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Level 11, 120 Collins Street
Melbourne, Victoria 3000 Australia
www.bluescopesteel.com
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BLUESCOPE STEEL LIMITED
ANNUAL REPORT 2004/05
EXPERTISE.
IMAGINATION
OUR CUSTOMERS SEEK NEW PRODUCTS AND NEW THINKING.
BY VALUING IMAGINATION, WE GROW OUR REVENUE.
OUR CUSTOMERS ARE OUR PARTNERS.
REVENUE
$8.0BILLION 2005
$5.8B 2004
$5.3B 2003
Wendy Wang from Butler China at the
award-winning Qantas jet hangar,
Canberra, Australia.
NET PROFIT AFTER TAX
$1.0BILLION 2005
$584M 2004
$452M 2003
Brett Everson at Port Kembla, one of the world's finest Steelworks.
OUR STRONG FINANCIAL POSITION.
REFLECTS THE CALIBRE OF OUR PEOPLE.
OUR PEOPLE ARE OUR STRENGTH.
SKILL.
INTEGRITY
REWARD.
OUR SHAREHOLDERS ARE OUR FOUNDATIONS. BELIEF
WE REWARD OUR SHAREHOLDERS’
FAITH WITH ONGOING VALUE.
Steel is used in many innovative, dynamic structures.
Melbourne, Australia's CityLink sound tunnel
showcases BlueScope Steel's flat plate product.
TOTAL DIVIDENDS 62CENTS
2005
40C 2004
29C 2003
INVOLVEMENT.
RESPECT
CAPITAL
INVESTMENT $660M
TAX PAID $310M
Tsunami relief housing, featuring roofing and trussing
donated by BlueScope Lysaght, Phuket, Thailand.
WE CONTRIBUTE TO EMPLOYEES, BUSINESSES AND GOVERNMENTS
IN MANY COMMUNITIES, ADDING TO WEALTH AND PROVIDING OPPORTUNITY.
OUR COMMUNITIES ARE OUR HOMES.
COMMUNITY
DONATIONS $2.2M
SUPPLIERS,
SERVICES & UTILITIES $2.1B
WAGES & SALARIES $1.3B
PAGE 8
CHAIRMAN’S MESSAGE
DELIVERING ON
COMMITMENTS
PERFORMANCE
I am very pleased to report that 2004/05 has
been another outstanding year for BlueScope
Steel. Our team’s performance over the three
years since public listing has been among
the best on the Australian Stock Exchange
ASX 100 for all industries.
When BlueScope Steel listed three years ago,
we committed to operate by the guiding
principles of Our Bond and to reward our
shareholders. We have met those commitments.
In the past year, revenue has grown by 38%
to a record $7.98 billion, demonstrating the
strength of the relationships we have built
with existing customers, and with new ones.
Net profit after tax was up 72% to
$1.007 billion, a reflection of the strength
of global steel markets and the performance
of BlueScope Steel’s people. We are proud
to be one of a select group of ASX-listed
companies to have achieved a profit of over
$1 billion in 2004/05. Earnings per share
increased by 77% to $1.37 per share,
compared to 78 cents last year.
SHAREHOLDERS
During the year we continued to reward our
shareholders. We declared a final dividend of
24 cents per share and a special dividend
of 20 cents per share, both fully franked.
For the year, ordinary and special dividends
totalled 62 cents per share, compared with
40 cents per share last year. All were fully
franked. Return on invested capital increased
to 25.4%, up from last year’s strong result
of 18.5%, and total shareholder return for
the year was 30%, paid and declared in
respect to 2004/05. In the last three years,
$1.58 billion has been invested in share
buybacks or dividends, which demonstrates
our focus on returns to shareholders.
EMPLOYEES AND COMMUNITIES
BlueScope Steel is committed to providing
safe workplaces. The involvement in safety
audits by 78% of our 17,500 employees
worldwide is evidence of their commitment.
Our Bond emphasises community respect
and involvement. In 2004/05 this was
underscored by donations of $2.2 million
to community causes. This included a major
tsunami relief initiative totalling over
$1.26 million, with a large proportion donated
directly by our employees. BlueScope Steel
undertook many other community projects
across Asia, New Zealand and the United
States, as well as Australia.
It is interesting to reflect on how the $8 billion
dollars of revenue we generated in 2004/05
was distributed. $1.3 billion was paid in
wages and salaries. $340 million was paid to
shareholders as dividends, $330 million was
used for share buybacks, $2.1 billion was spent
on suppliers, services and utilities, $310 million
was paid in income tax, and $660 million was
re-invested in our Company’s growth projects,
with a view to our future prosperity.
CAPITAL MANAGEMENT
We are proud of BlueScope Steel’s capital
management record. Since public listing, our
total return to shareholders, including ordinary
and special dividends, and share buybacks to
date is $2.09 per share – representing a 77%
pay out ratio. A great advantage of our public
listing has been the ability to re-invest in the
business for future profitable growth. Over
the past three years, we have invested more
than $1.5 billion. This includes $724 million
in 2004/05, with approximately $700 million
anticipated in the 2005/06 financial year. By
comparison, in the four years prior to listing,
the average amount of capital invested each
year was $120 million.
Your Directors believe that BlueScope Steel
has continued to meet the short and long term
interests of shareholders with an appropriate
balance between dividends, share buybacks
and long-term growth investments. This is
reflected in the fact that, in the period from our
public listing on July 15 2002 to June 30 2005,
our Total Shareholder Return (growth in share
price plus dividends) has been among the
highest of any ASX 100 company.
PAGE 9
1.37
.778
.571
03
04
05
EARNINGS
PER SHARE ($)
FROM OUR PUBLIC LISTING TO 30 JUNE 2005,
BLUESCOPE STEEL HAS BEEN AMONG THE
BEST PERFORMING STOCKS ON THE ASX.
Pedestrian bridge on Hume Freeway,
Lalor, Victoria
STRATEGY
We are implementing a strategy that will make
BlueScope Steel a unique steel company:
one that embodies excellence in steelmaking,
and also delivers a broad range of innovative,
valued steel products and solutions.
So, with three years of outstanding results,
and a long-term investment strategy that will
help buffer us against steel price volatility,
we are well on the way to establishing
our credentials. We hope you now regard
BlueScope Steel as a core holding in your
share portfolio.
GOVERNANCE
BlueScope Steel complies with the ASX
principles of Good Corporate Governance and
Best Practice Recommendations. I believe the
leadership shown by our Board of Directors,
the values and standards that have been set,
and the strategic guidance the Board has
provided are of a high order.
We will continue to reward shareholders.
In keeping with the principles of Our Bond,
we will also continue to care for our
employees, value our relationships with
customers, and respect the communities
in which we do business. I believe our future
success will reflect our Company’s adherence
to these ideals.
I would like to thank our 17,500 employees
for their performance, Managing Director
and CEO Kirby Adams and his team for their
strong leadership, and my Board colleagues
for their contribution.
GRAHAM KRAEHE AO, CHAIRMAN
PAGE 10
CREATING
OUR FUTURE
MANAGING DIRECTOR
AND CEO’S REPORT
This past financial year has been an extraordinary one for
BlueScope Steel – a year in which we again rewarded our shareholders
as we grew. Indeed, the year has been defined by growth. Revenue
was up 38%, while NPAT was up 72% to $1.007 billion.
IN 2006, WE WILL SEE THE FIRST
BENEFITS OF A RE-BALANCED
PORTFOLIO, AS WE ARE NOW
MIDWAY THROUGH OUR
$2 BILLION GROWTH PROGRAM,
INVOLVING OVER 20 PROJECTS
IN EIGHT COUNTRIES.
The current 2005/06 financial year will
be an exciting period for your Company
– the beginning of the phase in which we
deliver on our mid and downstream growth
initiatives. We have commenced operations
at our second metallic coating facility in
Thailand, and a number of major projects
will follow, including our metallic coating
and painting facility in Vietnam, which is due
for start-up early in the 2006 calendar year.
Supporting our growth is strong underlying
cashflow, and a robust balance sheet.
SAFETY
We also care for 17,500 employees and
contractors in 84 manufacturing sites across
17 countries. BlueScope Steel continues to
run a major safety program and we continue
our drive for Zero Harm. Key indicators
are very encouraging. Our lost time injury
frequency rate (LTIFR) was a record low of
less than one lost time injury per million
hours worked during the year. Our medical
treatment injury frequency rate (MTIFR) was
9.2 medically treated injuries per million
hours worked including our Butler operations,
and 4.4 excluding Butler. Our Asian businesses
were most impressive in this area, achieving
16 million working hours without any lost
time through injury.
However, our safety achievements were
marred by a tragic death. In the days
following this fiscal year, an employee at
our New Zealand Steel business was fatally
injured at work. I have sent our deepest
condolences to his family, friends and
colleagues, and our recent Stop for Safety
again emphasised the importance of safety
and equipment isolation. Our goal of Zero
Harm is the responsibility of us all. Every day,
everywhere, without exception.
OUTSTANDING FINANCIAL PERFORMANCE
On behalf of our 17,500 employees, we have
an outstanding set of results to report to
our owners. Our total revenue was a record
$7.98 billion, up $2.2 billion, or 38%, on the
previous year. Of this amount, $1.2 billion was
contributed by our recently acquired Butler
businesses. Demand for our excellent BlueScope
Steel products has been strong in all markets.
Despatches were up 5% on the previous
year, and EBIT was up $570 million, to a
record $1.388 billion.
NPAT was a record $1.007 billion, while earnings
per share was $1.37, enhanced by our share
buyback programs. Return on invested capital
was a robust 25.4%, with return on equity
30%, after tax. Net operating cashflows were
up 37% to $1.2 billion. We used this cash in a
balanced way, committing $660 million dollars
to capital expenditure and investments, with
$670 million returned to our shareholders.
PAGE 11
KIRBY ADAMS,
MANAGING DIRECTOR AND CEO
PAGE 12
25.4
1,388
18.5
14.5
818
611
160
THE NEXT FEW YEARS WILL BE EXCITING ONES,
AS WE DELIVER ON OUR MIDSTREAM AND
DOWNSTREAM GROWTH INITIATIVES AND
FURTHER IMPROVE OUR STEELMAKING ASSETS.
03
04
05
02
03
04
05
EBIT ($MILLION)
AFTER TAX
RETURN ON
INVESTED
CAPITAL (%)
One of our objectives has been to align the
interests of our employees with the interests
of you, our owners. Share ownership among
employees is now approaching 100%. We
believe a genuine sense of ownership among
our employees is contributing to our Company’s
strong performance.
OUR GROWTH STRATEGY
Our renewal strategy continues, with significant
growth initiatives ahead and underway.
Many are now familiar with our program of
faster growth for our mid and downstream
businesses. Our aim is to re-balance our
portfolio of businesses, thereby reducing
cyclical risk. We are on schedule in our efforts
to change the profile of your Company.
In the current year, we will see the first benefits
of a re-balanced portfolio, as we deliver on
this strategy. We are now midway through
our $2 billion growth program, which involves
over 20 major projects in eight countries.
We have commissioned our new $80 million
metallic coating facility in Thailand. Our
$160 million metallic coating and painting
facility in Vietnam will start up early in the
2006 calendar year, with our $280 million
China metallic coating and painting facility
commencing operations in the middle of the
2006 calendar year.
During the year, we announced a $100 million
investment program for India – a country that
is entering a period of vigorous economic
growth. Our downstream earnings will be
boosted by a number of new facilities around
the world, including our Western Sydney
COLORBOND® facility, new rollforming and
pre-engineered building (PEB) facilities in
China, our new Butler Manufacturing plant in
Jackson, Tennessee, and the Western Australia
Service Centre. We are also expanding our
Vistawall extrusion plant in Tennessee.
The resultant portfolio will comprise a unique
multi-national franchise, with greater balance
and diversification in terms of geography,
products and markets. BlueScope Steel is
uniquely positioned as the only pan-Asian
provider of steel building solutions.
A crucial part of this strategy is business
excellence. Consequently, we continue our
drive for excellence in areas such as cost
reduction and capital efficient capacity
increases. We continuously work on improving
our offers to customers, improving technical
support, delivery reliability and lead times,
and managing volatility. New products are
another focus in our drive for excellence,
with great energy directed into research
and development, product development and
extensions, along with new global alliances
and acquisitions.
ACHIEVING OUR BUSINESS GOALS
Last year, we achieved many of our
demanding goals with strong performance
across our geographic footprint. We have
now attained market leadership in a number
of segments around the world, including
PEBs in North America and China, downstream
steel solutions in Asia and Australia, and
an unmatched network of metallic coating,
painting and rollforming facilities.
Our Asian businesses achieved stable profit
performance, despite being faced with higher
costs. This segment’s performance was affected
by an increase of $19 million in pre-operating
costs related to projects underway in China,
India, Thailand and Vietnam. Higher feedstock
costs were offset by increased prices, and the
segment exceeded $1 billion in revenue for the
first time. Our employees in Asia are continually
pushing for growth in this energised region,
which we consider a core growth corridor.
In North America, we are working hard
to build and transform our downstream
businesses. Revenue for this business unit
exceeded $1 billion, with the first half year
showing a reasonable turnaround, while
the second half was disappointing. However,
even as this transformation is completed, the
benefits of Butler and Vistawall capabilities
are being felt across the company, particularly
in Asia, where PEB markets are growing.
PAGE 13
From left: Executive Leadership Team members
Ian Cummin and Brian Kruger with Kirby Adams.
The stand out performance during the past
year was from our three upstream steelmaking
businesses. These operations responded
with vigour to the high product margins
experienced in the steelmaking industry,
and generated revenue of almost $4 billion.
Super-profitability was achieved by Port Kembla
Steelworks, New Zealand Steel and the
50% owned North Star BlueScope Steel in
Ohio, USA. Total EBIT for this group was a
record $1.521 billion, up 143% on last year.
Production and safety records were set by
all these businesses, while our North Star
BlueScope Steel joint venture also cleared its
debts and paid its first dividend to BlueScope
Steel. Customers once again voted this business
'the number one flat rolled steel supplier in
North America', in the prestigious Jacobson
survey. I congratulate all those involved in
our very successful steelmaking operations
in Australia, New Zealand and North America.
Our downstream coated, painted, packaging,
building products and steel solutions
businesses in Australia dealt with a number
of challenges during the year, including
much higher input costs, strike actions and
restructures. The second half saw a recovery,
due to price increases, while our decision to
exit the export packaging products business
resulted in $25 million of restructuring costs.
Demand for our colourful products remains
strong, particularly in non-residential markets
in Australia.
OUTLOOK
The 2004/05 financial year has been an
exceptional one – the best in our Company’s
87 year history. In the coming year, we expect
strong demand for our products to continue.
However, BlueScope Steel will again be
affected by external cost pressures such
as raw materials and freight. As a result
of the mismatch between raw material
prices and steel prices, we are absorbing
an increase of approximately $600 million,
or 90%, in raw material costs, and this
cannot be entirely recovered this year.
But by achieving increases in prices and
production volumes, commissioning many
new projects, and improving the performance
of our acquisitions, we are working to make
2005/06 at least our second-best year ever.
Recent forecasts of GDP growth rates for the
2006 financial year indicate continuing good
levels of growth in Australia, New Zealand,
the USA, China and South East Asia. China’s
GDP is expected to grow at greater than 5%,
with global GDP growth exceeding 3%. These
forecasts confirm the economic premise on
which our growth strategy is based, and
suggest our regional economy will continue
to be the fastest growing steel products
market in the world.
In October 2004, I addressed the Board of
the International Iron and Steel Institute
on ways in which our global steel industry
could improve itself. As Institute Chairman,
I called for greater industry consolidation,
and for a more responsible approach to
capacity expansion. It is heartening to see
evidence of these trends at play in the global
steel industry. For example, China, which now
has steel companies that are members of the
IISI, has announced measures in both these
areas. As a supplier to China’s building and
construction markets, we welcome moves
that contribute to more stable growth.
BlueScope Steel achieved more last year than
most would have anticipated. So I thank our
shareholders for investing in BlueScope Steel,
our customers for their continuing confidence and
business, and our communities for hosting our
operations and continuing to use our beautiful
and colourful steel products and solutions.
Finally, I would like to acknowledge the efforts of
our employees. BlueScope Steel’s achievements
reflect the high calibre of our people. With few
exceptions, they are talented, dedicated, and
innovative. They are team players and people
of integrity. And importantly, they care for their
colleagues, our customers, their communities,
and our shareholders. I thank them all for these
extraordinary results.
KIRBY ADAMS,
MANAGING DIRECTOR AND CEO
PAGE 14
OUR
BOND
WE AND OUR CUSTOMERS PROUDLY BRING INSPIRATION,
STRENGTH AND COLOUR TO COMMUNITIES WITH BLUESCOPE STEEL.
OUR CUSTOMERS ARE OUR PARTNERS
Our success depends on our customers
and suppliers choosing us. Our strength
lies in working closely with them to
create value and trust, together with
superior products, service and ideas.
OUR PEOPLE ARE OUR STRENGTH
Our success comes from our people. We
work in a safe and satisfying environment.
We choose to treat each other with trust
and respect and maintain a healthy
balance between work and family life.
Our experience, teamwork and ability to
deliver steel inspired solutions are our
most valued and rewarded strengths.
OUR SHAREHOLDERS
ARE OUR FOUNDATIONS
Our success is made possible by the
shareholders and lenders who choose
to invest in us. In return, we commit to
continuing profitability and growth in
value, which together make us stronger.
OUR COMMUNITIES ARE OUR HOMES
Our success relies on communities
supporting our business and products.
In turn, we care for the environment,
create wealth, respect local values and
encourage involvement. Our strength is
in choosing to do what is right.
Employees at Port Kembla Steelworks.
PAGE 15
INVESTING
FOR GROWTH
OUR STRATEGY IN ACTION.
We call these our ‘downstream’ businesses, and
they market our brands such as COLORBOND®
and ZINCALUME® steel, LYSAGHT® steel
building solutions, and BUTLER® pre-engineered
buildings (PEB) to intermediate suppliers, and
directly to end-use customers.
Over the last three years, we have invested
heavily in our downstream businesses, pushing
further into high value-added, branded steel
products. This investment strategy aims to
capture the profit margins that accumulate as
we retain steel and add progressively greater
value to it.
For example, in April 2004 we acquired Butler
Manufacturing, an iconic PEB business in
North America and a market leader in China.
So, in this niche, we now occupy every stage
of the value chain. We make steel, we make
building products from that steel, and we
design, market and supply buildings made
from those products.
Importantly, the margins on value-added
steel products are less volatile than those
obtainable on commodities such as steel slab
and hot rolled coil. Therefore, we expect our
investment strategy to help insulate BlueScope
Steel against the effects of future volatility
in global steel pricing. As a large part of our
new capital investment is in Asia, we are also
aligning our growth with that of the world’s
fastest growing economies.
The global steel market has been historically
volatile, and this has driven capital away from
steel companies. Our aim is to reduce the
effects of this volatility, enhancing stable growth,
and making BlueScope Steel a prosperous,
long-term home for our shareholders’ capital.
It is this which makes us a different kind of
steel company.
Our products are highlighted in (from left):
BlueScope Lysaght office in Indonesia –
a BUTLER® pre-engineered building;
the Landcare building in New Zealand.
WE CONTINUE OUR PUSH
INTO HIGH-VALUE STEEL
MARKETS WITH OUR
BRANDED STEEL SOLUTIONS.
Since our listing on the Australian Stock
Exchange in 2002, BlueScope Steel has
designed and implemented an investment
strategy that differentiates us from many
other steel companies. A brief summary of
our operations will assist your understanding
of this strategy.
Our Company manufactures steel slab, hot
rolled coil and plate at our three steelmaking
facilities. We call these our ‘upstream’
businesses. However, we differ from many
steel companies in that we retain a large
proportion of our steel and further process
it, primarily into building products, while we
also supply the automotive, manufacturing,
whitegoods and packaging sectors in Australia.
This processing and marketing is done through
BlueScope Steel businesses such as Australian
Manufacturing Markets; BlueScope Lysaght;
our Asia Coated and Building Products
businesses including BlueScope Buildings;
and Butler Buildings in North America.
PAGE 16
EXECUTIVE LEADERSHIP TEAM
Clockwise from top left:
Kirby Adams, Noel Cornish,
Brian Kruger, Lance Hockridge,
Ian Cummin, Mike Courtnall
and Kathryn Fagg.
KIRBY ADAMS is Managing Director and
Chief Executive Officer of BlueScope Steel.
Mr Adams was appointed to the Board on
10 May 2002, having been Chief Executive
Officer of BHP Steel since March 2000.
NOEL CORNISH is President of Australian
and New Zealand Industrial Markets, with
responsibility for the Port Kembla Steelworks
and New Zealand Steel businesses. For the
previous three years he was President of
our Coated Products business in Australia.
BRIAN KRUGER is President of Australian
Manufacturing Markets. This unit comprises
our Illawarra Coated Products business,
including the Springhill facility, our Western
Port operation and our Service Centre
network. Mr Kruger succeeded Mr Cornish
in this role in July 2005, having previously
been Chief Financial Officer.
LANCE HOCKRIDGE is President of our
North America business unit. This unit
comprises North Star BlueScope Steel,
Butler Buildings, Vistawall and Castrip LLC.
Mr Hockridge has held this position since
April 2005. He was previously President
of Industrial Markets, a position he held
since 2000.
KATHRYN FAGG is President of Australian
Building and Logistics Solutions. This
business unit comprises BlueScope Lysaght,
BlueScope Water, Logistics and International
Trade Services. Ms Fagg is also responsible
for Information Systems and corporate
brand management.
MIKE COURTNALL is President of Asian
Building and Manufacturing Markets. He has
been responsible for BlueScope Steel’s Asian
businesses since 2000.
IAN CUMMIN is responsible for People
and Performance. This role includes Human
Resources, Safety and Corporate Affairs.
PAGE 17
Product development and brand building
are critical to our future growth. BlueScope
Steel offers many highly regarded brands to
the market, and these represent important
assets to our business. In Australia, our core
brands – COLORBOND®, ZINCALUME®,
and XLERPLATE® steels and the LYSAGHT®
range – are market leaders in the building,
construction, and manufacturing industries.
Our BlueScope Water business adds more
brands to our portfolio, including HYDRORIB®
drainage pipes, WATERPOINT® rainwater
tanks, AGRIRIB® low-pressure irrigation pipe,
and GALAXY™ water tanks. While our Butler
Manufacturing business brings us the iconic
BUTLER® brand, as well as the VISTAWALL™
architectural product range. Region-specific
brands, such as new Clean COLORBOND®
steel, enhance our reputation as a provider of
solutions for demanding conditions.
We are constantly looking for ways to leverage
our brands. Two examples are fencing made
from COLORBOND® steel and our TRUECORE®
steel house framing. We are also expanding
our renowned LYSAGHT® range of steel
building solutions across our global footprint.
WE CONTINUE TO BUILD
VALUE BY LEVERAGING
ESTABLISHED BRANDS AND
INTRODUCING NEW ONES.
During the year, we introduced a customer
partnership program to further increase
the value of the BlueScope Steel brand.
The program, named ‘Steel By’ allows our
customers to benefit from our Company brand
through the inclusion of the BlueScope Steel
partnership logo in their promotional material.
This logo is accompanied by the statements:
‘Steel Manufactured By BlueScope Steel’
or ‘Steel Supplied By BlueScope Steel.’
BUILDING
BRANDS
PAGE 18
BUSINESS OVERVIEW
BLUESCOPE STEEL BUSINESS SEGMENTS
CORPORATE AND GROUP
HIGHLIGHTS
(cid:129) Record results for Net Profit After Tax of
$1.007 billion, and Earnings per Share
of $1.37.
(cid:129) Rewarded shareholders with total dividends
announced for FY2005 of 62 cents per share,
fully franked.
(cid:129) Share buyback programs achieved 24.4 million
net reduction in shares, resulting in 3%
improvement in future earnings per share.
(cid:129) Lost time injury frequency rate for Group was
a record low 0.8 hours lost per million hours
worked during year.
(cid:129) $2 billion growth program underway
involving over 20 major projects in
eight countries.
COATED AND BUILDING PRODUCTS
ASIA
COATED AND BUILDING PRODUCTS
AUSTRALIA
KEY CUSTOMERS: Building and construction
industries and general manufacturers.
HIGHLIGHTS
(cid:129) 40th anniversary of operations in Asia.
(cid:129) Announced $100 million investment in
India to construct three new manufacturing
facilities at Pune, Chennai and New Delhi.
(cid:129) BlueScope Steel China team secured contract
to supply steel building products for world’s
tallest building, under construction in Shanghai.
(cid:129) Asia-wide launch of new, improved Clean
COLORBOND® steel.
(cid:129) Entered into alliance with Nippon Steel
for marketing of corrosion-resistant
SuperDymaTM steel.
(cid:129) Investments in major capital projects
in Thailand, Vietnam and China underway.
KEY CUSTOMERS: Building, construction,
automotive and packaging industries and
general manufacturers.
HIGHLIGHTS
(cid:129) Springhill achieved annual despatch record
(1.005 mt) – the third consecutive annual
record and first time 1.0 mt reached.
(cid:129) Four year site-based Enterprise Bargaining
Agreement (EBA) at Western Port certified.
(cid:129) New products launched included W-Dek‚
Quikform and new improved ZINCALUME®.
(cid:129) Construction of new state of the art
COLORBOND® facility in western Sydney.
(cid:129) BlueScope Water urban rainwater tank and
drainage pipe production facilities established
in Victoria, NSW and Queensland. Perth-based
Pioneer Water Tanks acquired.
600
74
EXTERNAL DESPATCHES ('000s of tonnes)
Domestic
Export
REVENUE
EBIT
NET OPERATING ASSETS
(pre-tax)
RETURN ON NET ASSETS
(pre-tax)
$ 1.05 billion
$82 million
$ 878 million
11.5%
1,915
477
EXTERNAL DESPATCHES ('000s of tonnes)
Domestic
Export
REVENUE
EBIT
NET OPERATING ASSETS
(pre-tax)
RETURN ON NET ASSETS
(pre-tax) (8.7%)
$3.19 billion
($116 million)
$1.427 billion
TOTAL SALES % (TONNES)
TOTAL SALES % (TONNES)
100
80
ASIA
AUSTRALIA
10
10
ASIA REST OF
WORLD
PAGE 19
HOT ROLLED PRODUCTS
NEW ZEALAND STEEL
KEY CUSTOMERS: Engineering, construction,
mining and manufacturing industries and
export customers who re-roll our steel.
KEY CUSTOMERS: Building and
construction industry, roll-formers
and manufacturing industries.
COATED AND BUILDING PRODUCTS
NORTH AMERICA
KEY CUSTOMERS: Consumers of
pre-engineered buildings (PEB) and
aluminium and glass architectural products.
HIGHLIGHTS
HIGHLIGHTS
HIGHLIGHTS
(cid:129) Port Kembla maintained near-record raw
steel production (5.123 mt).
(cid:129) Achieved record annual hot rolled coil
production (2.522 mt).
(cid:129) Record annual production (1.824 mt)
and record annual despatches (1.778 mt)
at North Star BlueScope Steel.
(cid:129) North Star BlueScope Steel voted number
one flat rolled steel supplier in North America
for third consecutive year in the Jacobson
survey of steel customers.
(cid:129) Record sales revenue of $756 million.
(cid:129) Strong results in both domestic and export
markets, with record domestic despatches
of 315,000 tonnes.
(cid:129) Three year Employment Contract agreed,
with no lost time or industrial action.
(cid:129) Improvements to management systems and
replacement of ageing finance, maintenance
and supply systems to support improved
productivity.
(cid:129) Integration completed, and transformation
of business underway with establishment
of five regional profit centres and new
management team.
(cid:129) Work performance system implemented to
increase production capability, reduce costs
and improve inventory management.
(cid:129) Robust Vistawall business continues to
grow well.
(cid:129) Production at high-cost Galesburg facility
ceased in April.
