Basler
Annual Report 2010

Plain-text annual report

thE tUrnarOUnd thE POtEntIaL BlueSCope Steel lImIted ABn 16 000 011 058 level 11, 120 CollInS StReet melBouRne, vICtoRIA 3000 AuStRAlIA www.BlueSCopeSteel.Com BLUESCOPE StEEL LImItEd AnnuAl RepoRt 2009/2010 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 9 / 2 0 1 0 2 0 1 0 J u n a $192 million profit turnaround from the previous year. conservative gearing and strong liquidity positions bluescope well to manage through the steel cycle and support growth initiatives. 2 0 0 9 d e c improved profitaBility in the december quarter – a result of cost reductions, improved demand and better margins. 2 0 0 8 d e c during the global financial crisis, a series of major initiatives implemented to protect the Balance sheet, improve liquidity, manage inventory and reduce capital expenditure and costs. 2 0 0 7 n o v launched Blueprint, our guide to business performance and growth. its focus – staying safe, protecting our balance sheet, building brands, improving efficiencies and enhancing customer service. taBle of contents 02 chairman’s message 04 managing director and ceo’s report 08 board of directors 09 safety 10 performance overview 12 our bond curvaceous weathering steel panels, crafted by bluescope facade solutions, reflect the deep red ochre of outback australia on the award-winning australian pavilion at shanghai expo. architects: wood marsh. cover: rising cloud-like above melbourne’s skyline is the distinctive aami park stadium rooftop. hot rolled coil from bluescope was formed into structural hollow sections by orrcon steel to support the stadium’s cutting-edge bioframe design. stadium designed by cox architects and constructed by grocon. five year performance* *reported results ORDINARY DIVIDEND(CENTS PER SHARE)554947440910080706REVENUE ($M)10329862410495891380310910080706EBIT ($M)15240106310995560910080706NET PROFIT AFTER TAX($M)-661265966863380910080706RETURN ON INVESTED CAPITAL (%)0.23.818.219.611.00910080706EARNINGS PER SHARE(CENTS PER SHARE)-7.16.966.278.739.60910080706 chairman’s message from graham Kraehe bluescope steel emerged from the tough times of the global economic crisis with a strong balance sheet, strong liquidity and a return to profit in 2010. Our profit for FY2010 represents a significant turnaround on the previous year’s net loss. Importantly, the Company is now well positioned to gain from continued strong Asian growth and a global economic recovery. The strong business performance improvement came from concentrated effort and hard work by our 18,000 employees worldwide. Everyone across the Company took effective measures to reduce costs and increase sales volumes. The Company has reduced gearing to a conservative level and BlueScope has a strong liquidity position. As a result, BlueScope now has improved its cost base and balance sheet to enable it to manage through business cycles and look at opportunities as the market improves. Currently, we are seeing a continued, although patchy, worldwide economic recovery and strength in most of the Asian economies in which we operate. colorbond® steel roofing creates a striking effect on the new wa basketball centre in perth, one of the finest training facilities in australia. designed by cox architects. asia posts strong improvement strategic direction governance The most pleasing result was the turnaround in the Company’s Asian businesses. Today, BlueScope has the best Asian footprint for mid and downstream products of any steel company. We have been operating in China for more than 20 years and in the Asian region for over 40 years. Our presence there gives us exposure to the most populous and fastest growing markets in the world. The Board will be in Shanghai in October where we are scheduled to hold a Board meeting and customer function in the Australian Pavilion at the Shanghai World Expo. This Pavilion, that showcases Australian architectural vision and our steel to the world, is one of the most popular of the Expo sites. We are very proud of this unique building. Expo has hosted more than 53 million visitors to date, including hundreds of BlueScope customers in China where we have found it a successful platform for sales and business development opportunities. shareholder value The Board committed to resuming dividend payments as a high priority once economic recovery became more apparent. The Board has therefore declared a 5 cent per share fully franked final ordinary dividend for FY2010. The decision to reinstate the dividend payments reflects the Company’s improved financial performance following the global financial crisis, our confidence in the medium to long term outlook for BlueScope Steel and the global steel industry, and the growth in the economies where we operate. During FY2010, the Company undertook a strategy review which builds on the 2007 Blueprint. The Board has endorsed the renewed strategy which will see us leverage our existing capabilities and capitalise on our market strengths. Managing Director and CEO Paul O’Malley discusses the strategy further, in his Report to shareholders. corporate citizenship BlueScope is committed to continuously improving the environmental footprint of our operations. The Company is working to improve its systems and performance through its network of environmental reviews and audits. In April 2010, the then Australian Federal Government deferred consideration of its Carbon Pollution Reduction Scheme until 2012. Also, on 1 July 2010, the New Zealand Government introduced an Emissions Trading Scheme (ETS). BlueScope’s New Zealand Steel operation will be affected by this ETS, but the New Zealand government policy recognises the global nature of the steel industry and its trade exposure so the net impact to New Zealand Steel should be minimal. The Company has developed a set of Greenhouse Policy Principles by which it will assess environmental policies in countries where we operate. In essence, we advocate policy that reduces emissions but minimises any loss of international competitiveness. These Principles can be viewed on BlueScope’s corporate website. Since BlueScope’s inception, the Company has been committed to the highest standards of Corporate Governance and to complying with the Australian Stock Exchange Corporate Governance Principles and Recommendations. In some cases, we have been at the forefront in key practices such as remuneration. The Board’s prime objective in managing remuneration has been to ensure employee remuneration reflects the Company’s performance, both in times of excellent results and in downturn years, so that they are aligned with the experience of shareholders. Directors and executives are required to personally build a holding of BlueScope shares and all employees are encouraged to become shareholders. The Company welcomes recent changes to diversity disclosures introduced by Australia’s Corporate Governance Council. BlueScope is committed to building a diverse workforce and considers that diversity, including gender diversity, is a key business issue. The complementary skills and experience of our individual Board members is the key to its strength and I thank all of our Board members for their contribution through the past year. On behalf of the Board, I would like to thank our 18,000 employees for the turnaround performance, and Managing Director and CEO Paul O’Malley and his team for sound leadership and guidance. 02 graham Kraehe ao CHAIRMAN 03 geodesic aami park stadium set against the beauty of the yarra river that flows through the city of melbourne. architects: cox architects. managing director and ceo’s report from paul o’malley last year was a turnaround year for your company. our performance steadily improved each quarter, despite the marKet challenges remaining after the global financial crisis. As the year progressed, we saw improved demand, better margins and the benefits of a substantially lower cost base. The biggest turnaround was the performance of our Asia businesses which posted a record $116 million Earnings Before Interest and Taxes (EBIT). At a company-wide level, we delivered significant permanent cost savings. Our lower cost base provides us valuable operating leverage when demand and steel prices improve. We successfully maintained our conservative gearing and strong liquidity which positions us well to manage through the steel cycle and support growth initiatives. Our New Zealand business delivered another solid result and despatch volumes for our Australian Coated and Industrial Products business rebounded. In North America, North Star BlueScope Steel, with its strong focus on production quality and customer service, also had a much improved performance. Overall, BlueScope achieved a good result given the unprecedented circumstances of the previous year and the challenging business environment. group performance overview At the start of FY2010, continued weak global demand for steel meant we operated significantly below our full steel making production capability. During the half, a strong export and domestic sales campaign, on the back of improving demand in Australia and Asia, supported returning the No 5 Blast Furnace at Port Kembla Steelworks to near full production capacity, after a successful reline. Still, we reported a small loss for the first half. Business performance improved during the second half with the benefits of cost reductions, further demand for our products and better steel margins all contributing to deliver a full year reported Net Profit After Tax (NPAT) of $126 million, a $192 million positive turnaround from the previous year. Underlying* NPAT doubled to $113 million equating to underlying earnings per share of 6.2 cents. A final ordinary dividend, fully franked, of 5 cents per share was declared. Total revenue was $8.6 billion, lower by 17 per cent in comparison to FY2009, reflecting lower domestic pricing across all segments of our business, the higher Australian dollar, and lower domestic sales volumes for Coated and Building Products North America. Net operating cash flow improved significantly and at the end of FY2010, was close to half a billion dollars for the year. The focus on maintaining the strength of the balance sheet and reducing costs continued into FY2010. We have maintained our conservative approach to gearing, held at around 11 per cent, and our strong liquidity position with $1.6 billion in undrawn debt and cash. *refer to page 17 in the Directors’ Report regarding underlying earnings. As an Australian and global manufacturing business, we must remain cost competitive. Anything that challenges our productivity, operating flexibility and cost base will put us at a disadvantage to our global competitors. During the financial year, $526 million in total cost savings were delivered. By the end of FY2010, $340 million of permanent savings had been achieved over our FY2008 cost base. Continuing to lower our cost base is an ongoing priority. safety At BlueScope Steel, there’s nothing more important than safety. It’s our number one priority. Despite this, tragically in March, an operator at our Phu My site in Vietnam was killed while working on the coating and painting lines. Our sincere condolences go to his family, workmates, and friends. This tragedy reminds us all that we must remain diligent in ensuring our safety and the safety of our workmates. We believe that all work can be done safely. In our pursuit of Zero Harm, there were a number of positive safety initiatives and results for the year. The Company’s injury levels remain at world’s best standard with Lost Time Injury Frequency Rate (LTIFR) remaining below one incident for every million hours worked for the sixth consecutive year. The Medically Treated Injury Frequency Rate (MTIFR) ended the year at a record low level of 4.9. business performance highlights asia Our Asian business performance was a highlight of FY2010, with record profits in China, Indonesia, Malaysia and Vietnam. Underlying EBIT for the year was $116 million, $31 million of that from our China business, compared to a loss of $21 million in FY2009. A new leadership team with its strong market focus, along with major cost reductions, led to improved domestic sales volumes and margins. The Indonesian domestic market strengthened during the year, particularly in the residential segment. Construction of the second coating line is on schedule to be operational by the third quarter of this financial year. In China, the Government’s economic stimulus package aided in improving demand for our coated business and we expect it will continue to positively impact the key infrastructure segment in FY2011. Our Butler pre-engineered building (PEB) business saw improved demand. Historically, in our Buildings business many customer orders are from major international corporations. Pleasingly, half our customers in the Butler China business now come from domestic Chinese companies that see our value proposition as helping them be successful in the market. Lysaght China further grew its market share in the industrial and premium public building segments. In Thailand, the political environment stabilised in April but customers in that market remain cautious. Our Vietnam coating and building businesses, under a new leadership team, recovered strongly with increased domestic demand, cost reductions and improved business processes. Asia, including China, is home to the world’s most populous and fastest growing economies. As they grow, demand for steel products grows. We are well placed with our business footprint in this area and plan a number of product developments to strengthen our market offer. Over the next few years the assets we have today, and the new metal coating line which will commence operation in Indonesia next year, provide increased earnings potential in Asia. 04 05 left: melbourne’s new headquarters for us retail giant, costco, at docklands displays the design diversity of pre-engineered buildings. architect: nh architecture. far left: ground-hugging house in the snowy mountains of nsw, with its curved roof of lysaght custom orb® is designed to withstand extreme weather. architect: james stockwell architecture. australia In Australia, our Coated and Industrial Products Australia business ended the year positively. Underlying EBIT was $108 million for the year, $188 million in the second half. Global steel demand continued to improve in all regions at the beginning of the fourth quarter of the year with hot rolled coil prices increasing by 20 to 25 per cent, improving margins. Our Australian Distribution and Solutions business, which includes BlueScope Lysaght, BlueScope Buildings Australia, BlueScope Water, our service centres and emerging businesses, struggled in an extremely competitive market segment with volumes and margins flat in the second half. new zealand & pacific islands Our New Zealand & Pacific Steel Products business delivered another solid performance with an underlying EBIT result of $73 million, achieving $52 million in the second half of the year. Domestic sales for the year rose by 10 per cent with higher demand from the manufacturing sector and increased government infrastructure investment. north america North Star BlueScope Steel, our 50 per cent joint venture mini mill, delivered an impressive result with earnings for our Hot Rolled Products North America segment improving to $61 million profit for the year compared to a loss of $58 million in FY2009. For the eighth consecutive year, North Star BlueScope Steel received the highest customer satisfaction rating in the Jacobson & Associates survey of 2,000 North American steel customers. Steelscape saw increased sales with despatches up by 37 per cent but margins softer. However, even during a challenging year, it was able to increase its market share. With the continued weakness in the US non-residential construction market, the Buildings business in our Coated and Building Products segment struggled. A good deal of hard work has been done over the past two years to rationalise the integrated Buildings businesses in the US and lower its cost base. We are confident that when market conditions turn around we will deliver improved results given our very competitive cost structure and market offer. strategy – scope to grow BlueScope is a leading global provider of steel building products and solutions. We are a diverse company with over 100 manufacturing plants in 17 countries. Of our 18,000 employees around the world, over 90 per cent are shareholders. Three years ago, we released our Blueprint to guide our business performance and growth. This encompassed: – reinvigorating our Australian and New Zealand businesses; – continuing the turnaround and improvement process across our Asian and North American businesses; and – growing or acquiring new businesses that build on our distinct competitive advantage. During the global financial crisis, our focus on the Blueprint fundamentals served us well – protecting our balance sheet, building brands, improving efficiencies through significant cost reductions, and enhancing customer service. During this time, we also reviewed our strategy to ensure we were ready for renewed growth around the world. As a result of this review, we have