California Steel Industries, Inc. Presented by: Ricardo Bernardes - - PowerPoint PPT Presentation

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California Steel Industries, Inc. Presented by: Ricardo Bernardes - - PowerPoint PPT Presentation

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California Steel Industries, Inc. Presented by: Ricardo Bernardes Chief Financial Officer Fontana, California November 2007 Safe Harbor Statement So me o f the sta te me nts in this pre se nta tio n c o nstitute fo rwa rd-lo o king sta

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SLIDE 1

Fontana, California November 2007

California Steel Industries, Inc.

Presented by: Ricardo Bernardes

Chief Financial Officer

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SLIDE 2

1

So me o f the sta te me nts in this pre se nta tio n c o nstitute “fo rwa rd-lo o king sta te me nts” within the me a ning o f the Priva te Se c uritie s L itig a tio n Re fo rm Ac t o f 1995. All sta te me nts o the r tha n tho se o f histo ric a l fa c ts inc lude d he re in, inc luding tho se re la te d to the c o mpa ny’ s fina nc ia l o utlo o k, g o a ls, b usine ss stra te g y, pro je c te d pla ns a nd o b je c tive s o f ma na g e me nt fo r future o pe ra tio ns, ne w o rde r tre nds a nd liq uidity a re fo rwa rd-lo o king sta te me nts. Suc h “fo rwa rd-lo o king sta te me nts” invo lve unkno wn risks a nd unc e rta intie s tha t ma y c a use the a c tua l re sults, pe rfo rma nc e o r a c hie ve me nts o f the c o mpa ny to b e ma te ria lly diffe re nt fro m a ny future re sults, pe rfo rma nc e o r a c hie ve me nts, e xpre sse d o r implie d b y suc h fo rwa rd-lo o king sta te me nts. F a c to rs suc h a s g e ne ra l e c o no mic a nd b usine ss c o nditio ns, a va ila b ility o f re q uire d c a pita l, c o ntinue d g o ve rnme nt suppo rt a nd funding fo r ke y spa c e a nd de fe nse pro g ra ms, fina nc ia l c o nditio n o f ma jo r c usto me rs, pro duc t pe rfo rma nc e , ma rke t a c c e pta nc e o f pro duc ts, se rvic e s a nd te c hno lo g ie s, a nd de pe nde nc e upo n lo ng - te rm c o ntra c ts with c o mme rc ia l a nd g o ve rnme nt c usto me rs ma y impa c t the c o mpa ny’ s re ve nue s, e xpe nse s, pro fit a nd c a sh flo w fro m pe rio d to pe rio d. F

  • r a mo re de ta ile d

disc ussio n o f the se fa c to rs, ple a se se e the c o mpa ny’ s mo st re c e nt filing s with the Se c uritie s E xc ha ng e Co mmissio n. Ca lifo rnia Ste e l I ndustrie s, I nc . a ssume s no o b lig a tio n to upda te a ny suc h fo rwa rd-lo o king info rma tio n.