EXTERNAL DESPATCHES ('000s of tonnes)
Port Kembla North Star Total
1,933
883
1,383
6
Domestic 1,050
Export
1,377
REVENUE
EBIT
NET OPERATING ASSETS
(pre-tax)
RETURN ON NET ASSETS
(pre-tax)
66.5%
$3.94 billion*
$1.338 billion
$2.03 billion
315
276
$756 million
$183 million
EXTERNAL DESPATCHES ('000s of tonnes)
Domestic
Export
REVENUE
EBIT
NET OPERATING ASSETS
(pre-tax)
RETURN ON NET ASSETS
(pre-tax)
$474 million
39.3%
177
10
$1.135 billion
($20 million)
EXTERNAL DESPATCHES ('000s of tonnes)
Domestic
Export
REVENUE
EBIT
NET OPERATING ASSETS
(pre-tax)
RETURN ON NET ASSETS
(pre-tax)
$234 million
(8.4%)
* excludes North Star BlueScope Steel
TOTAL SALES % (TONNES)
TOTAL SALES % (TONNES)
TOTAL SALES % (TONNES)
60
20
20
50
20
20
10
100
AUSTRALIA
AMERICAS
REST OF WORLD
NEW ZEALAND/PACIFIC
AUSTRALIA
AMERICAS
ASIA
AMERICAS
PAGE 20
ASIA
DIVERSE.
ENERGISED
THROUGH OUR BUSINESSES IN ASIA,
WE ARE ALIGNING OUR GROWTH
WITH SOME OF THE WORLD’S MOST
VIGOROUS ECONOMIES.
ASIA COATED AND
BUILDING PRODUCTS
The world’s economic centre
of gravity continued its shift
toward Asia in 2004/05. We
are extremely well positioned
in this exciting region, and have
continued investing in our Coated
and Building Products Asia
business, growing our painting,
metallic coating, rollforming and
pre-engineered buildings (PEB)
operations across Asia.
BlueScope Steel is Asia’s leading PEB
manufacturer, and our rollforming, painting and
metallic coating network is the region’s most
extensive. We are a leading Australian investor
in Asia, and in 2004/05 we achieved a major
milestone with 40 years experience ‘on the ground’
in the region. Our Asian business unit consists
of metallic coating and painting operations
in Thailand, Indonesia and Malaysia; BlueScope
Buildings (formerly Butler and Lysaght) facilities
in China; and BlueScope Lysaght operations in
eight other countries in Asia.
In the 2004/05 financial year we continued
expanding our business platform to further
capitalise on Asia’s economic growth. We have
a number of exciting new projects in the region.
These include an additional metallic coating line
in Thailand, and metallic coating and painting
facilities in Vietnam and China, which will double
our capacity to approximately one million tonnes.
We have also approved major projects in China,
Thailand and India to manufacture the LYSAGHT®
and BUTLER® range of building solutions. In total,
BlueScope Steel has now committed over $710
million to investments in Asia in the last two years.
For Coated and Building Products Asia,
2004/05 saw a pause in the continuous profit
growth of the preceding five years. This is a
result of increased business development and
pre-production costs, adverse foreign exchange
movements and profit from asset sales
impacting on the previous year’s results.
EBIT for the year was $82 million, down from
$104 million in 2003/04. Higher steel purchase
prices were offset by increased selling prices.
In 2004/05, sales revenue was $1.051 billion,
up from $699 million the previous year, greatly
assisted by the full-year contribution and higher
selling prices of BUTLER® PEBs. The full year
effect of our Butler Manufacturing acquisition
was significant, with the Butler business in
China contributing EBIT of $16 million. Volumes
increased year on year predominantly due
to Butler. Growth in the coating lines was
constrained by capacity.
Our investment strategy recognises the strong
long-term growth potential of Asia’s economies.
We are creating new markets across Asia for
premium steel building products such as Clean
COLORBOND® steel and ZINCALUME® steel,
and advanced solutions such as LYSAGHT®
building products and BUTLER® PEBs.
Our approach to growing local markets requires
continued investment to meet demand for steel
products. We expect to reap benefits as our
new downstream operations begin to generate
earnings from the rapidly growing Asian
construction market over the coming few years.
Our businesses in Asia delivered many highlights
in 2004/05. The BlueScope Steel China team
secured the contract to supply steel building
products for the world’s tallest building. We
executed a successful Asia-wide launch of new,
improved Clean COLORBOND® steel, and we
enhanced our reputation for quality through an
alliance with Nippon Steel Corporation for the
marketing of corrosion-resistant SuperDyma™
steel. In addition, we have continued to
implement an Enterprise Resource Planning (ERP)
platform for our businesses in Asia. Malaysia
and Indonesia are operating under this system,
while ERP work continued in China and Vietnam.
PAGE 21
We now employ over 3,000 people across Asia, including sales engineer Pang Howe
Koh, in Singapore, (below) and marketing executive Rachimi Hidayat, in Cibitung,
Indonesia (bottom left). Our steel building products feature in many examples
of contemporary architecture throughout the region.
PAGE 22
Clockwise from top left: BlueScope Lysaght Indonesia
employee Ardhian Yoga Oetoro; a unique expression of
COLORBOND® steel rollformed into tiles in Indonesia;
Suzhou facility under construction in China.
CHINA
BlueScope Steel is well positioned to grow in
the expanding Chinese steel building products
and pre-engineered buildings markets. We
began in-country operations in China in 1995,
and now run six manufacturing plants across
the country, as well as one in Taiwan, with
three more facilities being developed.
In 2004/05, building construction continued on
our $280 million metallic coating and painting
facility at Suzhou, 80 km west of Shanghai.
An impressive facility is taking shape, and
commissioning is planned for the middle of 2006
calendar year. During the year, we achieved
an important step with the successful launch
of our ZINCALUME® steel brand into China.
We also merged our Butler and Lysaght
operations, with the integrated BlueScope
Buildings China business managed by one team.
Accordingly, we approved our Company’s
first combined BUTLER® PEB-LYSAGHT®
facility. The plant, located in Guangzhou, will
cost $45 million. Site works are progressing,
registrations and approvals are complete,
and the project is on schedule for completion
by the middle of 2006 calendar year.
During the year, we expanded our BlueScope
Buildings Tianjin site into a full-service PEB
operation, investing in a new beam fabricating
line with a capacity of 12,000 tonnes per
annum. The $8 million Tianjin project was
completed on time and under budget. To meet
the ever-increasing demand for sophisticated
building products, we approved a $16 million
expansion of our Langfang facility to produce
architectural and sandwich panels for
premium facade applications.
In 2004/05 our China team successfully bid
for a Shanghai World Finance Center contract,
calling for supply of 220,000 square metres
of LYSAGHT 3W-DEK. The structural decking
product will form part of the flooring system
in what will become the world’s tallest
building. This 101-storey Shanghai project is
yet another showcase for BlueScope Steel in
China, and enhances our reputation for steel
building products of the highest quality.
During the year, the Chinese government
tightened funding available to local companies,
and this policy altered our BlueScope Buildings
China customer base. Sales to large Chinese
companies have fallen, but we have increased
sales to foreign-owned direct investors.
PAGE 23
1,051
104
84
82
699
71
569
530
02
03
04
05
02
03
04
05
REVENUE ($MILLION)
EBIT ($MILLION)
COATED AND BUILDING PRODUCTS
ASIA
INDIA
Alongside China, India is emerging as a major
economic powerhouse, with a consequent
increase in building and construction sector
demand. BlueScope Steel has been creating
markets for COLORBOND® and ZINCALUME®
steels in India since 1998, and in 2004/05 we
announced an investment of $100 million in
three new manufacturing facilities to meet
growing demand. This represents our
largest-ever initial greenfield downstream
investment in any country. These new
facilities are at New Delhi in the north,
Pune in the west, and Chennai in the south.
The Pune facility, which will manufacture
BUTLER® PEBs, and include a Design Centre,
is due for start-up in the second half of the 2006
calendar year. The New Delhi and Chennai
plants will provide Lysaght rollforming
services, and offer a full range of LYSAGHT®
products. They will commence operations in
mid-2007 calendar year. A network of 18 new
sales offices will help grow our reach in the
Indian building and construction markets.
We are also examining the feasibility of a
joint venture with India’s respected Tata Steel,
in a metallic coating and painting operation.
We expect discussions with Tata Steel to be
completed in early 2006 calendar year. The
JV, if formed, would also include our existing
downstream investments.
INDONESIA
PT BlueScope Steel Indonesia is the country’s
only local manufacturer of zinc/aluminium
metallic coated and pre-painted steel. We
market a number of Indonesia-only brands,
including PELANGI® steel, ABADI® steel,
and GEMILANG® steel. BlueScope Lysaght
Indonesia services growing building and
construction markets through facilities at
Cibitung, Medan and Surabaya.
Local demand was strong throughout the
year. Enquiries related to the reconstruction
of Aceh have been high, and orders have
been secured for thousands of steel houses.
In 2004/05, our metallic coating and painting
facility at Cilegon continued to operate at
full capacity, producing record tonnages of
metallic coated and painted steel.
Our new Lysaght factory and coating line
warehouse represents the first use of our
own PEB design for a BlueScope Steel facility.
The project was completed within six months
of breaking ground, and boosts Lysaght’s
presence in the Indonesian building products
market. In April, BlueScope Steel entered
into an arrangement with leading Indonesian
company PT Krakatau Steel, under which
they are supplied with steel slab from Port
Kembla Steelworks. The steel slab processed
by Krakatau Steel is then supplied as coil to
some of our Asian facilities. The arrangement
potentially contributes $100 million to the
vital Australia-Indonesia trade relationship.
MALAYSIA
BlueScope Steel Malaysia, a joint venture with
PNB Equity Resource Corporation Sdn Bhd, is
the country’s only local manufacturer of both
ZINCALUME® steel and Clean COLORBOND®
steel. The business supplies markets in
Malaysia, Singapore, Brunei and Sri Lanka.
We operate a metallic coating and painting
facility at Kapar, Selangor, and three BlueScope
Lysaght rollforming plants in Shah Alam,
Kota Kinabalu and Bintulu. In addition,
BlueScope Lysaght operates in Singapore and
Brunei. Production levels of metallic coated
steel were in line with last year, with a portion
going to the export market. The business
achieved record production of painted steel.
Our Malaysian operation is currently a major
supplier of feedstock to our China businesses.
THAILAND
BlueScope Steel (Thailand) Limited is a joint
venture with Thai investor Loxley Public
Company Limited. We operate a cold rolling,
metallic coating and painting facility at
Map Ta Phut in Rayong province, manufacturing
ZINCALUME® steel, Clean COLORBOND®
steel and TRUZINC® zinc coated steel.
BlueScope Lysaght Thailand operates
rollforming facilities at Bangkok, Khon Kaen
and Rayong. In 2004/05, strong demand for
premium products such as ZINCALUME®
steel, Clean COLORBOND® steel and Ultima
Hi Rib® sheeting resulted in an increase in
total domestic volumes over the previous year.
A second metallic coating line in Rayong
costing $80 million has commenced operations.
This expanded plant has a total metal coating
capacity of 385,000 tonnes per annum, some
of which will be used to initially seed markets
in Vietnam and China. Our cold rolling mill
capacity is also being ramped up from 260,000
to 350,000 tonnes per year to better meet the
requirements of two metallic coating lines.
In June 2005, we announced an initial $18 million
investment in a PEB manufacturing facility to
be built at Rayong, adjacent to our metallic
coating and painting operation. This will be
Thailand’s first dedicated PEB facility, and will
enhance our ability to deliver high value steel
solutions to Thailand’s building and construction
markets, and to markets in neighbouring
countries. It is scheduled for commissioning
during the third quarter of calendar year 2006.
BlueScope Steel is Australia’s single
largest investor in Thailand, with more than
$280 million invested (BlueScope Steel share)
over the past eight years.
VIETNAM
BlueScope Lysaght has rollforming facilities
in Hanoi and Ho Chi Minh City. The business
has been operating in Vietnam since 1993. The
resultant increase in demand for our premium
steel building products led to last year’s approval
of a $160 million metallic coating and painting
facility at Ba Ria, near Ho Chi Minh City.
Building construction on this facility is complete,
equipment installation is on schedule, and
we expect to commence operating early in
2006 calendar year. Our production capacity
will ultimately be 125,000 tonnes of metallic
coated, and 50,000 tonnes of painted steel
products per year.
During the year, BlueScope Lysaght Vietnam
commissioned and launched SMARTRUSS™
into the market place. Investment is also
being made in a steel tile manufacturing
facility to commence production in the first
quarter of 2006.
PAGE 24
AUSTRALIA
AUSTRALIAN BUILDING
AND LOGISTICS SOLUTIONS
IMAGINE.
INSPIRE
A COLORBOND® steel roof lends a dynamic profile
to the award-winning Wheatsheaf Residence in Central Victoria.
A celebration of steel (clockwise from right):
Daniel Wyatt and Christine Slade, BlueScope
Water, Keysborough, Victoria; Nambool Visitor
and Accommodation Complex and Environmental
Learning Centre, Victoria; Colonial Brewing
Company, Margaret River, Western Australia.
PAGE 25
CONTINUOUS PRODUCT
INNOVATION, STRONG
BRANDS AND RAPID
RESPONSE KEPT US AHEAD
IN A TIGHT MARKET.
This business includes Lysaght and
BlueScope Water. Both operate in high-value
steel markets that demand advanced products
and a strong customer focus. Our iconic
LYSAGHT® range of steel building solutions
inspires Australia’s architects and builders,
while BlueScope Water offers imaginative
solutions for a changing world. Our logistics
business brings our steel products and
solutions to customers around the world.
BLUESCOPE LYSAGHT
BlueScope Lysaght Australia manufactures
and distributes LYSAGHT® brand steel
products and services to the building and
construction sectors. The brand is almost
100 years old, and holds an enviable
reputation for quality. Lysaght products
are made primarily made from COLORBOND®,
ZINCALUME®, DECKFORM® and GALVASPAN®
steels. These are purchased from our
upstream business and rollformed to make
roofing and walling, structural, formwork,
framing, fencing and home improvement
products. LYSAGHT® branded products are
manufactured and marketed through 34
BlueScope Lysaght sites across Australia.
In 2004/05, BlueScope Lysaght continued to
boost its manufacturing, sales and marketing
capabilities. In December 2004, we acquired
Ranbuild, a successful designer and distributor
of prefabricated steel garages, barns and farm
sheds, with a comprehensive re-seller network
across Australia. Ranbuild has been
operating since 1948, and has a longstanding
commercial relationship with BlueScope Steel.
The acquisition is meeting expectations.
During the year, we launched a number of
new products and services, including Mobile
Roll Forming which offers customers on-site
manufacture of long roof sheeting; W-Dek,
an economical structural decking system; and
Quikform, a load-bearing concrete walling
system that enables fast multi-storey construction.
We also opened several sites during the year.
Our new Home Improvement Centres are
capitalising on rapid growth in Sydney’s west
and Melbourne’s southeast, while new Trade
Distribution Centres have been well received
in Queensland and Victoria.
BLUESCOPE WATER
Water shortages and water quality continue
to be a significant issue for many communities.
The BlueScope Water business complements
an increased emphasis on water conservation
across all BlueScope Steel’s operations.
During 2004/05, BlueScope Water developed
both manufacturing and retail capabilities in
Melbourne, Sydney and Brisbane to service the
growing urban market for tanks and rainwater
harvesting systems. While rainwater tanks are
common in rural Australia, they are becoming
more prevalent in cities, in response to urban
Australians’ greater awareness of water
scarcity. The acquisition of Perth-based Pioneer
Water Tanks in May has further expanded
the product and geographic footprint of
BlueScope Water. Our product portfolio now
includes rural, industrial and commercial water
storage tanks up to 2.5 million litres. We
service Australian markets as well as a growing
export market that covers some 20 countries.
Along with the recently established product
brands HYDRORIB® drainage pipes, WATERPOINT
CLASSIC® and WATERPOINT SLIMLINE®
rainwater tanks, several new brands were
added through the year. These include
AGRIRIB® low pressure irrigation pipe and
GALAXY™ water tanks from Pioneer Water
Tanks. BlueScope Water is well positioned
for growth in this emerging market.
LOGISTICS
BlueScope Steel is one of Australia’s largest
users of domestic road and rail services, and
a major customer of international shipping
services. Strong logistics capability is
essential to the success of our operations.
In 2004/05, our Company faced significant
increases in marine freight costs. However,
our longer-term contracts partly offset the
effect of spot price movements, with iron ore
import freight costs remaining substantially
below prevailing market rates. Nevertheless,
our marine freight costs increased by
$70 million during the year.
To ensure our Company’s new markets are fully
serviced, we developed a number of key
logistics partnerships across our Asian business
in 2004/05. In Australia, strategic improvements
continued, including a significant review of
our rail contracts, as well as a number of
marine and road-based contracts.
PAGE 26
AUSTRALIA
AUSTRALIAN MANUFACTURING MARKETS
INNOVATE.
COLOUR
Australian Manufacturing Markets delivers innovative steel products to the building and
construction, manufacturing, automotive and packaging industries, and to export customers.
This business segment produces COLORBOND® steel and ZINCALUME® steel – two of
Australian industry’s best-known brands. These are foundation products for a wide range
of steel applications, and bring unique structural and aesthetic choices to the market.
2.9
2.7
2.4
3.2
193
119
57
(116)
02
03
04
05
02
03
04
05
REVENUE ($BILLION)
EBIT ($MILLION)
COATED AND BUILDING PRODUCTS
AUSTRALIA
2004/05 was a difficult year for this business
segment, as it dealt with the impact of
dramatic increases in steel feedstock prices,
as well as industrial action. This led to the
segment recording an EBIT loss of $116 million.
The second half-year saw earnings improve
significantly as selling-price increases were
implemented to restore margins. Our decision
to withdraw from the export tinplate
market resulted in $25 million of additional
depreciation and restructure costs. Sales
revenue for the year was up to $3.19 billion,
compared with $2.88 billion the previous year.
WESTERN PORT
Our Western Port facility converts steel
slab from Port Kembla into hot and cold
rolled coil and metallic coated and painted
steel products, including ZINCALUME®
and COLORBOND® steels. Western Port
is an important part of southern Australia’s
manufacturing and building sectors.
Industrial action during the year delayed
completion of planned maintenance on
the hot strip mill, cold strip mill, and other
plants, and deprived Western Port of around
130,000 tonnes of production, at a cost
of $40 million. Regrettably, many of our
customers also experienced considerable
disruption to their operations.
However, a site-based Enterprise Bargaining
Agreement (EBA) was certified in March 2005,
covering a four-year period. Our people put
enormous energy into business recovery during
the year, restoring delivery performance levels
and ensuring our customers are restocked.
Work to expand metallic coating capacity
will be completed around the end of the 2005
calendar year, and will increase this capacity
by 30,000 tonnes per annum.
Replacement of pickle tanks was successfully
completed in January 2005. This will increase
capacity by 15,000 tonnes per annum, and
improve energy costs and operational security.
ILLAWARRA COATED PRODUCTS
In the Illawarra region of NSW, adjacent to
Port Kembla Steelworks, we operate a group
of facilities that convert steel feedstock to
branded BlueScope Steel products such as
COLORBOND® and ZINCALUME® steels.
Tinplate and blackplate for our Australian
packaging industry customers are also
produced at this site.
In 2004/05, our Springhill coated steel plant
again achieved several production records.
For the first time the plant exceeded one million
tonnes in total despatches, up 69,000 tonnes
on last year, to 1.005 million tonnes. This was
the plant’s third successive record year for
total despatches, while it also achieved the
milestone of producing its 20 millionth tonne
of metallic coated steel.
PAGE 27
Separate production records were set by
Springhill’s rolling, metal coating, and
painting operations. The cold rolling
operation produced 934,000 tonnes, up
from 901,000 tonnes the previous year. The
metal coating operation produced 761,000
tonnes, up from 742,000 in 2003/04. The
painting operation produced 158,000 tonnes,
up from 152,000 in 2003/04. This excellent
performance reflects the plant’s strong focus
on quality and manufacturing excellence.
In 2004/05, brownfields initiatives continued
to raise capacity and reduce costs.
Modifications to paintline ovens, completed
in March 2005, will deliver an additional
12,000 tonnes per year, while improvements
to metal coating lines will deliver a full-year
capacity increase of 35,000 tonnes.
After endeavouring for many years to make our
packaging products business profitable in an
oversupplied global market, we decided in
April 2005 to withdraw from the export tinplate
market. This will allow an additional 250,000
tonnes of hot rolled coil to be redirected to
other, more profitable BlueScope Steel products
and markets. During 2004/05, the packaging
products business contributed an EBIT loss
of $109 million to this business segment.
However, BlueScope Steel remains committed
to the Australian packaging market. At the
end of 2004/05, we negotiated new contracts
with our major domestic customers.
Clockwise from top: Canberra International Sports
and Aquatic Centre, a design detail from the Centre;
Leanne Barrett, customer service manager, whose
customers include Australian Manufacturing Markets.
WE DEALT WITH A NUMBER
OF CHALLENGES TO IMPROVE
OUR EARNINGS IN THE
SECOND HALF.
These commitments reflect our strong value
proposition, and will assist the ongoing
viability of our domestic tinplate business.
For the expected impact of the restructure
of packaging products during 2005/06,
please refer to page 68, Note 2 –
‘Australian Equivalents to International
Financial Reporting Standards.’
SERVICE CENTRE NETWORK
BlueScope Steel’s Service Centre network
processes flat steel products for use by the
building and construction, automotive,
whitegoods and rural sectors, and generates
around 40 per cent of our Australian state-
based sales of coated and painted products.
The seven sites offer custom slitting and
shearing services, while three – Acacia Ridge
in Queensland, CRM at Port Kembla, and
Chullora in NSW – also operate paint lines.
In 2004/05, the Service Centre network,
like our other downstream businesses, was
negatively affected by high input costs and
industrial disputes.
During the year, scheduled outages on the
Acacia Ridge and CRM paint lines caused a
slight drop in production, down 4% on last
year to 155,000 tonnes. However, increased
demand saw slitting production up 1% on
2003/04, to 425,000 tonnes.
In December 2004, we announced the
development of a new, state-of-the-art
COLORBOND® facility in western Sydney
at a capital cost of $120 million. The project,
positioned to benefit from the rapid growth
of the surrounding region, is expected to be
operational by the middle of the 2006/07
financial year.
PAGE 28
AUSTRALIA
PORT KEMBLA STEELWORKS
PERFORMANCE.
STRENGTH
WITH RECORD EARNINGS AND
NEAR RECORD PRODUCTION,
PORT KEMBLA STEELWORKS
CONSOLIDATED ITS REPUTATION.
Port Kembla is among the world’s best
Steelworks, and in 2004/05, it once again
demonstrated steelmaking strength.
International and domestic pricing for hot
rolled coil, steel slab and plate was very
strong. These high steel prices, combined
with near record production levels led to
record earnings with the Hot Rolled Products
segment reporting EBIT of $1.338 billion.
This fine performance is a credit to all
those who have worked hard to improve
the Steelworks over many years.
Located 80 kilometres south of Sydney,
Port Kembla Steelworks is a fully integrated
operation with all three major production
phases – ironmaking, steelmaking and shaping
– taking place on site. Port Kembla uses the Basic
Oxygen Steelmaking process to produce steel
slab, hot rolled coil and plate. It employs around
3,500 people, and has the advantages of a
deepwater port and close proximity to coal mines.
Port Kembla is a highly cost-efficient
steelmaking facility by world standards,
and our capital investment program is aimed
at maintaining this edge.
PAGE 29
Port Kembla Steelworks (from left):
raw materials preparation; slabmaking;
Matt Burke at work in our Plate Mill.
In 2004/05, Port Kembla maintained near-record
raw steel production levels, with 5.123 million
tonnes produced in 2004/05, compared with
5.145 million tonnes the previous year.
The Steelworks also set a record for hot rolled
coil production, achieving 2.522 million tonnes,
up from the record 2.501 million tonnes produced
in 2003/04. This was due to improvements
in all areas of mill operations, including the
slab re-heat furnace throughput rate.
A marked improvement was achieved in
finished plate production, with 374,000 tonnes
produced, up from 349,000 tonnes last year,
due to continuous improvements in plant
reliability, and working extra production shifts
to meet high domestic demand. Improvements
to process stability also led to the best coke
production levels since 2001, with 2.374
million tonnes produced during the year.
Export despatches for the year totalled
1.4 million tonnes, with Port Kembla
Steelworks continuing to make a major
contribution to Australia’s balance
of payments.
To ensure Port Kembla Steelworks’ excellence,
we continue to invest in expansion and
maintenance. Our $100 million hot strip mill
expansion is on schedule for completion in
the first quarter of 2007 financial year. This
will increase capacity by 400,000 tonnes to
2.8 million tonnes per year. Civil excavations
are almost finished, and work is progressing
well on the furnace structure.
During the year, we successfully replaced
the No. 3 Basic Oxygen Steelmaking vessel,
on time and under budget, after 21 years of
operation and 33.6 million tonnes produced.
The Blast Furnace No. 5 reline study is
progressing, with a final decision on the scope
of work expected in 2005/06. The last furnace
reline was in 1991. At this stage, we do not
propose to significantly increase capacity.
In 2004/05, new iron ore supply contracts
were entered into with four suppliers. These
contracts provide for the Company's medium
term iron ore needs.
Our premium steel brands, XLERPLATE® and
XLERCOIL® have shown strong sales growth
since their launch in 2003/04.
3.9
1,338
2.8
2.6
2.1
564
471
97
02
03
04
05
02
03
04
05
REVENUE ($BILLION)
EBIT ($MILLION)
HOT ROLLED PRODUCTS
PAGE 30
NEW ZEALAND
UNIQUE.
PROUD
THIS BUSINESS TOOK FULL ADVANTAGE
OF STRONG MARKET DEMAND,
REWARDING THE EFFORTS OF THOSE WHO
HAVE WORKED HARD TO IMPROVE IT.
New Zealand Steel is a unique steel business,
and in 2004/05 it showed its true performance
capabilities. Many people have worked hard
to improve this operation, and their efforts
have proved fruitful, with the business
taking full advantage of high demand in
the domestic construction market. Export
prices also rose, overcoming the effects
of a strong New Zealand dollar and higher
maintenance costs.
Our Steelworks, located at Glenbrook, south
of Auckland, is a unique, fully integrated
operation covering the entire steel supply chain.
It uses our iron-rich sands and locally sourced
coal to produce around 600,000 tonnes of steel
slab each year. Slabs are processed into hot and
cold rolled products, which are then on-sold, or
further processed into products such as hollow
sections, galvanised steel, and ZINCALUME®
steel and COLORSTEEL®.
PAGE 31
The business operates an extensive customer
service network, selling to domestic and
international markets.
In 2004/05, New Zealand Steel, including
our Pacific Islands business, achieved EBIT of
$183 million, an increase of 195% over last year,
showing the benefit of higher domestic and
export prices. Strong prices for the steelmaking
by-product vanadium slag also contributed.
In 2004/05, New Zealand Steel achieved
record domestic despatches of 315,000 tonnes,
compared with 272,000 tonnes the
previous year.
Slab production was 610,400 tonnes, slightly
down on last year’s figure of 611,300 tonnes,
due to scheduled maintenance work. Major
scheduled shutdowns in the iron plant, steel
plant and hot strip mill occurred during the
second half-year.
The metallic coating line achieved an annual
production record of 217,000 tonnes, up from
the previous record of 197,000 tonnes set in
2003/04, and despite a scheduled shutdown. An
induction oven was successfully commissioned
in February, and capacity is now 230,000 tonnes
per annum. Paint line production was 52,000
tonnes, consistent with the previous year.
An oven upgrade, completed in February, has
lifted capacity to 60,000 tonnes per year.
In May, we reached agreement on a
three-year Employment Contract. Procurement
initiatives provided cost savings of around
NZ$2.5 million, and will continue to deliver
savings in 2005/06. During the year, we made
improvements to management systems, and
also replaced ageing finance, maintenance and
supply systems at a cost of $NZ13.5 million.
We expect these changes to further enhance
productivity in 2005/06.
756
183
590
549
467
62
44
12
02
03
04
05
02
03
04
05
REVENUE ($MILLION)
EBIT ($MILLION)
NEW ZEALAND STEEL
AND PACIFIC ISLANDS
Clockwise from left: Botany Downs Secondary School
showcasing ZINCALUME® steel; New Zealand Steel
employee Peter Duffey, Fitter/Turner – Rolling Mills;
Iron sands mining operations.
PAGE 32
NORTH AMERICA
BUILD.
TRANSFORM
North America is an exciting part of
BlueScope Steel’s world. While recent strong
steel prices have favoured our upstream
businesses, we are working hard to enhance
our downstream operations, positioning our
Company to become this region’s leading
steel building solutions business.