broadened our strategy to include three additional core elements: – expand participation in our existing building and construction markets, better leveraging our current product base including custom engineered buildings, insulated panels, quality coated products and light-weight steel structures 06 – invest into large, high growth regions leveraging our product capability, especially through our Butler and Varco Pruden brands – evaluate raw material opportunities that reduce our raw material cost base through the cycle At the same time, we will continue to focus on the fundamentals of running our production lines at full capacity, reducing structural costs and managing to strict financial targets. environment Our Company has a long standing commitment to improving our environmental footprint across all our operations. This continues today with many environmental improvement initiatives underway. One key initiative is at our Western Port plant in Victoria where a significant water saving project under construction is expected to deliver a 65 per cent reduction in fresh water use and a 75 per cent reduction in wastewater discharge. The project is similar in design to a major recycled water initiative operating at our Port Kembla Steelworks since 2006 that has saved more than 20 billion litres of fresh water. people BlueScope is committed to building a diverse, global workforce that reflects the countries, communities and cultures in which we operate. We consider gender diversity, in particular, a key business priority. We are driving initiatives to attract, develop and retain women and to improve the participation of women throughout the organisation and in management positions. A Gender Diversity Project, commissioned by the Executive Leadership Team, has led to enhancements to our existing gender diversity programs. Recent initiatives include establishing a Diversity Council to provide visible leadership, sponsoring and monitoring of key programs, introducing diversity educational materials, and adopting diversity objectives with measures of success and targets against which the businesses will be monitored and assessed. The Board monitors progress against these initiatives. Our goal is to create a more diverse and inclusive workplace that will attract, encourage and develop a talented and capable workforce. We know significant improvements are needed to reach our goal and we are committed to making this happen. looKing ahead As we move into the first half of FY2011, we have a strong balance sheet, good liquidity and financial flexibility with low gearing. Our significantly reduced cost base positions us well for an upturn in market conditions across our footprint. We expect to see continued strong performance from our Asian businesses and the ongoing benefit of permanent cost reductions over the course of FY2011. BlueScope Steel is poised to benefit from a global recovery in the medium to long term. Our aim is to increase the market penetration of our products, to capitalise on improving market conditions, and grow our presence in the building and construction markets. This financial year has proven our resilience. I would like to thank all our employees and my management team for their strong commitment to Zero Harm and their outstanding contribution to achieving this profitable result in a very challenging time. I would also like to thank you, our shareholders, and also our customers, for your continued support. paul o’malley MANAGING DIRECTOR & CEO 07 safety WorKing hard every day to achieve zero harm our Board of directors bluescope steel is committed to the highest standards of corporate governance. seated, left to right: tan yam pin, diane grady, chairman graham Kraehe. back, left to right: daniel grollo, Ken dean, paul o’malley, Kevin mccann, ron mcneilly. for the directors’ biographies, please refer to pages 20 and 21. at bluescope steel, safety comes first. our goal is zero harm across our organisation from worKing in our manufacturing operations to distributing our products and in our offices. 8 REPORTED PERFORMANCE FOR (cid:10)WORLD STEEL MEMBER COMPANIES (EMPLOYEES & CONTRACTORS) our company bluescope steel is an international steel solutions company with a manufacturing and marKeting footprint spanning australia, new zealand, asia and north america. Our Company is a leading supplier of premium metallic coated and painted steel building products, and one of the world’s largest manufacturers of pre-engineered steel buildings (PEBs). BlueScope’s brand portfolio contains many well-known and iconic names including COLORBOND®, ZINCALUME®, and XLERPLATE® steels and LYSAGHT® building products. Our BlueScope Water business has achieved a leading position as a supplier of premium steel rainwater harvesting solutions. Products such as our WATERPOINT Slimline® and WATERPOINT Classic® steel tanks have been well received by the market. In North America, the BUTLER® brand has been part of the landscape for a century and is a premium brand in PEB systems. In our Asian markets, we have built an enviable reputation for quality with our purpose-designed Clean COLORBOND® steel which is ideal for tropical conditions. SMARTRUSS® is a well established and popular roof framing brand in Thailand and Indonesia. BlueScope Steel employs over 18,000 people in 17 countries, with more than 100 manufacturing facilities worldwide. The Company is a recognised global leader in safety, and is engaged in a range of initiatives to improve our environmental performance and the sustainability of our products. Our belief that all work can be done safely means we work continuously to improve our health and safety performance at every level. In 2009/2010, the Company’s injury levels are at world’s best standard with the Lost Time Injury Frequency Rate (LTIFR) remaining below one for the sixth consecutive year. Our actual LTIFR performance of 0.8 compares with the average for the World Steel members’ performance of 4.0. BlueScope Steel’s Medically Treated Injury Frequency Rate (MTIFR) was below five. Tragically, in our Vietnam business in March 2010, an operator was fatally injured. This tragedy reminds us that we must remain diligent in ensuring our own safety and the safety of our workmates. We believe that all injuries can be prevented. During the year, there were a number of safety improvements in many of our businesses and some were recognised by external safety awards. All of us at BlueScope are committed to making our workplace injury free. The result is that fewer people are being injured than ever before and the Company is cited for its best practice in workplace safety. We remain focused on reaching our goal of Zero Harm. 8 4 . 1 4 . 5 3 . 5 3 . 8 2 . 8 1 . 6 1 . 9 0 . 8 0 . 6 0 . 9 0 . 9 0 . 8 0 . 02 99 98 03 01 00 06 97 LOST TIME INJURY FREQUENCY RATE LOST TIME INJURIES PER MILLION HOURS WORKED Includes Contractors, Butler from 2004 and 2007/8 acquisitions 07 05 04 08 09 10 1 . 7 4 1 . 9 2 4 . 2 2 9 . 1 2 0 . 7 1 4 . 2 1 4 . 9 3 . 8 3 . 9 6 . 6 8 . 6 4 . 6 7 . 5 9 . 4 97 98 99 00 01 02 03 04 05 06 07 08 09 10 MEDICALLY TREATED INJURY FREQUENCY RATE MEDICALLY TREATED INJURIES PER MILLION HOURS WORKED Includes Contractors, Butler from 2004 and 2007/8 acquisitions 08 09 performance overvieW fy2010 Bluescope steel Business segments coated and industrial products australia australia distribution and solutions new zealand and pacific steel products coated and building products asia hot rolled products north america coated and building products north america lower result from reduced spread and strong australian dollar – Impacted by lower margins, but still delivered an underlying EBIT of $108 million with a 22% increase in domestic sales volume and the benefit of significant cost improvement initiatives – External export sales volume improved 46% over FY2009 on improved customer demand, and supported by resumed production from No 5 Blast Furnace from August 2009, following its successful reline – Pricing of COLORBOND® steel remained stable; metal coated products pricing declined compared to FY2009 largely due to the strong Australian dollar – Western Port and Springhill production volumes increased across all lines as customer demand improved – Second half result improved over first half particularly due to stronger international steel prices lower margins reduce earnings year of solid performance – Strong Australian dollar results in pricing pressure in domestic market, leading to lower margins – Domestic despatches 10% higher on improved demand, particularly driven by manufacturing end-use segment – Despatch volumes for BlueScope Lysaght marginally higher – Soft market conditions continue due to lower consumer demand across most regions of Australia in residential housing sector – Stronger demand in the building market led to higher production for the Sheet and Coil Processing business – New steel framing brand, Axxis®, launched with total framing sales up 24% – Export demand relatively strong but conditions remain challenging – Markets and project work in Pacific Islands business underpinned strong coated volumes – Production levels higher across the – Pioneer Water has stronger sales product range – Iron sands exports rose by 33% and vanadium volumes up 4% activity from seasonal rural spending but building delays in West Australia reduce revenues for Highline – Interest in BlueScope Buildings range, including pre-engineered steel buildings, remote steel framing supply, and steel building facades, is growing performance turnaround with record profits – Asia business led overall results with underlying EBIT $116 million – Strong market focus and major cost reductions resulted in improved domestic sales volumes and margins – Improved domestic market conditions in Indonesia increased demand for residential steel roofing and steel building frames – Construction of second metallic coating line in Indonesia on track to be operational in third quarter FY2011 – Political environment in Thailand stablised but markets remain cautious – Sales volumes rise for China Butler Buildings by 27% and by 29% for Lysaght from improved industrial and public sector demand impressive result from north star bluescope steel, our us steel-making joint venture – $119 million increase in underlying EBIT mainly due to a 33% increase in despatch volumes – High capacity utilisation rates maintained due to reputation for on-time delivery, quality and customer responsiveness challenging year in a tough market – Steelscape increased market share with despatches up 37% due to improved demand – Demand for new non-residential buildings weak with external despatches down 35% for BlueScope Buildings – Recovery in auto sales and production, – Integration program in Buildings service centre restocking and an improved agricultural sector lifts sales volumes – Receives highest customer satisfaction rating in Jacobson & Associates survey for eighth consecutive year business over last 2 years improves its ability to handle current market weakness and materially benefit from future market improvement – External shipments lower for ASC Profiles and Metl-Span from continued weak economic conditions fy 2010 fy 2009 fy 2010 fy 2009 fy 2010 fy 2009 fy 2010 fy 2009 fy 2010 fy 2009 fy 2010 fy 2009 external despatches ('000s of tonnes) external despatches ('000s of tonnes) external despatches ('000s of tonnes) external despatches ('000s of tonnes) external despatches ('000s of tonnes) external despatches ('000s of tonnes) Domestic Export revenue ($M) ebit ($M) underlying ebit ($M) net operating assets (pre-tax) ($M) return on net assets (pre-tax) 1,870 1,576 4,745 84 108 3,464 1,535 1,082 5,291 206 141 3,322 2% 6% Domestic Export revenue ($M) ebit ($M) underlying ebit ($M) net operating assets (pre-tax) ($M) return on net assets (pre-tax) 754 11 1,762 12 2 881 755 9 2,121 (23) 9 926 1% (2%) Domestic Export revenue ($M) ebit ($M) underlying ebit ($M) net operating assets (pre-tax) ($M) return on net assets (pre-tax) 265 241 618 73 73 398 241 273 695 65 87 346 19% 20% Domestic Export revenue ($M) ebit ($M) underlying ebit ($M) net operating assets (pre-tax) ($M) return on net assets (pre-tax) 889 89 1,349 116 116 899 717 109 1,543 (94) (21) 833 14% (8%) Domestic Export revenue ($M) ebit ($M) underlying ebit ($M) net operating assets (pre-tax) ($M) return on net assets (pre-tax) 924 – – 61 61 172 693 – – (58) (58) 183 34% (22%) Domestic Export revenue ($M) ebit ($M) underlying ebit ($M) net operating assets (pre-tax) ($M) return on net assets (pre-tax) 521 14 1,307 (21) (16) 806 553 19 2,189 (93) 9 919 (3%) (8%) 10 11 thE tUrnarOUnd thE POtEntIaL BlueSCope Steel lImIted ABn 16 000 011 058 level 11, 120 CollInS StReet melBouRne, vICtoRIA 3000 AuStRAlIA www.BlueSCopeSteel.Com BLUESCOPE StEEL LImItEd AnnuAl RepoRt 2009/2010 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 9 / 2 0 1 0 BlUescope steel limiteD 2009/2010 Directors’ report anD concise financial report taBle of contents 15 Directors’ report 20 Directors’ Biographies remuneration report 24 remuneration summary (unauDiteD) 26 remuneration report (auDiteD) 48 corporate governance statement concise Financial report 51 statement oF comprehensive income 52 statement oF Financial position 53 statement oF changes in equity 54 statement oF cash Flows 55 notes to the consoliDateD Financial statements inDepenDent auDitor’s report to the memBers 66 Directors’ Declaration 67 68 shareholDer inFormation 69 corporate Directory The Company is progressing a number of growth initiatives mainly aimed at expanding the manufacture and distribution of metallic coated and painted steel products. The status of these projects is: Projects approved during the year — Indonesia: a second metallic coating facility (capacity: 165,000 tonnes per annum) with in-line painting at Cilegon, which was • Australia: #5 Blast Furnace reline to commence in March 2009 temporarily placed on hold during the year ended 30 June 2009, with completion planned for June 2009; received Board approval to recommence construction and is now planned for completion during FY2011; and — India: the metallic coating and painting facilities project in India, which forms part of a 50/50 joint venture with Tata Steel, is planned for completion during FY2011. matters sUBseQUent to tHe Year enDeD 30 JUne 2010 There were no material matters subsequent to the year ended 30 June 2010. DiViDenDs In view of the financial performance of the Company in the second half of the year ended 30 June 2009 and the half year ended 31 December 2009 the Directors determined not to pay any dividends during the year ended 30 June 2010. On 13 August 2010, the Directors determined to pay a final fully franked dividend of 5 cents per share, which is to be paid to shareholders on 20 October 2010 (record date 24 September 2010). Directors’ report Directors’ report for tHe Year enDeD 30 JUne 2010 The Directors of BlueScope Steel Limited (‘BlueScope Steel’) present their report on the consolidated entity (‘BlueScope Steel Directors’ report for tHe financial Group’ or ‘the Company’) consisting of BlueScope Steel Limited Year enDeD 30 JUne 2008 and its controlled entities for the year ended 30 June 2010. The Directors of BlueScope Steel Limited (“BlueScope Steel”) principal actiVities present their report on the consolidated entity (“BlueScope Steel Group”) consisting of BlueScope Steel Limited and its controlled During the year the principal continuing activities of the BlueScope entities for the financial year ended 30 June 2008 (“FY 2008”). Steel Group, based principally in Australia, New Zealand, North America, China and elsewhere in Asia, were: principal actiVities (a) Manufacture and distribution of flat steel products; (b) Manufacture and distribution of metallic coated and painted During the year the principal continuing activities of the BlueScope Steel Group, based principally in Australia, New Zealand, North steel products; America, China and elsewhere in Asia, were: (c) Manufacture and distribution of steel building products; and (d) Design and manufacture of pre-engineered steel buildings and (a) Manufacture and distribution of flat steel products; (b) Manufacture and distribution of metallic coated and painted building solutions. steel products; siGnificant cHanGes in state of affairs (c) Manufacture and distribution of steel building products; and The following significant events occurred during the year: (d) Design and manufacture of pre-engineered steel buildings The reline of its No.5 Blast Furnace (one of two at Port Kembla and building solutions. Steelworks). The Company completed the reline of its No. 5 Blast siGnificant cHanGes in state of affairs Furnace which was blown-in during August 2009. The following significant events occurred during the year: Sinter plant upgrade at Port Kembla Steelworks. The sinter plant upgrade at Port Kembla Steelworks coincided with the reline of the (a) The Company is progressing a range of growth initiatives mainly No. 5 Blast Furnace and has been brought up to a rate consistent aimed at expanding the manufacture and distribution of metallic with the requirements of the blast furnace operations. The project coated and painted steel products. The status of these projects is: increased the competitiveness of the Port Kembla Steelworks Commenced operation through reducing the use of more expensive iron ore pellets and • Australia: the new painting facility (capacity: 120,000 tonnes per using less expensive iron ore fines in the iron making process. annum) in western Sydney. This facility commenced production in August 2007. Under construction • Australia: the sinter plant upgrade at Port Kembla steelworks will coincide with the reline of the #5 Blast Furnace during March 2009. The project will increase the competitiveness of the Port Kembla Steelworks through reducing the use of more expensive iron ore pellets and using less expensive iron ore fines to produce additional sinter; • Indonesia: a second metallic coating (capacity: 165,000 tonnes per annum) facility at Chilegon remains on schedule for commissioning towards the end of CY 2009; and • India: the metallic coating and painting facilities project in India, which form part of a 50/50 joint venture with Tata Steel, is planned to be completed during CY 2010. 