Safe Harbor Statement

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SLIDE 3

2

Today’s Agenda 12:00 - 12:15 - We lc o me a nd I

ntro duc tio ns

12:15 - 1:15 - L

unc h / Pre se nta tio n a nd Q & A

1:15 - 1:30 - Bre a k 1:30 - 2:45 - Pla nt to ur 2:45 - 3:00 - Clo sing

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SLIDE 4

Company Overview

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SLIDE 5

4

Experienced Management and Committed Stockholders

E

sta b lishe d in 1984

E

a c h sto c kho lde r a ppo ints two Bo a rd me mb e rs

Pre side nt & CE

O a nd Cha irma n a ppo intme nts a lte rna te b e twe e n sto c kho lde rs

Ma na g e d a s a n inde pe nde nt c o mpa ny

Cr e dit R ating: Baa3 / BB Cr e dit R ating: Baa3 / BBB

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SLIDE 6

5

Company Overview

Ne t Sa le s $460,283 % o f T

  • tal

40% Ma rke t Sha re (2) 55% Ma rke t Po sitio n 1 Ne t Sa le s $460,283 % o f T

  • tal

40% Ma rke t Sha re (2) 55% Ma rke t Po sitio n 1

Hot-R

  • lle d

Ne t Sa le s $107,460 % o f T

  • ta l

9% Ma rke t Sha re (2) 30% Ma rke t Po sitio n 2 Ne t Sa le s $107,460 % o f T

  • ta l

9% Ma rke t Sha re (2) 30% Ma rke t Po sitio n 2

Cold-R

  • lle d

Ne t Sa le s $571,537 % o f T

  • ta l

39% Ma rke t Sha re (2) 45% Ma rke t Po sitio n 1 Ne t Sa le s $571,537 % o f T

  • ta l

39% Ma rke t Sha re (2) 45% Ma rke t Po sitio n 1

Galvanize d

Ne t Sa le s $202,817 % o f T

  • ta l

12% Ma rke t Sha re (2) 25% Ma rke t Po sitio n 3 Ne t Sa le s $202,817 % o f T

  • ta l

12% Ma rke t Sha re (2) 25% Ma rke t Po sitio n 3

E R W Pipe

Ne t Sa le s $1,358,762 (1) E BI T DA $213,820 T

  • ns Shippe d (000s)

1,930 E mplo ye e s 931 Ne t Sa le s $1,358,762 (1) E BI T DA $213,820 T

  • ns Shippe d (000s)

1,930 E mplo ye e s 931

CSI (1)

(1) 2006; I nc lude s sc ra p sa le s a nd o the r. (2) Ma na g e me nt e stima te s – b a se d o n to ns so ld.

Califor nia Ste e l Industr ie s, Inc . ("CSI") is the L e ading Pr

  • duc e r
  • f F

lat R

  • lle d

Ste e l Pr

  • duc ts on the We st Coast with E

ithe r the #1 or #2 Mar ke t Position

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SLIDE 7

6

L ime sto ne Co a l I ro n Ore Sinte r Co ke Pe lle ts Mo lte n I ro n Sla b s Bla st F urna c e

Ca ste r

Sla b Ca ste r Ho t Strip Ro lling Mo lte n Ste e l Re he a t F urna c e Ste e lma king F a c ility

Our Busine ss mo de l pro vide s lo we r fixe d c o st struc ture and gre ate r pro duc tio n fle xibility than c o mpe tito rs

CSI is Unique in that it doe s not Pr

  • duc e R

aw Ste e l, But Inste ad Pur c hase s Slab fr

  • m the Wor

ld's Highe st Quality and L

  • we st Cost Pr
  • duc e r

s and F ur the r Pr

  • c e sse s

the Slab into its Pr

  • duc ts

Slab-Based Business Model

T ra ditio na l Ste e l Mill Ope ra tio n

CSI’s Ope r ations

Slabs: 7.8” to 9” thickness Hot Strip Rolling Mill Continuous Pickling Line #1 & #2 Galvanizing Lines 5 Stand Cold Reduction Mill Hydrogen Annealing & Temper Rolling ERW Pipe Mill Hot Rolled Pickled & Oiled Galvanized Full Hard Cold Rolled ERW Pipe

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SLIDE 8

7 $0 $100 $200 $300 $400 $500 $600 $700 $800 1999 2000 2001 2002 2003 2004 2005 2006 2007 Fo re c a st

Av e ra g e Sa le s Pric e Av e ra g e Sla b Co nsumptio n Co st Ma rg i n

Stable Operating Margins

T he Histor ic ally Str

  • ng Cor

r e la tion Be twe e n Our Ave r age Sale s Pr ic e and Our Ave r age Slab Consumption Cost has Allowe d CSI to Maintain Consiste nt Ope r ating Mar gins

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SLIDE 9

8

0.198 1.749 2.372 2.764 2.955 4.070 4.484 4.714 6.732 9.402 10.195 11.999 12.547 13.457 14.303 16.160