Our North America portfolio consists of four
businesses: North Star BlueScope Steel
operates a mini-mill at Delta, Ohio in which
we hold a 50% share; Butler Buildings is the
country’s leading designer and producer of
pre-engineered steel building systems (PEBs);
Vistawall manufactures aluminium and
glass architectural products; Castrip LLC
is a joint venture company commercialising
new steelmaking technology.
In addition, our International Markets
business brings Bluescope Steel products
from Australia, New Zealand and elsewhere
to our customers in North America.
In 2004/05, North Star BlueScope Steel
delivered a record result, due to strong
international steel prices and operational
excellence. Our newly acquired Butler
Buildings business is being successfully
transformed and integrated into the
BlueScope Steel family. Our Vistawall
business is robust, and growing well without
the capital constraints of previous ownership,
while Castrip LLC is providing exciting
glimpses of the future.
NORTH STAR BLUESCOPE STEEL
As with our other steelmaking businesses,
North Star BlueScope Steel enjoyed an
excellent year in 2004/05. The business
achieved a substantial increase in EBIT,
contributing $194 million to BlueScope
Steel’s results. Higher domestic prices for
steel in the United States, combined with
excellent operational performance, enabled
North Star BlueScope Steel to achieve its
highest ever EBIT result, despite rises in
scrap feedstock costs.
Our partner in this venture is North Star Steel,
a subsidiary of Cargill Inc. The combined
experience and efforts of the partners,
together with state-of-the-art technology,
has made this business an industry leader. In
November 2004, North Star BlueScope Steel
LLC made its final debt repayment, and is
now debt-free. The business has since begun
paying dividends to owners. In 2004/05, the
business set a number of records. Production
was 1.824 million metric tonnes, exceeding
forecasts, and up from the previous record
of 1.710 million metric tonnes in 2003/04.
This was due to increased slab caster
throughput, improvements to the Electric
Arc Furnaces and rolling mill, and overall
operational strength.
Steel industry customers again voted this
business ‘number one flat rolled steel
supplier in North America’ in the prestigious
Jacobson survey. North Star BlueScope Steel
beat 30 other steel mills in areas such as
quality, service, on-time delivery and
overall satisfaction.
WE ARE TRANSFORMING OUR
NORTH AMERICAN BUSINESSES,
EXTENDING OUR VALUE CHAIN
AND CREATING THE REGION’S
LEADING STEEL BUILDING
SOLUTIONS OPERATION.
1,135
(28)
(20)
956
04*
05
04*
05
REVENUE ($MILLION)
EBIT ($MILLION)
COATED AND BUILDING PRODUCTS
NORTH AMERICA
* normalised results
PAGE 33
(Left) The Applied Industrial Technologies Office in Cleveland, Ohio features a stunning Vistawall facade.
(Right) The Liquid Plastic company selected a customised BUTLER® PEB.
BUTLER BUILDINGS
Since acquiring Butler Manufacturing Company
in April 2004, we have implemented a fast-
paced and broad ranging transformation
program to realise the latent value of this
iconic North American business. Butler Buildings
is the industry’s leading brand, with the
strongest distribution network. By combining
the best of Butler with BlueScope Steel,
we aim to create a distinctive steel-based
building solutions business in North America.
We are making good progress toward this goal.
Butler Buildings supplies PEBs for many
applications, including warehouses,
manufacturing facilities, rural buildings, offices,
retail, schools, aircraft hangars and stadiums.
It is market leader in non-residential PEBs
in the United States, Canada and Mexico,
and is supported by a sales network of
1,100 Butler Builders.
During 2004/05, we undertook a program
to strengthen Butler Buildings. This included
closure of the high-cost Galesburg facility,
numerous cost reduction initiatives, and
management structure and process
improvements.
We also introduced steel feedstock from
North Star BlueScope Steel and linked steel
supply from our Australasian operations
to Butler Buildings, via our longstanding
North American customers. Our review of
non-essential assets continued with the
divestment of the disused Alabama facility
in May, for US$1.3 million, while the sale of
the Galesburg facility is progressing.
Butler Buildings improved its performance
in 2004/05, despite inconsistent market
demand, the previous state of the business,
the scale and speed of our transformation
program, and high and volatile prices for
steel and other raw materials. Shipments
were steady at 186,000 tons – the same
as the previous year.
Butler Buildings has excellent design and
technical capabilities, strong, well-recognised
brands in a high-value market, and is
providing support for global downstream
growth initiatives such as our China
business. We are reinvigorating Butler’s
licensee relationships, and believe this
business holds great potential as a strong
platform for growth in North America.
VISTAWALL
2004/05 was a year of solid performance for
Vistawall, which manufactures and markets
extruded aluminium store-fronts, curtain walls,
doors, windows and skylights. Aluminium
despatches were up 12% (by weight) on the
previous year and the business gained an
estimated 2% market share. Profitability was
strong, in line with expectations and despite
rising aluminium feed costs.
Following our acquisition of Vistawall, an
independent review confirmed our expectations
of this business. It is strong in operational
performance, sales capability, and product
range, while service levels and growth
potential are high.
We have invested to increase our sales and
marketing capability, while our expanded
range of service centres will boost our market
presence in sales and engineering. During the
year, we launched a number of new products,
including Solar Eclipse sunshades, Reliance
Wall, and Terra Swing terrace doors. We
also approved a major expansion of our
Tennessee plant to double our extrusion
capacity – this will be commissioned on
schedule in late 2005 calendar year.
CASTRIP
Castrip LLC is a joint venture company
developing a revolutionary strip casting
process that allows direct production of thin,
hot rolled coil from molten steel, bypassing
slab casting, hot rolling, and potentially
cold rolling. This technology was pioneered
at Port Kembla Steelworks. Our partners in
Castrip LLC are the US Steel company, Nucor,
and Japan’s IHI Heavy Industries.
The world’s first commercial Castrip® facility
operates at Nucor’s Crawfordsville, Indiana
plant, allowing Castrip® material to be
introduced to the market. In 2004/05, the
Castrip® process moved closer to large-scale
production with Nucor announcing its intention
to build more Castrip® facilities. A number
of steelmakers have expressed interest
in acquiring a Castrip® licence, and
negotiations are continuing.
PAGE 34
COMMUNITY
OUR
HOMES
WE EXPRESSED COMMUNITY SUPPORT THROUGH
A WIDE RANGE OF PROJECTS, INCLUDING OUR MAJOR
TSUNAMI RELIEF EFFORT.
Our Bond states that ‘our communities are
our homes.’ As well as succeeding as a
business, we strive to succeed as a citizen
of those communities in which we operate.
Our community programs provide support for
youth, the disadvantaged, the environment,
the arts and cultural diversity. Each year
we run hundreds of these programs, aimed
at improving and enriching the lives of our
fellow citizens. An example is our Australian
Workplace Giving program, introduced during
the year, which enables Australian employees
to contribute financially to partner charities,
supported by matched giving by the Company.
In addition to community programs and
projects, we undertake community work in
direct response to emergencies and disasters.
This work is often based on our understanding
of steel building materials and design. The
provision of relief housing is a typical example.
TSUNAMI RELIEF
The worst natural disaster during 2004/05
was the Asia Tsunami. Donations to the Red
Cross Asia Quake and Tsunami Appeal from
BlueScope Steel and our employees totalled
almost $1.3 million. Our Company made an
initial donation of $200,000 in late December,
and then announced we would match employee
donations dollar for dollar. When the Appeal
closed on January 31, direct employee
donations had reached $532,000.
Aside from the Appeal, employees and the
Company have contributed to the tsunami
relief effort in a number of ways. BlueScope
Steel’s businesses in Asia have donated steel
buildings and building materials, and individual
employees in the region have donated food,
clothing and other essential supplies, as well
as giving their time to assist embassies and
others in relief work.
Our Company has also worked with
architects, designers and aid agencies,
preparing designs for emergency
aid buildings. BlueScope Water has
manufactured and shipped over one hundred
rainwater tanks from Australia to Banda
Aceh, Indonesia. Many of the worst affected
countries, such as Indonesia, Malaysia
and Thailand, are countries in which we
have operations, but thankfully, none of our
employees were injured. BlueScope Steel
continues to support the rebuilding effort.
WORKING WITH RED CROSS
BlueScope Steel is involved with many community groups, including Red Cross.
Over the last 12 months, we worked closely with Red Cross in a number of countries.
The following letter acknowledges our involvement.
Australian Red Cross offers sincere thanks to the staff and management of BlueScope
Steel for your generous support over the last 12 months. Such support has helped to
fund a range of vital domestic and international programs targeting vulnerable people,
including those affected by the devastating Boxing Day Tsunamis.
With the help of organisations like BlueScope Steel, Australian Red Cross raised
$112 million towards our Asia Quake and Tsunami Appeal, of which $58 million has
already been spent or committed. Such tremendous funding support enabled us to
reach over one million people in affected areas with vital aid including food, medical
assistance, safe water, shelter and clothing.
Our relief efforts are now turning to rehabilitation and recovery. Australian Red Cross
has so far identified 30 longer-term programs of assistance, such as the community
housing project on Indonesia’s Nias Island. There, the Red Cross is helping to build
254 houses, nine bridges, two schools, three clean water systems and one first aid
centre. In the Maldives, a Red Cross tsunami waste and debris clearance project will
benefit some 50,000 affected people across 70 islands.
In addition to its support of our Tsunami Appeal, the staff and management of
BlueScope Steel have provided ongoing support through workplace giving. Dollars
raised through this initiative have helped to fund a range of community programs in
Australia, including our Good Start Breakfast Club, which serves more than 300,000
healthy breakfasts annually to primary school kids in areas of greatest need around
Australia. Australian Red Cross is proud to have been chosen as a participant in
BlueScope Steel’s Workplace Giving program and we thank all staff members who
have generously supported our cause.
PAGE 35
Support for our communities (clockwise from left): Australian Surf Lifesaving; Thai children
in front of relief housing in Phuket; Tsunami fund raising concert in Yogjakarta, Indonesia;
BlueScope Steel Youth Orchestra.
PAGE 36
HEALTH AND SAFETY
OUR
PEOPLE
OUR FUNDAMENTAL BELIEF
IS THAT ALL INJURIES CAN BE PREVENTED.
BlueScope Steel facilities in
(clockwise from top): Sunshine, Victoria,
New Zealand and Indonesia.
For every employee at every site,
safety comes first.
PAGE 37
68
60
52.2
47.1
4.8
4.1
3.4
3.4
2.8
1.8
1.9
1.4
0.8
0.6
29.1
22.4
21.9
17
12.2
11.3
9.3
9.2
6.8
4.4
29
16
14
8
94
95
96
97
98
99
00
01
02
03
2004
2005
94
95
96
97
98
99
00
01
02
03
2004
2005
LOST TIME INJURY FREQUENCY RATE
Includes contractors from 1996
Includes Butler performance data from July 2003
Excludes Butler performance
MEDICALLY TREATED INJURY FREQUENCY RATE
Includes contractors from 2004
Includes Butler performance data from July 2003
Excludes Butler performance
BlueScope Steel has a goal of Zero Harm. This goal is based on our
fundamental belief that all injuries can be prevented, and it drives continuous
improvement in health and safety performance at every level of the Company.
BlueScope Steel employees and contractors continue to work safer. Less
people are being injured than ever before, and our Company is being cited
as best practice in industrial safety. However, this does not diminish our drive
for yet more improvements.
In 2004/05, we improved our record low injury
performance, recording a Lost Time Injury
Frequency Rate (LTIFR) of less than one lost time
injury per million hours worked. This compares
exceptionally well to an international industry
average of just under 10. In the majority of
Company facilities, the Medical Treatment
Injury Frequency Rate (MTIFR) also continues to
decrease to record-best levels. The graphs on this
page show the impact of incorporating the Butler
performance data from July 2003. This business
has now embraced our safety journey.
Tragically, we experienced a fatality at our
New Zealand Steel operations just after the close
of the 2004/05 financial year. In the past eight years,
BlueScope Steel has had five fatalities. This equates
to a fatality every 55 million hours worked, which
is a marked improvement on historical performance
and less than half the rate of the international iron
and steel industry. But the only acceptable number
is zero, and we are doing everything possible
to achieve this.
In 2004/05, 78% of our people were involved in
conducting monthly safety audits, and the majority
of teams have every person involved in audits on a
monthly basis. Our newly acquired North American
businesses have also made good progress. Prior to
acquisition, audit participation rates were very low in
these businesses, but in one year, they have achieved
safety auditing involvement levels of over 60%. Another
proactive strategy sees our people involved in more
‘near miss’ reporting than ever before. In the past year,
over 23,390 near misses were reported.
BlueScope Steel has a comprehensive Occupational
Health and Safety Management System in place, which
is mandatory in all our operations. The Management
System focuses on three basic aspects: safe and
healthy people, safe systems, and a safe and tidy plant.
Under the System, 23 Safety Management Standards
have been established. Each business is required
to demonstrate compliance with these Standards.
We are pleased to report that during the year, the
self-assessment process showed a continuous
improvement in meeting these Standards.
COMMUNITY, SAFETY AND ENVIRONMENT REPORT
This Report will be available December 2005.
Shareholders wishing to register and receive a copy
of the Report can do so by visiting our website
www.bluescopesteel.com or by contacting
BlueScope Steel Direct in Australia on 1800 800 789.
PAGE 38
BOARD
OF DIRECTORS
GRAHAM KRAEHE, AO
Chairman (Independent), Age 62, BEc
Director since: May 2002
Extensive background in manufacturing and
was Managing Director and Chief Executive
Officer of Southcorp Limited from 1994 to
February 2001. As at the date of this report,
he is the Chairman of the National Australia
Bank, appointed on August 1997. He has
announced his retirement from the bank
effective September 2005. A Board member
of Djerriwarrh Investments Limited since
July 2002, the Innovation Economy Advisory
Board for Victoria since December 2002 and
a member of the Chairman’s Panel of the
Business Council of Australia. Mr Kraehe was
a non-executive director of News Corporation
Limited from January 2001 until April 2004
and Brambles Industries Limited from
December 2000 until March 2004.
He brings skills and experience in manufacturing
management and in companies with
substantial and geographically diverse
industrial operations. Mr Kraehe’s experience
with a wide range of organisations is relevant
for his role as Chairman of the Board.
RON MCNEILLY
Deputy Chairman (Independent),
Age 62, BCom, MBA, FCPA
Director since: May 2002
Deputy Chairman of the Board with over 30 years’
experience in the steel industry. He joined BHP
in 1962, and until December 2001 held various
positions with the BHP (now BHP Billiton) Group,
including Executive Director and President BHP
Minerals, Chief Operating Officer, Executive
General Manager and was Chief Executive
Officer BHP Steel until 1997. The latter role
developed his knowledge of many of the
businesses comprising BlueScope Steel today.
He is Chairman of Melbourne Business School
Limited, Chairman of Worley Parsons Limited
and a director since October 2002, and a director
of Alumina Ltd since December 2002. Vice
President of the Australia Japan Business
Cooperation Committee and a member of the
Council on Australia Latin America Relations.
A director of Ausmelt Limited from September
2002 until November 2004.
PAGE 39
TAN YAM PIN
Non-Executive Director (Independent),
Age 64, BEc (Hons), MBA, CA
Director since: May 2003.
KEVIN MCCANN, AM
Non-Executive Director (Independent),
Age 64, BA LLB (Hons), LLM
Director since: May 2002
A chartered accountant by profession,
formerly Managing Director of Fraser and
Neave Group, one of South-East Asia’s
leading public companies, and Chief Executive
Officer of its subsidiary company, Asia Pacific
Breweries Limited. A Member of the Public
Service Commission of Singapore since 1990.
Chairman of PowerSereya Limited (Singapore)
and is also a member of the Supervisory
Board of The East Asiatic Company Limited
A/S (Denmark), Keppel Land Limited
(Singapore) Singapore Post Limited, Great
Eastern Holdings Limited, CISCO Security Pte.
Ltd, and International Enterprise Singapore.
He resigned as director of FHTK Holdings Ltd
(Singapore) in 2004.
Mr Tan resides in Singapore. He brings
extensive knowledge of Asian markets, an
area of strategic importance to BlueScope
Steel. His financial and leadership skills
complement the skills on the Board.
KIRBY ADAMS
Managing Director and Chief Executive Officer,
Age 49, BSc (Industrial Eng), MBA
Director since: May 2002.
Appointed Managing Director and
Chief Executive Officer of BlueScope Steel
Limited in July 2002. Joined the BHP group
in 1995 and held various positions including
President BHP Services, Group General
Manager and Chief Executive Officer BHP
Service Companies, Corporate General
Manager Planning and Development and
President BHP Steel since February 2000.
Vice-Chairman of the International Iron
and Steel Institute since October 2004
and is a member of the Business Council
of Australia.
A non-Partner Chairman of Partners until
the end of 2004 of Allens Arthur Robinson,
a national law firm. A partner of the firm from
1970 until June 2004, specialising in mergers
and acquisitions, mineral and resources law
and capital markets transactions.
Currently Chairman of Healthscope Limited
since March 1994, Origin Energy Limited since
February 2000, Triako Resources Limited since
April 1999, and the Sydney Harbour Federation
Trust. Lead independent director of Macquarie
Bank Limited and appointed as director in
December 1996, member of the Defence
Procurement Advisory Board and has served on
the Boards of Pioneer International Limited, Ampol
Limited and the State Rail Authority of New
South Wales. A member of the Takeovers Panel
and a consultant to Deloitte Touche Tohmatsu.
Brings extensive legal expertise, commercial
experience as a director of a number of major
listed companies and experience in corporate
governance to the Board.
DIANE GRADY
Non-Executive Director (Independent), Age 57,
BA (Hons), MA (Chinese Studies), MBA
Director since: May 2002.
A full time non-executive director of various
companies since 1994. Currently a director
of Woolworths Limited since July 1996 and of
Wattyl Limited since December 1994. She is
Governor of Ascham School. Formerly, a Trustee
of the Sydney Opera House, a director of the
Australian Institute of Management (New South
Wales). She was a director of Lend Lease
Corporation from June 1994 until July 2002.
As a former partner with McKinsey & Co,
Ms Grady spent 15 years consulting to clients
in a broad range of industries on strategic
and organisational issues. In Australia, led
the firm’s Marketing, Retailing and Consumer
Goods practice and was a global leader of
McKinsey’s Change Management Centre.
PAUL RIZZO
Non-Executive Director (Independent),
Age 60, BCom, MBA
Director since: May 2002.
A Director of National Australia Bank
Limited since September 2004. A member
of the Advisory Board of Mallesons Stephen
Jaques, and Chairman of Foundation for
Very Special Kids. Formerly Chief Executive
Officer and Dean, director and Professorial
Fellow of the Melbourne Business School.
Held positions as Group Managing
Director – Finance and Administration of
Telstra Corporation Limited, Chief General
Manager – Retail Banking Commonwealth
Bank of Australia, Chief Executive Officer
of State Bank of Victoria and a range of
senior executive positions at Australia and
New Zealand Banking Group Limited. His
extensive financial experience is valuable
to the Board and in his role as Chairman
of the Audit and Risk Committee.
PAGE 40
DIRECTORS'
REPORT
(cid:129) Australia: a new painting facility (capacity: 120,000
tonnes per annum) in western Sydney. The facility
will cost approximately $120 million and is
expected to commence operation in early calendar
year 2007; and
(cid:129) Australia: an expansion of the Hot Strip Mill
(capacity increase: 2.4 to 2.8 million tonnes per
annum) at the Port Kembla Steelworks. The expansion
will cost approximately $100 million and is expected
to commence operation in the second half of
calendar year 2006.
b) The Company expanded its Australian
manufacturing, sales and distribution capabilities
through a number of acquisitions in the BlueScope
Lysaght and BlueScope Water businesses.
c) In March 2005, the Company decided to withdraw
from its unprofitable export tinplate business,
commencing from April 2005, resulting in the
planned closure of some operating lines within
two years.
d) On 1 July 2004, the Company completed a debut
debt raising in the US private placement market
totalling US$300 million with terms of 7 years
(US$100 million) and 10 years (US$200 million).
MATTERS SUBSEQUENT TO THE END
OF THE FINANCIAL YEAR
No matters or circumstances have arisen since
30 June 2005 that have significantly affected, or
may significantly affect, the BlueScope Steel Group
operations, results or state of affairs in future.
DIVIDENDS
BlueScope Steel paid a fully franked dividend for
the year ended 30 June 2004 of 18 cents per share
and a special dividend of 10 cents per share in
October 2004, and a fully franked interim dividend
of 18 cents per share in April 2005 to its shareholders.
On 23 August 2005, it was announced that
Directors determined to pay a final fully franked
dividend of 24 cents per share, which is to be paid
on 24 October 2005 (record date 5 October 2005)
to shareholders. The Directors have also announced
a fully franked special dividend of 20 cents payable
on 24 October 2005.
DIRECTORS’ REPORT FOR THE YEAR
ENDED 30 JUNE 2005
The directors of BlueScope Steel Limited
(“BlueScope Steel”) present their report on the
consolidated entity (“BlueScope Steel Group”)
consisting of BlueScope Steel Limited and its
controlled entities for the financial year ended
30 June 2005.
PRINCIPAL ACTIVITIES
During the year the principal continuing activities
of the BlueScope Steel Group, based principally in
Australia, New Zealand, North America, China and
elsewhere in Asia, were:
a) Manufacture and distribution of flat steel products;
b) Manufacture and distribution of metallic coated
and painted steel products;
c) Manufacture and distribution of steel building
products; and
d) Design and manufacture of pre-engineered steel
buildings and building solutions.
SIGNIFICANT CHANGES IN STATE
OF AFFAIRS
The following significant events occurred during
the year:
a) The Company is progressing a range of growth
initiatives aimed at expanding the manufacture and
distribution of metallic coating and painted steel
products. The following projects were approved:
Approved in 2003/2004
(cid:129) Thailand: installing a second metallic coating line
(capacity: 200,000 tonnes per annum) at the
Map Ta Phut plant. The facility will cost approximately
$80 million and is scheduled for completion in
August 2005;
(cid:129) Vietnam: the construction of a new metallic coating
(capacity: 125,000 tonnes per annum) and painting
(capacity: 50,000 tonnes per annum) facility. The
facility will cost approximately $160 million and is
expected to commence operation in early calendar
year 2006; and
(cid:129) China: a new metallic coating (capacity: 250,000
tonnes per annum) and painting (capacity: 150,000
tonnes per annum) facility. The facility will cost
approximately $280 million and is expected to
commence operation in mid calendar year 2006.
Approved in 2004/2005
(cid:129) China: the Group’s first Butler PEB/Lysaght facility.
The facility will cost approximately $45 million and
is expected to commence operation mid calendar
year 2006;
(cid:129) India: three new facilities delivering a range of
Lysaght and Butler products. The facilities will cost
approximately $100 million and will progressively
commence operations during 2006 and 2007;
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 41
REVIEW AND RESULTS OF OPERATIONS
The BlueScope Steel Group comprises five business reporting segments: Hot Rolled Products, New Zealand and Pacific Steel Products, Coated and Building Products
Australia, Coated and Building Products Asia, and Coated and Building Products North America. A description of the operations comprising these segments is provided
in Note 3 to the Annual Financial Report.
Segment Revenues
2005
$M
Segment Revenues
2004
$M
Segment Results
2005
$M
Segment Results
2004
$M
Sales revenue
Hot Rolled Products
New Zealand and Pacific Steel Products
Coated and Building Products Australia
Coated and Building Products Asia
Coated and Building Products North America
Corporate and Group
Intersegment eliminations
Other revenue
Operating revenue/EBIT
Net unallocated expenses
Profit from ordinary activities before income tax
Income tax expense
Profit from ordinary activities after income tax expense
Net profit attributable to outside equity interest
Net profit attributable to members of BlueScope Steel
Earning per share (cents)
3,939.5
756.4
3,190.3
1,051.3
1,134.4
359.9
(2,494.1)
43.9
7,981.6
2,838.6
590.2
2,883.5
698.6
191.5
372.9
(1,837.9)
32.2
5,769.6
1,338.5
182.8
(115.7)
81.8
(19.7)
(70.2)
(9.1)
1,388.4
(34.3)
1,354.1
(347.0)
1,007.1
(0.1)
1,007.0
137.4
563.8
62.1
192.9
104.0
(8.8)
(64.0)
(32.1)
817.9
(14.5)
803.4
(201.6)
601.8
(17.7)
584.1
77.8
Building on the strong performance of previous years,
the BlueScope Steel Group has achieved a record
financial result, delivering a net profit of $1,007.0
million and earnings per share of 137.4 cents.
The Company’s revenue increased $2,212.0 million to
$7,981.6 million, primarily achieved through acquisitions,
improved prices, and a favourable shift in the mix of
despatches from export to domestic. These were partly
offset by a reduction in the value of USD-denominated
sales, due to the strengthening of the Australian dollar.
Net profit after tax increased $422.9 million to a
record $1,007.0 million. This improvement was due
primarily to higher international and domestic steel
prices, improved margins from North Star BlueScope
Steel, and a favourable shift in mix of despatches
from export to domestic. These were partly offset
by higher raw material and operating costs, higher
planned repairs and maintenance to improve operating
stability, higher business development costs, and the
net impact of a higher AUD/USD exchange rate on
USD-denominated revenues and costs.
Hot Rolled Products
The earnings contribution from the Hot Rolled Products
segment increased as a result of stronger hot rolled
coil and slab pricing (to export, domestic and
inter-segment customers), and a substantial increase
in margins from North Star BlueScope Steel. These
were partly offset by higher scrap, coking coal, iron
ore, alloys and freight costs, together with an increase
in repairs and maintenance expenditure to ensure
reliability of operations, which underpins increased
production capacity together with the optimisation
of asset lives.
New Zealand and Pacific Steel Products
The earnings contribution from the New Zealand and
Pacific Steel Products segment increased as a result of
domestic and export price increases, and higher prices
for vanadium slag (a steel making by-product) and
continuing strong New Zealand domestic sales volumes.
Coated and Building Products Australia
The earnings contribution from the Coated and
Building Products Australia segment was significantly
affected by higher hot rolled coil and slab feed costs
(from Hot Rolled Products), which compressed margins
despite price increases in both domestic and export
markets. Earnings were also affected by industrial
action at the Western Port facility, an increase in
repairs and maintenance and restructuring costs
associated with the withdrawal from export tinplate.
These were partly offset by a favourable shift in mix
of despatches from export to domestic.
Coated and Building Products Asia
The earnings contribution from the Coated and Building
Products Asia segment was lower primarily due to an
increase in business development and pre-production
costs associated with developments in Vietnam,
Thailand, India and China, together with operating cost
increases. These were partly offset by sales volume
increases as a result of market growth initiatives
and the integration of BlueScope Butler China. The
segment maintained gross margins despite significant
increases in steel feed and coating metal costs.
Coated and Building Products North America
Butler Manufacturing Company, a leading manufacturer
of pre-engineered buildings, was acquired in April
2004 bringing a new suite of building and construction
products to the Company. This new segment delivered
negative earnings for the year. However, when
compared with comparative period earnings normalised
for discontinued operations and acquisition related
costs, earnings improved $8 million. This improvement
was achieved primarily through higher margins but was
negatively affected by costs associated with the early
closure of the Galesburg, Illinois plant and start-up
costs of a replacement plant at Jackson, Tennessee.
PAGE 42
LIKELY DEVELOPMENTS
AND EXPECTED RESULTS
Demand for BlueScope Steel’s products is expected
to remain firm during the 2005/06 financial year.
Spot prices for commodity steel products in global
markets have fallen in recent months and currently
appear to have stabilised or increased in certain
regions. Increases in iron ore and coal prices will raise
BlueScope Steel’s costs by approximately $380 million
(pre-tax) compared to the 2004/05 financial year.
The Company is unlikely to be able to fully recover
these cost imposts and therefore upstream margins
in the Hot Rolled Product segment will likely be
lower. However, we expect margins in our midstream
coating/painting and downstream roll forming and
pre engineering building businesses will improve.
During the 2005/06 financial year, the Company will
continue to work on improving those factors within
its control.
BOARD COMPOSITION
Particulars of the skills, experience, expertise and
special responsibilities of the Directors are set out
on pages 38–39 under Information on Directors and
form part of this report.