14 15 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT reView anD resUlts of operations The BlueScope Steel Group comprises six reportable operating segments: Coated & Industrial Products Australia, Australia Distribution & Solutions, New Zealand & Pacific Steel Products, Coated & Building Products Asia, Hot Rolled Products North America and Coated & Building Products North America. revenues 2010 $m revenues 2009 $m earnings 2010 $m earnings 2009 $m 4,744.5 1,761.6 618.1 1,348.6 0.0 1,306.8 0.7 9,780.3 (1,182.3) 8,598.0 25.8 8,623.8 5,290.7 2,120.7 694.9 1,542.8 0.0 2,188.8 0.2 11,838.1 (1,535.8) 10,302.3 26.6 10,328.9 Sales revenue/EBIT Coated & Industrial Products Australia Australia Distribution & Solutions New Zealand & Pacific Steel Products Coated & Building Products Asia Hot Rolled Products North America Coated & Building Products North America Discontinued operations Segment revenue/EBIT Inter-segment eliminations Segment external revenue/EBIT Other revenue/(net unallocated expenses) Total revenue/EBIT Net borrowing costs Profit (loss) from ordinary activities before income tax Income tax (expense)/benefit Profit (loss) from ordinary activities after income tax expense Net (profit) loss attributable to outside equity interest Net (profit) loss attributable to equity holders of BlueScope Steel Earnings per share (cents) 84.3 11.9 72.9 115.6 60.7 (21.3) 7.0 331.1 (19.8) 311.3 (71.2) 240.1 (103.2) 136.9 2.6 139.5 (13.5) 126.0 6.9 206.3 (23.3) 65.1 (94.1) (58.0) (93.2) 14.2 17.0 126.4 143.4 (128.3) 15.1 (128.5) (113.4) 46.6 (66.8) 0.4 (66.4) (7.1) Underlying earnings The reported earnings includes the following unusual and non-recurring items: eBit npat eps 2010 $m 2009 $m 2010 $m 2009 $m 2010 cps reported earnings Unusual or non-recurring events: Net (gains) losses from businesses discontinued Asset impairment Restructure and redundancy costs Profit on sale and leaseback of properties Integration costs associated with IMSA Steel Corp Write-off of feasibility costs on capital projects New Zealand tax adjustment Business development costs Western Port fire Other 240.1 15.1 126.0 (66.4) (7.0) – 30.6 (12.6) – – – 3.7 – – (14.7) 36.0 110.4 – 3.5 22.0 – – 10.2 (11.1) (6.0) – 21.0 (8.8) – – (21.5) 2.6 – – (13.0) 36.0 77.4 – 2.4 15.0 – – 7.1 (2.2) underlying earnings 254.8 171.4 113.3 56.3 6.9 (0.3) – 1.2 (0.5) – – (1.2) 0.1 – – 6.2 2009 cps (7.1) (1.4) 3.8 8.3 – 0.3 1.6 – – 0.8 (0.2) 6.1 GroUp reView Given the unprecedented circumstances in the year ended 30 June 2009 and the challenging business environment in the year ended 30 June 2010, we are pleased with the improvement in our overall business performance. We delivered an outstanding improvement in our Asian businesses, including record profits in China, Indonesia, Malaysia and Vietnam. We also achieved a significant reduction in the Company’s permanent cost base. Also encouraging was increasing demand in Australia, strong export sales and good earnings results both in New Zealand and at North Star BlueScope Steel, our steelmaking joint venture in the United States. We have been successful in maintaining conservative gearing (held at around 11%, net debt over net debt plus equity) and a strong liquidity position (held at $1.6B of undrawn debt and cash). Our target gearing has been reassessed and we believe a range of 25% to 30%, down from the range of 30% to 35%, to be appropriate for a business operating in a cyclical industry whilst seeking to maintain strong investment grade metrics. During the year ended 30 June 2010 earnings improved as the year progressed. First half – net underlying loss after tax of $53.2m First Quarter: Low global demand, continuing from the previous year, resulted in a first quarter loss. The Company operated below capacity with only No. 6 Blast Furnace operating at 100%, whilst No. 5 was ramping up after being restarted in August 2009, at the Port Kembla Steelworks. Additionally, there was a carry-over of higher priced raw materials inventory from the second half of the previous year. Second Quarter: On the back of improving global demand, the Company returned to near full production capacity by early October, following the successful re-line and ramp up of the No. 5 Blast Furnace. To support full production, a strong sales campaign resulted in improved volumes in Australia and Asia. We also saw a marked increase in capacity utilisation rates at the North Star BlueScope Steel operations. Allied to this, a material reduction in cost base enabled the Company to deliver better margins and a return to profit. second half – net underlying profit after tax of $166.5m Importantly for shareholders, the Directors have decided to reinstate dividend payments. This decision reflects our view of the financial performance of the business post the global financial crisis, the medium to long-term outlook for the Company and the global steel industry, and improved conditions in economies where we operate. Third Quarter: Reinvigorated sales, including improved domestic and export sales from the Coated & Industrial Products Australia (CIPA) segment, improved export sales volumes from New Zealand Steel and improved net sales volumes in Asia, contributed to a positive result. 16 17 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT Fourth Quarter: More than two-thirds of the half year result was delivered in this quarter reflecting the culmination of the hard work done earlier in the year. Collectively, the lower cost base, improved sales and better spreads (export HRC prices increased by 20-25% in Q4 vs. Q3) drove this much stronger final quarter result. A highlight for the year was our greatly improved performance in Asia, the future growth corridor of the world, with $115.6M underlying EBIT for the year versus a loss of $21.0M in the previous year. A new leadership team is driving our product offering and sales strategy. This, combined with a significant reduction in costs, particularly from streamlining manufacturing operations and a leaner back-office structure, underpinned the turnaround. We increased domestic sales volumes, and margins improved. Our Thailand business continued to be impacted by political instability and higher imports. Elsewhere, our second coating line (with in-line painting) development in Indonesia remains on schedule for completion in early calendar year 2011. In Australia, our CIPA segment finished the year positively having increased despatch volumes with an improved sales mix. Underlying EBIT was $107.6M for the year and $187.5M in the second half. External export despatches increased 42% in the second half (compared to the first half), and improved prices in the fourth quarter enhanced margins. We also saw second half domestic demand improve by 11% on average across our core sectors. Despite this, our Distribution business struggled in a very competitive market segment with volumes and margins flat in the second half. Our New Zealand & Pacific Steel Products segment delivered another solid underlying EBIT result of $72.9M, of which $51.6M was achieved in the second half. Domestic sales, to the manufacturing end-use sector in particular, increased notably in this half. The team also achieved increased export margins and despatch volumes. In North America, the North Star BlueScope Steel mini mill delivered a significantly improved result. Earnings from our Hot Rolled Products North America segment improved to $60.7M (profit), over a $58.0M loss in the prior year. The North Star team continued to produce quality products and achieve excellent delivery performance to customers. This delivered volume improvements through the year and, along with better margins, contributed to the turnaround in the second half. However, in our Coated & Building Products segment the Buildings business struggled due to continued weakness in the non-residential construction market. This was partly offset by improved performance from our Steelscape coated business, with improved sales volumes but softer margins. Significant work has been completed in the rationalisation of the integrated Buildings businesses in the US (including design, manufacturing and delivery networks) and we are confident this will deliver better results when overall market conditions improve, given our very competitive cost structure and market offers. Turning to safety, our goal remains Zero Harm. Tragically, in March, an operator working at our Vietnam coating facility sustained a fatal injury. Following this tragedy, safety sessions were held across the entire organisation. It is only through the combined efforts and contributions of everyone that we can achieve our goal of Zero Harm. On environment matters, we continued our focus on reducing the environmental footprint of our major manufacturing facilities, and improving our environment systems. The Company has developed eight Greenhouse Gas Policy Principles, which form the basis for responding to proposed GHG regulations. Central to our position is that such regulations must not undermine the international competitiveness of the Company’s major operations. We are taking further significant steps to cut water use in our Australian operations, with a recycled water project currently under construction at the Western Port plant that will reduce its fresh water consumption by 65 per cent. segment results coated & industrial products australia The earnings contribution from the Coated and Industrial Products Australia segment decreased significantly, primarily as a result of lower domestic selling prices across all commoditised products, lower export hot rolled coil and slab prices and a stronger Australian dollar. These were partly offset by lower coal, iron ore and scrap costs, cost reduction initiatives, higher domestic and export despatch volumes combined with lower per unit conversion costs arising from the increased production volumes, and lower inventory net realisable value provisions. australia Distribution & solutions The earnings contribution from the Australia Distribution & Solutions segment increased compared to the previous year’s loss primarily due to lower steel feed costs, cost reduction initiatives and inventory net realisable value provisions taken during the prior comparative period. These were partly offset by lower domestic selling prices. new Zealand & pacific steel products The earnings contribution from the New Zealand & Pacific Steel Products segment increased principally as a result of higher domestic despatch volumes and shipments of Taharoa iron sands, cost reduction initiatives, one-off costs incurred during the prior comparative year relating to the write-off of feasibility costs previously capitalised on capital projects placed on hold and lower inventory net realisable value provisions. These were partly offset by lower domestic and export selling prices and an unfavourable movement in the US dollar relative to the NZ dollar. coated & Building products asia The earnings contribution from the Coated & Building Products Asia segment improved significantly compared to the prior year loss as a result of higher sales volumes, lower steel feed costs, cost reduction initiatives and one-off costs incurred during the prior comparative year relating to asset impairment charges and internal restructuring costs. These were partly offset by lower domestic and export prices and unfavourable foreign exchange movements in China, Thailand and Malaysia. Hot rolled products north america The earnings contribution from the Hot Rolled Products North America segment increased significantly compared to the previous year’s loss primarily due to higher despatch volumes, lower per unit conversion costs driven by the increased volumes, cost reduction initiatives and inventory net realisable value provisions taken during the comparative period. These were partly offset by reduced spread at North Star BlueScope Steel driven by lower hot rolled coil prices partly offset by lower average scrap and pig iron prices. coated & Building products north america The earnings contribution from the Coated & Building Products North America segment increased primarily due to cost reduction initiatives and lower inventory net realisable value provisions. These were partly offset by lower sales volumes and unfavourable exchange rate translation movements. liKelY DeVelopments anD eXpecteD resUlts steel industry In the second half of June 2010, global steel prices fell in response to reduced demand and concern about increased exports from China. A prompt response from global steel producers to reduce production and continued supply discipline in China, have contributed to steel prices stabilising in the mid-US$600’s/tonne as at mid August. Global capacity utilisation is currently around 80% (or around 75% ex-China). We need to see a return to mid-80% capacity utilisation (including China) to achieve a sustained improvement in the steel pricing environment. Other major global steel influences are the continued high cost of raw materials and concern about a slowing Chinese economy, due to credit tightening and softer demand. The Chinese Government is taking the appropriate action to move their economy back to a more sustainable growth path. Our businesses in China continue to see robust physical activity through their order books. strategy We recently undertook a review of our strategy to position us for growth, following the end of the global financial crisis. Building on the strategy detailed in our November 2007 ‘Blueprint’, the review reinforced our focus on: 1. reinvigorating our Australian and New Zealand businesses; 2. continuing the turnaround and improvement process across our Asian and North American businesses; and 3. growing, or acquiring, new businesses that build on our distinct competitive advantage: The review also concluded that we should broaden our strategic activities to include three additional core elements. These are to: — expand participation in our existing building and construction markets, better leveraging our current product base including custom engineered buildings, insulated panels, quality coated products and light-weight steel structures; — invest into large, high growth regions leveraging our product capability, especially through our Butler and Varco Pruden brands; and — evaluate raw material opportunities that reduce our raw material cost base through the cycle. We will, of course, continue to pursue the fundamentals of maximum asset utilisation, structural cost reductions and management to strict financial targets – both with regard to the operation of our existing business and in our expansion and growth initiatives. outlook In the first half of the year ended 30 June 2011 we expect continued strong performance from our Asian businesses and the ongoing benefit of permanent cost reductions. However, in the first quarter we currently see: — significant spread contraction (recent fall in export steel prices by more than USD$100/tonne, coupled with higher raw material costs); — softer demand where customers, particularly distributors, buy less during periods of price pessimism; — continued demand weakness in the US; and — an ongoing drag due to the strong AUD vs. USD. We are seeing a modest real-time increase in export steel prices in our region for second quarter delivery. Overall, we are planning for significantly improved market conditions over the medium to long term, despite short term concerns. Over the last couple of years we have strengthened the balance sheet and improved the effectiveness of the global BlueScope operations, both in terms of reduced cost base and improved productivity. The strategic imperative now is to increase market penetration in our footprint to enable our company to profitably capitalise on improving market conditions and grow our presence in global building and construction markets. 