70 0.72 0.66 0.65 0.81 0.83 0.66 0.64 0.68 0.63 0.62 0.61
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Historical data – Recycling
47
Half Year ended 31 December 2012 2011 2010 2009 2008 2007
$m $m $m $m $m $m
Total Revenue/Income 672.2 739.5 714.4 492.1 685.9 527.4
EBITDA (0.4) 11.0 3.2 3.8 (29.0) 10.4
EBIT (8.3) 2.1 (5.3) (3.6) (37.0) 5.7
Sales Margin -1.2% 0.3% -0.7% -0.7% -5.4% 1.1%
Assets 617.3 659.8 647.0 614.0 671.3 628.3
Funds Employed 538.4 581.2 567.5 548.9 604.8 536.5
Return on funds employed -3.0% 0.7% -1.8% -1.3% -12.1% 2.1%
Employees (number) 876 997 1,017 962 1,010 1,054
Ferrous tonnes - external (Mt) 0.40 0.44 0.51 0.36 0.39 0.39
Ferrous tonnes - internal (Mt) 0.42 0.44 0.47 0.47 0.48 0.38
Non ferrous tonnes (Mt) 0.12 0.12 0.13 0.08 0.08 0.08
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1H13 Reconciliation of Mining costs
48
Iron ore
$m
Other
$m
Total
$m
Revenue 363 10 373
COGS (163) (5) (168)
Freight (57) (2) (59)
Gross margin 142 3 145
Overheads & other1 (28)
EBITDA 118
Iron ore COGS $163m / 3.42Mt (dmt, including royalties) $48/dmt
Less conversion to wet tonnes and royalties (royalties included in COGS) $5/t
Average loaded mining cost (wmt, excl. royalties & depreciation)2 $43/wmt
1 Arrium assumed responsibility for sales agency from BHP Billiton 2 September. Overheads include Arrium marketing teams in Australia and North China. Previous BHP Billiton agency cost historically shown as reduction from revenue.2 Includes Middleback Ranges loaded ore cost of $42/wmt and higher costs for initial Southern Iron sales.
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Reconciliation
49
*Underlying results from Mining, Mining Consumables and Recycling segments are from total operations which are equivalent to the underlying results from the continuing operations of each segment. Segment underlying results from continuing operations are equivalent to those reported in the 31 December 2013 Half Year Financial Report.
Reconciliation of segment underlying results from continuing operations to total underlying consolidated segment results*
MANUFACTURING
Continuing
operations
Discontinued
operations Total segment
Continuing
operations
Discontinued
operations Total segment
Total Revenue/Income 1,156.6 0.1 1,156.7 1,263.4 4.1 1,267.5
EBITDA 21.2 0.5 21.7 (30.6) (16.7) (47.3)
EBIT (27.2) 0.5 (26.7) (75.2) (18.3) (93.5)
Sales Margin (EBIT) -2.4% 500.0% -2.3% -6.0% -451.3% -7.4%
Assets 1,725.8 2.6 1,728.4 2,264.8 3.2 2,268.0
Funds Employed 1,267.4 - 1,267.4 1,876.7 - 1,876.7
Return on Funds Employed (%) -3.5% 0.0% -3.5% -7.7% 0.0% -9.5%
AUSTRALIAN DISTRIBUTION
Continuing
operations
Discontinued
operations Total segment
Continuing
operations
Discontinued
operations Total segment
Total Revenue/Income 1,147.7 2.2 1,149.9 1,167.8 103.3 1,271.1
EBITDA 11.7 1.4 13.1 21.7 (17.8) 3.9
EBIT (0.2) 1.4 1.2 8.6 (18.8) (10.2)
Sales Margin (EBIT) 0.0% 63.9% 0.1% 0.7% -18.2% -0.8%
Assets 1,184.2 10.2 1,194.4 1,354.7 93.6 1,448.3
Funds Employed 918.8 - 918.8 1,026.2 - 1,026.2
Return on Funds Employed (%) 0.0% 0.0% 0.3% 1.6% 0.0% -1.9%
2012 2011
Underlying results
2012 2011
Underlying results
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1H13 statutory vs underlying results
50
1 Related to redundancies from organisational changes and other direct expenditure associated with business restructures. 2 Impairment of the ARC brand name portfolio and goodwill in the Manufacturing and Distribution segments. 3 Tax adjustments related to prior year adjustments and the net impact of Mineral Resource Rent Tax. 4 Related to gains on sale of Steel & Tube Holdings and other non-recurring costs.5 Relating to the results of the Oil and Gas Pipe and Steel and Tube Holdings businesses.