COMPANY SECRETARIES
Michael Barron Chief Legal Officer and Company
Secretary, BEc, LLB, ACIS
Michael Barron is responsible for the legal affairs of
BlueScope Steel and for Company secretarial matters.
Prior to joining BlueScope Steel, Mr Barron held the
position of group general counsel of Orica Limited
where he was employed for 16 years, holding a variety
of legal positions in Australia and overseas.
Lisa Nicholson, B.Sc., LLB, ACIS
Lisa Nicholson is responsible for Company secretarial
matters for BlueScope Steel and its subsidiaries.
Ms Nicholson has company secretarial and legal
experience gained from working with Coles Myer Ltd,
Lend Lease Employer Systems Ltd and DaimlerChrysler
Australia/Pacific Pty Ltd.
The following were Directors for the full financial
year: Graham John Kraehe AO (Chairman), Ronald
John McNeilly (Deputy Chairman), Kirby Clarke Adams
(Managing Director and Chief Executive Officer),
Diane Jennifer Grady, Harry Kevin (Kevin) McCann
AM, Paul John Rizzo and Tan Yam Pin. John Crabb
resigned effective 28 July 2004.
Laurence Mandie, B.Sc. (Hons), LLB (Hons)
Laurence Mandie is a corporate counsel with
BlueScope Steel and is responsible for the legal
affairs of the Australian Building and Logistics
Solutions businesses, and corporate functions such
as finance and IT. Mr Mandie has extensive legal
experience gained from working in the Mergers and
Acquisitions group of Freehills, a national law firm
and on secondment, as Acting General Counsel and
Company Secretary of Pasminco Limited.
PARTICULARS OF DIRECTORS’
INTERESTS IN SHARES AND OPTIONS
OF BLUESCOPE STEEL LIMITED
Director
Ordinary shares
Share rights
G J Kraehe
K C Adams *
D J Grady
H K McCann
R J McNeilly
P Rizzo
Y P Tan
109,676
1,825,881
36,358
21,913
514,587
24,702
11,980
0
945,000
0
0
0
0
0
* Mr Adams’ current holding of BlueScope Steel Limited shares
includes 685,000 arising from the BlueScope Steel long term
incentive plan. The remaining shares have been acquired with his
own funds.
MEETINGS OF DIRECTORS
The attendance of the current Directors at Board and Board Committee meetings from 1 July 2004 to 30 June 2005 is as follows:
BOARD MEETINGS
COMMITTEE MEETINGS
Audit and Risk
Remuneration
and Organisation
Committee
Health, Safety
& Environment
Nomination
G J Kraehe
K C Adams
D J Grady
H K McCann
R J McNeilly
P Rizzo
Y P Tan
A
13
13
13
13
13
13
13
B
13
13
13
13
13
13
12
A
–
–
–
5
5
5
–
B
*5
*4
–
5
5
5
–
A
5
–
5
–
5
–
5
B
5
*3
5
–
5
–
5
A
4
4
4
4
4
4
4
B
4
4
4
4
4
4
4
A
5
–
5
5
5
5
5
B
5
*5
5
5
5
5
5
All Directors have held office for the entire 2004/05 financial year. Mr Crabb resigned as a Director of BlueScope Steel on 28 July 2004 and attended no meetings during the 2004/05 financial year.
A = number of meetings held during the period 1 July 2004 to 30 June 2005 during the time the Director was a member of the Board or the Committee as the case may be.
B = number of meetings attended by the Director from 1 July 2004 to 30 June 2005 while the Director was a member of the Board or the Committee as the case may be.
* = not a member of the relevant Committee. However, Directors who are not members of the relevant Committee often attend meetings.
There were a number of unscheduled meetings held during the year. They are as follows:
Board meetings: 2
Roc meetings: 1
The Non-Executive Directors met twice during the 2004/05 financial year without the presence of management.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 43
REMUNERATION REPORT
1. POLICY AND STRUCTURE
1.1 Board Policy Setting
The Board oversees the BlueScope Steel Human
Resources Strategy, both directly and through the
Remuneration and Organisation Committee of the
Board. The purpose of the Committee as set out
in its charter is “…to assist the Board to ensure
that the Company:
(cid:129) has a human resources strategy aligned to the
overall business strategy, which supports “Our Bond”;
(cid:129) has coherent remuneration policies that are
observed and that enable it to attract and retain
executives and Directors who will create value
for shareholders;
(cid:129) fairly and responsibly rewards executives having
regard to the performance of the Company, the
creation of value for shareholders, the performance
of the executive and the external remuneration
environment; and
(cid:129) plans and implements the development and
succession of executive management.”
As part of its charter the Committee considers
remuneration strategy, policies and practices
applicable to Non-Executive Directors, the
Managing Director and Chief Executive Officer,
senior managers and employees generally.
Input to the Committee’s operations is sought
from the Managing Director and Chief Executive
Officer and the Executive Vice President People
and Performance who both attend Committee
meetings, as appropriate. In addition, advice is
received from independent expert advisers in a
number of areas including:
(cid:129) Remuneration benchmarking
(cid:129) Short term incentives
(cid:129) Long term incentives
(cid:129) Contract terms
The Board recognises that BlueScope Steel
operates in a highly competitive global environment
and that the performance of the Company depends
on the quality of its people.
The Company’s approach to remuneration for
Non-Executive Directors and employees, with
particular reference to salaried employees and
senior managers is set out below.
1.2 Non-Executive Directors’ Remuneration
Fees and payments to Non-Executive Directors
reflect the demands which are made on, and the
responsibilities of, the Directors. Non-Executive
Directors’ fees and payments are reviewed
annually. The Board has sought the advice of an
expert external remuneration consultant to ensure
that fees and payments to Non-Executive Directors,
the Chairman of the Board and the Chairman of
Committees of the Board reflect their duties and are
in line with the market. The Chairman is not present
at any discussions relating to the determination of
his own remuneration.
Non-Executive Directors do not receive share rights
or other performance based rewards. Non-Executive
Directors are expected to accumulate over time a
shareholding in the Company at least equivalent in
value to their annual remuneration. Non-Executive
Directors are required to salary sacrifice a minimum
of 10% of their remuneration each year and be
provided with BlueScope Steel shares (instead of
cash fees), which are acquired on-market in the
approved policy windows. Shareholders approved
this arrangement at the Annual General Meeting
in November 2003, and Non-Executive Directors
commenced participation in this arrangement
in January 2004.
The current annual base fees for Non-Executive
Directors are as follows:
(cid:129) Chairman – $420,000
(cid:129) Deputy Chairman – $220,000
(cid:129) Directors – $140,000
The remuneration of the Chairman and Deputy
Chairman is inclusive of Board Committee fees.
Other Non-Executive Directors who chair a Board
Committee receive additional yearly fees and
members of the Audit and Risk Committee also
receive an additional yearly fee on the basis of
advice from the remuneration consultant. The
current annual Committee Chair fees are as follows:
(cid:129) Remuneration and Organisation Committee – $20,000
(cid:129) Audit and Risk Committee – $30,000
(cid:129) Health, Safety, Environment and Community
Committee – $15,000 (Currently chaired by the Deputy
Chairman of the Board so no fee is currently paid).
Members of the Audit and Risk Committee (other
than Chairman and Deputy Chairman of Board and
the Chairman of the Committee) receive a fee of
$15,000 per annum.
Mr Tan (a resident of Singapore) receives a travel
and representation allowance recognising his
involvement in representing the Board in activities
with BlueScope Steel’s Asian business and the
significant travel requirement imposed in respect
of his attendance at meetings. This allowance is
currently $20,000 per annum.
Non-Executive Directors’ fees are determined
within an aggregate Directors’ fee pool limit, which
is approved by shareholders. The maximum fee
pool limit is $1,750,000 per annum (inclusive of
superannuation) as approved by shareholders at the
Annual General Meeting in 2003. As it has been 3
years since the fee limit was established, the Board
believes it appropriate to seek shareholder approval
at the forthcoming Annual General Meeting, to raise
the maximum remuneration payable to $2,250,000
per annum (inclusive of superannuation). Approval
will allow BlueScope Steel the flexibility to appoint
another Director without exceeding the limit.
Compulsory superannuation contributions on behalf
of each Director are paid in addition to the fees
capped at $11,585. Non-Executive Directors do
not receive any other retirement benefits.
Non-Executive Director Fees and payments
will be next reviewed by an independent expert
in January 2006.
1.3 Salaried Employees
1.3.1. Principles
BlueScope Steel has approximately 7,600 salaried
employees. Other employees are covered by
Collective Agreements or statutory instruments in
the countries in which BlueScope Steel operates.
BlueScope Steel’s remuneration and reward
practices aim to attract, motivate and retain
talent of the highest calibre and support
“Our Bond” by creating distinguishable differences
in remuneration, consistent with performance.
The Company’s salaried remuneration framework
is designed to:
(cid:129) make a clear link between rewarding employees
and the creation of value for the shareholders
and the business.
(cid:129) Recognise and reward individual performance
and accountability for key job goals.
(cid:129) Provide distinguishable remuneration differences
between levels.
(cid:129) Maintain a competitive remuneration level relative
to the markets in which the Company operates.
The framework is built on an appropriate mix
of base salary/pay (including work and expense
related allowances), variable pay/short term
incentives and long term equity participation
opportunities.
1.3.2 Base Salary/Pay
Base salary/pay is determined by reference
to the scope and nature of an individual’s role,
performance, experience, work requirements
and market data.
Market data is obtained from external sources
to establish appropriate guidelines for positions,
with the goal to pay slightly above median.
PAGE 44
REMUNERATION REPORT CONTINUED
1. POLICY AND STRUCTURE CONTINUED
1.3 Salaried Employees continued
1.3.3 Variable Pay and Short Term Incentives
Most employees have access to a variable/at
risk component of remuneration in the form of
a performance related pay, or other variable pay
schemes in which reward is at risk. All senior
managers and many salaried employees participate
in a formal short term incentive plan.
The Short Term Incentive Plan (STI) is an annual
“at risk” cash bonus scheme which is structured
to deliver total compensation in the upper
quartile for the respective market group when
stretch performance is attained. STI awards are
not an entitlement but rather the reward for
overall company results and the individual or team
contribution to performance. The scheme is applied
at the discretion of the Board which has established
rules and protocols to ensure that STI payments
are aligned with organisation and individual
performance outcomes. Target Short Term Incentive
levels are set having regard to appropriate levels
in the market and range from 10% of base salary
through to 100% at CEO level. For outstanding
results, participants may receive up to 150% of
their target bonus amount.
Goals are established for each participant under the
following categories which are drawn from the “Our
Bond” charter. Each year objectives are selected to
focus on key areas which underpin the achievement
of outstanding performance including:
(cid:129) Shareholder Value Delivery – financial performance
measures are used including Net Profit After Tax,
Cash Flow, and Earnings Before Interest and Tax.
Company wide financial performance goals are
predetermined by the Board with the goals for the
combined individual businesses required to exceed
the overall goal. A minimum of 30% of STI Plans
at senior manager level (with 60% at CEO level),
is based on BlueScope Steel wide financials.
For other participants, 20% of the Plan is based
on BlueScope Steel corporate financials.
(cid:129) Zero Harm – safety and environmental performance
measures, including Lost Time Injury Frequency
Rates, Medical Treatment Injury Frequency Rates
and environmental measures.
(cid:129) Business Excellence – performance measures
for the financial year ended 30 June 2005 were
focused on delivery performance, days of inventory
and quality measures.
(cid:129) Strategy – implementation of specific longer term
strategic initiatives.
STI Plans are developed using a balanced
approach to Financial/Shareholder value and Key
Performance Indicator (KPI) metrics. At the senior
executive level, 60% of the STI award is based on
Financial/Shareholder value measures with 40%
based on KPI metrics. For other participants, 50%
of the STI award is based on Financial/Shareholder
value measures and 50% is based on KPI metrics.
Predetermined performance conditions including
threshold, target and stretch hurdles are set for
each plan and are assessed against these conditions
using quantified and verifiable measures or an
assessment of value contribution. Target levels
are set having regard to the desired result for
each goal. The applicable threshold and stretch
ranges are set taking into account the degree of
stretch inherent in the target. The threshold is the
minimum performance level for which a payment
will be made. The stretch is the maximum level.
Consequently, if threshold is not reached, no
payment is made in respect of that goal.
1.3.4 Equity Based Opportunities
The Board gives consideration each year to the
creation of opportunities for employees to participate
as equity owners in the Company based on
Company performance and other relevant factors.
Shareholder approval is sought for any shares or
share rights to be granted to the Managing Director
and Chief Executive Officer.
a) Employee Share Plans
In August 2004, all employees were invited to
participate in a scheme which provided for a grant
of 150 ordinary BlueScope Steel shares (or a reward
of equal value in countries where the issue of shares
was not practicable). The aim of the Plan was to
assist employees to build a stake in the Company
by providing each eligible employee with a parcel of
shares, at no cost to the employee. Employees who
become shareholders have the potential to benefit
from dividends paid on the shares, growth in the
market value of their shares and any bonus shares
or rights issues the Board of Directors may approve
from time to time.
The form of the share offer depended on local
regulations and tax laws. In Australia, eligible
employees were offered shares with a restriction
on trading of these shares for 3 years. Over 99%
of employees worldwide who were offered shares
participated in the Plan.
The allocation of shares to employees under
such schemes and the form of the offer is at the
discretion of the Board and is considered on a year
by year basis.
b) Long Term Incentive Plan – Approach
Consideration is also given on an annual basis
to the award of share rights to senior managers
under the Long Term Incentive Plan. The Long
Term Incentive Plan is designed to reward senior
managers for long term value creation. It is part
of the Company’s overall recognition and retention
strategy having regard to the long term incentives
awarded to senior managers in the markets in
which the Company operates.
The decision to make an award of share rights is
made annually by the Board. Individual participation
is determined based on the:
(cid:129) Strategic significance of the role and outcomes
achieved.
(cid:129) Impact on strategic outcomes in terms of special
achievements or requirements.
(cid:129) Future potential and succession planning requirements.
(cid:129) Performance and personal effectiveness in
achieving outstanding results.
Details of the awards under the Plan since the
demerger are set out below. In summary, the main
features of the Plan is as follows:
(cid:129) The awards are generally made in the form of share
rights (with the exception of part of the July 2002
award as set out below). Share rights are a right
to acquire an ordinary share in BlueScope Steel at
a later date subject to the satisfaction of certain
performance criteria.
(cid:129) The vesting of share rights under the Plan requires
a sustained performance over a number of years
(usually 3) with a hurdle based on Total Shareholder
Return (TSR) relative to the TSR of the companies
in the S&P/ASX 100 index at the award grant date.
The hurdles have been set to underpin the creation
of superior Total Shareholder Return in the context
of the top 100 Australian Companies.
(cid:129) The share rights available for exercise are
contingent on BlueScope Steel’s ranking – TSR
percentile with either a stepped vesting (2002
awards) or a sliding scale (2003 and 2004 awards)
with the minimum ranking for vesting being the
51st percentile. With sliding scale vesting the
total number of share rights that vest for a senior
manager increase proportionally as BlueScope
Steel’s TSR percentile ranking increases. The sliding
scale introduced in 2003 was based on advice from
an external remuneration consultant and was part
of a review which balanced short and long term
risk in the short and long term incentive schemes.
(cid:129) Given the potential volatility of the Company’s
earnings and the cyclical nature of the markets
in which the Company operates, provision
is generally made for limited retesting on a
predetermined basis (however, this does not
apply to the September 2002 award).
(cid:129) Any share rights which do not vest, lapse on
resignation or termination for cause or at the expiry
of the relevant performance period, which ever
comes first.
(cid:129) The Board has discretion to vest share rights in
the event of a change in control. The Board has
determined that any outstanding share rights can
vest before the end of the performance period if a
“change in control” occurs. Vesting at this time will
depend upon early testing of the relevant performance
hurdles at that time. A “change of control” is
generally an entity acquiring unconditionally more
than 50% of the issued shares of the Company.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 45
(cid:129) External valuation advice from
Vesting Requirements
PricewaterhouseCoopers Securities Limited has
been used to determine the value of the Executive
Share Rights at grant date for each award. The
valuation has been made using the Binomial Option
Pricing Model using standard option pricing inputs
such as the underlying stock price, exercise price,
expected dividends, expected risk free interest rates
and expected share price volatility. In addition,
specific factors in relation to the likely achievement
of performance hurdles and employment tenure
have been taken into account.
The July 2002 award, which was tested on
30 September 2004 against the set performance
hurdles, achieved the TSR performance hurdle at
the 100th percentile. Accordingly, all share rights
outstanding for this award vested having regard
to the outstanding performance achieved.
The September 2002 award has an additional
restriction that any shares acquired under this
award cannot be sold prior to 30 September 2007
and any participant who resigns during this two
year holding period forfeits any shares acquired
under this award, unless the Board (in its absolute
discretion) determines otherwise.
In September 2004, 201 senior and high potential
managers were invited to participate in the Long
Term Incentive Plan.
c) Long Term Incentive Plan –
Outline of Specific Awards
(i) July 2002 Award
Nominated executives were awarded share rights
in BlueScope Steel Limited in lieu of the awards
that would otherwise have been made under
BHP Billiton Limited’s Long Term Incentive Plan in
October 2001. For this award, a once-only increase
equivalent to an additional 50% of the value of
the award was made. This once-only increase
was to recognise that, but for the BlueScope Steel
demerger, the nominated employees would have
been eligible for an award under the BHP Billiton
Limited’s Long Term Incentive Plan in October
2001, and the first performance period under the
BlueScope Steel Long Term Incentive Plan was
shorter than the three year period usually adopted
under BHP Billiton Limited’s plan.
TSR Performance Hurdle
First Performance Period
% of Share Rights that Vest
Second Performance Period
% of Share Rights that Vest
80th – 100th percentile
100%
70th – < 80th percentile
60th – < 70th percentile
50th – < 60th percentile
< 50th percentile
90%
70%
50%
50%
50%
50%
50%
50% of share rights awarded lapse
and 50% to be carried over to a
second performance period at the
Board’s discretion
None – all unvested share rights lapse
immediately.
Details of the July 2002 Award
Market Price Share Rights
Nil Priced Share Rights
Grant Date
25 July 2002
25 July 2002
From 30 September 2004
From 30 September 2004
Exercise Date (subject to
vesting requirements)
Latest Expiry Date
Share Rights Granted
Number of Participants
at Grant Date
Number of Current
Participants
Exercise Price (1)
Fair Value Estimate
at Grant Date (2)
Share Rights Lapsed
since Grant Date
25 July 2007
14,355,000
105
3
$2.85
$5,742,000
1,265,394
Performance hurdle achieved
100%
Number of Share Rights
Vested
Number of Share Rights
Exercised
Number of participants
at Exercise Date
Share Rights still to be
Exercised
13,089,606
12,808,655
100
280,951
31 March 2006
2,800,300
12
11
Nil
$3,276,351
194,900
100%
2,605,400
2,605,400
11
–
1 The share rights awarded in July 2002 comprised both nil priced and market priced share rights. The exercise price established for the
Market Priced Share Rights was based on the volume weighted average price of the BlueScope Steel Limited shares sold under the sale
facility at the time of the demerger from BHP Billiton and BlueScope Steel shares on the Australian Stock Exchange during the first five
trading days. Selected executives received Share Rights with a nil exercise price.
2 External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share
Rights at grant date. Currently, these fair values are not recognised as expenses in the financial statements. However, were these grants
to have been expensed they would have been amortised over the vesting period resulting in an estimated increase in employee benefits
expense of $1.04 million for the 2005 (2004: $4.2 million) financial year. Note that no adjustments to these amounts have been made to
reflect actual forfeiture of shares.
PAGE 46
(ii) September 2002 Award
Vesting Requirements
TSR Performance Hurdle
% of Share Rights that Vest
80th – 100th percentile
70th – < 80th percentile
60th – < 70th percentile
51st – < 60th percentile
< 51st percentile
100%
90%
70%
50%
None – all unvested share rights lapse immediately.
Details of the September 2002 Award
Nil Priced Share Rights
Grant Date
30 September 2002
Exercise Date (subject to vesting requirements)
From 1 October 2005
Expiry Date
Share Rights Granted
Number of Participants at Grant Date
Number of current Participants
Exercise Price
Fair Value Estimate at Grant Date1
Share Rights Lapsed since Grant Date
(iii) September 2003 Award
Vesting Requirements
30 September 2006
4,751,500
119
116
Nil
$4,656,470
282,621
TSR Performance Hurdle
% of Share Rights that Vest
1 External valuation advice from PricewaterhouseCoopers Securities
Limited has been used to determine the value of the Executive
Share Rights at grant date. Currently, these fair values are not
recognised as expenses in the financial statements. However,
were these grants to have been expensed they would have been
amortised over the vesting period resulting in an estimated
increase in employee benefits expense of $1.55 million for
the year ended 30 June 2005 (2004: $1.55 million). Note that
no adjustment to this amount has been made to reflect actual
forfeiture of shares.
75th – 100th percentile
51st – < 75th percentile
< 51st percentile
100%
A minimum of 52% plus a further 2% for each
increased percentage ranking. Any unvested
share rights will be carried over to be assessed
at subsequent performance periods.
All share rights will be carried over to be assessed
at subsequent performance periods.
If the performance hurdles are not met at the end
of the first performance period (or are only partially
met), four subsequent performance periods will apply.
The subsequent performance periods commence
on 1 October 2003 and end on 31 March 2007,
30 September 2007, 31 March 2008 and
30 September 2008 respectively. Vesting at a
subsequent performance period will only occur if
the vesting requirements have been met and any
previous percentile rankings are exceeded.
Details of the September 2003 Award
Grant Date
Exercise Date (subject to vesting requirements)
Expiry Date
Share Rights Granted
Number of Participants at Grant Date
Number of current Participants
Exercise Price
Fair Value Estimate at Grant Date1
Share Rights Lapsed since Grant Date
Nil Priced Share Rights
24 October 2003 (All executives excluding
Managing Director and Chief Executive Officer)
13 November 2003 (Managing Director and
Chief Executive Officer)
From 1 October 2006
30 September 2008
3,183,800
144
141
Nil
$9,678,752
109,453
1 External valuation advice from PricewaterhouseCoopers Securities
Limited has been used to determine the value of the Executive
Share Rights at grant date. Currently, these fair values are not
recognised as expenses in the financial statements. However,
were these grants to have been expensed they would have been
amortised over the vesting period resulting in an estimated
increase in employee benefits expense of $3.3 million for the year
ended 30 June 2005 (2004: $2.3 million). Note that no adjustment
to this amount has been made to reflect actual forfeiture of shares.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 47
(iv) September 2004 Award
Vesting Requirements
TSR Performance Hurdle
% of Share Rights that Vest
75th – 100th percentile
51st – < 75th percentile
< 51st percentile
100%
A minimum of 52% plus a further 2% for each percentage
ranking. Any unvested share rights will be carried over
to be assessed at subsequent performance periods.
All share rights will be carried over to be assessed
at subsequent performance periods.
Details of the September 2004 Award
Nil Priced Share Rights
Grant Date 2
31 August 2004
Exercise Date (subject to vesting requirements)
From 1 September 2007
Expiry Date
Share Rights Granted
Number of Participants at Grant Date
Number of current Participants
Exercise Price
Fair Value Estimate at Grant Date 1
Share Rights Lapsed since Grant Date
31 October 2009
2,306,400
201
200
Nil
$11,139,912
6000
If the performance hurdles are not met at the end
of the first performance period (or are only partially
met), four subsequent performance periods will apply.
The subsequent performance periods commence
on 1 September 2004 and end on 29 February 2008,
31 August 2008, 28 February 2009 and 31 August 2009
respectively. Vesting at a subsequent performance
period will only occur if the vesting requirements
have been met and any previous percentile rankings
are exceeded.
1 External valuation advice from PricewaterhouseCoopers Securities
Limited has been used to determine the value of the Executive
Share Rights at grant date. Currently, these fair values are not
recognised as expenses in the financial statements. However,
were these grants to have been expensed they would have
been amortised over the vesting period resulting in an estimated
increase in employee benefits expense of $2.3 million for the
year ended 30 June 2005. Note that no adjustment to this amount
has been made to reflect actual forfeiture of shares.
2 The award granted on 31 August 2004 to the Managing Director
and Chief Executive Officer was subject to Shareholder approval
at the 2004 Annual General Meeting.
d) Special Share Rights Awards
e) Employee Share Purchase Plan
Special Share Rights are awarded by the Board from
time to time to meet specific or exceptional demands.
In 2004, special share rights were awarded to two
executives to facilitate the effective integration and
turn around of the North America Coated and Building
Products business, the effective integration of the
China operations of BlueScope Butler and successful
completion of Asian capital expansion. The awards
have been made in the form of share rights in 2
tranches which are vested on the achievement of
specific performance objectives determined by the
Managing Director and Chief Executive Officer and
the Chairman of the Board. The performance hurdles
set are tested at the end of each performance period
(i.e. 30 June 2005 for Tranche 1 and 30 June 2006
for Tranche 2). Any unvested share rights rolled over
from Tranche 1 which did not meet the performance
hurdles are added to the Tranche 2 award and
new performance hurdles determined for the period
1 July 2005 – 30 June 2006. No tranche 1 special
share rights were vested.
Facility is also made available, to Australian
employees only at this stage, to be provided with
shares at market prices through salary sacrifice from
salary or incentives/bonuses. Under the purchase plan,
shares can be provided on a tax deferred basis and
therefore sale or transfer is restricted. Shares provided
under the Plan are entitled to participate in dividends.
1.3.5 Superannuation
BlueScope Steel operates superannuation funds in
Australia, New Zealand and North America for its
employees. In these locations there are a combination
of defined benefit and accumulation type plans. The
defined benefit schemes are closed to new members.
Contributions are also made to other international
superannuation plans for employees outside of
Australia, New Zealand and North America.
1.3.6 Other Benefits
Additionally, executives are eligible to participate
in an annual health assessment program designed
to safeguard the Company against the loss or long
term absence for health related reasons.
PAGE 48
2. RELATIONSHIP BETWEEN COMPANY PERFORMANCE AND REMUNERATION
The graph set out below outlines the performance of BlueScope Steel in terms of Total Shareholder Return
compared to the performance of the S&P/ASX 100 for the same period. The TSR Index for BlueScope Steel
as at 30 June 2005 was 314.9 compared to 151.2 for the S&P/ASX 100.
BLUESCOPE STEEL LIMITED
TOTAL SHAREHOLDER RETURN INDEX COMPARED TO S&P/ASX100
15/07/02 TO 30/06/05
Source: ABN AMRO
450
400
350
300
250
200
150
100
50
0
1/07/02
1/01/03
1/07/03
1/01/04
1/07/04
1/01/05
1/07/05
BlueScope Steel – TSR Index
S&P/ASX 100 – TSR Index (Rebased)
An analysis of other Company performance and performance related remuneration data relating to the nominated
senior Corporate executives set out in Section 3 over the same period are set out in the tables below:
BlueScope Steel Performance Analysis
Measure
Share Price
Change in Share Price $
Change in Share Price %
Dividend Per Share
Earnings Per Share
NPAT $m
% movement
EBIT $m
% movement
EBITDA $m
% movement
30 June 2002
30 June 2003
30 June 2004
30 June 2005
$2.85 (1)
–
–
N/A
N/A
N/A
N/A
$160m
–
$412m
–
$3.72
$0.87
30.5%
0.29 cents
57.1 cents
$452m
–
$611m
282%
$881m
114%
$6.74
$3.02
81.2%
0.40 cents
77.8 cents
$584m
29.2%
$818m
34%
$1105m
25%
$8.23
$1.49
22.1%
0.62 cents
137.4 cents
$1,007m
72.4%
$1388m
70%
$1696
53%
(1) Share Price as at 15 July 2002
As reflected in the table above, over the total period:
(cid:129) EBITDA has increased by 312% since 30 June 2002.
(cid:129) EBIT has increased by 768% since 30 June 2002.