18 19 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT Directors’ BioGrapHies BoarD composition The following were Directors for the year ended 30 June 2010: Graham John Kraehe AO (Chairman), Ronald John McNeilly (Deputy Chairman), Diane Jennifer Grady AM, Daniel Bruno Grollo, Harry Kevin (Kevin) McCann AM, Kenneth Alfred Dean, Paul Francis O’Malley (Managing Director and Chief Executive Officer) and Tan Yam Pin. Particulars of the skills, experience, expertise and special responsibilities of the Directors are set out below. GraHam KraeHe ao Chairman (Independent) Age 67, 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. Chairman of Brambles Industries Limited since February 2008 and a Non-Executive Director since December 2000, Member of the Board of the Reserve Bank of Australia since February 2007, Djerriwarrh Investments Limited since July 2002, Member of the Board of Governors of CEDA and a Director of European Australian Business Council. Mr Kraehe was a Non-Executive Director of National Australia Bank Limited from August 1997 to September 2005 and Chairman from February 2004 to September 2005, and was a Non-Executive Director of News Corporation Limited from January 2001 until April 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 67, 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 Group (now BHP Billiton), including Executive Director and President BHP Minerals, Chief Operating Officer and 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. 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 until December 2009. Chairman of Melbourne Business School Limited until May 2010. Diane GraDY am Non-Executive Director (Independent) Age 62, BA (Hons), MA (Chinese Studies), MBA Director since: May 2002 Director of Woolworths Ltd since July 1996 and Goodman Group from September 2007, Wattyl Ltd from December 1994 until October 2006 and Senior Adviser to McKinsey & Co. Has served on the boards of a number of public and not-for-profit organisations including Lend Lease Corporation, Greengrocer.com (Chair), Sydney Opera House Trust, Ascham School (current Chair) and as President of Chief Executive Women. Formerly a partner of McKinsey & Co. serving clients in a wide range of industries on strategic growth and change initiatives. Diane is an experienced director who brings valuable strategic and business expertise to the Board and to her role as Chair of the Remuneration and Organisation Committee. KeVin mccann am Non-Executive Director (Independent) Age 69, BA LLB (Hons), LLM, FAICD Director since: May 2002 Chairman of Origin Energy Limited since February 2000, the Sydney Harbour Federation Trust and the Corporate Governance Committee of the Australian Institute of Company Directors since May 2009. Lead independent director of Macquarie Bank Limited and Macquarie Group Limited. Director of the Sydney Harbour Conservancy, Member of the Board and NSW President of the Australian Institute of Company Directors, Member of the Council of the National Library of Australia, the Evans and Partners Advisory Board and the University of Sydney Senate. Chairman of Healthscope Ltd from May 1994 to October 2008, Chairman of Triako Resources Limited from April 1999 until September 2006, Member of the Takeovers Panel from 2001 to March 2010, Member of the Defence Procurement Advisory Board from March 2004 until March 2008 and has served on the Boards of Pioneer International Limited, Ampol Limited and the State Rail Authority of New South Wales. Acting Chairman of Macquarie Bank Limited and Macquarie Group Limited from November 2008 to August 2009. Former Chairman of Partners of Allens Arthur Robinson, a national and international Australian law firm, and a partner of the firm from 1970 until June 2004, specialising in mergers and acquisitions, mineral and resources law and capital markets transactions. He brings extensive legal expertise, commercial experience as a director and former director of a number of major listed companies and experience in corporate governance to the Board. paUl o’malleY Managing Director and Chief Executive Officer Age 46, BCom, M. App Finance, ACA Director since: August 2007 Appointed Managing Director and Chief Executive Officer of BlueScope Steel on 1 November 2007. Joined BlueScope Steel as its Chief Financial Officer in December 2005. Formerly the CEO of TXU Energy, a subsidiary of TXU Corp based in Dallas, Texas, and held other senior management roles within TXU including Senior Vice President and Principal Financial Officer and, based in Melbourne, Chief Financial Officer of TXU Australia. Before joining TXU, he worked in investment banking and consulting. Ken Dean Non-Executive Director (Independent) Age 57, BCom (Hons), FCPA, FAICD Director since: April 2009 Mr Dean has been a Director of Santos Limited since February 2005 and has held past directorships with Alcoa of Australia Limited, Woodside Petroleum Limited and Shell Australia Limited. Mr Dean spent more than 30 years in a variety of senior management roles with Shell in Australia and the United Kingdom. His last position with Shell, which he held for five years, was as Chief Executive Officer of Shell Finance Services based in London. Upon his return to Australia in 2005, he was Chief Financial Officer of Alumina Limited, a position from which he resigned in 2009 to focus on non-executive directorship roles. He brings extensive international financial and commercial experience to the Board. companY secretaries michael Barron, Chief Legal Officer and Company Secretary, BEc, LLB, ACIS Responsible for the legal affairs of BlueScope Steel and for company secretarial matters. Joined the Company as Chief Legal Officer and Company Secretary in January 2002. Prior to that occupied position of Group General Counsel for Orica. Darren mackenzie, BA, LLB (Hons) Corporate counsel with BlueScope Steel. A lawyer with over 10 years experience in private practice and corporate roles. clayton mccormack, BCom, LLB Corporate counsel with BlueScope Steel. A lawyer with over 10 years experience in private practice and corporate roles. tan Yam pin Non-Executive Director (Independent) Age 69, BEc (Hons), MBA, CA Director since: May 2003 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 Ltd. A member of the Public Service Commission of Singapore since 1990 and a Director of the Board of Keppel Land Limited (Singapore), Singapore Post Limited, Great Eastern Holdings Limited, Leighton Asia Limited and The Lee Kuan Yew Scholarship Fund. Mr Tan previously served as Chairman of PowerSeraya Limited (Singapore) from 2004 to 2009, as Director of Certis CISCO Security Pte. Ltd from 2005 to 2009, as Director of The East Asiatic Company Limited A/S (Denmark) from 2003 to 2006, as Director of International Enterprise Singapore from 2004 to 2008 and as a Director of Singapore Food Industries Ltd from 2005–2009. 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. Daniel Grollo Non-Executive Director (Independent) Age 40 Director since: September 2006 Chief Executive Officer of Grocon Pty Ltd, Australia’s largest privately owned development and construction company. He is a Director of the Green Building Council of Australia and a Director and National President of the Property Council of Australia. Mr Grollo was appointed a Director of CP1 Limited in June 2007. He brings extensive knowledge of the building and construction industry to the Board. 20 21 remUneration report BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT particUlars of Directors’ interests in sHares anD options of BlUescope steel limiteD As at the date of this report the interests of the Directors in shares and options of BlueScope Steel are: Directors ordinary shares share rights G J Kraehe R J McNeilly P F O’Malley D J Grady H K McCann Y P Tan D B Grollo K A Dean 286,276 1,321,502 227,613 128,382 152,720 157,116 128,156 26,624 – – 1,477,511 – – – – – meetinGs of Directors The attendance of the current Directors at Board and Board Committee meetings from 1 July 2009 to 30 June 2010 is as follows: Board meetings audit and risk committee remuneration and organisation committee health, safety and environment committee nomination committee other sub- committees a 11 11 11 11 11 11 11 11 B 11 11 11 93 11 10 11 11 a – 4 – – 4 – 4 4 B 41 4 42 – 4 – 4 4 a 6 6 – 6 – 6 – – B 6 6 62 6 – 6 1 1 a 4 4 4 4 4 4 4 4 B 4 4 4 4 4 4 4 4 a 2 2 – 2 2 2 2 2 B 2 2 22 2 2 2 2 2 a 3 1 3 – – – – 1 B 3 1 3 – – – – 1 G J Kraehe R J McNeilly P F O’Malley D J Grady H K McCann Y P Tan D B Grollo K A Dean All Directors have held office for the entire year ended 30 June 2010. A = number of meetings held during the period 1 July 2009 to 30 June 2010 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 2009 to 30 June 2010. 1 The Chairman of the Board is not a Committee member and attends as part of his There were a number of unscheduled meetings held during the year. They are as follows: Board meetings: 3 The Non-Executive Directors have met once during the year ended 30 June 2010 (without the presence of management). Non-Executive Directors meetings are chaired by the Chairman of the Board. duties as Chairman. 2 The Chief Executive Officer is not a Committee member and attends by invitation as required. 3 All meetings not attended were unscheduled meetings. 22 23 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT remUneration sUmmarY (UnaUDiteD) BlueScope’s remuneration strategy is designed to support the delivery of long-term shareholder returns and to ensure executive rewards reflect achievements during the year. As a company in a highly cyclical industry, financial results vary significantly from year to year, reflecting factors such as price and spread, foreign exchange and volume variations on international markets. It is important that the remuneration policy enables the Company to retain and motivate its executive talent to manage through these cycles. KeY remUneration Decisions DUrinG tHe Year In the past year the Board has, with management support, remained focused on ensuring remuneration practices reflect the current operating environment, are consistent with good governance practices and take account of the potential risks to the Company. Key decisions taken by the Board include: — freezing fixed remuneration for all executives and managers for the year ended 30 June 2010; — Declining to pay short term incentive (sti) plan bonuses for the year ended 30 June 2009, notwithstanding that many employees achieved their non-financial targets during the year; — awarding moderate sti bonuses for the year ended 30 June 2010 for significant achievements in responding to the challenges of the global financial crisis; — freezing Directors’ fees for the years ended 30 June 2009 and 30 June 2010. the base fee for both the chairman and non-executive Directors has not been increased since January 2006; — Deferring the annual salary review for salaried employees until January 2010; and — Determining there would be no vesting of the 2006 long term incentive plan award. The following table shows the remuneration actually earned by each member of the Executive Leadership Team during FY2010 with comparatives for FY2009. The amounts required under accounting disclosures are set out on pages 36 – 37. name executive Director P F O'Malley Kmp executives – current N H Cornish4 M R Vassella5 P E O'Keefe I R Cummin M G Barron S R Elias S Dayal6 KA Mitchelhill6,7 total 2010 total 2009 year 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 Base pay $ superannuation1 $ total Fixed pay $ sti awarded2 $ ltip vested3 $ total $ 1,680,000 1,666,667 752,500 743,750 725,792 723,333 551,250 546,875 556,400 550,334 556,400 550,334 645,000 637,500 630,000 630,000 718,769 740,000 6,816,111 6,788,793 235,200 233,333 105,350 104,125 101,611 101,267 77,175 76,563 77,896 77,047 77,896 77,047 90,300 89,250 88,200 88,200 100,628 103,600 954,256 950,431 1,915,200 1,900,000 857,850 847,875 827,403 824,600 628,425 623,438 634,296 627,381 634,296 627,381 735,300 726,750 718,200 718,200 819,397 843,600 806,400 – 302,505 – 310,800 – 198,450 – 221,336 – 221,336 – 256,581 – 378,000 – 306,600 – – 411,947 – 549,790 – – – – – 429,357 – 413,426 – – – – – – 2,721,600 2,311,947 1,160,355 1,397,665 1,138,203 824,600 826,875 623,438 855,632 1,056,738 855,632 1,040,807 991,881 726,750 1,096,200 718,200 1,125,997 843,600 7,770,367 7,739,224 3,002,008 – – 1,804,520 10,772,375 9,543,744 1 Superannuation entitlement of 14% of annual base pay. KMP may have elected to have received some of this amount as a cash allowance. Superannuation Guarantee obligations will have been met to remit amount to a complying superannuation fund. 2 No performance related bonuses were paid in the year ended 30 June 2009. 3 Share rights vested and exercised during the year ended 30 June 2009 are valued at market value on date of exercise. 4 Mr Cornish is a member of the Defined Benefit Division of the BlueScope Steel Superannuation Fund. Amounts disclosed are notionally 14% of base pay. 5 Mr Vassella took a short period of leave without pay during the year ended 30 June 2010. This had the effect of reducing has base pay for the period. 6 Base pay for 2009 has been annualised at the rate upon appointment. 7 Mr Mitchelhill took a short period of leave without pay during the year ended 30 June 2010. This had the effect of reducing his base pay for the period. 24 Specific comments in relation to amounts included in the table are: Bluescope shareholding policy Base pay has not been increased since 1 September 2008. no sti payments for fY2009 substantially reduced Total Remuneration earned for that period from prior years. The decision to award STI payments for FY2010 has seen remuneration levels for FY2010 increase on FY2009. However, STI payments are moderate and at less than 50% of the maximum available opportunity. Importantly, the Board’s decision, with the support of management, to withhold payments under the STI Plan for FY2009, even though many participants had achieved their non-financial objectives, was evidence of the strong desire to align the experience of management with that of shareholders. Excellent performance of management in delivering on a range of initiatives to improve the Company’s financial position in FY2010 has resulted in the approval of payments under the STI Plan. These included cost savings of $526 million, balance sheet and liquidity improvement initiatives, the successful reline of Blast Furnace No 5, and improved Asian segment performance. no lti vesting for Kmp under the LTI Plan during FY2010 even though awards made in 2006 were tested on two occasions during the year. At both times, the performance did not meet the hurdle and therefore the award did not vest. This is consistent with the general performance of the Company and its share price. The last vesting occurred in September 2008 (FY 2009) in respect of awards under the 2004 and 2005 LTI Plans. LTI Plans will continue to be tested in accordance with the Terms of Issue. We believe the shareholding policy clearly demonstrates the personal commitment of all Directors and executives to align their interests with those of all shareholders. — All Non-Executive Directors are required to build over time and maintain a shareholding equal to one year’s total annual fees; — The Managing Director and Chief Executive Offer and the Executive Leadership Team (ELT) are required to build and hold a shareholding equal to 100% of their annual base pay from participation in the Long Term Incentive Plan, net of tax obligations; and — All other executives, a group of approximately 200 senior people, are required to build and hold a minimum of 50% of their annual base pay in Company shares. This policy results in this group having significant personal financial exposure to the value of BlueScope Steel shares. stringent corporate governance standards The Remuneration and Organisation Committee (the Committee) is responsible for the Company’s remuneration practices and policies on behalf of the Board. The Committee is comprised entirely of independent Non-Executive Directors and adheres to stringent corporate governance standards. For example, prior to the release of the Productivity Commission recommendations on Executive Termination payments BlueScope had already reviewed its executive redundancy policy and limited payments to a maximum of 12 months pay. The Board notes that existing policies and practices at BlueScope Steel are consistent with the recommendations arising from the Productivity Commission Report on Executive and Director Remuneration in Australia. 