1.422

2.669 0.985 1.395

A B A C C C B C B A B C B B C C C C C C

Non-Union Work Force

T

e a m b a se d e nviro nme nt

No le g a c y c o sts – pe nsio n o r b e ne fit I

nc re a sing wo rke r pro duc tivity pe r to n

Outsta nding Sa fe ty Pro g ra m

936 933 918 928 920 942 968 961 959 956 930 921 930 943 931

1.30 1.30 1.29 1.18 1.18 1.14 1.02 1.04 1.00 1.12 1.09 1.69 2.02 1.44 1.42

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Avera g e Num b er o f E m plo yees Ma nho urs Per T

  • n

T

  • ns B

illed (000s)

R e c or dable Injur y R ate by Company

Re sults fo r the F irst S e me ste r 2007 (Rate pe r 200,000 manho urs wo rke d) S

  • urc e : Ame ric an I

ro n & S te e l I nstitute

Manhour s pe r T

  • n

GROUP A - Co mpa nie s with mo re tha n 5,000 e mplo ye e s re pre se nting 36% o f 2007 ra w ste e l pro duc tio n. GROUP B - Co mpa nie s with 1,000 to 5,000 e mplo ye e s re pre se nting 9%

  • f 2007 ra w ste e l pro duc tio n.

GROUP C - Co mpa nie s with le ss tha n 1,000 e mplo ye e s re pre se nting 2% o f 2007 ra w ste e l pro duc tio n.

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SLIDE 10

9

Long-Standing Customer Relationships

CSI

’ s re la tio nships with 90% o f its to p 30 c usto me rs e xte nd b e yo nd 10 ye a rs

Ove r 150 a c tive c usto me rs in a wide ra ng e o f industrie s CSI

’ s la rg e st c usto me r a c c o unts fo r 6% o f sa le s

T

  • p 10 c usto me rs re pre se nt le ss tha n 43% o f to ta l sa le s

Co nstruc tio n 23%

Custome r Base Composition Se rvic e Ce nte rs 39% OE M/ Co nstruc tio n 21% T ub ing & Spira l We ld Mfg 33% Othe r 7%

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SLIDE 11

10

Re-Heat Furnace Executive Summary

  • E

nviro nme nta l

  • Co mb ina tio n o f e ffic ie nt b urne rs a nd b e st a va ila b le c o ntro l te c hno lo g y will a llo w us to

pro duc e 3 millio n to ns/ yr while g e ne ra lly re duc ing e missio ns. 3 millio n to ns/ yr while g e ne ra lly re duc ing e missio ns.

  • I

nve stme nt

  • Ca pe x a pro x: US$ 70MM
  • # 5 re he a t F

urna c e wo uld b ring CSI a ro und $5 millio n/ yr c o st re duc tio n $5 millio n/ yr c o st re duc tio n.

  • Ma rke t
  • CSI

will inc re a se sa le s to tra ditio na l c usto me rs, witho ut pric e disc o unt, b y utilizing impro ve d se rvic e q ua lity.

  • Co nside ring ra pidly c ha ng ing b usine ss c o nditio ns, CSI

ne e ds F L E XI BI L I T Y Othe r Co nside ra tio n

  • By c o nse rva tive a ssumptio n, pa yb a c k o f # 5 re he a t furna c e wo uld b e

a ro und 3 ye a rs a nd sho w po sitive NPV.

  • $70 millio n inve stme nt wo uld b e the le a st e xpe nsive wa y to a dd 1 millio n

to ns o f HSM c a pa c ity in the We st Co a st ma rke t

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SLIDE 12

11

Disciplined Financial Policy

($ in millions)

2002 2003 2004 2005 2006

Ca sh a nd Ca sh Eq uiva le nts 2.9 $ 42.6 $ 0.8 $ 104.3 $ 5.6 $ L

  • ng Te rm De b t

Re vo lving Cre dit Fa c ility

  • $
  • $

4.0 $

  • $
  • $

8.50% Se nio r No te s Due s 2009 150.0 150.0

  • 6.125% Se nio r No te s Due 2014
  • 150.0

150.0 150.0 To ta l De b t 150.0 $ 150.0 $ 154.0 $ 150.0 $ 150.0 $ Cla ss C Preferre d Sto c k 30.0 30.0 30.0 30.0