(cid:129) Earnings per share for the two years ended 30 June 2003 to 30 June 2005 have increased by 141%.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 49
BSL Performance Related Remuneration Analysis for Senior Corporate Executives
Measure
Year ended 30 June 2003
Year ended 30 June 2004
Year ended 30 June 2005
Average % increase in short term incentive Payments
1st year
1.9
12.3
The Board Remuneration Strategy short term incentive component takes into account business unit financial performances and non financial and strategic hurdles. Market
consensus on future earnings is also taken into account in setting financial targets as these take into account forecast movements in steel prices, exchange rate and other
external factors likely to impact financial performance. Some participants in short term incentives have not met all of the hurdles with the result that some short term
incentive payments have been below the possible maximum level. On average, the short term incentives payable to the Managing Director and Chief Executive Officer
and other senior nominated executives was 100% of the potential short term incentive which could be awarded, which reflects the outstanding results achieved this year.
In relation to long term incentives, share price and earnings performance have been in the top percentile when measured against the Companies in the S&P/ASX 100 index
and this performance is the key factor impacting the value of long term equity incentives and their likelihood of meeting the required hurdles for vesting.
3. SPECIFIC REMUNERATION DETAILS
3.1 Directors
Details of the audited remuneration for the year ended 30 June 2005 for each Non-Executive Director of BlueScope Steel is set out in the following table.
PRIMARY
POST-EMPLOYMENT
Name
GJ Kraehe
RJ McNeilly
J Crabb
(resigned 27 July 2004)
DJ Grady
HK McCann
PJ Rizzo
Tan YP
BASE FEE
Cash
$
Salary Sacrifice
$
Committee Fee /
Allowance
$
340,304
168,681
10,577
73,199
111,935
120,844
111,434
37,811
18,742
–
52,839
14,103
16,779
14,604
–
–
1,269
20,000
15,000
30,000
20,000
Other
$
6,678
–
–
–
–
–
–
Superannuation
$
11,585
11,585
1,337
11,585
11,585
–
11,585
Total
$
396,378
199,008
13,183
157,623
152,623
167,623
157,623
PAGE 50
3.2 Details of senior executives’ (including the Managing Director and Chief Executive Officer’s) remuneration
The audited information contained in the table below represents the annual remuneration for the year ended 30 June 2005 for the Managing Director and Chief Executive
Officer and the six most highly remunerated executives responsible for the strategic and operational direction of the Company.
In addition there was one Business Unit executive who met the requirement for remuneration disclosure for the financial year ended 30 June 2005, being Mr Alossi,
President BlueScope Buildings, China.
PRIMARY
POST-
EMPLOYMENT
EQUITY
Name
Cash Salary
and Fees
$
At Risk CashLX
Bonus (1)
$LX
Other
$
Sub total
$
Superannuation
$
Share Rights (2)
$LX
Total
$
EXECUTIVE DIRECTOR
KC Adams – Managing
Director and CEO
EXECUTIVES
LE Hockridge – President
BlueScope Steel North America
(effective 1 April 2005, formerly
President Industrial Markets)
BG Kruger – Chief Financial
Officer
KJ Fagg – President Market
and Logistics Solutions
NH Cornish – President
Australian Building and
Manufacturing Markets
M Courtnall – President Asian
Building and Manufacturing
Markets
IR Cummin – Executive Vice
President Human Resources
M Alossi – President
BlueScope Buildings China
1,411,442
2,131,250
8,302
3,550,994
207,482
803,956
4,562,432
630,161
600,000
67,011
1,297,172
90,490
294,664
1,682,326
525,747
470,000
526,385
470,000
476,318
430,000
–
–
–
995,747
76,779
230,439
1,302,965
996,385
73,769
250,400
1,320,554
906,318
69,497
217,821
1,193,636
424,029
380,000
41,686
845,715
61,811
187,042
1,094,568
406,385
370,000
1,527
777,912
56,969
148,931
983,812
358,455
505,579 (3)
414,811 (4)
1,278,845
12,200
12,850
1,303,895
(1) Refer to Section 1.3.3 for details of the at risk cash bonus (Short-Term Incentive Plan). Amounts reflect the annual cash bonus for the year ended 30 June 2005 based on actual performance. Actual annual
cash bonus amounts will be paid in September 2005.
(2) Valuation of equity remuneration in the form of share rights granted, excludes the effect of tenure risk. For each award, total fair value is pro-rated over the award period, from grant date to expected vesting date.
(3) Mr Alossi’s previous employment agreement provided for a bonus for the 12 months ending 31 December 2004. 50% of that bonus has been included in the table above. Further Mr Alossi was eligible for a
bonus for the 6 months ending 30 June 2005, which has been included above. Mr Alossi’s contract has now been aligned with the BlueScope Steel STI Plan as outlined in Section 1.3.3.
(4) Mr Alossi is a US Expatriate with BlueScope Steel China. The non-monetary benefits indicated relate to benefits arising out of his assignment in China, including medical plan, housing, foreign and US taxes.
It should be noted that effective 1 July 2005, the following senior executives assumed new positions within the BlueScope Steel Limited organisation structure,
with the exception of Mr Cummin who assumes his new role effective 1 September 2005.
Name
New Title
BG Kruger
KJ Fagg
NH Cornish
IR Cummin
President Australian Manufacturing Markets
President Australian Building and Logistics Solutions
President Australian and New Zealand Industrial Markets
Executive Vice President People and Performance
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 51
Share Rights granted to the Managing Director and Chief Executive Officer and the top seven most highly remunerated executives during the financial year
ended 30 June 2005 were as follows:
Name
DIRECTORS
K C Adams
EXECUTIVES
L E Hockridge
B G Kruger
K Fagg
N Cornish
M Courtnall
I Cummin
M Alossi
% of Remuneration
Consisting of
Share Rights (1)
Value of Share Rights
Granted during the Year
at Grant Date (2)
Value of Share Rights
exercised during
the year (3)
Value of Share Rights at
lapse date, that lapsed
during the year (4)
18%
18%
18%
20%
20%
18%
16%
1%
931,368
353,118
277,046
277,046
250,832
222,048
214,338
61,680
917,900
388,332
296,542
345,988
296,542
236,510
–
–
–
–
–
–
–
–
–
–
(1) This figure is calculated on the value of share rights awarded in the year ended 30 June 2005 as a percentage of the total value of all remuneration received in that same year.
(2) External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights. The valuation has been made using the Binomial Option Pricing
Model using standard option pricing inputs such as the underlying stock price, exercise price, expected dividends, expected risk free interest rates and expected share price volatility. In addition, the likely
achievement of performance hurdles of the share rights have been taken into account.
(3) External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of the Executive Share Rights for the July 2002 award that were exercised in the year ended
30 June 2005.
(4) Mr Hockridge and Mr Courtnall were awarded 20,000 and 10,000 Share Rights (Tranche 1) respectively under the Special Incentive award on 3 August 2004. Tranche 1 performance hurdles as at 30 June 2005 were
not met. In accordance with the terms of the Special Share Rights Issue the Share Rights from Tranche 1 were rolled over into the second performance period. A further Award of 20,000 and 10,000 respectively
(Tranche 2) have been awarded and both Tranches are subject to new performance hurdles as determined by the Board for the period 1 July 2005 – 30 June 2006. Refer to Section 1.3.4 (d) for further information.
The Share Rights Awarded to Executives under the July 2002 Award vested at the 100% level in September 2004.
Details of the audited Share Rights holdings for the specified executives are set out below:
Name
DIRECTORS
K C Adams
EXECUTIVES
L E Hockridge
B G Kruger
K Fagg
N Cornish
M Courtnall
I Cummin
M Alossi
Share Rights
Balance at
30 June 2004
Share Rights Granted in
year ended
30 June 2005
Share Rights Vested in
year ended
30 June 2005
Share Rights Lapsed in
year ended
30 June 2005
Share Rights
Balance at
30 June 2005
1,448,800
181,200
552,900
425,700
488,700
419,200
342,300
94,700
–
68,700
53,900
53,900
48,800
43,200
41,700
12,000
685,000
289,800
221,300
258,200
221,300
176,500
–
–
–
–
–
–
–
–
–
–
945,000
331,800
258,300
284,400
246,700
209,000
136,400
12,000
PAGE 52
4. EMPLOYMENT CONTRACTS
ENVIRONMENTAL REGULATION
4.1 Managing Director and Chief Executive
Officer – Outline Of Employment Contract
Outlined below are the key terms and conditions
of employment contained within the employment
contract for Mr Kirby Adams, the Managing Director
and Chief Executive Officer.
Mr Adams’ base employment contract conditions
were determined prior to the demerger on
7 July 2002 and are regularly reviewed by the Board
of BlueScope Steel. He receives an annual base
pay of $1,425,000. This amount is reviewed on an
annual basis in accordance with the Board’s senior
executive salary review policy. In addition, Mr Adams
is eligible to participate in the Short Term Incentive
Plan and, subject to shareholder approval,
Long Term Incentive Plan awards.
Mr Adams may terminate the contract by giving
three months’ written notice, upon which he is
entitled to his annual base pay, which has been
accrued but not paid up to the date of termination,
plus any vested awards under the Long Term
Incentive Plan, and any other payments for which
he is eligible under the Short Term Incentive Plan.
The Company may terminate the contract by giving
one months’ written notice (or a payment in lieu of
notice based on Mr Adams’ annual base pay) and
a gross termination payment equal to 24 months
of Mr Adams’ annual base pay, plus any applicable
Short Term Incentive Plan and Long Term Incentive
Plan awards, and reimbursement for the reasonable
costs of relocation from Australia to the United
States of America. The Company may also terminate
the contract on 30 days’ notice in the event of
serious misconduct or a serious breach of the
contract. In this event, Mr Adams is only entitled
to his annual base pay which has accrued but not
been paid up to the date of termination plus any
vested Long Term Incentive Plan awards.
4.2 Other Specified Executives
Remuneration and other terms of employment for
the other specified executives set out above are
formalised in employment contracts which can be
terminated with notice. Each of these agreements
provide for the annual review of annual base pay,
provision of performance-related cash bonuses,
other benefits including annual health assessment,
and participation, when eligible, in the Long Term
Incentive Plan. The contracts provide for notice of
one to six months for resignation by the executive
or termination by the Company. In the event of
termination by the Company other than for cause,
a termination payment of 12 months pay or the
Company Redundancy Policy, whichever is the
greater, will apply. The Company Redundancy
Policy provides for 14 weeks pay plus 2.5 weeks
for each year of service.
BlueScope Steel’s Health, Safety, Environment and
Community (“HSEC”) Policy provides the foundation
for the way in which environment is managed
at all levels of the organisation. BlueScope Steel
cares for the environment and is committed to the
efficient use of resources, reducing and preventing
pollution and product stewardship. Product
stewardship is a product-centred approach to
environmental protection, focusing on all aspects
of the product lifecycle.
The BlueScope Steel Group has continued to ensure
its environmental management systems are robust
by again achieving ISO 14001 accreditation following
a series of external reviews performed during
the reporting period. BlueScope Steel has also
developed a customised compliance system to
enable its environmental responsibilities to be
appropriately managed. This provides a systematic
means for line management to both understand
and demonstrate compliance with their specific
statutory obligations on a monthly basis. The
environmental compliance system has been
successfully implemented at a number of BlueScope
Steel’s operations, including Port Kembla, Springhill
and Western Port already. It is anticipated that
by the end of the 2005–2006 financial year, the
compliance system will have been implemented
at most of BlueScope Steel’s operations.
BlueScope Steel notified relevant authorities
of a number of statutory non-compliances with
environmental regulations during the reporting
period. Most of these were relatively minor in
nature and related to the Port Kembla Steelworks
in New South Wales (NSW) Australia. There were
no significant environmental incidents recorded
during the reporting period.
As reported in last year’s Directors’ Report,
BlueScope Steel received a fine of $70,000 under
the Protection of Environment Operations Act
(NSW) 1997, in July 2004, over an incident at the
Port Kembla Steelworks in March 2003 that caused
air emissions resulting from a failure to maintain
equipment. This is reported as the fine was handed
down within the 2004–2005 financial year.
The Port Kembla Steelworks has entered into
voluntary agreements with the NSW Department
of Environment and Conservation (“DEC”) to
investigate possible land contamination of two
areas within its site, the No.2 Steelworks and
the recycling area. These investigations continue
to take place in consultation and co-operation
with the DEC.
INDEMNIFICATION AND INSURANCE
OF OFFICERS
BlueScope Steel has entered into directors’ and
officers’ insurance policies and paid an insurance
premium in respect of the insurance policies, to
the extent permitted by the Corporations Act 2001.
The insurance policies cover former Directors of
BlueScope Steel along with the current Directors
of BlueScope Steel (listed on page 42). Executive
officers and employees of BlueScope Steel and
its related bodies corporate are also covered.
In accordance with Rule 21 of its Constitution,
BlueScope Steel, to the maximum extent permitted
by law:
(cid:129) must indemnify any current or former Director
or Secretary; and
(cid:129) may indemnify current or former executive officers,
of BlueScope Steel or any of its subsidiaries, against
all liabilities (and certain legal costs) incurred in
those capacities to a person, including a liability
incurred as a result of appointment or nomination
by BlueScope Steel or its subsidiaries as a trustee
or as a director, officer or employee of another
corporation.
The current Directors of BlueScope Steel have each
entered into an Access, Insurance and Indemnity
Deed with BlueScope Steel. The Deed addresses the
matters set out in Rule 21 of the Constitution and
includes, among other things, provisions requiring
BlueScope Steel to indemnify a Director to the
extent to which they are not already indemnified as
permitted under law, and to use its best endeavours
to maintain an insurance policy covering a Director
while they are in office and seven years after
ceasing to be a Director.
The Directors have not included details of the nature
of the liabilities covered or the amount of the
premium paid in respect of the directors’ and officers’
liability insurance contract, as (in accordance with
normal commercial practice) such disclosure is
prohibited under the terms of the contract.
Under the terms of the agreement for the acquisition
of Butler Manufacturing Company, the Company
undertook to assume Butler Manufacturing’s
commitments to indemnify, and maintain insurance
in respect of, former Directors and officers of
Butler Manufacturing against liabilities incurred
by them as directors and officers, to the extent
permitted by Delaware law. On acquisition of Butler
Manufacturing Company, BlueScope Steel continued
Butler’s arrangements to indemnify former Directors
and officers.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 53
This report is made in accordance with a resolution
of the directors.
G J KRAEHE
CHAIRMAN
K C ADAMS
MANAGING DIRECTOR AND CEO
Melbourne
22 August 2005
AUDITOR’S INDEPENDENCE
DECLARATION TO THE DIRECTORS
OF BLUESCOPE STEEL LIMITED
In relation to our audit of the financial report
of BlueScope Steel Limited for the year ended
30 June 2005, to the best of my knowledge and
belief, there have been no contraventions of
the auditor independence requirements of the
Corporations Act 2001 or any applicable code
of professional conduct.
ERNST & YOUNG
ALAN I BECKETT
PARTNER
Melbourne
22 August 2005
PROCEEDINGS ON BEHALF OF
BLUESCOPE STEEL
As at the date of this report, there are no leave
applications or proceedings brought on behalf
of BlueScope Steel under section 237 of the
Corporations Act 2001.
ROUNDING OF AMOUNTS
BlueScope Steel is a company of a kind referred to
in Class Order 98/0100, issued by the Australian
Securities and Investments Commission, relating
to the “rounding off” of amounts in the Directors’
Report. Amounts in the Directors’ Report have been
rounded off in accordance with that Class Order
to the nearest hundred thousand dollars.
AUDITOR
Ernst & Young was appointed as auditor for
BlueScope Steel at the 2002 Annual General Meeting.
AUDITOR INDEPENDENCE AND
NON-AUDIT SERVICES
The auditor’s independence declaration for the
year ended 30 June 2005 has been received from
Ernst & Young. This is set out at page 53 of the
Directors’ Report.
(cid:129) Ernst & Young provided the following non-audit
services during the year ended 30 June 2005.
$497,000; international assignee employment
taxation services;
(cid:129) $178,000; country specific taxation compliance
services and advice in New Zealand, Malaysia,
Vietnam and North America;
(cid:129) $139,000; specific compliance tax services in
relation to the acquisition of Butler Manufacturing
Company;
(cid:129) $5,000; review of BlueScope Steel (Thailand) Board
of Investment Report; and
(cid:129) $26,000; bookkeeping and tax services for Butler
Manufacturing Company’s Chile subsidiary. The
Directors were satisfied, on the basis of materiality,
that auditor independence was not compromised.
Note: Butler Manufacturing Company was previously
audited by KPMG.
The Directors are satisfied that the provision of
these non-audit services is compatible with the
general standard of independence for auditors
in accordance with the Corporations Act. The
nature and scope of each type of non-audit service
provided is considered by the Directors not to have
compromised auditor independence. The Directors’
belief is consistent with advice received by the
Audit and Risk Committee of the Board.
PAGE 54
2005 CORPORATE GOVERNANCE STATEMENT
DISCLOSURE REQUIRED BY THE ASX CGC RECOMMENDATIONS
REFERENCE
Functions reserved to the Board and those delegated to management
See Role of the Board on page 55
Skills experience and expertise relevant to the position of Director
See Board of Directors on pages 38–39
Names of Directors considered by the Board to constitute independent Directors
and BlueScope Steel’s relevant thresholds
See Independent Non-Executive Directors on page 56
Procedure for independent professional advice
See Access to information and independent advice on page 55
Directors’ terms of office
See Board of Directors on pages 38–39
Names of the Nomination Committee members and attendance
See Nomination Committee and Meetings of Directors on pages 59 and 42
Composition of Board Chairperson and role of Chairman and Managing Director
and Chief Executive Officer
Code of conduct for Directors and executives
Company code of conduct
Securities Trading Policy
See Role and Composition of the Board on page 55
See Guide to Business Conduct on page 61
See Guide to Business Conduct on page 61
See Share ownership and dealing on page 60
Audit and Risk Committee members and their qualifications
See Audit and Risk Committee on page 58
Audit and Risk Committee meetings and attendance
See Meetings of Directors on page 42
Financial statements sign-off and structure of Audit and Risk Committee
See Audit and Risk Committee on page 58
Procedures for ASX disclosure requirements
Shareholder communications strategy
Attendance of external auditor
Risk oversight committee
Risk management and internal controls
Performance evaluation
See Shareholders on page 55
See BlueScope Steel’s website www.bluescopesteel.com
See the External audit on page 60
See Audit and Risk Committee on page 58
See Internal control and risk management on page 58
See Board on page 57
Company’s remuneration policies and disclosure
See Remuneration Report and Non-Executive Directors’ remuneration on page 43
Remuneration and Organisation Committee members and attendance
See Remuneration and Organisation Committee and Meetings of Directors
on pages 59 and 42
Retirement benefits for Non-Executive Directors
See Non-Executive Directors’ remuneration on page 43
INTRODUCTION
The Board operates in accordance with a set of
corporate governance policies, which take into account
relevant best practice recommendations including
the ASX Corporate Governance Council Principles
of Good Corporate Governance and Best Practice
Recommendations (“ASX CGC Recommendations”).
The Board considers that BlueScope Steel complies with
the requirements in the ASX CGC Recommendations.
BlueScope Steel is a global organisation, with
businesses operating in many countries, including
Australia, New Zealand, North America, China and
elsewhere in Asia. Entities within the BlueScope Steel
Group must, therefore, comply with a range of varying
legal, regulatory and governance requirements.
The Board places great importance on the
governance of BlueScope Steel and, in particular,
the need to focus on carrying out prudent risk-taking
activities, which achieve a balance between:
(cid:129) The generation of rewards for shareholders who
invest their capital;
(cid:129) The supply of goods and services of value to the
BlueScope Steel’s global customers; and
(cid:129) The provision of safe and meaningful employment
for employees in a way, which contributes to the
welfare of the community.
This Corporate Governance Statement outlines
the key aspects and mechanisms of BlueScope
Steel’s governance framework, which have been
established, and kept under review, by the Board.
Summaries of the charters under which the Board
and Board committees operate (including a copy of
the Audit and Risk Committee charter) and other
relevant information referred to in this Corporate
Governance Statement are available on BlueScope
Steel’s website www.bluescopesteel.com.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 55
SHAREHOLDERS
THE BOARD OF DIRECTORS
Access to information and independent advice
Shareholders who elect the Board perform
a fundamental role in the governance of
BlueScope Steel.
The Board recognises that shareholders must receive
high quality relevant information in a timely manner.
Arrangements for communicating with shareholders
are summarised on BlueScope Steel’s website
www.bluescopesteel.com.
BlueScope Steel is subject to continuous disclosure
obligations under the Listing Rules of the Australian
Stock Exchange (ASX) and Australian corporations
legislation. Subject to limited exceptions under the
continuous disclosure requirements, BlueScope Steel
must immediately notify the market, through the
ASX of any information, which a reasonable person
would expect to have a material effect on, or lead
to a substantial movement in, the price or value of
its shares.
To achieve these objectives and satisfy the
regulatory requirements, the Board provides
information to shareholders and the market in
several ways, including:
(cid:129) Communicating with all shareholders in annual
reports and financial statements, releases of results
to the ASX each half year and at BlueScope Steel’s
Annual General Meeting;
(cid:129) Releasing price sensitive announcements and other
relevant significant announcements directly to the
market via the ASX. Copies of these announcements
are immediately placed on BlueScope Steel’s
website www.bluescopesteel.com;
(cid:129) Conducting briefings with analysts and institutions
from time to time, particularly after release of full
and half-year results. Copies of analyst briefings
are placed on the Company’s website. In doing
so, BlueScope Steel recognises the importance of
making sure that any price sensitive information
provided during these briefings is made available
to all shareholders and the market at the same time
and in accordance with the requirements of the
ASX and the Australian Securities and Investments
Commission; and
(cid:129) Providing information on BlueScope Steel’s website,
which contains extensive information about the
BlueScope Steel Group and its activities, including
statutory reports and investor information.
BlueScope Steel has a Market Disclosure Committee,
comprising the Chairman, the Managing Director
and Chief Executive Officer, the Chief Financial
Officer, Company Secretary, the Vice-President
Investor Relations and the Executive Vice-President
Corporate Affairs, to monitor and assess all
significant information, which may require disclosure.
The Company Secretary is responsible for providing
announcements to the ASX. A summary of
BlueScope Steel’s Continuous Disclosure Policy
is available on BlueScope Steel’s website
www.bluescopesteel.com.
ROLE OF THE BOARD
The Board’s role is to oversee the management
of the Company on behalf of all shareholders.
The Board has developed and adopted a Charter
that sets out:
(cid:129) Its specific powers and responsibilities;
(cid:129) The matters relating to the management of the
Company delegation to the Managing Director
and Chief Executive Officer and those specifically
reserved to the Board; and
(cid:129) Procedures aimed at ensuring the effective operation
of the Board.
Matters reserved to the Board include:
(cid:129) (Values and standards) setting the Company’s values
and standards of conduct and monitoring adherence
to these standards, in the interests of the Company’s
shareholders, employees, customers, suppliers and
the communities in which it operates and, generally,
safeguarding the reputation of the Company;
(cid:129) (Leadership) providing leadership of the Company
within a framework of prudent and effective controls
which enable risk to be assessed and managed;
(cid:129) (Direction and objectives) setting the Company’s
direction, strategies and financial objectives and
being satisfied that the necessary financial and
human resources are in place for the Company
to meet its objectives;
(cid:129) (Performance assessment) ensuring that the
performance of management, and the Board itself,
is regularly assessed and monitored;
(cid:129) (Compliance) monitoring compliance with regulatory
and ethical standards; and
(cid:129) (Appointing Managing Director) appointing,
terminating and reviewing the performance of the
Managing Director and Chief Executive Officer.
A summary of the Board Charter is available at
BlueScope Steel’s website www.bluescopesteel.com.
The Board has delegated responsibility for the
day-to-day operation and administration of the
BlueScope Steel Group to the Managing Director
and Chief Executive Officer, Mr Kirby Adams. The
Executive Leadership Team assists the Managing
Director and Chief Executive Officer in the day-to-day
management of the business. The levels of authority
for management are documented in detail in a
Delegation of Authority Policy established under
the Board Charter.
The Delegation of Authority Policy is readily available
on the Company’s intranet to all employees, along
with detailed guidelines setting the internal approvals
that must be obtained in order to enter into specific
transactions.
The roles of the Chairman and the Managing
Director and Chief Executive Officer are separate.
Directors are entitled to full access to
the information required to discharge their
responsibilities, including access to executives
of the BlueScope Steel Group.
The Board (as well as Board Committees and
individual Directors) may also obtain independent
professional advice, at the expense of the Company,
in carrying out their responsibilities, including in the
absence of BlueScope Steel’s management, where
they consider it appropriate to do so. Procedures have
been adopted to set out the practical steps by which
independent professional advice is to be obtained.
Company Secretary
The Board is assisted by the Company Secretary,
who advises on the management of meetings,
the implementation of governance procedures
and compliance with regulatory requirements.
Composition of the Board and Director
appointment
For the majority of the 2004/05 financial year,
the Board comprised seven Directors, including
six independent Non-Executive Directors and
one Executive Director (the Managing Director
and Chief Executive Officer). John Crabb resigned
on 28 July 2004.
The Board collectively brings significant commercial,
business, operational, financial, legal and international
experience in a range of industries. The Directors
all bring skills and expertise, which, in aggregate,
combine to form a Board, which is equipped to
discharge its responsibilities. For the Directors’
biographies, their term of office and information
about their skills, experience and qualifications relevant
to their position please refer to pages 38 and 39.
BlueScope Steel’s Constitution and the Listing
Rules of the ASX require that no member of the
Board (other than the Managing Director and
Chief Executive Officer) may serve for more
than three years without being re-elected by
shareholders at an Annual General Meeting of
BlueScope Steel. Also, one-third of the Directors
(not including the Managing Director and Chief
Executive Officer) must retire, and are eligible to
be re-elected by the shareholders at each Annual
General Meeting. The Managing Director and
Chief Executive Officer serve as a Director until
he ceases to be the Chief Executive Officer. At
the 2005 Annual General Meeting, Graham Kraehe
and Tan Yam Pin will stand for re-election.
PAGE 56
Independent Non-Executive Directors
The Board, excluding the Director in question,
assesses the independence of each Non-Executive
Director at least annually in light of the interests
disclosed by that Director, as part of its overall
commitment to standards of corporate governance
in line with best practice.
The Board believes that independence is one
important attribute of an effective Non-Executive
Director. Other important attributes include business
acumen and experience, an inquiring mind and
personal integrity. In addition, the Board as a whole
must work together effectively to combine and
leverage the skills, knowledge and experience of its
members to provide leadership to BlueScope Steel
in generating value for shareholders and meeting
the expectations of other stakeholders. The work of
the Board must be supported by robust structures
and processes that facilitate depth and breadth of
understanding of BlueScope Steel’s business, foster
open and constructive debate, define roles and
responsibilities clearly and ensure proper compliance
with laws.
The governance process implemented by the
Board has been designed, as a whole, to address
all of these issues in a manner that will maximise
the contribution of the Board to the success of
the business.
In assessing the independence of a Non-Executive
Director, consideration is given to the underlying
purpose behind each of the specific relationships
identified as relevant to independence (see below),
and the overall purpose of independence.
The Board considers that the overall purpose of
independence is to ensure that a Director does not
have a relationship where there are, or are perceived
to be, matters which could materially interfere with
the Director:
(cid:129) Making decisions on matters that regularly come
before the Board or its committees;
(cid:129) Objectively assessing information and advice given,
or obtained, by management;
(cid:129) Setting policy for general application across the
BlueScope Steel group of companies; and
(cid:129) Generally, carrying out the performance of his or her
role as a Director, or which could inhibit free Board
discussion of matters coming before the Board.
The Board considers all of the circumstances relevant
to a Director, in determining whether the Director
is free from any interest and any business or other
relationship, which could, or could reasonably be
perceived to, materially interfere with the Director’s
ability to act in the best interests of BlueScope
Steel. Amongst the circumstances considered by
the Board are a range of factors, including the
relations described in Box 2.1 of the ASX CGC
Recommendations. In determining whether a
sufficiently material relationship (as described in
Box 2.1 of the ASX CGC Recommendations) exists
between BlueScope Steel and a third party, the
Board has regard to all the circumstances of the
relationship, including, among other things:
(cid:129) (expenses/revenues) the proportion of a class of
expenses or revenues that the relationship represents
to both BlueScope Steel and the third party;
(cid:129) (strategic importance) the strategic importance to
BlueScope Steel’s business of the goods or services
purchased or supplied by BlueScope Steel;
(cid:129) (uniqueness of services) the extent to which the
services supplied are integral to the operation of
BlueScope Steel’s business, including the extent
to which the services provided are unique and not
readily replaceable;
(cid:129) (goods/services) the nature of the goods or services;
(cid:129) (transaction) the nature of the transaction; and
(cid:129) (value) the value of the transaction to BlueScope
Steel and the other party to the transaction.