25 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT remUneration report (aUDiteD) The Committee has responsibility for remuneration strategy, policies and practices applicable to Non-Executive Directors, the Managing Director and Chief Executive Officer, senior managers and employees generally. The Committee focuses on the following activities in its decision making on the Company’s remuneration arrangements: — Approving the terms of employment of the Executive Leadership Team, including determining the levels of remuneration; — Ensuring a robust approach to performance management through approving the STI objectives and reviewing performance of members of the Executive Leadership Team; — Considering all matters relating to the remuneration and performance of the Managing Director and Chief Executive Officer prior to Board approval; — Approving awards of equity to employees; and — Ensuring the Company’s remuneration policies and practices operate in accordance with good corporate governance standards, including approval of the Remuneration Report and communications to shareholders on remuneration matters. The Committee seeks input from the Managing Director and Chief Executive Officer and the Executive General Manager, People and Organisation Performance, who attend Committee meetings except where matters relating to their own remuneration are considered. In addition, advice is obtained by the Committee from external specialist remuneration advisers in a number of areas including: — Remuneration benchmarking; — Short-term incentives; — Long-term incentives; and — Contract terms. The Company’s approach to remuneration recognises that BlueScope Steel operates in a highly cyclical and competitive global environment and that the performance of the Company is affected by the quality of its people. The Directors of the Company present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 for the Company and the consolidated entity for the year ended 30 June 2010. The information provided in this Remuneration Report has been audited as required by section 308(3c) of the Corporations Act 2001. This Remuneration Report forms part of the Directors’ Report. structure of this report 1. Remuneration and Organisation Committee 2. Non-Executive Directors’ Remuneration 3. Remuneration Policy and Structure 4. Relationship between Company Performance and Remuneration 5. Specific Remuneration Details 1. remUneration anD orGanisation committee The Board oversees the BlueScope Steel Human Resources Strategy, both directly and through the Remuneration and Organisation Committee of the Board (the Committee). The Committee consisted entirely of independent non-executive directors. The members of the Committee during the year were: Ms Diane Grady – Independent Director and Chairman of the Committee Mr Graham Kraehe – Chairman of the Board and Committee Member Mr Ron McNeilly – Deputy Chairman and Committee Member Mr Tan Yam Pin – Independent Director and Committee Member The purpose of the Committee is to assist the Board in overseeing that the Company: — Has a human resources strategy aligned to the overall business strategy, which supports ‘Our Bond’; — Has coherent remuneration policies that are observed and that enable it to attract and retain executives and Directors who will create value for shareholders; — 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 — Plans and implements the development and succession of executive management. 2. non-eXecUtiVe Directors’ remUneration The Committee, on behalf of the Board, seeks the advice of expert external remuneration consultants to ensure that fees and payments reflect the duties of Board Members and are in line with the market. The Chairman and the Deputy Chairman of the Board do not participate in any discussions relating to the determination of their own fees. 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 have previously been required to salary sacrifice a minimum of 10% of their fees each year to acquire BlueScope Steel shares. Changes to the taxation of employee share plans introduced by the Federal Government effective 1 July 2009, made the operation of this plan impractical and the Board resolved to cease operation of this plan with effect from 1 July 2009. The schedule of fees and payments of Non-Executive Directors are reviewed each January. There were no fee increases in 2009 or 2010. Some committee fees were revised in 2008. The schedule of fees effective 1 January 2008, and which currently applies, is as follows: The maximum fee pool limit is currently $2,925,000 per annum (inclusive of superannuation) as approved by shareholders at the Annual General Meeting in 2008. Total fees paid to Directors for the year ended 30 June 2010 amounted to $1,765,039. Compulsory superannuation contributions capped at $15,199 per annum (commencing 1 July 2010) are paid on behalf of each Director. Compulsory superannuation contributions for the year ended 30 June 2010 were $14,461 per annum. Non-Executive Directors do not receive any other retirement benefits. 3. remUneration policY anD strUctUre 3.1 Key principles BlueScope Steel’s remuneration and reward practices aim to attract, motivate and retain employees of the highest calibre, as well as supporting ‘Our Bond’ by rewarding performance through remuneration. The Company’s salaried remuneration framework is designed to: — Link employee remuneration with the creation of a sustainable business and value for shareholders; — Recognise and reward individual performance and accountability for key job goals; — Provide distinguishable remuneration differences between levels; role Fees effective 1 Jan 2008 and Chairman1,2 Deputy Chairman1 Non-Executive Director2 Chairman of Audit and Risk Committee Member of Audit and Risk Committee Chairman of Remuneration and Organisation Committee Member of Remuneration and Organisation Committee Chairman of Health, Safety and Environment Committee Member of Health, Safety and Environment Committee Travel and Representation Allowance3 $450,000 $260,000 $150,000 $35,000 $18,000 $25,000 $13,000 $25,000 $13,000 $20,000 1 Additional fees are not payable to the Chairman and Deputy Chairman for membership of Committees. 2 Base fee has not changed since 1 January 2006. 3 Allowance paid to Tan Yam Pin who is based in Singapore. — Maintain a competitive remuneration level relative to the markets in which the Company operates. The framework is built on an appropriate mix of base pay and variable pay comprising short-term incentives and long-term equity incentives. The remuneration structure encourages a balanced approach to managing risk by: — The requirement of the Board to approve the performance targets and the measurement of performance for the STI; — The imposition of a cap of 150% of target on STI awards; — The incorporation of a significant component of remuneration for achievement of longer term targets through the long term incentive plan; and — The requirement for executives to build a prescribed shareholding in the Company. The Company is satisfied that its remuneration strategies and outcomes remain appropriate in the current economic environment. 26 27 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT 3.2 fixed remuneration Fixed remuneration is determined by reference to the scope and nature of each individual’s role, performance, experience, work requirements and remuneration level for comparable roles in companies of similar complexity, size and geographical spread. Market data is obtained from external sources to establish appropriate guidelines for comparable roles. Remuneration reviews are usually conducted on an annual basis. There are no guaranteed remuneration increases for executives and all increases are based on individual contribution, competitive and fair market positioning, and performance. The Committee reviews proposed executive increases and approves increases for each Executive Leadership Team member. The Committee obtains market data from external advisers. No general increases were paid to executives and senior managers for the year ending 30 June 2010. The September 2009 salary review for other salaried employees was withheld until January 2010 and a modest increase was approved for a limited group of salaried employees. 3.2.1 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 defined contribution type plans. The defined benefit schemes are closed to new members. Contributions are also made to other international retirement benefit plans for employees outside of Australia, New Zealand and North America. 3.2.2 other Benefits Additionally, executives are eligible to participate in an annual health assessment program designed to safeguard the Company against loss or long-term absence for health-related reasons. Employees engaged on international assignments are also provided with relocation benefits including housing, relocation costs and other living adjustments under the Company’s international assignment policy. 3.3 short term incentives (Variable pay) All senior managers and many salaried employees participate in the Short Term Incentive Plan (‘STI’). The STI is: — An annual ‘at risk’ cash bonus scheme, which is structured to deliver total remuneration 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 policies to ensure that STI payments are aligned with the organisation and individual performance outcomes; — Target STI levels are set having regard to appropriate levels in the market and range from 10% of base salary through to 80% at CEO level. These levels are reviewed annually. For outstanding results, participants may receive a further 50% of their target bonus amount; — Goals for each participant are drawn from the following categories: — Financial Measures – performance measures include Net Profit After Tax, Cash Flow, Return on Invested Capital, and Earnings Before Interest and Tax; — Zero Harm – safety and environment performance measures, including Lost Time Injury Frequency Rates, Medically Treated Injury Frequency Rates and environmental measures; — Business Excellence – performance measures for the year ended 30 June 2010 included operational targets such as long-term structural reductions to the cost base of the Company, balance sheet and liquidity initiatives and improvements to the performance of business units; and — Strategy – implementation of specific longer-term strategic initiatives. STI plans are developed using a balanced approach to financial measures and key performance indicator (‘KPI’) metrics. At the senior executive level, 60% of the STI award is based on financial measures with 40% based on KPI metrics. For other participants, 50% of the STI award is based on financial measures and 50% is based on KPI metrics. Performance conditions, including threshold, target and stretch hurdles, are set for each plan and these conditions are assessed using quantified and verifiable measures or an assessment of value contribution. If the threshold level is not reached, no payment is made in respect of that goal. The Board retains the discretion to adjust any STI payments in exceptional circumstances, including determining that no award is paid. — The minimum ranking required for vesting being the 51st percentile against the peer group at which point 52% of an award vests. Maximum vesting (100% of a participant’s share rights) occurs at the 75th percentile or above; — In view of the cyclical nature of the markets in which the Company operates, there are up to four retests at six monthly intervals following the initial three-year performance period. This helps moderate short-term share price volatility that may arise due to a market view of future Hot Rolled Coil prices, which is not reflective of actual Company performance. At each retest period, shares only vest if they have reached the hurdles for the total period from the date of the initial grant; — Unvested share rights lapse on resignation or termination for cause or at the expiry of the relevant performance period, whichever comes first; and — ‘Change of Control’ conditions may result in early vesting provided the relevant performance hurdles are satisfied. 3.4.3 share ownership Guidelines Long-term equity incentives are tied to Company performance as experienced by shareholders. Employees who participate in the LTIP are excluded from selling, assigning, charging or mortgaging their share rights. Share rights are personal to the employee. Employees are excluded from transferring any risk or benefit from the unvested share rights to any other party. So called ‘cap and collar’ transactions cannot be made in respect of BlueScope Steel share rights. Employees are required to provide an annual confirmation that they are in compliance with this policy. The Committee oversees the objective setting process and approves the targets and performance measures for all members of the Executive Leadership Team. The Board approves the targets and performance measures of the Managing Director and Chief Executive Officer. 3.4 equity-Based opportunities The Company encourages employee share ownership. This is achieved in the following ways: — for all employees, through the General Employee Share Plan; and — for executives, through the Long Term Incentive Plan. 3.4.1 General employee share plan The Company operates a General Employee Share Plan with more than 97% of eligible employees participating in the plan. The allocation of shares to employees under such schemes and the form of the offer are determined by the Board on a year-by-year basis taking account of Company performance. No plan was offered for the year ending 30 June 2010. 3.4.2 long term incentive plan Awards of share rights are made to senior managers under the Long Term Incentive Plan (‘LTIP’). The LTIP 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. Awards are based on a percentage of the relevant executive’s Base Pay and individual performance including living ‘Our Bond’. The number of share rights awarded to participants is calculated on a conservative basis by using the share price, averaged over three months to 31 August (‘face value’), rather than the accounting ‘fair value’ of the rights. Details of awards under the LTIP are set out below. In summary, the main features of the LTIP are as follows: — Awards are generally made as a right to acquire an ordinary share for no consideration on vesting; — Vesting requires sustained performance over at least three years 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 commencement date; 28 29 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT summary table of long term incentive plan awards Grant Date september 2004 september 2005 september 2006 september 20071 september 20081 september 20091 31 August 2004 (The grant to the MD & CEO was subject to shareholder approval at the 2004 AGM) 18 November 2005 (The grant to the MD & CEO was subject to shareholder approval at the 2005 AGM) 18 November 2006 (The grant to the MD & CEO was subject to shareholder approval at the 2006 AGM) 5 November 2007 (all executives excluding MD & CEO) 14 November 2007 (MD & CEO) 28 November 2008 (The grant to the MD & CEO was subject to shareholder approval at the 2008 AGM) 30 November 2009 (The grant to the MD & CEO was subject to shareholder approval at the 2008 AGM) Exercise Date From 1 September 2007 From 1 September 2008 From 1 September 2009 From 1 September 2010 From 1 September 2011 From 1 September 2012 Expiry Date 31 October 2009 31 October 2010 31 October 2011 31 October 2012 31 October 2013 31 October 2014 Total Number of Share Rights Granted Total Number of Cash Rights Granted Number of Participants at Grant Date Number of Current Participants Exercise Price Fair Value Estimate at Grant Date Fair Value per Share Right at Grant Date Share Rights Lapsed since Grant Date vesting schedule TSR Hurdle – 75th–100th percentile 2,306,400 1,938,100 2,310,950 1,934,845 2,248,246 8,090,480 201 0 Nil 228 3 Nil 206 134 Nil 217 199 Nil 255 244 Nil 158,000 313 312 Nil $11,143,602 $7,086,856 $12,012,780 $11,468,263 $2,765,343 $10,516,812 $5.14 $3.89 $5.53 $6.37 (5 Nov 2007) $6.42 (14 Nov 2007) $1.64 $1.70 437,978 413,780 987,569 307,788 222,928 78,349 100% 100% 100% 100% 100% 100% TSR Hurdle – 51st–<75th percentile There is no vesting until the 51st percentile, at which point 52% vests increasing on a linear basis to 100% vesting at the 75th percentile. Any unvested Share Rights will be carried over for assessment at subsequent performance periods. TSR Hurdle – < 51st percentile All Share Rights will be carried over for assessment at subsequent performance periods. Vesting Outcome 1st Performance Period Vesting Outcome 2nd Performance Period Vesting Outcome 3rd Performance Period Vesting Outcome 4th Performance Period Vesting Outcome 5th Performance Period 58.00% 100% 62.82% 100% 0.00% 0.00% – – – – – – – – – – – – – – – – – – 1 These grants are within the first performance period and are yet to be tested. 30 long-term incentives will only occur when the Company has delivered superior share price and dividend returns to shareholders over the performance period. Vesting can only occur when the Company outperforms against the companies in the S&P/ASX 100 index. For existing unvested LTIP grants to vest, the Company’s relative TSR performance over the remainder of the relevant performance periods will firstly need to recover its relative performance against the companies in the S&P/ASX 100 and then to outperform those companies in order to generate superior returns by reversing the decline in share price and dividend performance of recent times. 