H22 Results Baoshan Iron & Steel Co.,Ltd. August 22
Disclaimer The following presentation distributed herewith includes forwardlooking 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 forwardlooking statements. Baosteel s actual results or developments may differ materially from those indicated by these forwardlooking 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.
I. Operation Results II. Industry Dynamics III.Company Outlook
Production and Sales unit:million tons H2 2H2 H22 HoH YoY Crude steel output 3.43 3.2.79.8% 2.2% Sales of finished products 2.76 3.4.86 9.% 7.% including:domestic.45.6.65 8.3% 7.% export.3.43.2 5.4% 7.6%
Sales Breakdown of Finished Products Note:BNA included,unit:million tons
Gross ProfitProducts unit:million tons billion Yuan Sales Revenue YoY Cost YoY Gross margin YoY CRC 4.77 27.4 9.% 24.5 2.4%.6% 6.2 ppts HRC 3.62 5.6 2.5% 4. 7.8%.2% 4. ppts Plate. 4.7 5.2% 5.2 3.%.% 2.6 ppts Tube.73 5. 5.3% 4.5 7.8%.% 2.5 ppts Stainless steel.5 6. 34.9% 6. 32.2%.% 4. ppts Special steel.2 2.2 64.5% 2.4 6.6% 6.4% 8. ppts Others. 4.4.8% 4.6 4.3% 4.% 6. ppts Total.86 65.5 9.2% 6.3 5.6% 6.4% 4. ppts
Income Statement Summary unit:billion Yuan H2 2H2 H22 HoH YoY Revenue.5.7 98. 2.2%.7% Cost 4.56.8 95.82 3.% 8.4% Gross profit.7 8.9 7.73 Gross margin% 9.63 7.97 7.87. ppts.76 ppts Operating profit 6.76 2.8 2.72 Operating margin% 6.8.86 2.77.9 ppts 3.3 ppts Net profit 5.8 2.28 9.6 Net profit margin% 4.57 2.4 9.8 7.76 ppts 5.23 ppts
Assets Sale Profit Impact Assets Sold Date of assets sale Net profit in H22 Pretax profit from assets sale Stainless Steel Asset st April, 22.47 6.44 Special Steel Asset st April, 22.27 2.65 Total.74 9.9 Unit: billion Yuan Note:Total profit from assets sale was 9.58 billion Yuan and 9.9 billion Yuan was realized, remaining Vs shareholdings sale pending approval of Ministry of Commerce
Financial Highlights unit:yuan H2 2H2 H22 HoH YoY EPS.29.3.55 323.% 89.7% BVPS 5.98 6.8 6.43 5.8% 7.5% Net CFO per share.3.38.57 5.% 83.9% Gross margin% 9.59 7.97 7.82.5 ppts.77 ppts ROE (weighted)% 4.8 2.3 8.73 6.7 ppts 3.92 ppts Note:EPS is.4 excluding nonrecurring gains and losses
Solvency and Liquidity Financial index unit 223 2263 Change Solvency Total debts/ total assets % 5.89 47.9 3.8 ppts Current ratio.8.99 23.8% Quick ratio.42.58 38.% Financial index unit 223 2263 Change Days of receivables day 8.4 7.7.7% Liquidity Days of inventories day 74.9 74.9 Cash conversion cycle day 5. 56.3.2%
I. Operation Results II. Industry Dynamics III.Company Outlook
Macro Economy GDP growth, YoY(%) CPI growth, YoY(%) 4 7. 6.5 6.2 6. 6. 5.5 2 5. 4.2 4. 4.5 4. 3.2 3.6 3.4 3. 8 3. 2. 2.2.8 6. 2Q26 4Q26 2Q27 4Q27 2Q28 4Q28 2Q29 4Q29 2Q2 4Q2 2Q2 4Q2 2Q22 ul 2 Aug Sep Oct Nov Dec an 22 Feb Mar Apr May un ul GDP up 7.6% in Q2, lowest level in the past 3 quarters. GDP up 7.8% in H as expected, slowed down due to economic restructuring. Data source: National Bureau of Statistics CPI up.8% in uly, lowest in the past 3 months. Downward trend in CPI growth due to government control. Further room for monetary loosening.