Materiality is considered from the perspective
of both BlueScope Steel and its Directors.
The Board considers that each Non-Executive
Director is independent when assessed on the
criteria above, taking into account all relevant
matters and relationships of the particular
Non-Executive Director. Relevantly, the Board’s
reasons include:
(cid:129) At the date of this report, Mr Kraehe held the
position of Non-Executive Chairman of the National
Australia Bank Limited (but has announced his
retirement effective September 2005). National
Australia Bank Limited is a supplier of banking
services and funding facilities. The National
Australia Bank Limited forms part of a consortium
of twelve banks providing funding to the BlueScope
Steel Group. Decisions required by the consortium
are by majority of the banks (as a minimum).
National Australia Bank is not the transactional or
principal banker for the Company. After assessing
all of the circumstances of the arrangements with
the National Australia Bank, the Company does not
consider National Australia Bank to be a “material”
supplier for the purpose of the assessment of
independence. Having considered the goods and
services supplied by the National Australia Bank
Limited and the materiality criteria set out above,
the Board considers that this relationship is not
material for the purpose of independence. Mr Kraehe
does not participate in any decisions regarding
transactions with the National Australia Bank Limited.
(cid:129) Mr McCann was a non-partner Chairman of the
firm Allens Arthur Robinson until the end of the
2004 calendar year. Allens Arthur Robinson is not
the exclusive or primary provider of legal services
to BlueScope Steel and provides legal services to
BlueScope Steel on normal terms and conditions.
The Board considers that, having regard to
Mr McCann’s role with the firm, the amount of
the fees paid to Allens Arthur Robinson and the
nature of the services supplied, and based on the
materiality criteria set out above, Allens Arthur
Robinson is not a material professional adviser for
the purposes of independence. The Board also notes
that Mr McCann is not involved in Allens Arthur
Robinson providing legal advice to BlueScope Steel
or in selecting BlueScope Steel’s legal advisers.
(cid:129) Mr McCann is a director of Origin Energy Limited,
which is not considered by the Board to be a
material supplier for the purpose of independence.
Mr McCann does not participate in any decisions
regarding transactions with Origin Energy Limited
and it is not the exclusive or primary provider of
utilities to BlueScope Steel. The Board considers
that, having regard to Mr McCann’s role with Origin
Energy Limited, the amount paid to that company,
the nature of services supplied, and based on the
materiality criteria set out above, Origin Energy
Limited is not a material supplier for the purposes of
independence. The Board also notes that Mr McCann
is not involved in selecting utility providers for
BlueScope Steel.
(cid:129) Mr Rizzo is a director of the National Australia
Bank Limited, which as noted above for Mr Kraehe,
is not considered by the Board to be a material
supplier for the purpose of independence. National
Australia Bank is not the transactional or principal
banker for the Company. After assessing all of
the circumstances of the arrangements with the
National Australia Bank, the Company does not
consider National Australia Bank to be a “material”
supplier for the purpose of the assessment of
independence. Mr Rizzo does not participate in
any decisions regarding transactions with National
Australia Bank Limited. Mr Rizzo is also a member
of the Advisory Board of Mallesons Stephen Jaques,
a national law firm, which is one of a number of
law firms that provide legal advisory services to
BlueScope Steel. It is noted that Mallesons Stephen
Jaques is not the exclusive or primary provider
of legal services to BlueScope Steel. The Board
considers that, having regard to Mr Rizzo’s role with
the firm, the amount of the fees paid to Mallesons
Stephen Jaques and the nature of the services
supplied, and based on the materiality criteria set
out above, Mallesons Stephen Jaques is not a
material supplier for the purposes of independence.
The Board also notes that Mr Rizzo is not involved
in Mallesons Stephen Jaques providing legal advice
to BlueScope Steel or in selecting BlueScope Steel’s
legal advisers.
(cid:129) None of Mr McNeilly, Ms Grady or Mr Tan had
any relationships that required assessment for
independence purposes.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 57
Board succession planning and training
Meetings without management
Executives
The Board is conscious of the need to ensure
that proper processes are in place to deal with
succession issues at Board level. This will require
the Board periodically to assess the skill-set
necessary to meet the BlueScope Steel Group’s
demands.
The Board has established a Nomination
Committee, chaired by Mr Graham Kraehe,
and comprising all the Non-Executive Directors.
Newly appointed Directors receive induction
and training. This includes management briefings
to familiarise themselves with the significant
operations of the BlueScope Steel Group.
Arrangements are made for new Directors to
visit BlueScope Steel’s major operational sites at
Port Kembla and Western Port. Each Non-Executive
Director has received a formal letter of appointment
setting out the expectations and time commitments,
among other things, required of them.
Board meetings
During the 2004/2005 financial year, the Board
has met 13 times to review matters such as the
financial performance of the BlueScope Steel
Group, current trading and key business initiatives,
and its strategies, budgets and business plans.
Included in the Board’s schedule was a separate
meeting held to specifically consider BlueScope
Steel’s Group strategy.
Procedures are also in place to ensure that
Directors can meet to consider and decide urgent
matters, as and when they arise.
Materials for Board and Board committee meetings
are circulated to the Directors in advance. The
agenda for meetings is formulated with input from
the Chairman and the Managing Director and Chief
Executive Officer and, if required, other Directors.
The Chairman regularly requests that a member of
the Board review the conduct of the Board meeting
at its conclusion.
Members of senior management frequently make
presentations to the Board, and telecommunication
technologies may be utilised to facilitate
participation.
In the 2004/05 financial year, Board meetings
were held in various locations, including in
Melbourne (at BlueScope Steel’s head office),
Sydney, in the United States (home to the group’s
Butler and Vistawall businesses), and Port Kembla
(at BlueScope Steel’s integrated steelworks
operations). The Board has a programme to meet
at various sites in Australia and in Asia during the
remainder of 2005 and in 2006. The Board has also
visited key customer operations.
The Non-Executive Directors have held regular
meetings without the presence of management.
All BlueScope Steel executives are subject to annual
performance planning and review.
The annual performance planning and review
involves a key executive being evaluated by their
immediate superior, usually the Managing Director
and Chief Executive Officer. The executive is
assessed against:
(cid:129) achievement of financial goals;
(cid:129) completion of key job specifications and goals;
(cid:129) achievement of other specific business and strategic
objectives;
(cid:129) contribution towards specific business plan
objectives; and
(cid:129) adherence to values expressed in “Our Bond”.
In assessing a key executive’s performance,
the Managing Director and Chief Executive
Officer may consult with the Chairman. The
outcomes of performance reviews are reported
to the Remuneration and Organisation Committee,
which has overall responsibility for ensuring
that performance management processes are
in place for all key executives. The Remuneration
and Organisation Committee considers executive
remuneration.
The Remuneration and Organisation Committee
also considers the overall amount of any short-term
incentive to be provided to eligible executives, and
reviews and approves the specific amount of any
short-term incentive bonus award to particular senior
executives. The review takes into account the overall
performance of BlueScope Steel against a range
of measures, and the contribution made by a
particular executive.
The Chairman and the Board conduct the
performance evaluation of the Managing Director
and Chief Executive Officer. This evaluation involves
an assessment of a range of factors including the
overall performance of BlueScope Steel and the
achievement of pre-determined goals.
Conflicts of interest
The Board is conscious of its obligations to ensure
that Directors avoid conflicts of interest (both real
and apparent) between their duty to BlueScope
Steel and their own interests. The Board has
adopted a procedure to ensure that conflicts and
potential conflicts of interest are disclosed to the
Board. Where a matter is to be considered by
the Board, the Chairman (or where the Chairman
has a conflict or potential conflict, the Deputy
Chairman) in consultation with Company Secretary
may implement procedures to avoid the Director
with the interest acting or being perceived to act in
conflict with his or her duties to BlueScope Steel.
The Company Secretary maintains a register of
Directors’ interests.
Directors’ and executives’ remuneration
Details of the remuneration policies of BlueScope
Steel are set out in the remuneration report
contained in this report on pages 43–51.
Board
The Board reviews its effectiveness and individual
performance regularly.
In 2004, the Board completed a review of its
effectiveness, with the assistance of an external
consultant. The review concluded that the Board
is functioning well with an appropriate mix of skills
and experience and effective working relationships
exist amongst Board members and between the
Board and management. Consistent with the advice
of the consultant, the Board determined that it
would fully review its performance every two years.
The next review will take place in the 2005/06
financial year.
The Nomination Committee has reviewed the
performance of Directors seeking re-election.
Board committees
The Charter of each BlueScope Steel Board
Committee requires the committee to regularly
review its performance and, where necessary, make
recommendations to the Board for improving the
committee’s effectiveness. During the financial year
the Audit and Risk Committee conducted a formal
review of its performance that involved seeking
feedback from committee members, management
and other regular committee participants such
as, in the case of the Audit and Risk Committee,
the external auditors. Performance reviews of the
Remuneration and Organisation and Health Safety
and Environment Committee are scheduled to take
place later this calendar year.
PAGE 58
BOARD COMMITTEES
External reporting
Internal audit
Given the importance of certain matters to corporate
governance, the Board has established a number
of committees to assist in the execution of its
responsibilities:
(cid:129) the Audit and Risk Committee;
(cid:129) the Remuneration and Organisation Committee;
(cid:129) the Health, Safety and Environment Committee; and
(cid:129) the Nomination Committee.
Other committees of the Board may be formed to
deal with specific matters.
Each of the Board’s committees operates under
terms of reference (charters), detailing its roles
and responsibilities. The charters contain a number
of common features, including the ability of a
committee to obtain independent professional advice
at the expense of BlueScope Steel, the requirement
for reporting to the Board and periodic reviews of
committee operations.
The number of Board Committee meetings held
during the year ended 30 June 2005 and the
attendance at those meetings by members is set
out in the Directors’ Report on page 42.
Regular reports of the committees’ activities are
provided to the Board, Committee papers and
minutes are circulated to all Directors.
Audit and Risk Committee
The Audit and Risk Committee assists the Board
in the effective discharge of its responsibilities
for financial reporting, internal controls, risk
management, internal and external audit and
insurance (with the exception of Directors’
and Officers’ Liability Insurance).
The Committee’s charter was amended during the
course of the year to widen the scope of matters
delegated to it by the Board and is set out in full on
BlueScope Steel’s website www.bluescopesteel.com.
Set out below is an overview of the Committee’s
objectives, as contained in the Committee’s Charter:
(cid:129) (review of financial statements) review all published
financial statements which are required to be signed
by Directors, prior to approval by the Board and
any annual or Directors’ report which discusses
BlueScope Steel’s position or results;
(cid:129) (internal audit) approve the internal auditor, review
the audit scope and approve internal audit plans;
(cid:129) (internal audit findings) review and monitor
management’s responsiveness to the internal
audit findings;
Insurance
(cid:129) (insurance) responsibility for reviewing and approving
all aspects of the Company’s insurance programme
except for the Directors’ and Officers’ Liability
insurance, which is the responsibility of the Board.
A complete copy of the Audit and Risk Committee
charter is available on BlueScope Steel’s website
www.bluescopesteel.com. The Audit and Risk
Committee meets before the finalisation of all major
financial announcements of BlueScope Steel and
must meet at least four scheduled times a year.
The committee assists the Board with the
implementation of the risk management programme
approved by the Board. The programme involves
identification and assessment of significant risks
and rating of the effectiveness of associated
controls. Mitigation strategies are developed
and implemented. Periodic reports are made
to the Board and the Audit and Risk Committee
on progress with this work.
As required by its charter, the Audit and Risk
Committee is composed entirely of independent
Non-Executive Directors.
The members of the Audit and Risk Committee are
Mr Paul Rizzo (Committee Chairman), Mr Kevin McCann
and Mr Ron McNeilly. In addition to their business
experience, each member brings particular experience
relevant to the functions of the Committee. Mr Rizzo
has significant financial management and reporting
experience. Mr McNeilly has an understanding of
the industry in which BlueScope Steel operates and
Mr McCann has both financial and legal experience,
which is valuable to the functioning of the Audit and
Risk Committee.
All Directors are invited to attend meetings of the
Audit and Risk Committee, with standing invitations
also extended to the Chief Financial Officer and
the external and internal auditors. Discussions are
held with the external and internal auditors without
management being present.
(cid:129) (compliance processes) review and consider the
processes used by management to monitor and
ensure compliance with laws, regulation and other
requirements relating to external reporting of
financial information;
(cid:129) (accounting policies) review and assess BlueScope
Steel’s proposed professional and regulatory
pronouncements regarding accounting policies
and financial reporting and assess their impact
on BlueScope Steel.
Internal control and risk management
(cid:129) (risk management systems) consider whether
BlueScope Steel has effective risk management
systems in place to review, assess and manage
business, financial and operational risk;
(cid:129) (risk management policies) approve certain financial
risk management policies;
(cid:129) (credit limits) approve credit limits and guarantees
up to a specified monetary limit;
(cid:129) (internal controls) review and approve management’s
programs and policies which deal with the
adequacy and effectiveness of internal controls over
BlueScope Steel’s business processes, including the
determination of financial statements;
(cid:129) (theft and fraud reports) receive reports concerning
material actual and suspected breaches of law,
including fraud and theft and assess systems to
manage this risk;
(cid:129) (litigation and contingencies) review any litigation,
claim or other contingency which could have a
material effect upon the financial position or
operating results of BlueScope Steel;
(cid:129) (superannuation plans) receive reporting concerning
the accounting treatment of BlueScope Steel’s
superannuation plans and determine questions
of accounting treatment raised;
(cid:129) (related party transactions) review and monitor
related party transactions and assess their propriety.
External audit
(cid:129) (external auditor) make recommendations to
the Board on the appointment, reappointment
or replacement and remuneration of the external
auditor, agree the terms of engagement, review
the audit scope and monitor auditor independence;
(cid:129) (policies for non-audit services) develop policies for
approval by the Board, in respect of the provision of
non-audit services by the external auditor, and approve
provision of non-audit services by the external auditor;
(cid:129) (coordination with internal audit) ensure the external
auditor is coordinated with internal audit programs;
(cid:129) (external audit findings) review and monitor
management’s responsiveness to the external
audit findings.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 59
Health, Safety and Environment Committee
The primary objectives of the Health, Safety and
Environment Committee (HSEC), as set out in its
charter, are to:
(cid:129) (HSEC Policy) adopt a Health, Safety, Environment
and Community Policy and, as it considers necessary,
recommend changes to that policy;
(cid:129) (compliance) monitor BlueScope Steel’s compliance
with the approved HSEC Policy;
(cid:129) (HSEC standards) assess the HSEC standards of
BlueScope Steel;
(cid:129) (HSEC risks) assess the operations of BlueScope
Steel and make recommendations for assessing,
avoiding, eliminating, controlling and minimising
HSEC risks;
(cid:129) (legislation) assess compliance by BlueScope Steel
with applicable legislation;
(cid:129) (acceptable practices) research and recommend
the adoption of acceptable HSEC practices in the
industries in which BlueScope Steel operates;
(cid:129) (incident reporting) receive reports concerning
HSEC incidents within BlueScope Steel; and
(cid:129) (implications) consider HSEC issues that may have
strategic, business and reputational implications
for BlueScope Steel.
The Chairman of the HSEC is Mr Ron McNeilly, an
independent Non-Executive Director. All Directors
are members of the HSEC because of the importance
of health, safety and the environment to BlueScope
Steel’s operations. The composition of the HSEC will
be reviewed later in this calendar year. The HSEC
charter requires that the committee meets at least
four scheduled times per year.
Remuneration and Organisation Committee
The Remuneration and Organisation Committee
assists the Board in ensuring that BlueScope Steel:
(cid:129) (human resources strategy) has a human resources
strategy aligned to the overall business strategy,
which supports the BlueScope Steel Business
Charter Our Bond;
(cid:129) (practices and policies) has remuneration policies
and practices that are observed and that enable it to
attract and retain executives and Directors who will
create value for shareholders;
(cid:129) (remuneration and performance) fairly and responsibly
rewards executives having regard to the performance
of BlueScope Steel, the creation of value for
shareholders, the performance of the executive
and the external remuneration environment;
(cid:129) (succession) plans and implements the development
and succession of executive management
and Directors.
The Committee has authority to advise the Board
on specific remuneration matters and has a role to
approve certain other matters. The specific areas
of responsibility are human resources strategy,
remuneration policy, executive incentive and equity
based plans, awards under executive incentive and
equity based plans, executive Director and senior
management remuneration, performance management,
succession planning, termination, succession and
Non-Executive Director remuneration.
Board approval is required for the following:
(cid:129) (contract variation) changes to the remuneration or
contract terms of executive Directors;
(cid:129) (incentive plans) the design of new equity plans or
executive cash-based incentive plans;
(cid:129) (incentive awards) total level of award proposed from
equity plans or executive cash-based incentive plans;
(cid:129) (Managing Director selection) selection of the
Managing Director and Chief Executive Officer;
(cid:129) (Managing Director compensation) compensation
and all performance related matters for the
Managing Director and Chief Executive Officer;
(cid:129) (executive termination payments) termination
payments to executive Directors.
(cid:129) (required skills) assessing the skills required
on the Board;
(cid:129) (Board skills) assessing the extent to which the
required skills are represented on the Board from
time to time;
(cid:129) (review processes) establishing processes for the
review of the performance of the Board as a whole
and individual Non-Executive Directors; and
(cid:129) (Board candidates) establishing processes for the
identification of suitable candidates for appointment
to the Board.
Executive Leadership Team
BlueScope Steel’s Executive Leadership Team (ELT)
is responsible to the Managing Director and CEO
for the day-to-day leadership and management of
BlueScope Steel as a whole. The ELT performs its
role in consultation with, and obtains guidance from
the Board and Board committees. The ELT’s specific
responsibilities, include:
(cid:129) (BlueScope Steel corporate strategy) developing
and implementing the strategic direction of the
BlueScope Steel Group;
(cid:129) (business area strategies) reviewing and developing
strategies for business areas;
The Committee is composed entirely of independent
Non-Executive Directors.
(cid:129) (safety) reviewing and developing safety strategy,
high level processes and procedures;
(cid:129) (capital expenditure) reviewing and endorsing all
capital proposals over $5 million. The ELT recommends
to the Board all capital proposals over $25 million;
(cid:129) (human resources) reviewing and discussing human
resource talent and succession and developing
human resource strategies and practices;
(cid:129) (policies and standards) discussing and endorsing
major policies and standards that have been
delegated to management by the Board in areas
such as Human Resources, Information Technology,
Risk Management and Finance; and
(cid:129) (performance) reviewing Company and business unit
financial performance and operational performance
and agreeing any necessary actions.
The members of the Executive Leadership Team are
Kirby Adams (Managing Director and Chief Executive
Officer), who is Chairman of the ELT, Lance Hockridge
(President BlueScope Steel North America), Noel
Cornish (President, Australian and New Zealand
Industrial Markets), Mike Courtnall (President Asian
Building and Manufacturing Markets), Kathryn Fagg
(President Australian Building and Logistics Solutions),
Gerard Hammond (Acting Chief Financial Officer),
Brian Kruger (President Australian Manufacturing
Markets) and Ian Cummin (Executive Vice President
People and Performance). The ELT meets regularly
and prior to all board meetings, generally at
BlueScope Steel sites.
The members of the Committee are Ms Diane Grady
(Committee Chairman), Mr Graham Kraehe, Mr Ron
McNeilly and Mr Tan Yam Pin. All members of the
Committee are independent Non-Executive Directors.
The Committee is required to review its performance
annually and the review is scheduled to take place
later in the calendar year 2005. The Committee
meets at least four scheduled times a year.
The Committee seeks advice and guidance, as
appropriate, from the Managing Director and Chief
Executive Officer, and the Executive Vice President
People and Performance. It may also seek advice
from external experts, including in the absence of
management of BlueScope Steel.
Information on BlueScope Steel’s remuneration policies
in respect of the costs and benefits of those policies
and the link between remuneration paid to Directors
and executives and Company performance is
detailed in the Directors’ Report on pages 43 to 51.
Nomination Committee
The Nomination Committee is responsible for
reviewing the membership of the Board and for
consideration of candidates for membership of the
Board. Mr Graham Kraehe chairs the Committee. All
Non-Executive Directors are members. As the Board
believes that the responsibilities of the Committee
will be performed most effectively if all Non-Executive
Directors are involved. Detailed work of the
Committee may be delegated to a sub-committee.
The purpose of the Committee is to assist the Board
to discharge its responsibilities for ensuring that the
Board is comprised of individuals who are able to
discharge the responsibilities of Directors having
regard to the law and the highest standards of
governance. The Committee achieves this purpose by:
PAGE 60
ACCOUNTABILITY AND AUDIT
External audit
Ernst & Young are BlueScope Steel’s external
auditors.
The lead audit partner and the review partner
of our external auditors rotate every five years.
The current lead audit partner and review partner
were first appointed for the 2001/02 and 2004/05
audits of BlueScope Steel respectively.
Non-audit work is prohibited, where independence
may be compromised or conflicts arise. The Board
revised the policy for the use of the Company’s
external auditor for non-audit services during
the year. All non-audit services provided by the
Company’s external auditor are to be approved by
the Audit and Risk Committee who assess whether
any independence issues or conflicts of interest
arise prior to the engagement. The revised policy
also requires Audit and Risk Committee approval for
the employment of partners or senior engagement
team staff by the company within two years of
leaving the external audit firm.
Ernst & Young representatives have previously
attended the Annual General Meetings of BlueScope
Steel and were available to answer questions from
shareholders as appropriate. For the 2005 Annual
General Meeting, the lead auditor of BlueScope
Steel or a suitable member from the audit team will
attend, as is required by the Corporations Act as
amended by the CLERP 9 Act. Further, shareholders
now have the right to submit written questions to
the auditors as specified under the Corporations
Act, and the auditor may table answers to the
questions at the AGM.
Internal control and risk management
The Board has overall responsibility for the
BlueScope Steel Group’s systems of internal control.
These systems are designed to ensure effective and
efficient operations, including financial reporting
and compliance with laws and regulations, with
a view to managing the risk of failure to achieve
business objectives.
The Board reviews the effectiveness of the
internal control systems and risk management
on an ongoing basis, and monitors risk through
the Audit and Risk Committee (see the Audit and
Risk Committee). The Board regularly receives
information about the financial position and
performance of BlueScope Steel.
PricewaterhouseCoopers assists the Board by
providing a comprehensive internal audit service.
CEO and CFO assurances
For annual and half-yearly accounts released
publicly, the Managing Director and Chief Executive
Officer and the Chief Financial Officer assure the
Board that:
1. The financial records of the BlueScope Steel Group
have been properly maintained.
2. The BlueScope Steel financial statements and notes
required by the accounting standards, for external
reporting:
(a) give a true and fair view of the financial position
and performance; and
(b) comply with the accounting standards (and
any further requirements in the Corporations
Regulations), and applicable ASIC Class Orders.
3. The above representations are based on a system
of risk management and internal compliance
and control relating to financial reporting which
implements the financial reporting and risk
management policies adopted by the Board,
and that those systems are operating efficiently
and effectively in all material respects.
Share ownership and dealing
Details of shares in BlueScope Steel Limited held
by Directors are set out in the Directors‘ Report on
page 42.
The Board has established a Securities Trading Policy
covering dealings in BlueScope Steel’s shares. The
objective of the Policy is to ensure that shareholders,
customers and the business community have
confidence that Directors and senior management
comply with the law and best practice in corporate
governance, and handle confidential information
lawfully and with integrity. The Policy highlights
the restrictions imposed by Australian corporations
legislation on trading in BlueScope Steel shares and
other entities’ securities at a time when a person
has non-public price sensitive information.
Under the Policy, Directors and senior management
are required to notify the Company Secretary and
obtain clearance before dealing in BlueScope Steel
Limited shares. Directors and senior management
are prohibited from dealing in BlueScope Steel
Limited shares outside designated trading windows.
Any dealings in BlueScope Steel’s shares by a
Director are reported to the Board at its next
meeting. The ASX is notified of any share dealings
by a Director within five business days.
BLUESCOPE STEEL LIMITED DIRECTORS' REPORT
PAGE 61
Corporate social responsibility
BlueScope Steel is committed to meeting high
standards of compliance with respect to its health,
safety, environmental and community responsibilities,
which are essential to the way in which the
BlueScope Steel Group conducts its business.
Some of these important issues are the responsibility
of the Health, Safety and Environment committee.
However, BlueScope Steel views these matters as
key issues, for which BlueScope Steel can have an
impact in every aspect of its operations and interactions
within the communities in which it operates.
The Health, Safety, Environmental and Community
Policy addressing these issues can be found on
BlueScope Steel’s website www.bluescopesteel.com.
BlueScope Steel Guide to Business Conduct
(including whistleblower protection)
BlueScope Steel Limited has a Guide to Business
Conduct, which provides an ethical and legal
framework for all employees. The Guide defines how
the BlueScope Steel Group relates to its customers,
employees, shareholders and the community.
At the core of the Guide to Business Conduct is the
desire to build trust between BlueScope Steel and
these stakeholders, through the implementation of
principles of legal compliance and proper process;
fair competition; the application of industry best
practice to the health, safety and well-being of
BlueScope Steel’s employees; a focus on long-term
benefits rather than short-term advantage for
individuals; cooperation, driven by BlueScope
Steel’s belief in people and teamwork; and respect
for the diverse range of people and cultures.
The Guide to Business Conduct provides a common
behavioural framework applicable to all BlueScope
Steel’s employees, irrespective of their specific
job, direct employer or location around the world.
The Guide also applies to BlueScope Steel’s
Non-Executive Directors.
As a means of improving its policies and practices
regarding the detection and management of
business misconduct, the Board has revised its
policy on Fraud and Misappropriation, to cover
guidelines on reporting and responding to all
suspected business misconduct, including the
protection for whistleblowers introduced into the
Corporations Act by the CLERP 9 Act amendments.
BlueScope Steel is in the process of implementing
these guidelines throughout the organisation.
The revised guidelines set out mechanisms
that employees can use to report suspected
incidents of business misconduct, such as fraud,
misappropriation and breach of legislative
requirements. Reports of suspected business
misconduct may be made directly to line managers,
to BlueScope Steel’s Business Conduct Panel
or a whistleblower hotline. Disclosures to the
hotline may be made on a confidential basis.
The Guidelines also detail how BlueScope Steel
will respond to allegations of business misconduct,
in particular, the protections that will be offered
to employees who report suspected misconduct
and give commitments about how the outcomes
of investigations will be reported.
Political contributions
BlueScope Steel does not contribute funds to any
political party, politician, or candidate for public
office. It may, however, incur costs for attendance
at events hosted by a political party for briefing
purposes or for the purpose of meeting and having
dialogue with political figures and contributes to
the public debate of policy issues that may affect
it in the countries in which it operates.
PAGE 62
2005 CONCISE FINANCIAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2005
Revenue from ordinary activities
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expenses
Diminution in value of non-current assets
External services
Freight on external despatches
Carrying amount of non-current assets sold
Other expenses from ordinary activities
Borrowing costs expense
Shares of net profits of associates and joint venture partnership accounted for using the equity method
Profit from ordinary activities before income tax expense
Income tax expense
Profit from ordinary activities after income tax expense
Net profit attributable to outside equity interest
Net profit attributable to members of BlueScope Steel Limited
Net increase (decrease) in foreign currency translation reserve
Total revenue, expenses and valuation adjustments attributable to members of BlueScope Steel
Limited recognised directly in equity
Total changes in equity other than those resulting from transactions with owners as owners
Basic earnings per share
The above consolidated statement of financial performance should be read in conjunction
with the accompanying notes and discussion and analysis.
Notes
8
6
2005
$M
7,981.6
146.7
(3,296.8)
(1,347.0)
(306.1)
(1.6)
(1,093.0)
(484.3)
(9.9)
(394.7)
(37.5)
196.7
1,354.1
(347.0)
1,007.1
(0.1)
1,007.0
(56.7)
(56.7)
950.3
Cents
137.4
2004
$M
5,769.6
1.7
(2,145.6)
(1,075.2)
(286.7)
(1.4)
(800.0)
(418.7)
(6.0)
(288.7)
(16.8)
71.2
803.4
(201.6)
601.8
(17.7)
584.1
12.7
12.7
596.8
Cents
77.8
BLUESCOPE STEEL LIMITED DISCUSSION AND ANALYSIS OF
CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2005
PAGE 63
DISCUSSION AND ANALYSIS
OF CONSOLIDATED STATEMENT
OF FINANCIAL PERFORMANCE
A breakdown of revenue and profit from ordinary
activities before income tax by reporting segment
is set out in note 2.