4. relationsHip Between companY performance anD remUneration The short-term and long-term incentive components of the remuneration strategy reward achievement against Company and individual performance measures over short-term and long-term timeframes. The graph below shows the Total Shareholder Return (‘TSR’) performance of BlueScope Steel compared to the performance of the S&P/ASX 100 for the eight-year period to 30 June 2010. The TSR Index for BlueScope Steel as at 30 June 2010 was 126.68 compared to 190.50 for the S&P/ASX 100. The use of a relative TSR measure as the Company’s performance hurdle for the Long Term Incentive Plan ensures that vesting of BLUESCOPE STEEL LIMITED TOTAL SHAREHOLDER RETURN INDEX COMPARED TO S&P/ASX 100 15/7/02 to 30/6/10 Source: RBS 600 500 400 300 200 100 0 J u n e 2 0 0 2 D e c 2 0 0 2 J u n e 2 0 0 3 D e c 2 0 0 3 J u n e 2 0 0 4 D e c 2 0 0 4 J u n e 2 0 0 5 D e c 2 0 0 5 J u n e 2 0 0 6 D e c 2 0 0 6 J u n e 2 0 0 7 D e c 2 0 0 7 J u n e 2 0 0 8 D e c 2 0 0 8 J u n e 2 0 0 9 D e c 2 0 0 9 J u n e 2 0 1 0 BlueScope Steel – TOT Return IND S&P/ASX 100 – TSR (Rebased) 31 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT 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 is set out below. Bluescope steel performance analysis measure Share Price Change in Share Price ($) Change in Share Price (%) Dividend per Share: Ordinary (cents) Special (cents) Earnings per Share (cents)1 reporteD NPAT $ million % movement EBIT $ million % movement EBITDA $ million % movement unDerlying NPAT $ million % movement EBIT $ million % movement EBITDA $ million % movement 30 June 2004 30 June 2005 30 June 2006 30 June 2007 30 June 2008 30 June 2009 30 June 2010 $6.74 $3.02 81.2 30 10 77.8 $584 – $818 – $8.23 $1.49 22.1 42 20 134 $982 68.2 $1,388 69.7 $1,105 $1,696 – 53.5 $578 – $822 – $1,129 95.3 $1,559 89.7 $7.95 -$0.28 -3.4 44 0 47.9 $338 -65.6 $556 -59.0 $850 -49.9 $555 -50.8 $840 -46.1 $1,109 $1,856 – 67.3 $1,127 -39.3 $10.34 $2.39 30.1 47 0 95.3 $686 103.0 $1,099 97.7 $1,423 67.4 $11.34 $1.00 9.7 49 0 80.1 $596 -13.1 $1,063 -3.3 $1,420 -0.2 $643 15.9 $816 26.9 $1,057 $1,273 25.8 20.5 $1,374 $1,630 21.9 18.7 $2.53 -$8.81 -77.7 5 0 -7.1 -$66 -111.1 $15 -98.6 $380 -73.2 $56 -93.1 $171 -86.6 $536 -67.1 $2.10 -$0.43 -17.0 5 0 6.9 $126 -290.9 $240 1,500.0 $590 55.3 $113 101.8 $255 49.1 $605 12.9 change increase from 30/6/04 to 30/6/10 -$4.64 -68.8 N/A N/A N/A -$458 -78.4 -$578 -70.7 -$515 -46.6 -$465 -80.4 -$567 -69.0 -$504 -45.4 Note: From 1 July 2004 financial information is based on International Financial Reporting Standards (IFRS). 1 Prior period earnings per share has been restated for the bonus element of the one for one share rights issue undertaken in May and June 2009 using a factor of 1.21. 4.1 performance-related remuneration analysis In setting financial targets, the Board takes a number of factors into account, including market consensus on future earnings, forecast movements in steel prices, exchange rate and other external factors likely to impact financial performance. The Board aims to align executive remuneration to business outcomes and shareholder experience. No short-term incentive payments were made for the year ended 30 June 2009 although many employees had achieved their non-financial targets during the year. The graph below shows the actual STI outcomes against target for the Executive Leadership Team over the past seven years overlaid against the changes to Group Underlying NPAT over the same period. This clearly illustrates the relationship between Company performance and awards made under the STI Plan and demonstrates that the STI awards payable to executives reflect the financial results for the year and overall Company performance. For 2010, demanding non-financial objectives were achieved to deliver immediate and long-term value to shareholders. These included cost savings of $526 million, balance sheet and liquidity initiatives, and improved performance in the Asian segment. Notwithstanding these achievements, STI payments will be below target, reflecting the Company’s financial performance. relationsHip Between sti awarDs anD GroUp performance group underlying npat ($ million) target sti payout % actual sti payout % % 150 100 50 0 P M K o t i t u o d a p I T S t e g r a t f o e g a t n e c r e P $M 1200 1000 800 600 400 200 0 Actual STI Target STI 04 05 06 07 08 09 10 ) n o i l l i m $ ( T A P N g n i y l r e d n u p u o r G 32 33 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT 5. specific remUneration Details 5.1 Key management personnel – Directors’ remuneration Details of the audited remuneration for the year ended 30 June 2010 for each Non-Executive Director of BlueScope Steel are set out in the following table. 5.2 Key management personnel – executives’ (including managing Director and chief executive officer’s) remuneration The Key Management Personnel of BlueScope Steel Limited include those members of the Executive Leadership Team who have the authority and responsibility for planning, directing and controlling the activities of the Company. These executives also represent the five most highly remunerated executives within the organisation. The following table shows the current composition of the Executive Leadership Team, who all held their positions during the year. name Directors – current G J Kraehe R J McNeilly D J Grady H K McCann Y P Tan D B Grollo K A Dean total 2010 total 2009 short-term employee benefits Fees $ non-monetary $ sub-total $ post-employment benefits1 $ 450,000 450,000 260,000 260,000 188,000 188,000 181,000 196,000 196,000 196,000 181,000 172,554 195,450 30,631 12,362 14,413 – – – – – – – – – – – – 462,362 464,413 260,000 260,000 188,000 188,000 181,000 196,000 196,000 196,000 181,000 172,554 195,450 30,631 14,461 13,745 14,461 13,745 14,461 13,745 14,461 13,745 14,461 13,745 14,461 13,745 14,461 2,326 year 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 total $ 476,823 478,158 274,461 273,745 202,461 201,745 195,461 209,745 210,461 209,745 195,461 186,299 209,911 32,957 1,651,450 1,493,185 12,362 14,413 1,663,812 1,507,598 101,227 84,796 1,765,039 1,592,394 1 Post-employment benefits relate to superannuation arrangements. Key management personnel current Kmp position P F O’Malley N H Cornish Managing Director and Chief Executive Officer Chief Executive, Australian & New Zealand Steel Manufacturing Businesses M R Vassella President, North America P E O’Keefe I R Cummin Chief Executive, Australian Coated & Industrial Markets Executive General Manager, People and Organisation Performance M G Barron Chief Legal Officer and Company Secretary S R Elias S Dayal Chief Financial Officer Chief Executive, Asia K A Mitchelhill Chief Executive, Australian Distribution & Solutions Dates executive leadership team position held during year ended 30 June 2010 1 July 2009 – 30 June 2010 1 July 2009 – 30 June 2010 1 July 2009 – 30 June 2010 1 July 2009 – 30 June 2010 1 July 2009 – 30 June 2010 1 July 2009 – 30 June 2010 1 July 2009 – 30 June 2010 1 July 2009 – 30 June 2010 1 July 2009 – 30 June 2010 The audited information contained in the following tables represent the annual remuneration for the year ended 30 June 2010 for the Key Management Personnel – Executives. The aggregate remuneration of the Key Management Personnel – Executives of the Company is set out below. Short-term employee benefits1 Post-employment benefits Other long-term benefits Termination benefits Share-based payments total 2010 $ 2009 $ 10,898,772 8,409,538 412,329 72,432 – 530,027 243,320 – 2,253,122 2,002,370 13,636,655 11,185,255 1 This includes base salary, annual leave accruals, non-monetary benefits, superannuation received as cash allowance and bonus payments. 34 35 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT The remuneration of each member of the Key Management Personnel – Executives of the Company is set out in the following tables: Kmp remuneration name executive Director P F O'Malley 5 Kmp executives – current N H Cornish M R Vassella 6 P E O'Keefe I R Cummin M G Barron S R Elias S Dayal6, 7, 8 K A Mitchelhill 7, 8, 9 total 2010 total 2009 year 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 short-term employee benefits share-based payments salary and fees $ movement in annual leave provision1 $ Bonus $ non- monetary $ other 2 $ sub-total $ post-employment benefits3 $ other long-term employee benefits4 $ termination benefits $ shares and units $ options and rights $ % of remuneration that is performance related10 % total $ 1,680,000 1,666,667 752,500 743,750 725,792 723,333 551,250 546,875 556,400 550,334 556,400 550,334 645,000 637,500 630,000 693,000 718,769 842,167 6,816,111 6,953,960 -32,308 -10,178 26,049 -74,918 -22,470 26,114 -4,241 8,890 -23,540 -13,026 -23,540 7,284 7,442 7,164 16,751 20,934 10,614 22,923 -45,243 -4,813 806,400 0 940 60,878 302,505 0 310,800 0 198,450 0 221,336 0 221,336 0 256,581 0 378,000 0 306,600 0 3,002,008 0 0 0 425,021 889,009 0 0 0 0 0 0 0 0 68,378 167,335 71,570 42,756 565,909 1,159,978 204,526 183,333 0 0 78,694 51,267 46,191 26,563 8,066 0 37,620 0 62,551 39,250 42,367 0 79,972 0 559,987 300,413 2,659,558 1,900,700 1,081,054 668,832 1,517,837 1,689,723 791,650 582,328 762,262 537,308 791,816 557,618 971,574 683,914 1,135,496 881,269 1,187,525 907,846 10,898,772 8,409,538 30,674 50,000 123,410 89,250 22,917 50,000 30,984 50,000 69,830 77,047 40,276 77,047 27,749 50,000 45,833 44,100 20,656 42,583 412,329 530,027 41,999 47,986 -79,592 58,362 18,500 51,443 13,781 15,028 13,911 18,607 13,911 19,963 16,125 16,841 15,750 7,639 18,047 7,451 72,432 243,320 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 136,826 168,000 0 59,974 116,128 253,020 0 0 0 44,552 0 0 0 0 16,067 7,810 19,833 8,154 288,854 541,510 825,343 621,586 265,638 281,529 154,351 92,451 120,930 74,819 199,738 211,972 120,838 74,296 139,735 85,781 63,283 9,107 74,412 9,319 1,964,268 1,460,860 3,694,400 2,788,272 1,390,510 1,157,947 1,829,733 2,136,637 957,345 722,175 1,045,741 889,486 966,841 728,924 1,155,183 836,536 1,276,429 949,925 1,320,473 975,353 13,636,655 11,185,255 44.2 22.3 40.9 24.3 25.4 4.3 33.4 10.4 40.3 23.8 35.4 10.2 34.3 10.3 34.6 1.0 28.9 1.0 1 Negative movement in annual leave provision indicates leave taken during the year exceeded leave accrued. The reduction in annual leave balances has been a key initiative to reduce employment costs, with members of the ELT setting an example. 2 Due to changes in the superannuation legislation resulting in maximum contribution levels, members of the Defined Contribution Division can elect to receive a proportion of their superannuation as a cash allowance. 3 Post-employment benefits relate to superannuation arrangements. There are no other post-employment benefits. 4 This shows movement in long service leave benefits during the year. 5 Non-monetary includes executive health check. 6 Non-monetary includes benefits provided under the Company’s international assignment policy, e.g. accommodation, tax equalisation and medical coverage. 7 KMP appointed to ELT during year ended 30 June 2009. Amounts disclosed for year ended 30 June 2009 are for part year only. 8 Disclosed amounts include negotiated sign-on arrangements for year ended 30 June 2009. 9 Non-monetary includes relocation expenses. 10 the % of remuneration that is performance related recognises sti payouts at below target. lti is based on accounting values rather than the amounts actually received. 36 37 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT 5.3 cash Bonuses 5.4 share rights Holdings For the year ended 30 June 2010, below-target STI payments will be made, resulting in outcomes for executives averaging less than 50% of the maximum STI. Eligibility to receive a bonus is subject to the terms and conditions of the plan, including a minimum of six months performance during the plan year and employment during the period is not terminated for resignation or performance-related reasons. Under the Company’s Short Term Incentive Plan each executive can earn between 0% and 150% (maximum) of the STI target award. The table below shows the STI opportunity, actual percentage outcome achieved and percentage forfeited for the year ended 30 June 2010. name executive Director P F O’Malley Kmp executives – current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill target of annual base pay % actual sti as a % of maximum sti for year ended 30 June 2010 % % of maximum sti forfeited for year ended 30 June 2010 % 80 60 60 60 60 60 60 60 60 40 45 47 40 44 44 44 67 47 60 55 53 60 56 56 56 33 53 Share Rights granted, exercised and forfeited by the Key Management Personnel during the year ended 30 June 2010 were as follows: Value of share rights Holdings remuneration consisting of share rights1 % value of share rights granted during the year at grant date2 $ value of share rights exercised during the year $ value of share rights at lapse date, that lapsed during the year $ total value of share rights granted, exercised and lapsed during the year $ 43 26 20 28 26 28 27 24 27 1,581,000 365,500 359,431 267,750 270,249 270,249 313,293 306,000 354,569 – – – – – – – – – – 1,581,000 – – – – – – – – 365,500 359,431 267,750 270,249 270,249 313,293 306,000 354,569 name executive Director P F O’Malley Kmp executives – current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill 1 This figure is calculated on the value of share rights awarded in the year ended 30 June 2010 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 share rights awarded in the year ended 30 June 2010. The valuation has been made using the Black-Scholes Option Pricing Model (BSM) that includes a Monte Carlo simulation analysis. The Share Rights awarded to executives under the September 2006 Award were tested after the first (31 August 2009) and second (28 February 2010) performance periods and no vesting occurred. They will be tested after the conclusion of the third performance period on 31 August 2010. Details of the audited Share Rights holdings for year ended 30 June 2010 for the Key Management Personnel are set out in the following table. Refer to the Summary Table of Long Term Incentive Plan Awards (on page 30) for details with respect to fair values, exercise price and key dates. 38 39 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT share rights holdings for the financial year ended 30 June 2010 The table below sets out the details of each specific share right tranche and awards granted and vested during the year ended 30 June 2010 for each KMP. share rights award summary Balance at 30 June 2009 granted in year ended 30 June 2010 exercised in year ended 30 June 2010 1 lapsed in year ended 30 June 2010 vested and not yet exercised in year ended 30 June 2010 Balance at 30 June 2010 unvested at 30 June 2010 total share rights vested in year ended 30 June 2010 2010 executive Director P F O’Malley Kmp executives – current N H Cornish M R Vassella P E O’Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill 547,511 930,000 – – 1,477,511 – 1,477,511 – 2010 178,810 103,328 92,039 134,459 130,159 93,179 45,400 55,250 215,000 211,430 157,500 158,970 158,970 184,290 180,000 208,570 – – – – – – – – – – – – – – – – 393,810 314,758 249,539 293,429 289,129 277,469 225,400 263,820 – – – – – – – – 393,810 314,758 249,539 293,429 289,129 277,469 225,400 263,820 – – – – – – – – executive Director P F O'Malley Kmp executives – current N H Cornish 1 The number of shares issued is equal to the number of rights exercised and no amount was paid or remains unpaid for each share issued. share rights holdings for the financial year ended 30 June 2009 Balance at 30 June 2008 granted in year ended 30 June 2009 exercised in year ended 30 June 20091 lapsed in year ended 30 June 2009 vested and not yet exercised in year ended 30 June 2009 Balance at 30 June 2009 unvested at 30 June 2009 total share rights vested in year ended 30 June 2009 352,153 246,358 51,000 – 547,511 – 547,511 51,000 190,900 47,320 50,317 144,952 139,966 44,362 – – 56,954 56,008 41,722 42,112 42,112 48,817 45,400 55,250 69,044 – – 52,605 51,919 – – – – – – – – – – – 178,810 103,328 92,039 134,459 130,159 93,179 45,400 55,250 – – – – – – – – 178,810 103,328 92,039 134,459 130,159 93,179 45,400 55,250 69,044 – – 52,605 51,919 – – – 2009 executive Director P F O’Malley Kmp executives – current N H Cornish M R Vassella P E O’Keefe I R Cummin M G Barron S R Elias S Dayal2 K A Mitchelhill2 1 The number of shares issued is equal to the number of rights exercised and no amount was paid or remains unpaid for each share issued. 2 Appointed to Executive Leadership Team during the year. M R Vassella P E O'Keefe2 I R Cummin M G Barron2 S R Elias S Dayal K A Mitchelhill number of share rights awarded Date of grant % vested in year ended 30 June 2010 % Forfeited in year ended 30 June 2010 share rights yet to vest Financial year in which awards may vest value of share rights not vested 30 June 20101 $ min $ max 70,100 231,053 246,358 930,000 70,100 51,756 56,954 215,000 47,320 56,008 211,430 11,500 38,817 41,722 157,500 53,900 38,447 42,112 158,970 49,600 38,447 42,112 158,970 44,362 48,817 184,290 45,400 180,000 55,250 208,570 18-Nov-06 14-Nov-07 28-Nov-08 30-Nov-09 18-Nov-06 05-Nov-07 28-Nov-08 30-Nov-09 05-Nov-07 28-Nov-08 30-Nov-09 18-Nov-06 05-Nov-07 28-Nov-08 30-Nov-09 18-Nov-06 05-Nov-07 28-Nov-08 30-Nov-09 18-Nov-06 05-Nov-07 28-Nov-08 30-Nov-09 05-Nov-07 28-Nov-08 30-Nov-09 28-Nov-08 30-Nov-09 28-Nov-08 30-Nov-09 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 70,100 231,053 246,358 930,000 70,100 51,756 56,954 215,000 47,320 56,008 211,430 11,500 38,817 41,722 157,500 53,900 38,447 42,112 158,970 49,600 38,447 42,112 158,970 44,362 48,817 184,290 45,400 180,000 55,250 208,570 2011 2011 2012 2013 2011 2011 2012 2013 2011 2012 2013 2011 2011 2012 2013 2011 2011 2012 2013 2011 2011 2012 2013 2011 2012 2013 2012 2013 2012 2013 – – – – 387,653 1,483,360 404,027 1,581,000 – – – – – – – – – – – – – – – – – – – – – – – – – – 387,653 329,686 93,405 365,500 301,428 91,853 359,431 63,595 247,264 68,424 267,750 298,067 244,907 69,064 270,249 274,288 244,907 69,064 270,249 282,586 80,060 313,293 74,456 306,000 90,610 354,569 40 41 1 External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of Share Rights held by KMP at 30 June 2010. 