Demand and Supply AnalysisSupply(Crude Steel) Unit: million tons H2 2H2 H22 HoH YoY Output 35 33 357 7.8%.7% Net export 7 8 2 6.6% 23.5% Apparent Consumption 336 34 336 7.% Crude steel output was 357 million tons in H. Daily output remained high at.96 million tons in H and.99 million tons in uly. Crude steel output is expected to stay high in 2H, but slow down YoY. Net export grew fast in H due to less import and more export. Data source: CISA
Demand and Supply AnalysisImport & Export Monthly net export million tons 5 4 3 2..5.4.5.6..2.3.2.9.7.6.6.2.4 2.8 3.6 4.2 3.2.5.7.7.5.5.5.5 3.43.4 3.5 3. 3.2 2.8 2.9 3. 2.8 2.6 2.5 2.2 3.8 3.5 3.9 4. 3. an9 ul9 an ul an ul an2 ul2 Data source: Wind Import 6.9 million tons, down 4% YoY and export 27.2 million tons, up 2% YoY in H. Steel export and net export slightly decreased in uly.
Demand and Supply AnalysisDemand(Infrastructure) Year FAI YoY(%) 35 35 billion yua 3 25 2 5 8.3 29. 28.8 27.2 24.3 25.8 26.6 3.4 24.5 23.8 2.4 3 25 2 5 4.4 5 2 22 23 24 25 26 27 28 29 2 2 H22 FAI 5 trillion Yuan in H, up 2.4% YoY, continued to slow down. Data source: wind Benefit from several factors (private capital was encouraged in the sector, loosening monetary policy etc.), water project investment speed up and most railway projects resumed.
Demand and Supply AnalysisDemand(Real Estate) Investment (billion Yuan, left) Growth Ytd, YoY (%, right) New start area (billion square meters) Sales area (billion square meters) 8 4.25 7 35.2 6 5 4 3 3 25 2 5.5..5 2 Feb May Aug Nov Mar un Sep Dec Apr2 ul2. Feb May Aug Nov Mar un Sep Dec Apr2 ul2 Data source: wind Downward trend in real estate investment in H, sales volumn was stable. Social housing new start was 5.8 million units, with 3.6 million units finished by uly, 72% of annual plan, and 66 billion Yuan invested.
Demand and Supply Analysis Demand(Automobile) Output Sales million 2. output YoY% 48.3 5. million 2. sales YoY% 46.5 5. 5. 35.2 32.44 4. 5. 34.2 32.37 4.. 27.32 22.2 3.. 25.3 2.84 3. 4. 2.56 2. 5.5 3.54 2. 5. 5.2.84 4.84. 5. 6.7 2.45 3.56..... 23 26 29 anul,22 23 26 29 anul,22 Data source: wind Output and sales recovered YoY by uly. New stimulus policies (energysaving subsidy, replacement, sales to the countryside) are expected in 2H.
Demand and Supply AnalysisDemand(Home Appliance) Home Appliance Output ul,yoy anul,yoy 2% % %.9% 7.3% 8.2%.3% 5.9% 8.3% 37.2%.6% % 2% TV washing machine refrigerator airconditioner 3% 4% Data source: wind Energy saving home appliance subsidy policy speed up industry upgrading and promote consumption. Industry is expected to recover in 2H.
Demand and Supply AnalysisDemand(Machinery) Machinery industry growth,yoy 5% 45% 4% 35% 2 2 22 3% 25% 2% 5%.6% 3.3% 2.%.9% 2.2% % 5% % anfeb Mar Apr May un ul Aug Sep Oct Nov Dec Data source: CMIF Machinery industry growth rate sharply decreased. Growth is expected to recover to 5% in 2H due to policy loosening.
Demand and Supply AnalysisDemand(Ship Building) Shipbuilding completion 6 4 27 28 29 2 2 22 In million tonnage 2 8 6 5.49 4.8 5.92 6.48 6.75.33 5.42 4 2 an Feb Mar Apr May un ul Aug Sep Oct Nov Dec Data source: wind Completion, new order and carrying order were :32.2,.7 and 3 million tonnages respectively in 2, new order down 5.3% YoY, carrying order down 3.7% YoY. Shipping market depressed; demand was weak; ship yards were still in difficulties.
Steel Inventory Unit: million tons 826 2 629 22 727 22 83 22 MoM YoY Rebar 5.43 6.7 6.62 5.9.7% 8.8% Wire.4.78.73.39 9.7% 33.7% HRC 4.3 3.83 3.85 3.9.3% 9.3% CRC.59.7.68.66.2% 4.4% Plate.48.63.5.48.3% % Long product 6.47 8.49 8.35 7.3 2.6% 2.8% Flat product 7.37 7.6 7.3 7.3 % 4.6% Total 3.84 5.65 5.38 4.33 6.8% 3.5% Data source: Mysteel Destocking slowed down, but still grew YoY. Steel mill inventory was 2.47 million tons at the end of une, up 34% YoY. Output grew fast while steel price depressed, steel mills faced the pressure of destocking.