Key points to note on the profit from ordinary
activities before income tax expense are:
(cid:129) Building on the strong performance of previous years,
the BlueScope Steel Group has achieved a record
financial result, delivering a net profit of $1,007.0
million and earnings per share of 137.4 cents.
(cid:129) The Company’s revenue increased $2,212.0 million
to $7,981.6 million, primarily achieved through
acquisitions, improved prices, and a favourable
shift in mix of despatches from export to domestic.
These were partly offset by a reduction in the value
of USD denominated sales, due to the strengthening
of the Australian dollar.
New Zealand and Pacific Steel Products
INCOME TAX
(cid:129) The effective tax rate for the twelve months ended
30 June 2005 was 25.6% (2004: 25.1%). The tax
rate differs from the Australian tax rate of 30%
primarily due to the utilisation of unbooked tax
losses in New Zealand, together with the utilisation
of tax exemptions in our Thailand Coating operation.
These were partly offset by North Star BlueScope
Steel being taxed at approximately 40%
(US 35% tax rate plus state taxes).
(cid:129) The earnings contribution from the New Zealand and
Pacific Steel Products segment increased as a result
of domestic and export price increases, higher prices
for vanadium slag (a steel making by-product) and
continuing strong New Zealand domestic
sales volumes.
Coated and Building Products Australia
(cid:129) The earnings contribution from the Coated
and Building Products Australia segment was
significantly affected by higher hot rolled coil and
slab feed costs (from Hot Rolled Products), which
compressed margins despite price increases in both
domestic and export markets. Earnings were also
affected by industrial action at the Western Port
facility, an increase in repairs and maintenance and
restructuring costs associated with the withdrawal
from export tinplate. These were partly offset by
a favourable shift in mix of despatches from export
to domestic.
(cid:129) Net profit after tax increased $422.9 million to a
Coated and Building Products Asia
record $1,007.0 million. This improvement was due
primarily to higher international and domestic steel
prices, improved margins from North Star BlueScope
Steel and a favourable shift in mix of despatches
from export to domestic. These were partly offset
by higher raw material and operating costs, higher
planned repairs and maintenance to improved
operating stability, higher business development costs
and the net impact of a higher AUD/USD exchange
rate on USD denominated revenues and costs.
Hot Rolled Products
(cid:129) The earnings contribution from the Coated and
Building Products Asia segment was lower primarily
due to an increase in business development and
pre-production costs associated with developments
in Vietnam, Thailand, India and China, together with
operating cost increases. These were partly offset
by sales volume increases as a result of market
growth initiatives and the integration of BlueScope
Butler China. The segment maintained gross
margins despite significant increases in steel
feed and coating metal costs.
(cid:129) The earnings contribution from the Hot Rolled
Coated and Building Products North America
Products segment increased as a result of stronger
hot rolled coil and slab pricing (to export, domestic
and inter-segment customers), and a substantial
increase in margins from North Star BlueScope Steel.
These were partly offset by higher scrap, coking coal,
iron ore, alloys and freight costs, together with an
increase in repairs and maintenance expenditure
to ensure reliability of operations which underpins
increased production capacity together with the
optimisation of asset lives.
(cid:129) Butler Manufacturing Company, a leading
manufacturer of pre-engineered buildings, was
acquired in April 2004, bringing a new suite
of building and construction products to the
Company. This new segment delivered negative
earnings for the year. However, when compared
with comparative period earnings normalised for
discontinued operations and acquisition related
costs, earnings improved $8 million. This improvement
was achieved primarily through higher margins but
was negatively affected by costs associated with
the early closure of the Galesburg, Illinois plant
and start up costs of the replacement plant at
Jackson, Tennessee.
PAGE 64
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2005
Notes
Current assets
Cash assets
Receivables
Inventories
Other
Total current assets
Non-current assets
Receivables
Inventories
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Other
Total current liabilities
Non-current liabilities
Payables
Interest bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Parent entity interest
Contributed equity
Reserves
Retained profits
Total parent entity interest
Outside equity interest in controlled entities
Total equity
7
8
2005
$M
84.6
1,052.8
1,152.2
39.5
2,329.1
7.4
58.6
253.5
4.6
3,629.0
61.6
112.4
7.5
4,134.6
6,463.7
818.6
255.7
215.6
263.0
60.5
1,613.4
5.0
620.2
351.9
372.7
1,349.8
2,963.2
3,500.5
1,747.5
(131.2)
1,841.0
3,457.3
43.2
3,500.5
2004
$M
119.4
989.2
891.4
43.7
2,043.7
7.1
71.1
236.3
4.6
3,288.6
58.0
60.1
12.6
3,738.4
5,782.1
728.3
416.0
154.3
294.7
92.5
1,685.8
–
176.7
388.3
337.7
902.7
2,588.5
3,193.6
1,914.9
(77.5)
1,302.9
3,140.3
53.3
3,193.6
The above consolidated statement of financial position should be read in conjunction with the accompanying notes and discussion and analysis.
BLUESCOPE STEEL LIMITED DISCUSSION AND ANALYSIS OF
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2005
PAGE 65
DISCUSSION AND ANALYSIS
OF CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Key notes on balance sheet movements are
as follows:
ASSETS AND LIABILITIES
(cid:129) An increase in receivables due mainly to higher
sales prices.
(cid:129) An increase in inventories due to higher raw
material costs and timing of raw material receipts
and export shipments.
(cid:129) An increase in property, plant and equipment due to
expenditure on new coating line facilities in Vietnam,
China and a second metal coating line in Thailand
and the Hot Strip Mill upgrade at Port Kembla.
(cid:129) An increase in intangible assets arising from
Lysaght Australia and BlueScope Water business
acquisitions.
(cid:129) An increase in payables due to higher capital
expenditure and an increase in raw material,
freight and other costs.
(cid:129) An increase in provision for income tax in line
with increased earnings, mainly from Australian
operations.
EQUITY
(cid:129) During April 2005, the company completed an
off-market share buy-back of 25,856,197 shares,
representing 3.5% of its issued share capital. The
shares were bought back at $7.75 per share for a
total cost of $202 million (includes $2 million of
transaction costs). The price of $7.75 represented
a 9% discount to the volume weighted average of
BlueScope Steel Limited shares over the five days
up to and including the closing date of the buyback.
(cid:129) Shares bought back on-market totalled $125 million
(15,880,095 shares).
(cid:129) $37 million of share proceeds from the exercise
of share rights issued in July 2002 under the senior
manager long term incentive plan.
(cid:129) A decrease in the exchange fluctuation reserve
due to the impact of the strengthening of the AUD
on foreign operations.
RELATIONSHIP BETWEEN DEBT
AND EQUITY
(cid:129) The current gearing ratio, calculated as net debt
over net debt plus equity, is 18.4% (2004: 12.9%).
(cid:129) On 1 July 2004, the Company completed a debut
debt raising in the US private placement market
totalling USD300 million with terms of 7 years
(USD100 million) and 10 years (USD200 million).
PAGE 66
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2005
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Other revenue
Borrowing costs
Income taxes paid
Net cash inflow (outflow) from operating activities
Cash flows from investing activities
Payments for purchase of controlled entities, net of cash acquired
Payments for property, plant and equipment
Payments for investments
Proceeds from sale of property, plant and equipment
Proceeds from sale or redemption of investments
Net associate loan receivable repaid (advanced)
Net cash inflow (outflow) from investing activities
Cash flows from financing activities
Proceeds from issues of shares
Share buyback
Employee share plan
Proceeds from other borrowings
Proceeds from finance leases
Repayment of borrowings
Repayment of finance leases
Dividends paid
Dividends paid to outside equity interests in controlled entities
Net cash inflow (outflow) from financing activities
Net increase (decrease) in cash held
Cash at the beginning of the financial year
Effects of exchange rate changes on cash
Cash at the end of the financial year
Notes
5
2005
$M
8,243.9
(7,166.0)
1,077.9
125.4
3.7
21.0
(26.9)
(312.1)
889.0
(17.8)
(600.0)
(45.2)
12.8
–
28.5
(621.7)
36.9
(327.0)
–
2,893.9
0.6
(2,541.0)
(4.5)
(343.0)
(5.2)
(289.3)
(22.0)
118.1
(13.1)
83.0
2004
$M
5,948.3
(5,099.9)
848.4
1.0
2.6
43.3
(15.8)
(119.4)
760.1
(290.0)
(289.1)
(5.5)
11.8
6.5
(11.2)
(577.5)
–
(259.4)
(9.2)
3,469.5
–
(3,114.0)
(0.3)
(241.6)
(3.0)
(158.0)
24.6
91.0
2.5
118.1
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes and discussion and analysis.
BLUESCOPE STEEL LIMITED DISCUSSION AND ANALYSIS OF
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2005
PAGE 67
DISCUSSION AND ANALYSIS
OF CONSOLIDATED STATEMENT
OF CASH FLOWS
CASH FLOWS FROOM OPERATING
ACTIVITIES
The increase in net operating cash flows reflects
an increase in operating cash profits partly offset
by an increase in net working capital. The increase
in net working capital primarily reflects:
(cid:129) An increase in inventory due to higher raw material
costs and the timing of raw material receipts and
export shipments.
(cid:129) An increase in receivables mainly due to higher prices.
(cid:129) Partially offset by higher operating payables due
to increased raw material, freight and other costs.
Other major movements in operating activities are:
(cid:129) Dividend payments of $123 million received from
North Star BlueScope Steel.
(cid:129) Income tax payments were $193 million higher
primarily due to increased profits earned from
Australian operations. Tax losses and other
tax exemptions exist in our New Zealand and
Asian operations.
CASH FLOWS FROM INVESTING
ACTIVITIES
Major movements in investing cash flows are
as follows:
(cid:129) The prior year cash flow included $278 million
for the acquisition of the Butler Manufacturing
Company.
(cid:129) Payments for property, plant and equipment has
increased by $311 million due mainly to expenditure
on new coating line facilities in Vietnam and China,
a second metal coating line in Thailand and the
Hot Strip Mill upgrade at Port Kembla.
(cid:129) Lysaght Australia and BlueScope Water business
acquisitions.
(cid:129) A loan to North Star BlueScope Steel was fully
repaid during the year.
CASH FLOWS FROM FINANCING
ACTIVITIES
Major financing cash flows are as follows:
(cid:129) The payment of $343 million in dividends
(2004: $242 million). This amount includes $75 million
(2004: $53.8 million) in special dividend payments.
(cid:129) $327 million of shares bought back
(2004: $259 million).
(cid:129) $37 million of share proceeds from the exercise
of share rights issued in July 2002 under the senior
manager long term incentive plan.
(cid:129) The company borrowed an additional $349 million
of debt.
PAGE 68
NOTE 1
BASIS OF PREPARATION OF THE CONCISE FINANCIAL REPORT
The concise financial report has been prepared in accordance with the requirements of the Corporations Act 2001 and Accounting Standard AASB 1039 “Concise Financial Reports”.
The concise financial report relates to the consolidated entity incorporating the assets and liabilities of all entities controlled by BlueScope Steel Limited as at 30 June 2005
and the results of all controlled entities for the year then ended. The accounting policies adopted are consistent with those of the previous year.
ROUNDING OF AMOUNTS
The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts
in financial reports. Amounts in the concise financial report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars.
NOTE 2
AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS)
The Australian Accounting Standards Board (AASB) is adopting Australian equivalents to International Financial Reporting Standards (AIFRS) for application to reporting
periods beginning on or after 1 January 2005. The adoption of AIFRS will be first reflected in the consolidated entity’s financial statements for the half-year ending
31 December 2005 and the year ending 30 June 2006.
Entities complying with AIFRS for the first time are required to restate their comparative financial statements to reflect the application of AIFRS. The majority of AIFRS
transition adjustments will be made retrospectively against opening retained earnings at 1 July 2004.
BlueScope Steel Limited is well advanced in transitioning its accounting policies, systems and financial reporting from current Australian accounting standards.
Set out below are the key areas where accounting policies are expected to change on adoption of AIFRS and our best estimate of the quantitative impact on the changes on
total equity as at the date of transition and 30 June 2005 and on net profit for the year ended 30 June 2005. The amounts disclosed are the company’s best estimates as at
the date of preparing the year-end financial report. These figures could change due to potential amendments to, and interpretations of, current AIFRS by the standard setters
together with ongoing work undertaken by the company’s AIFRS project team.
(a) RECONCILIATION OF EQUITY AS PRESENTED UNDER AGAAP TO THAT UNDER AIFRS
(b) RECONCILIATION OF NET PROFIT AS
PRESENTED UNDER AGAAP TO THAT UNDER AIFRS
Consolidated
Notes
As at
30 Jun 2005
$M
As at
1 Jul 2004
$M
Total equity under AGAAP
3,500.5
3,193.6
Adjustments to retained earnings (net of tax)
Defined benefit superannuation
Impairment of assets
Income tax methodology
Foreign currency translation
Business combinations
Share based payments
Equity accounting
Opening exchange fluctuation reserve
Adjustments to other reserves (net of tax)
Share based payments
Opening exchange fluctuation reserve
Total equity under AIFRS
Estimated change $m
Estimated change %
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(vi)
(viii)
(193.2)
(125.7)
86.3
(12.6)
5.0
(9.0)
(0.1)
(77.5)
9.0
77.5
3,260.2
(240.3)
(6.9%)
(130.5)
(71.6)
80.6
–
–
(2.6)
0.7
(77.5)
2.6
77.5
3,072.8
(120.8)
(3.8%)
Notes
(i)
(ii)
(iv)
(v)
(vi)
(vii)
Consolidated
Year ended
30 Jun 2005
$M
1,354.1
19.8
(77.2)
22.0
4.9
(6.4)
(0.9)
1,316.3
(347.0)
12.7
982.0
1,007.1
(25.1)
(2.5%)
Net profit as reported
under AGAAP
Defined benefit superannuation
Impairment of assets
Foreign currency translation
Business combinations
Share based payments
Equity accounting
Net profit before tax under AIFRS
Income tax (expense)/benefit – AGAAP
Income tax (expense)/benefit
– AIFRS Adjustment
Net profit after tax under AIFRS
Net profit after tax under AGAAP
Estimated change to net profit
after tax $m
Estimated change to net profit
after tax %
BLUESCOPE STEEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2005
PAGE 69
The increase in the liability from July 2004 is
primarily due to a reduction in corporate bond
interest rates in New Zealand and North America.
The AIFRS balance sheet asset and liability to be
recognised under AASB 119 for the Australian and
New Zealand defined benefit superannuation fund
positions differs from the information disclosed in
Note 38 to the full financial report due to:
(cid:129) AASB 119 requiring the fund surplus or deficit
to be grossed up for employer contributions tax
(Australia 15%, New Zealand 33%); and
(cid:129) the accrued benefits liability is to be discounted
using a corporate bond rate with terms to maturity
that match, as closely as possible, the estimated
future cash outflows.
Under current AGAAP, the accrued benefits liability
is not grossed up for employer contribution tax and
is discounted using the expected return on the fund
assets, which is typically a higher rate than the
corporate bond rate.
In December 2004, AASB 119 was reissued to
provide options in accounting for actuarial gains
and losses by allowing either a direct adjustment
against retained earnings, a progressive profit and
loss ‘corridor’ approach or immediate recognition
in the profit and loss. The company intends to early
adopt the revised standard to enable actuarial gains
and losses to be taken directly to retained earnings.
The post tax amount to be taken to retained
earnings as an actuarial loss at 30 June 2005
is $80.2M (pre tax $92.9M).
The company will recognise a $19.8M lower
employment cost in the year ended June 2005
under AIFRS as current company contributions
are in excess of the actuarial determined expense.
This benefit is split between Hot Rolled Products
$6.7M, Coated and Building Products Australia
$5.1M, Corporate and Group $1.2M and
New Zealand and Pacific Steel Products $6.8M.
(ii) Impairment of assets
AASB 136 Impairment of Assets determines the
recoverable amount of cash generating units by
assessing the higher of fair value less costs to sell
and value in use. In determining value in use, future
cash flows are discounted using a risk adjusted
pre-tax discount rate. Cash generating units (CGUs)
are described as the smallest group of assets that
generate cash flows from continuing use that are
largely independent.
BlueScope Steel currently assesses the recoverable
value of income generating units (IGUs) using
future cash flows discounted at a pre-tax company-
wide discount rate. IGUs are defined as a group of
assets working together to generate cash flows.
The CGU approach requires certain assets to be
assessed for recoverability on a standalone basis
rather than being grouped into an IGU with the
discount rate including a country risk premium.
Both of these differences increase the possibility
of certain BlueScope Steel assets being impaired.
The company has defined its CGUs, reassessed its
impairment testing policy and tested all assets for
impairment as at transition date and at 30 June 2005.
This assessment has necessitated a $102.3M
($71.6M net of tax) impairment write-down for
the Packaging Products CGU at 1 July 2004 and an
additional $82.3M ($57.6M net of tax) write-down
at 30 June 2005. The Packaging Products operational
assets will have been written down to nil value
at 30 June 2005 under AIFRS.
As a result of the 1 July 2004 write-down,
depreciation expense will be $5.1M lower for
the year ended 30 June 2005.
Under AGAAP, Packaging Products is grouped
with other Australian steel manufacturing assets
(Port Kembla Steelworks, Springhill and Western
Port operations), which was treated as an IGU,
and therefore Packaging Products was not tested
for impairment on a standalone basis. Packaging
Products is impaired on a standalone basis primarily
as a result of low growth and margin compression
since the facility was upgraded in the 1990’s and
further impaired at 30 June 2005 due to increases
in unit costs following the withdrawal from export
tinplate. The company continues to operate these
assets and is investigating ways of improving
their profitability.
The reduction in property plant and equipment will
be attributable to the Coated and Building Products
Australia reporting segment.
(i) Defined benefit superannuation
Under AASB 119 Employee Benefits, employer sponsors
are required to recognise the net surplus or deficit in
employer sponsored defined benefit superannuation
funds as an asset or liability. This asset or liability is
measured as the present value of the defined benefit
obligation at the reporting date plus unrecognised
actuarial losses (less unrecognised actuarial gains)
less the fair value of the superannuation fund’s assets
at that date. The present value of the defined benefit
obligation is based on expected future payments
which arise from membership of the fund to the
reporting date, calculated annually by independent
actuaries. Consideration is given to expected future
wage and salary levels, experience of employee
departures and periods of service.
The requirements of AASB 119 change the group’s
current accounting policy whereby a liability is only
recognised where a legal obligation exists and the
defined benefit superannuation expense matches
the company contribution. Under AASB 119, the
defined benefit superannuation expense is actuarially
determined and includes current service cost,
interest cost, and plan expenses offset by employee
contributions and the expected return on fund assets.
This expense is grossed up for any contributions tax
payable (Australia 15%, New Zealand 33%).
At 30 June 2005, an actuarially determined liability
is to be recorded for the deficit in the New Zealand
defined benefit superannuation fund and a small asset
for the Australian defined benefit superannuation fund.
Due to existing legal obligations arising from defined
benefit funds in the Coated and Building Products
North America Group a liability for the defined benefit
shortfall was taken up under AGAAP. However, an
additional liability is required to be recognised due
to the requirements of AASB 119 to discount the
accrued benefit liability using the corporate bond
rate (or equivalent) which is lower than the expected
return on the fund’s assets.
Actuarial valuations have been undertaken for each
defined benefit superannuation fund in the Group.
A breakdown of the AASB 119 adjustment for the
surplus and shortfalls of the Group’s funds, including
the associated tax adjustment, is as follows:
Consolidated
30 June 2005
$M
1 Jul 2004
$M
0.5
(168.7)
(40.2)
15.2
(14.3)
(116.6)
(6.3)
6.7
Australia entities
New Zealand Steel
Coated and Building
Products North America
Deferred tax asset/
liability
Net adjustment
(193.2)
(130.5)
PAGE 70
(iii) Income tax methodology
(v) Business combinations
(vii) Equity accounting
Under AASB 128 Investments in Associates,
where an investor holds 20% or more of the
voting power of the investee, it is presumed that
the investor has significant influence, unless it
can be clearly demonstrated that this is not the
case. The company holds some minor investments
in New Zealand Steel whereby equity accounting
was not applied with revenue being brought to
account when dividends were received.
(viii) Exchange fluctuation reserve
AASB 121 The Effects of Changes In Foreign
Exchange Rates introduces a new requirement
where upon disposal of a foreign operation
the cumulative translation difference for that
operation must be taken to the income statement
as part of the gain or loss on disposal. Under
current Australian Accounting Standards, the
cumulative translation difference pertaining to
the operation disposed would be transferred
directly to retained earnings without impacting
the income statement.
In accordance with AASB 1, the company has
elected to restate the exchange fluctuation
reserve to nil on transition to AIFRS. In adopting
this exemption the 1 July 2004 opening exchange
fluctuation reserve balance will be transferred
directly to opening retained earnings.
(c) RESTATED AIFRS STATEMENT OF
CASH FLOWS FOR THE YEAR ENDED
30 JUNE 2005
No material impacts are expected to the cash
flows presented under AGAAP on adoption
of AIFRS.
AASB 112 Income Taxes requires all tax assets to
be recognised if they are probable of realisation.
Probable is defined as more likely than not. Under
current Australian accounting standards income tax
losses can only recognised if they are considered to
be virtually certain of realisation. The company has
reassessed its accounting policy for the recognition
of tax assets in accordance with AASB 112 and
recognised an additional tax benefit of $87.5M in
the opening AIFRS balance sheet at 1 July 2004
(30 June 2005 $86.3M). As a result of booking this
additional benefit, the company expects to commence
recognising a tax expense on New Zealand Steel’s
profit during the second half of FY 2006.
A further change arising from implementing
AASB 112 is the requirement to use the balance
sheet liability method and to tax effect fair value
adjustments arising from business combinations
(refer point (v)). The balance sheet approach
focuses on the taxation of transactions and other
events that affect amounts recognised in either
the Balance Sheet or a tax-based balance sheet.
As tax assets are not allocated to reporting
segments in accordance with AASB 114 Segment
Reporting this adjustment will not impact our
individual reporting segments.
(iv) Foreign currency translation
AASB 121 Effect of Changes in Foreign Exchange
Rates requires exchange gains and losses arising
from loan balances, including intercompany
balances, to remain in the consolidated income
statement unless they form part of a net investment
in a foreign operation. If these tests are met, the
exchange fluctuation is able to be reported in
a separate component of equity and would be
realised upon disposal of the foreign operation.
The company’s foreign currency loans, including
intercompany loans, not denominated in the
functional currency of the business do not currently
meet the tests required under AASB 121 for a
hedge of a net investment of a foreign operation
resulting in exchange fluctuations on loan balances
being taken to the income statement. Under
AGAAP these items have been recorded against
the exchange fluctuation reserve.
Management has undertaken a thorough review
of the future impact on the income statement
from foreign currency exposures arising from the
changes identified above. Future foreign currency
exposure is to be managed through balancing
foreign exchange debt with foreign exchange
intercompany balances and no material earnings
volatility is expected.
The profit and loss impact arising from exchange
rate fluctuations on loan balances is to be allocated
to the Corporate and Group reporting segment.
Under AASB 3 Business Combinations, goodwill
will no longer be amortised but instead be subject
to annual impairment testing. This has resulted
in a change in the group’s accounting policy that
currently amortises goodwill over its useful life
not exceeding 20 years. Impairment testing as at
1 July 2004 and 30 June 2005 have confirmed no
impairment of goodwill.
The company has elected to apply the exemption
under AASB 1 First-time Adoption of Australian
Equivalents to International Financial Reporting
Standards to not restate pre 1 July 2004 business
combinations in accordance with AASB 3.
AASB 3 applies more stringent tests in identifying
acquired intangible assets than current Australian
accounting standards. This will result in a lower
goodwill number being recorded on post 1 July
2004 acquisitions. AASB 136 Intangible Assets
requires intangible assets that do not have indefinite
lives to be amortised over their useful life.
Consistent with AASB 112 Income Taxes, business
combinations post 1 July 2004 are required to
incorporate the tax effect of fair value adjustments.
This impacts the amount of goodwill recognised.
(vi) Share based payments
Under AASB 2 Share-based Payment, the company
is required to expense the fair value of share rights
and awards granted to employees as remuneration
over the expected vesting period. This standard
applies to all share rights and awards issued
after 7 November 2002 which have not vested
as at 1 January 2005. BlueScope Steel issues
share rights to senior executives in the organisation
as part of its remuneration strategy which focuses
on performance, accountability and aligning
performance-related reward with the value
delivered to shareholders.
AASB 2 requires the fair value of the share rights
granted to executives in September 2003 and
September 2004, and any subsequent grants,
to be expensed over the expected vesting period
with a corresponding increase in an equity reserve.
No tax deduction is allowed for the amount
expensed. The fair values and other details on
share rights granted by BlueScope Steel are
disclosed in the Remuneration Report.
A minor component of the September 2003 and
September 2004 Employee Share Ownership
Program (ESOP) requires BlueScope Steel shares
to be issued to employees in certain countries
three years from the grant date. The fair value
of the future share issue is required to be
expensed over the remaining vesting period
with a corresponding increase in an equity reserve.
Future share ownership programs will require
the fair value granted to be expensed to the profit
and loss over the vesting period. Under current
Australian accounting standards, the shares
would have been issued at nil cost and no
expense recognised.
BLUESCOPE STEEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2005
PAGE 71
Coated and Building Products Asia
Coated and Building Products Asia manufactures
and distributes a range of metallic coated and
painted steel products primarily to the building
and construction industry and to some sections
of the manufacturing industry across Asia.
On 27 April 2004, BlueScope Steel Limited acquired
the Butler Manufacturing Company, which includes
BlueScope Butler China, a business which designs,
manufacturers and markets pre-engineered steel
building systems and components across China.
In addition, Vistawall has operations in China which
manufacture and sell extruded aluminium and glass
products for the building and construction sector.
Coated and Building Products North America
On 27 April 2004, BlueScope Steel Limited acquired
Butler Manufacturing Company, a leading designer
and manufacturer of pre-engineered steel building
systems for the non-residential market with operations
in North America and China. This segment includes
the North American operations and has two
main divisions: the North American Buildings
Group, which designs, manufactures and markets
pre-engineered steel buildings and component
systems; and Vistawall, which manufactures and
sells extruded aluminium and glass products for the
building and construction sector.
Corporate and Group
Corporate and Group relates primarily to logistics
and corporate activities
Intersegment pricing and segment
accounting policies
Intersegment sales are made on a commercial
arms-length basis. Segment accounting policies
are the same as the consolidated entity’s policies
outlined in the full financial report.
(d) OTHER IMPACTS FROM ADOPTION
OF AIFRS
(i) Hedge accounting
AASB 139 Financial Instruments: Recognition
and Measurement states that in order to achieve
a qualifying hedge, the company is required to
meet the following criteria:
- Identify the type of hedge;
- Identify the hedged item or transaction;
NOTE 3
SEGMENT INFORMATION
BUSINESS SEGMENTS
The consolidated entity has five business reporting
segments: Hot Rolled Products, Coated and Building
Products Australia, New Zealand and Pacific Steel
Products (formerly New Zealand Steel), Coated and
Building Products Asia and Coated and Building
Products North America.
- Identify the nature of the risk being hedged;
Hot Rolled Products
- Identify the hedging instrument;
- Demonstrate that the hedge has and will continue
to be effective; and
- Document the hedging relationship.
The accounting principles outlined in AASB 139 do
not require retrospective application as management
have elected to apply the exemption in AASB 1
and will therefore apply from 1 July 2005. The
project team is in the process of determining the
impact that adopting the standard would have on
the financial statements of the Group. The impact
of this standard is not expected to have a material
impact on the financial statements of the Group
given the low level of hedging activity undertaken.
(ii) Sale of receivables program
AASB 139 Financial Instruments: Recognition
and Measurement only allows financial assets
to be derecognised where an entity transfers
substantially all the risks and rewards of
ownership of the financial asset. The Group’s sale
of receivables program does not currently meet
the derecognition requirements. As a result, the
program will be recorded separately as a liability
rather than an offset against receivables and the
expense of running the program will be shown as
an interest cost rather than an operating expense.