2 Award granted 2006 prior to appointment to Executive Leadership Team. BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT 5.5 shares awarded as remuneration In the year ended 30 June 2008 a number of senior executives were awarded shares under the Special Share Retention Plan. Some of those shares vested in the year ended 30 June 2010. 5.6 share Holdings in Bluescope steel limited The following table details the shares held by Key Management Personnel as well as any related-party interests in BlueScope Steel Limited as at 30 June 2010. 5.7 managing Director and chief executive officer – outline of employment contract Paul O’Malley was appointed to the position of Managing Director and Chief Executive Officer effective from 1 November 2007. share award summary 2010 executive Director P F O’Malley Kmp executives – current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal2 K A Mitchelhill2 number of shares awarded Date of grant % vested in year ended 30 June 2010 % forfeited in year ended 30 June 2010 shares yet to vest Financial year in which awards may vest value of shares not vested 30 June 20101 $ min $ max 15,000 06-Aug-07 17,000 06-Aug-07 18,000 06-Aug-07 – – 25,000 03-Aug-07 32,000 01-Sep-07 – – – – – – – – 20,000 10-Mar-09 25,000 27-Feb-09 – – – – – 100 – – – – – – – – – – – – – – – – – – 15,000 17,000 18,000 – 25,000 – – – – – 2011 2012 2013 – 2011 – – – – – – – – – – – – – – – 159,600 180,880 191,520 – 266,000 – – – – – 20,000 2012 – 48,200 25,000 2012 – 59,500 1 Share price at grant date has been used to determine the value of shares held by KMP at 30 June 2010. 2 Granted on appointment to BlueScope Steel. share Holdings1 in Bluescope steel limited ordinary shares held as at 30 June 2010 ordinary shares held as at 30 June 2009 286,276 1,321,502 128,382 152,720 157,116 128,156 26,624 286,276 1,321,502 128,382 152,720 157,116 128,156 11,624 227,613 227,613 68,584 57,303 15,303 338,292 191,924 – 20,000 77,666 68,584 57,303 15,303 338,292 191,924 – 20,000 77,666 name non-executive Directors – current G J Kraehe R J McNeilly D J Grady H K McCann Y P Tan D B Grollo K A Dean executive Director P F O’Malley Kmp executives – current N H Cornish M R Vassella P E O’Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill 1 lncluding related-party interests. Mr O’Malley’s current annual base pay is $1,680,000. This has not changed since 1 September 2008. Remuneration is reviewed annually in accordance with the Board’s senior executive salary review policy. In addition, Mr O’Malley is eligible to participate in the Short Term Incentive Plan and, subject to shareholder approval, Long Term Incentive Plan awards. In a year where financial performance was adversely affected by the economic downturn, the Managing Director and Chief Executive Officer received no payment for financial outcomes. His strong leadership in cost reduction, financial restructuring and driving the strategic initiatives of Global PEB and Asian restructure resulted in an STI bonus of $806,400 which is 40% of his maximum total bonus available. Upon appointment Mr O’Malley was provided with 50,000 BlueScope Steel Limited shares (purchased on-market) to be held subject to certain restrictions. Some or all of these shares will be forfeited by Mr O’Malley if his employment with BlueScope Steel is terminated within the restriction period specified, other than as a result of fundamental change in his employment terms. The employment of Mr O’Malley may be terminated in the following circumstances: — by notice: on six months’ notice by either party. If BlueScope Steel terminates Mr O’Malley’s employment by notice, it may provide payment in lieu of notice and must make an additional payment of 12 months’ annual base pay. — with cause: immediate termination by BlueScope Steel if, among other things, Mr O’Malley wilfully breaches his Service Contract, is convicted of various offences for which he can be imprisoned or is disqualified from managing a corporation, or engages in conduct which is likely to adversely impact the reputation of BlueScope Steel. In this circumstance, Mr O’Malley will be entitled to his annual base pay up to the date of termination. — illness or disablement: BlueScope Steel may terminate Mr O’Malley’s employment if he becomes incapacitated by physical or mental illness, accident or any other circumstances beyond his control for an accumulated period of six months in any 12-month period and, in this circumstance, will make payment of six months’ notice based on annual base pay. — fundamental change: Mr O’Malley may resign if a fundamental change in his employment terms occurs and within three months of the fundamental change Mr O’Malley gives notice to BlueScope Steel. In this event, the Company will provide Mr O’Malley with six months’ notice, or a payment in lieu of that notice, and a termination payment of 12 months’ annual base pay. 42 43 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT The rules governing the Company’s Long Term Incentive Plan and Short Term Incentive Plan will apply to his LTIP and STI awards on termination of his employment, including the STI and LTIP rules which provide that STI and LTIP awards will be forfeited if Mr O’Malley’s employment is terminated for cause. Provision has also been made for early vesting (subject to testing) of LTIP awards on a change of control. Mr O’Malley is subject to a 12-month non-compete restriction after his employment ceases with BlueScope Steel. Mr O’Malley cannot solicit or entice away from BlueScope Steel any supplier, customer or employee or participate in a business that competes with BlueScope Steel during the 12-month period. 5.8 other Key management personnel – executives Remuneration and other terms of employment for the disclosed Key Management Personnel are formalised in employment contracts that can be terminated with notice. Each of these agreements provide for an 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 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. No annual salary reviews have been made to Key Management Personnel since September 2008 and as a result there was no increase in fixed remuneration for the year ended 30 June 2010. Agreements are also in place for Key Management Personnel detailing the approach the Company will take with respect to payment of their termination payments and with respect to exercising its discretion on the vesting of share rights in the event of a ‘Change of Control’ of the organisation. enVironmental reGUlation The BlueScope Steel Group Health, Safety, Environment and Community (‘HSEC’) Policy provides the foundation for the way in which the environment is managed at all levels of the organisation. The BlueScope Steel Environment Principles and Standards detail the requirements for implementation of the policy throughout the Company. An environment compliance system is in operation across the Company to promote compliance with all relevant laws. In addition to our compliance obligations, the Company has undertaken a range of initiatives that focus on five main areas: reducing greenhouse gas emissions; reducing pollution to land, air and water; reducing waste to landfill; optimisation of material reuse; and recycling and conserving energy and fresh water. The reline of Port Kembla’s No. 5 Blast Furnace included major projects to reduce fresh water usage, reduce water discharged into Allens Creek and reduce emissions to air. The furnace was recommissioned in September 2009. A significant water saving project is being planned for the Western Port plant, which is expected to deliver a 65% reduction in fresh water use and a 75% reduction in wastewater discharged. BlueScope Steel, South East Water and the Victorian Government will jointly fund the project. BlueScope Steel Group notified relevant authorities of 42 statutory non-compliances with environmental regulations during the year ended 30 June 2010. During the year the Company did not receive any environment-related fines. energy efficiency and greenhouse gas regulation The production of greenhouse gases is inherent in the primary chemical process used to produce iron and steel. The opportunities to reduce direct emissions from these processes are therefore very limited. Despite this, BlueScope Steel is committed to reducing the greenhouse gas intensity of its operations. The Company is also playing an active role in the global steel industry’s efforts to reduce greenhouse gas emissions. We also believe BlueScope’s steel products will play an integral role in reducing society’s greenhouse gas emissions, including as components in renewable energy infrastructure (e.g. wind towers; gas pipelines; solar power plants), in more sustainable transport infrastructure (e.g. trains, buses; lighter, more efficient steel products for cars), and in greener, more energy efficient buildings. Steel is 100% recyclable and its life is potentially infinite. A range of BlueScope Steel’s operations, particularly iron and steelmaking in Australasia and the US, are emissions intensive and trade exposed, and consequently the Company remains acutely aware of the ongoing national and international debate about the regulation of greenhouse gas emissions, including carbon taxes and emissions trading schemes. In Australia, the Federal Government announced in April 2010 (and subsequently reconfirmed) that consideration of its Carbon Pollution Reduction Scheme would be deferred until 2012, implying the scheme is unlikely to commence before 2013. In July 2010, the Government announced that if re-elected, an interim carbon policy will include investment in renewable energy infrastructure, energy efficiency measures, and the establishment of a Citizens’ Assembly to advise the government. The policy is not expected to impose a carbon price directly on the steel industry, though it is likely to increase the cost of electricity. The Victorian Government also announced a new climate change policy in July 2010, with a target of a 20 per cent reduction in greenhouse gas emissions by 2020, compared to year 2000 levels. It is not expected that a carbon price will be imposed directly on the steel industry; however, the policy is also likely to lead to an increase in electricity costs. The New Zealand emissions trading scheme (ETS) commenced on 1 July 2010. New Zealand Steel is a liable entity and expects to be allocated a proportion of permits as an emissions-intensive, trade-exposed entity. It is expected to bear some carbon costs from suppliers (Scope 3 costs) for which it will not receive allocated permits. The New Zealand Government will review the ETS in 2011, including the arrangements for allocation of permits, and will take into account whether comparable carbon regulation has been introduced by major trading partners. The company will continue to put its view to the government in the lead up to this review that the ETS must not impose costs that adversely affect New Zealand Steel’s competitiveness. BlueScope’s steelmaking plants are world competitive, and around half the steel products we make each year in our Australian plants are exported. The Company works hard to maintain its competitiveness. In contrast, many overseas steelmakers receive subsidies and other support to help them export. Policy that puts higher costs on us but not on overseas steelmakers risks undermining BlueScope’s competitiveness. Accordingly, the Company has developed eight Greenhouse Policy Principles by which it will assess the policies of political parties and governments, and advocate policy that minimises any loss of competitiveness: 1) Reducing greenhouse gas emissions is a global problem that requires a global approach. 2) Australia should adopt policy that achieves emissions targets at least cost. Putting a price on carbon which is visible to consumers and producers, through a market mechanism (emissions trading or carbon tax), is likely to drive least cost abatement. 3) The competitiveness and financial viability of Australia’s trade exposed steel industry must not be eroded. We cannot place our industries at a disadvantage to the rest of the world. Transitional measures for trade exposed industries – including the steel industry – will be essential for as long as our global competitors (including India, China, US, Japan, Korea and Taiwan) do not face comparable carbon costs. 4) A single national carbon policy should be the goal of governments. Complementary policy measures adopted by Federal and State governments must be effective and least cost, and address recognised market failures. These policies must avoid market distortions or perverse incentives, overlap and unnecessary compliance costs and regulatory burden. 5) Revenue raised by a carbon price should be earmarked for investment in greenhouse gas abatement and assistance for households and industry. Policy should provide incentives for research and development and investment in abatement, including appropriate recognition for early movers. 6) Policy must not lead to carbon leakage, by which Australian production is simply replaced by foreign production that may, in fact, be less carbon efficient. 7) Policy should be comprehensive, including all sectors of the economy (and imports where appropriate), and be transparent. 8) Policy must recognise the very long time horizons for investment in the steel industry, including for potential next generation lower emissions iron and steelmaking technology. 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 69). Executive officers and employees of BlueScope Steel and its related bodies corporate are also covered. 44 45 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT In accordance with Rule 21 of its Constitution, BlueScope Steel to the maximum extent permitted by law: — must indemnify any current or former Director or Secretary; and — 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. 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 2010 has been received from Ernst & Young. This is set out at page 47 of the Directors’ Report. Ernst & Young provided the following non-audit services during the year ended 30 June 2010: Audit related assurance services — $724,124 acquisition related investigating accountants assurance; — $63,749 greenhouse gas emissions related assurance; Other services — $133,681 taxation compliance services; and — $53,906 other advisory services. 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 2001. The nature, value and scope of each type of non-audit service provided is considered by the Directors not to have compromised auditor independence. This report is made in accordance with a resolution of the Directors. 