  • Sto c kho lde rs' Eq uity

217.2 210.8 303.1 295.3 349.8 To ta l Ca pita liza tio n 397.2 $ 390.8 $ 487.1 $ 475.3 $ 499.8 $

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SLIDE 13

12

Operating Performance Highlights

$ in millio ns

2002 2003 2004 2005 2006

Bille d To ns (000s of ne t tons) 2,014 1,885 2,106 1,814 1,930 Net Sa le s $754.4 $763.6 $1,257.0 $1,234.4 $1,358.8 EBITDA $101.1 $48.6 $224.0 $118.8 $213.8 Inte re st Expe nse, net $14.1 $13.1 $10.7 $11.3 $5.2 Net Inc ome $35.0 $4.5 $109.3 $43.4 $109.0 Ca pita l Expenditures $20.8 $16.5 $23.0 $43.0 $33.2

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SLIDE 14

13

Strong Credit Statistics

2002 2003 2004 2005 2006

EBITDA / Inte re st Expe nse 7.2x 3.7x 21.0x 10.5x 41.5x To ta l De b t / EBITDA 1.6x 3.1x .7x 1.3x .7x Ne t De b t / EBITDA 1.6x 2.2x .7x .3x .7x To ta l De b t / Bo o k Ca pita liza tio n 39.7% 38.4% 31.6% 33.7% 30.0% Ne t De b t / Bo o k Ca pita liza tio n 39.0% 27.5% 31.5% 10.3% 28.9%

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SLIDE 15

14

2007 Highlights

  • 100

200 300 400 500 600 700 800

J a n

  • J

u l

  • J

a n

  • 1

J u l

  • 1

J a n

  • 2

J u l

  • 2

J a n

  • 3

J u l

  • 3

J a n

  • 4

J u l

  • 4

J a n

  • 5

J u l

  • 5

J a n

  • 6

J u l

  • 6

J a n

  • 7

J u l

  • 7

HRC Slab Margin

  • U. S. Se r

vic e Ce nte r Ste e l Inve ntor ie s Mar gin HR C Pr ic e v Slab Cost

Hig h de ma nd in E

uro pe a nd Asia dro ve sla b pric e s to hig h le ve ls c o mpa re d to HRC

Sla b supplie r c o nc e ntra tio n, e spe c ia lly fo r

hig h-q ua lity g ra de s

U.S. se rvic e c e nte rs strug g le d to a djust

inve nto ry le ve ls

Ove ra ll e nd use r de ma nd so ft / sta b le in

the U.S.

Sub -prime / ho using ma rke t a ffe c te d

c o nstruc tio n b usine ss

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SLIDE 16

15

2008 Highlights

U.S. Se rvic e Ce nte r inve nto rie s a re lo w

c o mpa re d to histo ric a l le ve ls

Se rvic e c e nte rs will re sume histo ric a l

purc ha sing pa tte rns

Ja nua ry 2008 o rde r b o o k b uilding up E

stima te d pric e inc re a se fo r 1Q08 b e twe e n $20 - $40/ ne t to n

Sta b le de ma nd in E

uro pe a nd Asia

Disc re te inc re a se in sla b supply

  • U. S. Se r

vic e Ce nte r Ste e l Inve ntor ie s v Hot R

  • lle d She e t Pr

ic e s CR U Global Inve ntor y Inde x

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SLIDE 17

16

Key Financial Data

2007 F

  • r

ec a st 2008 F

  • r

e c a st

Sa le s (U S$ b il l io ns) $1.3 $1.5 E BIT DA (U S$ mi l l i

  • ns)

$39 $55 T

  • ns (1,000)

1,720 1,920 Ca pe x (U S$ mi l l i

  • ns)

$33 $51 T

  • ta l De b t (U

S$ mil li

  • ns)

$191 $191

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SLIDE 18

California Steel Industries, Inc.