As a result of the exemption to be applied in AASB 1,
these requirements will be implemented from 1 July
2005. If the principles were applied to the 30 June
2005 balance sheet, current receivables would have
increased by $140 million with a corresponding
increase in current interest bearing liabilties.
(iii) Non-operating software
AASB 138 Intangible Assets requires computer
software that is not an integral part of computer
hardware or is not integral to the operation of a
piece of machinery to be classified as an intangible
asset. BlueScope Steel currently discloses all
capitalised computer software as property, plant
and equipment.
A reclassification of non-operating software will
reduce the net tangible assets of the company
with a corresponding increase in intangible assets.
The 30 June 2005 net book value of software to be
classified as an intangible asset is approximately
$75 million.
Hot Rolled Products includes the Port Kembla
Steelworks, a steel making operation with an
annual production capacity of approximately
5.1 million tonnes of crude steel. The Port Kembla
Steelworks manufactures and distributes slab,
hot rolled coil and plate. Slab and hot rolled coil is
supplied to Coated and Building Products Australia
for further processing, as well as to other domestic
and export customers.
The segment also includes a 50% interest in
the North Star BlueScope Steel joint venture,
a steel mini-mill in the United States, and a
47.5% shareholding in Castrip LLC.
New Zealand and Pacific Steel Products
(formerly New Zealand Steel)
The New Zealand Steel operation at Glenbrook,
New Zealand, produces a full range of flat steel
products for both domestic and export markets.
It has an annual production capacity of
0.6 million tonnes.
This segment also includes facilities in
New Caledonia, Fiji and Vanuatu which
manufacture and distribute the Lysaght range
of products.
Coated and Building Products Australia
Coated and Building Products Australia markets
a range of products and material solutions to the
Australian building and construction industry and
is also a key supplier to the Australian automotive
sector, major white goods manufacturers and
general manufacturers. Coated and Building
Products Australia is a leader in metallic coating
and painting technologies supplying a wide range
of branded products such as COLORBOND®
pre-painted steel, ZINCALUME® zinc/aluminium
alloy-coated steel and the LYSAGHT® range
of building products. The Coated and Building
Products business comprises two main metallic
coating production facilities at Springhill in
New South Wales and Western Port in Victoria
together with a network of manufacturing and
distribution facilities throughout Australia.
The segment also includes Packaging Products,
an operation producing tinplate in Australia
which is used by the packaging industry in
applications for food, beverages, paint, oil
and other steel packaging.
PAGE 72
NOTE 3 SEGMENT INFORMATION
PRIMARY REPORTING – BUSINESS SEGMENTS
Corporate and
Group
Consolidated
Hot Rolled
Products (1)
New Zealand
and Pacific
Steel Products
$M
2,112.7
1,826.8
3,939.5
1.9
1.9
3,941.4
1,338.5
$M
615.5
140.9
756.4
9.0
9.0
765.4
182.8
Coated and
Building
Products
Australia
$M
2,984.9
205.4
Coated and
Building
Products Asia
$M
999.3
52.0
3,190.3
1,051.3
2.0
2.0
3,192.3
(115.7)
3.1
3.1
1,054.4
81.8
Coated and
Building
Products North
America
$M
1,132.1
2.3
1,134.4
22.5
22.5
1,156.9
(19.7)
$M
96.2
263.7
359.9
5.4
5.4
365.3
(70.2)
1,338.5
182.8
(115.7)
81.8
(19.7)
(70.2)
2,593.9
578.7
1,917.7
1,167.6
472.2
47.3
564.1
104.3
490.4
289.4
238.0
58.1
2005
Sales to external customers
Intersegment sales
Intersegment elimination
Total sales revenue
Other revenue
Intersegment elimination
Total other revenue
Total segment revenue
Segment result
Intersegment elimination
Total segment result
Unallocated revenue less unallocated expenses
Profit from ordinary activities before
income tax expense
Income tax expense
Net profit
Segment assets
Unallocated assets (2)
Intersegment elimination
Total assets
Segment liabilities
Unallocated liabilities (2)
Intersegment elimination
Total liabilities
Investments in associates and joint venture
partnership
Acquisition of property, plant and equipment,
intangibles and other non-current segment assets
Depreciation and amortisation expense
Other non-cash expenses
246.9
140.1
131.7
1.0
–
36.8
28.2
1.3
–
175.2
98.7
3.9
1.9
342.9
25.2
0.9
4.7
50.5
20.4
2.9
–
1.7
1.9
–
(1) The Hot Rolled Products segment results includes $194 million share of net profits of joint venture partnership.
(2) External borrowings, sale of receivables program, cash and tax balances are classified as unallocated.
$M
7,940.7
2,491.1
(2,491.1)
7,940.7
43.9
(3.0)
40.9
7,981.6
1,397.5
(9.1)
1,388.4
(34.3)
1,354.1
(347.0)
1,007.1
6,777.4
48.8
(362.5)
6,463.7
1,744.3
1,496.2
(277.3)
2,963.2
253.5
747.2
306.1
10.0
BLUESCOPE STEEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2005
PAGE 73
NOTE 3 SEGMENT INFORMATION
PRIMARY REPORTING – BUSINESS SEGMENTS CONTINUED
Corporate and
Group
Consolidated
Hot Rolled
Products (2)
New Zealand
and Pacific
Steel Products
$M
1,517.3
1,321.3
2,838.6
4.7
4.7
2,843.3
563.8
$M
514.7
75.5
590.2
1.6
1.6
591.8
62.1
Coated and
Building
Products
Australia
$M
2,742.3
141.2
2,883.5
3.2
3.2
2,886.7
192.9
Coated and
Building
Products Asia
$M
663.8
34.8
698.6
11.5
11.5
710.1
104.0
Coated and
Building
Products North
America
$M
191.1
0.4
191.5
2.0
2.0
193.5
(8.8)
$M
108.9
264.0
372.9
9.2
9.2
382.1
(64.0)
563.8
62.1
192.9
104.0
(8.8)
(64.0)
2,382.6
538.7
1,684.0
813.2
518.9
45.1
524.1
97.7
428.7
204.0
286.9
70.7
2004 (1)
Sales to external customers
Intersegment sales
Intersegment elimination
Total sales revenue
Other revenue
Intersegment elimination
Total other revenue
Total segment revenue
Segment result
Intersegment elimination
Total segment result
Unallocated revenue less unallocated
expenses
Profit from ordinary activities before income
tax expense
Income tax expense
Net profit
Segment assets
Unallocated assets (3)
Intersegment elimination
Total assets
Segment liabilities
Unallocated liabilities (3)
Intersegment elimination
Total liabilities
Investments in associates and joint venture
partnership
Acquisition of property, plant and equipment,
intangibles and other non-current segment
assets (4)
Depreciation and amortisation expense
Other non-cash expenses
232.1
–
–
–
4.2
64.9
127.9
(0.5)
27.9
36.1
(0.6)
101.3
93.6
1.6
162.9
21.9
0.8
176.0
3.6
0.2
–
3.5
3.6
–
(1) Minor changes have been made to the comparative period results reported in the 30 June 2004 concise financial report.
These changes relate to the reorganisation of Lysaght Pacific and International Trading activities to align with current management responsibilities.
(2) The Hot Rolled Products segment result includes $71.1 million share of net profits of joint venture partnership.
(3) External borrowings, sale of receivables program, cash and tax balances are classified as unallocated.
(4) Includes property, plant and equipment acquired on 27 April 2004 from the purchase of the Butler Manufacturing for $186.1million.
This is reflected in the Coated and Building Products North America and Asia segments.
$M
5,738.1
1,837.2
(1,837.2)
5,738.1
32.2
(0.7)
31.5
5,769.6
850.0
(32.1)
817.9
(14.5)
803.4
(201.6)
601.8
5,982.5
124.7
(325.1)
5,782.1
1,612.1
1,225.6
(249.2)
2,588.5
236.3
536.5
286.7
1.5
PAGE 74
NOTE 4
REVENUE
Sale of goods
Services
Sales revenue
Other revenue
Total revenue
2005
$M
7,780.9
159.8
7,940.7
40.9
7,981.6
123.6
5,738.1
31.5
5,769.6
NOTE 5
DIVIDENDS
NOTE 6
EARNINGS PER SHARE
2004
$M
2005
$M
2004
$M
2005
Cents
2004
Cents
5,614.5
Total dividends
343.0
241.6
Basic earnings
per share
137.4
77.8
As at 30 June 2005, the company’s franking credits
available for subsequent years is $257.8 million
(2004: $147.4 million). The franking credits balance
includes franking credits that are expected to arise
from the payment of income tax payable as at the
end of the financial year.
There is no diluted earnings per share impact from the
senior managers long term incentive plan disclosed in
the Remuneration Report as it is the current practice
of the company to satisfy these entitlements through
the buyback and cancellation of an equivalent number
of BlueScope Steel Limited issued shares.
The directors have declared a fully franked final dividend
of 24 cents and a fully franked special dividend of
20 cents per fully paid ordinary share. The estimated
final dividend payable of $170 million and the special
dividend payable of $142 million, to be paid on
24 October 2005 (record date 5 October 2005), have
not been recognised as a liability at 30 June 2005.
A fully franked final dividend of 18 cents ($134.9 million)
and a fully franked special dividend of 10 cents
($74.9 million) per fully paid ordinary share was paid
on 18 October 2004. A fully franked interim dividend
of 18 cents per fully paid ordinary share was paid
on 4 April 2005 ($133.2 million).
2005
Number
2004
Number
733,031,445
750,542,940
2005
$M
2004
$M
1,007.1
601.8
(0.1)
(17.7)
1,007.0
584.1
Weighted average
number of shares
Weighted average
number of ordinary
shares used as the
denominator in
calculating basic
earnings per share
Reconciliation
of earnings used
in calculating
earnings per share
Basic earnings
per share
Net profit
Net profit
attributable to
outside equity
interest
Earnings used in
calculating basic
earnings per share
BLUESCOPE STEEL LIMITED
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2005
PAGE 75
2005
Shares
732,320,847
(41,736,292)
15,414,055
1,943,100
2004
Shares
784,685,949
(52,365,102)
–
–
2005
$M
1,914.9
(204.2)
36.5
0.4
0.1
2004
$M
2,182.1
(257.7)
–
(9.2)
0.3
707,941,710
732,320,847
1,747.5
1,914.9
NOTE 7
MOVEMENTS IN ORDINARY SHARE CAPITAL
Opening balance
Share buyback
Long term incentive plan
Employee share plan
Less: Transaction costs arising on share buyback
SHARE BUYBACK
(i) On-market share buyback.
In August 2004, the company announced its intention to buyback on-market 18.4 million shares. Up until 30 April 2005 the company purchased on-market 9,534,633 shares
at an average market price of $7.86 per share. In May 2005, the company announced the maximum number for the on-market share buyback program would be increased to
35 million shares. A total of 15,880,095 shares were purchased for the 12 months at an average price of $7.83 per share.
The previous year’s share buyback reflects the publicly announced on-market share buyback program, which concluded in March 2004.
(ii) Off-market share buyback.
On 19 April 2005, the company outlayed $200.4 million buying back 3.5% of its issued capital at $7.75 per share which represented a 9% discount to the volume weighted
average share price over the five-day period to 8 April 2005.
In accordance with the principles outlined in UIG 22 “Accounting for share Buybacks of No Par Value Shares”, the capital component of $3.07 per share has been debited
against the Share Capital Account while the remaining amount, including transaction costs of $1.7 million has been debited against retained earnings.
EMPLOYEE SHARE PLAN
In September 2004, the company issued 150 BlueScope Steel Limited shares at nil cost to 12,954 eligible employees (1,943,100 shares). In September 2003, the company
provided 200 BlueScope Steel shares at nil cost to 9,403 eligible employees (1,880,600 shares). An equivalent number of shares were bought back at $4.88 per share.
The objective of these share issues is to recognise and reward employees for their contribution to the BlueScope Steel’s financial results and workplace safety performance
and provide them with the opportunity to become long term shareholders.
SHARE RIGHTS
The long term incentive plan is an award of share rights to eligible senior managers. The full details of the operation of the plan can be found in the Remuneration Report.
In September 2004, 12,808,655 shares were issued at $2.85 per share and 2,605,400 shares were issued at nil cost in accordance with the term outlined in the July 2002 award.
PAGE 76
NOTE 8
RETAINED PROFITS
Retained profits at the beginning of the financial year
Net profit attributable to members of BlueScope Steel Limited
Share buyback
Dividends paid
Aggregate of amounts transferred from reserves
NOTE 9
FULL FINANCIAL REPORT
Notes
5
2005
$M
1,302.9
1,007.0
(122.9)
(343.0)
(3.0)
1,841.0
2004
$M
961.4
584.1
–
(241.6)
(1.0)
1,302.9
Further financial information can be obtained from the full financial report which is available from the company, free of charge, on request. A copy may be requested by
contacting the company’s share registrar whose details appear in the Corporate Directory. Alternatively, both the full financial report and the concise financial report can
be accessed via the internet at www.bluescopesteel.com.
BLUESCOPE STEEL LIMITED
DIRECTORS’ DECLARATION
30 JUNE 2005
The directors declare that in their opinion, the concise financial report of the consolidated entity for the year ended 30 June 2005 as set out on pages 62 to 76 complies
with Accounting Standard AASB 1029: Concise Financial Reports.
The financial statements and specific disclosures included in this concise financial report have been derived from the full financial report for the year ended 30 June 2005.
The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities
of the consolidated entity as the full financial report, which as indicated in note 9, is available on request.
This declaration is made in accordance with a resolution of the directors.
G J KRAEHE
CHAIRMAN
K C ADAMS
MANAGING DIRECTOR AND CEO
Melbourne
22 August 2005
BLUESCOPE STEEL LIMITED
PAGE 77
INDEPENDENT AUDIT REPORT
TO THE MEMBERS OF BLUESCOPE STEEL LIMITED
SCOPE
Audit approach
INDEPENDENCE
The concise financial report and directors’
responsibility
The concise financial report comprises the
statement of financial position, statement of
financial performance, statement of cash flows
and accompanying notes to the financial statements
for the consolidated entity for the year ended
30 June 2005. The consolidated entity comprises
both BlueScope Steel Limited (the company) and
the entities it controlled during the year.
The directors of the company are responsible
for preparing a concise financial report and the
additional disclosures included in the directors’
report are designated as audited (‘the additional
disclosures’):
(cid:129) directors remuneration table on p. 49 of the directors’
report;
(cid:129) senior executives’ remuneration table on p. 50
of the directors’ report; and
(cid:129) share rights holdings table for specified executives
on p. 51 of the directors’ report,
that complies with the Accounting Standard AASB
1039 “Concise Financial Reports”, in accordance
with the Corporations Act 2001. This includes
responsibility for the maintenance of adequate
accounting records and internal controls that are
designed to prevent and detect fraud and error, and
for the accounting policies and accounting estimates
inherent in the concise financial report and the
additional disclosures.
We conducted an independent audit on the concise
financial report and the additional disclosures in
order to express an opinion on them to the members
of the company. Our audit was conducted in
accordance with Australian Auditing Standards in
order to provide reasonable assurance as to whether
the concise financial report is free of material
misstatement. The nature of an audit is influenced
by factors such as the use of professional judgment,
selective testing, the inherent limitations of internal
control, and the availability of persuasive rather
than conclusive evidence. Therefore, an audit cannot
guarantee that all material misstatements have
been detected.
We performed procedures to assess whether in all
material respects the concise financial report and
the additional disclosures are presented fairly in
accordance with Accounting Standard AASB 1039
“Concise Financial Reports”. We formed our audit
opinion on the basis of these procedures, which
included:
(cid:129) testing that the information in the concise financial
report and the additional disclosures are consistent
with the full financial report, and
(cid:129) examining, on a test basis, information to provide
evidence supporting the amounts, discussion and
analysis, and other disclosures in the concise
financial report that were not directly derived from
the full financial report.
We have also performed an independent audit of
the full financial report of the company for the year
ended 30 June 2005. Our audit report on the full
financial report was signed on 22 August 2005,
and was not subject to any qualification. For a better
understanding of our approach to the audit of the
full financial report, this report should be read
in conjunction with our audit report on the full
financial report.
We are independent of the company, and have
met the independence requirements of Australian
professional ethical pronouncements and the
Corporations Act 2001. We have given to the
directors of the company a written Auditors’
Independence Declaration, signed on 22 August
2005, a copy of which is included in the Directors
Report. In addition to our audit of the full and
concise financial reports and the additional
disclosures, we were engaged to undertake the
services disclosed in the notes to the financial
statements of the full financial report. The provision
of these services has not impaired our independence.
AUDIT OPINION
In our opinion, the concise financial report and
additional disclosures included in the Directors’
Report designated as audited of BlueScope Steel
Limited complies with Accounting Standard
AASB 1039 “Concise Financial Reports”.
ERNST & YOUNG
A I BECKETT
PARTNER
Melbourne
22 August 2005
PAGE 78
SHAREHOLDER INFORMATION
DISTRIBUTION SCHEDULE
RANGE
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and Over
Total
NO OF HOLDERS
NO. OF SHARES
% OF ISSUED CAPITAL
119,445
57,520
7,329
3,625
243
188,162
50,678,632
128,249,766
52,364,061
74,824,531
402,033,020
708,150,010
7.16
18.11
7.39
10.57
56.77
100.00
The number of security investors holding less than a marketable parcel of 54 securities ($9.320 on 31/08/2005) is 4,116 and they hold 122,378 securities.
TWENTY LARGEST REGISTERED SHAREHOLDERS AS WEDNESDAY 31 AUGUST 2005
RANK
NAME OF SHAREHOLDER
TOTAL UNITS
% OF ISSUED CAPITAL
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA LIMITED
WESTPAC CUSTODIAN NOMINEES LIMITED
NATIONAL NOMINEES LIMITED
ANZ NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
RBC GLOBAL SERVICES AUSTRALIA NOMINEES PTY LIMITED
QUEENSLAND INVESTMENT CORPORATION
COGENT NOMINEES PTY LIMITED
AMP LIFE LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
WESTPAC FINANCIAL SERVICES LIMITED
SUNCORP CUSTODIAN SERVICES PTY LIMITED
IAG NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
PSS BOARD
GOVERNMENT SUPERANNUATION OFFICE
CITICORP NOMINEES PTY LIMITED
VICTORIAN WORKCOVER AUTHORITY
CSS BOARD
HEALTH SUPER PTY LTD
Total for Top 20
Total other investors
Grand total
The on-market buyback ended on Friday 2 September 2005.
SUBSTANTIAL SHAREHOLDERS
86,811,322
83,205,333
68,608,018
21,359,637
17,997,509
11,731,680
10,017,490
9,754,455
4,836,089
4,614,603
4,588,242
3,573,181
3,261,590
2,813,300
2,304,825
2,215,307
1,838,293
1,678,549
1,676,833
1,600,454
344,486,710
363,663,300
708,150,010
12.26%
11.75%
9.69%
3.02%
2.54%
1.66%
1.41%
1.38%
0.68%
0.65%
0.65%
0.50%
0.46%
0.40%
0.33%
0.31%
0.26%
0.24%
0.24%
0.23%
48.65%
51.35%
100.00%
Barclays Global Investors Australia Limited, by a notice of initial substantial holder dated 10 March 2003, advised that it and its associates were
entitled to 39,730,425 ordinary shares.
AXA and AXA Asia Pacific Holdings Limited, by a notice of change in interests of a substantial holder dated 25 August 2005, advised that it and
its associates were entitled to 46,760,523 ordinary shares.
BLUESCOPE STEEL LIMITED
PAGE 79
CORPORATE DIRECTORY
DIRECTORS
G J Kraehe AO Chairman
R J McNeilly Deputy Chairman
K C Adams Managing Director and
Chief Executive Officer
D J Grady
H K McCann AM
P J Rizzo
Y P Tan
SECRETARY
M G Barron
EXECUTIVE LEADERSHIP TEAM
K C Adams Managing Director
and Chief Executive Officer
N Cornish President Australian
and New Zealand Industrial Markets
M Courtnall President Asian Building
and Manufacturing Markets
I Cummin Executive Vice President
People and Performance
B Kruger President Australian
Manufacturing Markets
K Fagg President Australian Building
and Logistics Solutions
L Hockridge President North America
G Hammond Acting Chief Financial Officer
NOTICE OF ANNUAL GENERAL MEETING
The Annual General Meeting (AGM)
will be held:
Friday 11 November 2005
2 pm (local time)
The Grand Hyatt,
123 Collins Street, Melbourne, Australia
WEBCAST
The AGM will be webcast live on
www.bluescopesteel.com and an archived
version will be lodged on the website for
viewing at a convenient time.
REGISTERED OFFICE
BlueScope Steel Centre
Level 11, 120 Collins Street,
Melbourne, Victoria 3000
Telephone: +61 3 9666 4000
Fax: +61 3 9666 4111
POSTAL ADDRESS
PO Box 18207, Collins Street East,
Melbourne, Victoria 8003
SHARE REGISTRAR
ASX Perpetual Registrars Limited
Level 4, 333 Collins Street
Melbourne, Victoria 3000
Telephone: 1300 855 998 (within Australia)
+61 3 9615 9130 (outside Australia)
General Fax: +61 3 9615 9900
Proxy Fax: +61 2 9287 0309
Website: www.asxperpetual.com.au
E-mail: bluescopesteel@asxperpetual.com.au
AUDITOR
Ernst & Young Chartered Accountants
Level 33, 120 Collins Street,
Melbourne, Victoria 3000
STOCK EXCHANGE
BlueScope Steel Limited shares are listed on
the Australian Stock Exchange (ASX code: BSL).
WEBSITE ADDRESS
www.bluescopesteel.com
Design and production: ERD Design Commmunications Photograpy: Jean-Marc LaRoque, Peter Hyatt, Kenny Chai, David Lock, Chris Kappa, Peter Bennetts, Paul Bradshaw,
CityLink photograph courtesy and copyright Transurban Limited Printing: Impact Printing Paper: PhoeniXmotion and Precision, Spicers Paper, produced with totally chlorine free pulp.
PAGE 80
OPERATIONS AROUND THE WORLD
AUSTRALIA
STEEL PRODUCTION, ROLLING,
COATING AND PAINTING FACILITIES
1 Port Kembla, NSW, Port Kembla
Steelworks
1 Port Kembla, NSW, Springhill Works
2 Chullora, NSW
3 Hastings, VIC, Western Port Works
4 Acacia Ridge, QLD
CORPORATE OFFICE
5 Melbourne, VIC
SERVICE CENTRES
4 Acacia Ridge, QLD
1 CRM, Port Kembla, NSW
2 Chullora, NSW
6 Sunshine, VIC
7 Braeside, VIC
8 Wingfield, SA
9 WA Service Centre
BLUESCOPE LYSAGHT AUSTRALIA
10 Archerfield, QLD
11 Rocklea, QLD
12 Rockhampton, QLD
13 Mackay, QLD
14 Townsville, QLD
15 Cairns, QLD
16 Gold Coast, QLD
17 Toowoomba, QLD
2 Chullora, NSW
18 Emu Plains, NSW
19 Smithfield, NSW
20 Minchinbury, NSW
21 Smeaton Grange, NSW
22 Cardiff, NSW
23 Tamworth, NSW
24 Dubbo, NSW
25 Coffs Harbour, NSW
26 Albury, NSW
27 Queanbeyan, ACT
28 Lyndhurst, VIC
29 Dandenong, VIC
30 Campbellfield, VIC
31 Geelong, VIC
32 Hobart, TAS
33 Launceston, TAS
34 Devonport, TAS
35 Gillman, SA
36 Darwin, NT
37 Forrestfield, WA
BLUESCOPE WATER
38 Keysborough, VIC
39 St Marys, NSW
40 Unanderra, NSW
41 Beenleigh, QLD
THAILAND
42 Map Ta Phut, Rayong,
BlueScope Steel Thailand
BLUESCOPE LYSAGHT THAILAND
43 Bangkok
44 Khon Kaen
42 Map Ta Phut, Rayong
MALAYSIA
45 Kapar, Selangor, BlueScope Steel
Malaysia
BLUESCOPE LYSAGHT MALAYSIA
46 Shah Alam, Selangor
47 Kota Kinabalu, Sabah
48 Kuching Bintulu, Sarawak
INDONESIA
49 Cilegon, Java, BlueScope Steel
Indonesia
BLUESCOPE LYSAGHT INDONESIA
50 Cibitung, Java
51 Medan, Sumatra
52 Surabaya, Java
VIETNAM
53 Ba Ria-Vung Tau Province,
BlueScope Steel Vietnam
(operational 2006)
BLUESCOPE LYSAGHT VIETNAM
54 Ho Chi Minh City
55 Hanoi
CHINA
56 Suzhou Province, BlueScope Steel
China (operational 2006)
BLUESCOPE BUILDINGS
57 Shanghai
58 Tianjin
59 Langfang
60 Guangzhou
61 Chengdu
INDIA
BLUESCOPE BUILDINGS
62 Pune (operational 2006)
63 Chennai (operational 2007)
64 New Delhi (operational 2007)
OTHER BLUESCOPE LYSAGHT
– ASIA PACIFIC
65 SINGAPORE – Jurong
66 BRUNEI – Bandar Seri Begawan
67 SRI LANKA – Colombo
68 TAIWAN – Kaohsiung
69 NEW CALEDONIA – Noumea
70 VANUATU – Port Vila
71 FIJI – Suva, Nadi and Lautoka
USA
CORPORATE OFFICE
72 Dallas, TX – Regional Headquarters
BUILDINGS GROUP
MANUFACTURING PLANTS
73 Annville, PA
74 Laurinburg, NC
75 Jackson, TN
76 Visalia, CA
77 San Marcos, TX
78 Selmer, TN
BUILDINGS GROUP
ADMINISTRATION AND
ENGINEERING
79 Kansas City, MO
80 Birmingham, AL
81 Peoria, IL
82 Memphis, TN
83 Mason, OH
KORETECK
84 Staunton, VA
VISTAWALL MANUFACTURING
PLANTS
85 Terrell, TX
86 Greeneville, TN
VISTAWALL SERVICE/
DISTRIBUTION CENTRES
87 Seattle, WA
88 San Francisco, CA
89 Sacramento, CA
90 Modesto, CA
91 Los Angeles, CA
92 Denver, CO
72 Dallas, TX
93 Houston, TX
94 Minneapolis, MN
95 Wausau, WI
96 St Louis, MO
97 Chicago, IL
98 Detroit, MI
99 Cincinnati, OH
100 Cleveland, OH
101 Warwick, RI
102 Washington, DC
103 Tucker, GA
104 Newnan, GA
105 Tampa, FL
106 Bristol, PA
107 Bloomsburg, PA
JOINT VENTURE OPERATING
SITES
108 Delta, OH – North Star BlueScope
Steel
109 Crawfordsville, IN – Castrip®
CANADA
BUILDINGS GROUP SALES OFFICE
110 Burlington, ONT
111 Edmonton, Alberta
MEXICO
BUTLER GROUP MANUFACTURING
PLANT
112 Monterrey, Nuevo Leon
NEW ZEALAND
113 Glenbrook – New Zealand Steel
114 Waikato North Head –
Ironsands Mine
115 Taharoa – Ironsands Mine
111
91
87
88
89
90
76
94
95
81
97
109
110
98
100
108
99
101
106
92
79
96
83
107
73
102
84
74
105
82
75
80
78
86
104
103
72
85
93
77
112
59
58
61
56
57
60
68
55
44
43
42
54
53
51
46
45
65
48
47
66
64
62
63
67
50
49
52
36
9
37
15
14
13
12
70
69
71
1011
4
1741
16
25
22
2
19
1
40
23
24
39
18
20
21
35
8
27
26
30
6
31
2928
38
5
3
7
34
33
32
113
114
115
GROWTH.
RESULTS
B
L
U
E
S
C
O
P
E
S
T
E
E
L
L
I
M
I
T
E
D
A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
4
/
0
5
Level 11, 120 Collins Street
Melbourne, Victoria 3000 Australia
www.bluescopesteel.com
9
3
2
0
0
7
5
0
4
4
6
6
4
BLUESCOPE STEEL LIMITED
ANNUAL REPORT 2004/05