Iron Ore Inventory Iron ore port inventory Australian Brazil India 43. 38. 33. million tons 28. 23. 8. 3. 8. an Apr ul Oct an Apr ul Nov Feb2 May2 Aug Data source: Mysteel Port inventory of Indian iron ore went down due to export decrease in India in H. Inventory remained high, 98.2 million tons in 25 main ports by 3st Aug.
Raw Material Cost Platts(62%Fe) 62% 粉矿 Platts 指数价格走势 (CFR CFR, 美元 / 干吨 ) 2 226,93 9 242, 86 297, 83 8 69.5 7 6 235, 65 5 46.9 4 39 2 2 9 8 7 6 5 4 n a r p A 焦炭价格 Coke price l u t c O 2 n a 废钢价格 Scrap price 2 r p A 2 l u 3 33.5 4 2 月 2 月 3 月 2 2 年 2 2 年 2 2 年指数年均价 average 2 2 年指数年均价 average 22 22 年 4 月 5 月 6 月 276, 6 7 月 8 月 87,.75 9 月 月 228, 6.75 an Feb Mar Apr May un ul Aug Sep Oct Nov Dec 月 2 月 36 32 28 24 n a r p A l u t c O 2 n a 2 r p A 2 l u Data source: Mysteel Imported Iron ore 366 million tons in H, up 9.2% YoY. Iron ore price sharply decreased with the steel price. Platts fell below USD, lowest level in the past 2 years. Coke price down 2% YoY in H, and is expected to decrease more in 2H.
Steel Price Unit: Yuan/ton 26 Aug,2 27 ul,22 3 Aug,22 MoM YoY HRC 484 387 353 8.8% 27.% CRC 547 47 446 5.3% 8.5% Plate 487 368 345 6.3% 29.2% Wire 5 356 337 5.3% 32.7% Rebar 5 384 369 3.9% 26.3% Data source: Mysteel
Operating margin of largemedian size steel mills was only.3% in H, with profit of 2.4 billion Yuan, down 95.8% YoY. Steel price was weak in H, lowest since 2. Limited room for price rebound in 2H, low profit is expected to remain. Market Trend Data source: Mysteel 3 34 38 42 46 5 54 58 62 66 a n 9 A p r 9 u l 9 O c t 9 a n A p r u l O c t a n A p r u l O c t a n 2 A p r 2 u l 2 热轧 3. 冷轧. 螺纹 2Ⅲ 级 HR3. CR. Rebar2III 3 4 5 6 7 8 9 a n 9 A p r 9 u l 9 O c t 9 a n A p r u l O c t a n A p r u l O c t a n 2 A p r 2 u l 2 冷轧. 镀锌. 彩涂.476 硅钢 6 CR. Galvanized. Prepainted. 476 Silicon6
I. Operation Results II. Industry Dynamics III.Company Outlook
22 Plan Adjusted Former Plan Present Plan Chang Iron (million tons) 23.25 22.79 2.% Steel (million tons) 25.25 23.98 5.% Sales (million tons) 24.25 23.46 3.3% Revenue (billion Yuan) 2.6 9.6 9.3% Cost (billion Yuan) 9.6 8. 8.2%
22 Plan AdjustedProducts Breakdown Note:BNA CRC sales of 2. million tons excluded,.78 million tons HRC sold to BNA included
CAPEX 35. 3. 28.7 25. 22.5 billion Yuan 2. 5. 3.9 8.2 7.8 4. 6.6 2.74. 5.. 25 26 27 28 29 2 2 22E Company CAPEX was 5.24 billion Yuan in H. New HRC line with capacity of 4 million tons in Meishan Steel was put into operation.
Zhanjiang Project Project introduction Approved by NDRC on 24th May. Opening ceremony on 3st May. Static investment is expected 4 billion Yuan. Designed Capacity in st Phase: 8.23 million ton pig iron, 8.7 million ton crude steel, 6.37 million ton finished products. Approved by the Board of Directors, pending approval of the general shareholders meeting on 7th Sep. Investment rationale To target at auto and home appliance markets in south China and southeast Asia. To strengthen Baosteel s leading position in high quality flat carbon steel products. To build dual production bases to safeguard the production. To make full utilization of existing advanced managerial and technical resources.
Investment in Zhanjiang Project Competitive Advantage To conduct product positioning and equipment layout design based on market demand. To achieve lower manufacturing cost with management innovation, operation efficiency improvement, and technology transfer. To shorten the learning curve with integrated operation mechanism with Baosteel Shanghai base, and the advantage in procurement, sales and high quality steel production. Financing plan The project will be financed by bank loans and capital injection (operation cash flow, as well as proceeds from asset sale).
Stock Buyback To use no more than 5 billion Yuan at price no more than 5 Yuan/share. Pending approval of the general shareholders meeting on 7th Sep.