Half Year ended 31 December 2012
Reconciliation between Underlying
and Statutory Results
Continuing
operations
Discontinued
operations5
Total
Operations
Statutory
Restructuring
costs1 Impairment2Tax
adjustments3 Other items4
Total
Operations
Underlying
Sales Revenue 3,322.5 81.9 3,404.4 - - - - 3,404.4
Other Revenue/Income 49.0 4.0 53.0 - - - - 53.0
Total Revenue/Income 3,371.5 85.9 3,457.4 - - - - 3,457.4
Gross Profit 513.1 29.3 542.4 - - - - 542.4
EBITDA 209.2 20.8 230.0 13.7 - - (0.9) 242.8
Depreciation & Amortisation (121.8) (1.1) (122.9) - - - - (122.9)
Impairment (474.5) - (474.5) - 474.0 - - (0.5)
EBIT (387.1) 19.7 (367.4) 13.7 474.0 - (0.9) 119.4
Finance costs (57.1) (0.3) (57.4) - - - - (57.4)
(Loss)/profit before tax (444.2) 19.4 (424.8) 13.7 474.0 - (0.9) 62.0
Tax expense/(benefit) (15.6) (5.0) (20.6) (4.1) - 16.3 (0.4) (8.8)
(Loss)/profit after tax (459.8) 14.4 (445.4) 9.6 474.0 16.3 (1.3) 53.2
Non-controlling interests (0.4) (1.4) (1.8) - - - - (1.8)
Net (loss)/profit after tax (460.2) 13.0 (447.2) 9.6 474.0 16.3 (1.3) 51.4
Operating cash flow 127.8 6.5 - - 1.7 136.0
Statutory Results Underlying Results
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1H12 statutory vs underlying results
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1 Direct costs relating to the sale of the Piping Systems business and the acquisition of WPG Resources Limited subsidiaries in October 2011.2 Restructuring costs related to redundancies from organisational changes and other direct expenditure associated with business restructures.3 Impairment of property, plant and equipment and intangible assets associated with the Oil and Gas Pipe and LiteSteelTM Technologies businesses.4 Tax adjustments related to prior years.5 Relating to the results of the Piping Systems, LiteSteelTM Technologies, Oil and Gas Pipe and Steel and Tube Holdings businesses.
Half Year ended 31 December 2011
Reconciliation between Underlying
and Statutory Results
Continuing
operations
Discontinued
operations5
Total
Operations
Statutory
Transaction
costs1
Restructuring
costs2 Impairment3Tax
adjustments4
Total
Operations
Underlying
Sales Revenue 3,546.9 250.2 3,797.1 - - - - 3,797.1
Other Revenue/Income 21.8 0.6 22.4 - - - - 22.4
Total Revenue/Income 3,568.7 250.8 3,819.5 - - - - 3,819.5
Gross profit 547.1 31.3 578.4 - - - - 578.4
EBITDA 206.9 (11.3) 195.6 23.0 20.0 - - 238.6
Depreciation & Amortisation (97.7) (4.9) (102.6) - - - - (102.6)
Impairment - (129.5) (129.5) - - 129.5 - -
EBIT 109.2 (145.7) (36.5) 23.0 20.0 129.5 - 136.0
Finance costs (61.5) (0.7) (62.2) - - - - (62.2)
Profit/(loss) before tax 47.7 (146.4) (98.7) 23.0 20.0 129.5 - 73.8
Tax benefit/(expense) 10.1 17.9 28.0 (7.0) (6.0) - (9.0) 6.0
Profit/(loss) after tax 57.8 (128.5) (70.7) 16.0 14.0 129.5 (9.0) 79.8
Non-controlling interests (0.5) (2.4) (2.9) - - - - (2.9)
Net profit/(loss) after tax 57.3 (130.9) (73.6) 16.0 14.0 129.5 (9.0) 76.9
Operating cash flow 187.2 16.0 12.5 - - 216
Statutory Results Underlying Results
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This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of Arrium andcertain 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 lookingstatements involve known and unknown risks, significant uncertainties, assumptions, contingencies and other factors, many of which are outside thecontrol of Arrium, which may cause the actual results or performance of Arrium to be materially different from any future results or performanceexpressed or implied by such forward looking statements. Such forward-looking statements speak only as of the date of this presentation. Factors thatcould cause actual results or performance to differ materially include without limitation the following: risks and uncertainties associated with theAustralian and global economic environment and capital market conditions, the cyclical nature of the steel industry, the level of activity in theconstruction, manufacturing, mining, agricultural and automotive industries in Australia and North and South America and, to a lesser extent, the sameindustries in Asia and New Zealand, mining activity in the Americas, commodity price fluctuations, fluctuations in foreign currency exchange andinterest rates, competition, Arrium's relationships with, and the financial condition of, its suppliers and customers, legislative changes, regulatorychanges or other changes in the laws which affect Arrium's business, including environmental laws, a carbon tax, proposed mining tax and operationalrisk. The foregoing list of important factors is not exhaustive. There can be no assurance that actual outcomes will not differ materially from thesestatements.
This presentation contains certain non-statutory financial measures including underlying EBIT, underlying EBITDA, underlying NPAT, underlyingearnings per share and underlying effective tax rate. These measures are used to assist the reader understand the financial performance of thecompany’s operations. Non-statutory financial information has not been audited or reviewed as part of KPMG’s report on the 2013 Half Year FinancialReport. However, KPMG have undertaken a set of procedures to agree the financial information in this presentation to underlying information suppliedby the company. Details of the reconciliation between non-statutory and statutory financial measures can be found in the Appendix of thispresentation.
The information in this presentation that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by PaulLeevers, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Leevers is a full-time employee of OneSteel Manufacturing PtyLtd. Mr Leevers has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activitywhich he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of ExplorationResults, Mineral Resources and Ore Reserves'. Mr Leevers consents to the inclusion in this presentation of the matters based on his information inthe form and context in which it appears.
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