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 financial year ended 30 June 2010, 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 B R MEEHAN Partner 13 August 2010 g J Kraehe ao Chairman Liability limited by a scheme approved under Professional Standards Legislation p F o’malley Managing Director and Chief Executive Officer Melbourne 13 August 2010 46 47 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT corporate GoVernance statement introduction As a global organisation with businesses operating in many countries, the BlueScope Steel Group must comply with a range of legal, regulatory and governance requirements. The Board places great importance on the proper governance of the Group. The Board operates in accordance with a set of corporate governance principles that take into account relevant best practice recommendations. These include the Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council (2nd edition) (‘ASX Principles and Recommendations’). The Company complies with each of the recommendations in the ASX Principles and Recommendations. A summary of BlueScope Steel’s compliance with the recommendations follows, including details of specific disclosures required by a recommendation. Further information on the Company’s corporate governance policies and practices can be found on the Company’s website. principle 1 – lay solid foundations for management and oversight The Board has adopted a Charter which sets out, among other things, its specific powers and responsibilities and the matters delegated to the Managing Director and Chief Executive Officer and those specifically reserved for the Board. A statement of the matters reserved for the Board and the areas of delegated authority to senior management is available on the Company’s website. As part of the Board’s oversight of senior management, all Company executives are subject to annual performance review and goal planning. This involves evaluation of the executives by their immediate superior. Each executive is assessed against a range of criteria, including achievement of financial, safety, business excellence and strategic goals, and adherence to the Company’s values as expressed in ‘Our Bond’. All senior executives participated in a performance evaluation on this basis during the year ended 30 June 2010. principle 2 – structure the Board to add value The Board is structured to bring to its deliberations a range of commercial, operational, financial, legal and international experience relevant to the Company’s global operations. Pages 20 to 21 set out the qualifications, expertise and experience of each Director in office at the date of this Directors’ Report, and their period of office. The Board considers all of its Non-Executive Directors to be independent. In making this assessment, the Board considers whether the Director is free of any business or other relationship that could, or could reasonably be perceived to, materially interfere with the exercise by the Director of an independent judgement in the interests of the Company as a whole. In determining whether a relationship between the Company and a Director is material and would compromise the Director’s independence, the Board has regard to all the circumstances of the relationship including, where relevant: — the proportion of the relevant class of expenses or revenues that the relationship represents to both the Company and the Director; and — the value and strategic importance to the Company’s business of the goods or services purchased or supplied by the Company. Further details regarding the circumstances considered by the Board in making assessments of independence are contained on the Company’s website under ‘Directors’ Independence Policy‘. The Board seeks to achieve a Board composition with a balance of diverse attributes including skill sets, background, gender, geography, and industry experience. The Board (and Board Committees and individual Directors) may obtain independent professional advice, at the Company’s cost, in carrying out their responsibilities. Independent advice can be obtained without the involvement of the Company’s management, where the Board or the Director considers it appropriate to do so. Procedures have been adopted by the Board setting out the practical steps by which independent advice may be obtained. All Non-Executive Directors are members of the Nomination Committee. Their attendance at meetings of the Committee are set out on page 22. The Board reviews its effectiveness and the performance of each Director regularly. The Board completed an internal review of its effectiveness in August 2010 involving distribution of a questionnaire to Directors and senior management. Confidential responses were collated by the Company’s auditors and discussed by the Board. The review concluded that the Board is functioning well with an appropriate mix of skills and experience and that an effective working relationship exists among Board members and between Board and management. In addition, each Committee reviews its performance and effectiveness periodically through a confidential questionnaire completed by members of the Committee and relevant management attendees. The results of these reviews are discussed by the Committee. Each Board Committee has conducted a review on this basis in the last 12 months. A formal review of the performance of individual Directors takes place periodically, involving completion of an evaluation questionnaire by other Board members, the results of which are collated and discussed by the Chairman with the Director concerned and by the Board as a whole. In addition, the performance of the Chairman and other Directors are reviewed regularly through other informal mechanisms such as meeting critiques, discussions between Directors and the Chairman, and as part of Board and Committee evaluations. The Nomination Committee has reviewed the performance of Directors seeking election in 2010 and endorses their candidature. principle 3 – promote ethical and responsible decision making The Company welcomes recent changes announced to this Principle around diversity disclosures. BlueScope is committed to building a diverse workforce and considers that diversity (including gender diversity) is a key priority contributing to the success of our business. In addition to programs currently in place and others which are being developed to promote diversity, the Company’s policies and disclosures will be developed consistent with the requirements of the ASX Principles and Recommendations. The Company has a set of values known as ‘Our Bond’ and 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. Information relating to the Guide and ‘Our Bond’ is available on the Company’s website. In addition, the Board has established a Securities Trading Policy which governs dealing in the Company’s shares and derivative securities. A summary of the policy is available on the Company’s website. principle 4 – safeguard integrity in financial reporting The Board has established an Audit and Risk Committee which 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 is set out in full on the Company’s website. Separate discussions are held with the external and internal auditors without management present. The composition and structure of the Audit and Risk Committee complies with the requirements of the ASX Principles and Recommendations. The names of the members of the Audit and Risk Committee and their attendance at meetings of the Committee are set out on page 22 of this Directors’ Report. The qualifications of the members are set out on pages 20 to 21. principle 5 – make timely and balanced disclosure The Company is subject to continuous disclosure obligations under the ASX Listing Rules and Australian corporations legislation. Subject to limited exceptions, the Company must immediately notify the market, through ASX, of any information that a reasonable person would expect to have a material effect on the price or value of its securities. As part of its continuous disclosure responsibilities, the Company has established market disclosure protocols to promote compliance with these requirements and to clarify accountability at a senior executive level for that compliance. A summary of the Company’s Continuous Disclosure Policy is included on the Company’s website. principle 6 – respect the rights of shareholders Respecting the rights of shareholders is of fundamental importance to the Company and a key element of this is how we communicate with our shareholders. In this regard, the Company recognises that shareholders must receive high-quality relevant information in a timely manner in order to be able to properly and effectively exercise their rights as shareholders. The Company’s communications policy is summarised on the Company’s website. principle 7 – recognise and manage risk The Board has required management to design and implement a risk management and internal control system to manage the Company’s material business risks and management has reported that those risks are being managed effectively. For the annual and half-year accounts released publicly, the Board has received assurance from the Managing Director and Chief Executive Officer and the Chief Financial Officer that, in their opinion: — the financial records of the Group have been properly maintained; — the financial statements and notes required by accounting standards for external reporting: (i) give a true and fair view of the financial position and performance of the Company and the consolidated BlueScope Steel Group; and (ii) comply with the accounting standards (and any further requirements in the Corporations Regulations) and applicable ASIC Class Orders; and — the above representations are based on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Information relating to the Company’s policies on risk oversight and management of material business risks is available on the Company’s website. 48 49 BLUESCOPE STEEL LIMITED DIRECTORS’ REPORT concise financial report 30 JUne 2010 principle 8 – remunerate fairly and responsibly The Remuneration Report (on pages 23 to 44) sets out details of the Company’s policy and practices for remunerating Directors, key management personnel and senior executives. The names of the members of the Remuneration and Organisation Committee and their attendance at meetings of the Committee are set out on page 22. Information relating to: — the role, rights, responsibilities and membership requirements for the Remuneration and Organisation Committee; and — the Company’s Securities Trading Policy, which prohibits entering into transactions in associated products that limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes; is also available on the Company’s website. Other than superannuation, there are no schemes for retirement benefits for Non-Executive Directors. all information referred to in this corporate governance statement as being on the company’s website is included under the ‘responsibilities/corporate governance’ section of the website. 50 BLUESCOPE STEEL LIMITED statement of compreHensiVe income for tHe Year enDeD 30 JUne 2010 consoliDateD revenue from continuing operations Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Impairment of non-current assets Freight on external despatches External services Finance costs Other expenses Share of net profits (losses) of associates and joint venture partnerships accounted for using the equity method profit (loss) before income tax Income tax (expense) benefit Profit (loss) from continuing operations Profit from discontinued operations after income tax net profit (loss) for the year other comprehensive income Gain (loss) on cash flow hedges taken to equity (Gain) loss on cash flow hedges transferred to inventory Net gain (loss) on hedges of subsidiaries Exchange differences on translation of foreign operations Actuarial gain (loss) on defined benefit superannuation plans Income tax on items of other comprehensive income other comprehensive income for the year total comprehensive income for the year Profit (loss) is attributable to: Owners of BlueScope Steel Limited Non-controlling interests Total comprehensive income is attributable to: Owners of BlueScope Steel Limited Non-controlling interests earnings per share for profit (loss) from continuing operations attributable to the ordinary equity holders of the company Basic earnings per share Diluted earnings per share earnings per share for profit (loss) attributable to the ordinary equity holders of the company Basic earnings per share Diluted earnings per share The above statement of comprehensive income should be read in conjunction with the accompanying notes. notes 5 6 8 8 8 8 2010 $m 8,623.1 11.4 100.5 (4,963.2) (1,526.0) (349.8) (0.1) (544.5) (917.3) (112.1) (254.6) 62.9 130.3 3.5 133.8 5.7 139.5 (0.5) – (11.1) (17.5) (33.0) 14.7 (47.4) 92.1 126.0 13.5 139.5 77.7 14.4 92.1 cents 6.6 6.6 cents 6.9 6.9 2009 $m 10,328.7 60.5 25.0 (6,236.9) (1,695.4) (364.7) (69.8) (565.8) (1,068.9) (134.4) (349.3) (56.3) (127.3) 48.2 (79.1) 12.3 (66.8) (3.8) (1.3) (46.0) 224.3 (103.6) 91.9 161.5 94.7 (66.4) (0.4) (66.8) 84.2 10.5 94.7 Cents (8.5) (8.5) Cents (7.1) (7.1) 51 BLUESCOPE STEEL LIMITED 2010 CONCISE FINANCIAL REPORT BLUESCOPE STEEL LIMITED statement of financial position as at 30 JUne 2010 BLUESCOPE STEEL LIMITED statement of cHanGes in eQUitY for tHe Year enDeD 30 JUne 2010 assets current assets Cash and cash equivalents Receivables Inventories Other Non-current assets classified as held for sale Total current assets non-current assets Receivables Inventories Investments accounted for using the equity method Property, plant and equipment Deferred tax assets Intangible assets Other Total non-current assets total assets liaBilities current liabilities Payables Interest bearing liabilities Current tax liabilities Provisions Deferred income Derivative financial instruments Total current liabilities non-current liabilities Payables Interest bearing liabilities Deferred tax liabilities Provisions Retirement benefit obligations Deferred income Total non-current liabilities total liabilities net assets equity Contributed equity Reserves Retained profits Parent entity interest Non-controlling interest total equity The above statement of financial position should be read in conjunction with the accompanying notes. 52 consoliDateD 2010 $m 2009 $m 251.4 1,169.5 1,762.5 66.9 3,250.3 14.9 3,265.2 29.1 66.8 248.4 4,258.3 84.9 1,041.1 3.8 5,732.4 8,997.6 1,111.6 140.9 7.4 408.8 132.1 0.5 1,801.3 8.5 853.0 134.3 210.2 230.1 4.5 1,440.6 3,241.9 5,755.7 4,032.4 (118.4) 1,747.3 5,661.3 94.4 5,755.7 369.2 976.8 1,628.9 54.4 3,029.3 28.8 3,058.1 36.4 72.9 262.4 4,261.6 79.5 1,089.4 4.3 5,806.5 8,864.6 939.8 236.7 2.7 392.3 108.6 – 1,680.1 19.9 888.2 143.2 209.3 260.6 – 1,521.2 3,201.3 5,663.3 4,032.6 (104.8) 1,651.7 5,579.5 83.8 5,663.3 consoliDateD 30 June 2010 Balance at 1 July 2009 Profit (loss) for the period Other comprehensive income total comprehensive income for the year transactions with owners in their capacity as owners: Shares issued – transaction costs on share issues – General Employee Share Plan – exercise of share rights Share-based payment expense Dividends declared Tax credits recognised directly in equity Transfer to undistributable profits reserve Balance at 30 June 2010 consoliDateD 30 June 2009 Balance at 1 July 2008 Profit (loss) for the period Other comprehensive income total comprehensive income for the year transactions with owners in their capacity as owners: Shares issued – capital raising – transaction costs on share issues – General Employee Share Plan – exercise of share rights Share-based payment expense Dividends declared Dividend reinvestment plan Tax credits recognised directly in equity Transfer to minority interest Balance at 30 June 2009 contributed equity $m reserves $m retained earnings $m non-controlling interest $m 4,032.6 – – – (0.9) 0.2 – – – 0.5 – (0.2) 4,032.4 (104.8) – (26.5) (26.5) – (0.4) – 4.7 – – 8.6 12.9 (118.4) 1,651.7 126.0 (21.8) 104.2 – – – – – – (8.6) (8.6) 1,747.3 83.8 13.5 0.9 14.4 – – – – (3.8) – – (3.8) 94.4 contributed equity $m reserves $m retained earnings $m non-controlling interest $m 2,151.2 – – – 1,826.1 (66.4) 20.2 9.3 – – 69.8 22.4 – 1,881.4 4,032.6 (281.6) – 178.2 178.2 – – (0.7) (9.3) 8.6 – – – – (1.4) (104.8) 1,997.5 (66.4) (27.6) (94.0) – – – – – (251.6) – – (0.2) (251.8) 1,651.7 74.7 (0.4) 10.9 10.5 – – – – – (1.6) – – 0.2 (1.4) 83.8 The above statement of changes in equity should be read in conjunction with the accompanying notes. total $m 5,663.3 139.5 (47.4) 92.1 (0.9) (0.2) – 4.7 (3.8) 0.5 – 0.3 5,755.7 total $m 3,941.8 (66.8) 161.5 94.7 1,826.1 (66.4) 19.5 – 8.6 (253.2) 69.8 22.4 – 1,626.8 5,663.3 53 BLUESCOPE STEEL LIMITED 2010 CONCISE FINANCIAL REPORT BLUESCOPE STEEL LIMITED notes to tHe financial statements 30 JUne 2010 BLUESCOPE STEEL LIMITED statement of casH flows for tHe Year enDeD 30 JUne 2010 cash flows from operating activities Receipts from customers Payments to suppliers and employees Dividends received Joint venture partnership distributions received Interest received Other revenue Finance costs paid Income taxes (paid) received net cash (outflow) inflow from operating activities cash flows from investing activities Payment for subsidiaries, net of cash acquired Payments for property, plant and equipment Payments for intangibles Payments for investment in joint venture partnership Payments for investment in business assets Proceeds from sale of property, plant and equipment Repayment of loans by related parties net cash (outflow) inflow from investing activities cash flows from financing activities Proceeds from issues of shares Capital share raising costs Proceeds from borrowings Repayment of borrowings Dividends paid to Company's shareholders Dividends paid to minority interests in subsidiaries net cash inflow (outflow) from financing activities net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents cash and cash equivalents at end of financial year non-cash investing and financing activities The above statement of cash flows should be read in conjunction with the accompanying notes. consoliDateD 2010 $m 2009 $m notes 8,873.4 (8,503.8) 11,420.9 (10,669.2) 369.6 6.5 64.4 9.5 21.8 (102.1) 7.2 376.9 – (365.3) (8.0) (1.3) (0.4) 43.4 5.0 (326.6) – (0.9) 2,157.1 (2,312.3) – (3.7) (159.8) (109.5) 363.8 (5.0) 249.3 751.7 7.1 – 5.9 24.7 (160.4) (204.5) 424.5 (2.7) (733.0) (12.2) (11.9) (2.0) 29.7 4.4 (727.7) 1,832.2 (66.4) 19,117.9 (20,061.1) (182.0) (1.7) 638.9 335.7 19.6 8.5 363.8 7(d) 10 1. Basis of preparation of tHe concise financial report The concise financial report relates to the consolidated entity consisting of BlueScope Steel Limited and the entities it controlled at the end of, or during, the year ended 30 June 2010. The accounting policies adopted have been consistently applied to all years presented. The full financial report on which this concise financial report is based complies with Australian Accounting Standards issued by the Australian Accounting Standards Board (AASB) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). This concise financial report has been prepared in accordance with the Corporations Act 2001 and Accounting Standard 1039 Concise Financial Reports. The concise financial report is an extract from the full financial report for the year ended 30 June 2010. The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities as the full financial report. Further financial information can be obtained from the full financial report. rounding of amounts The Company is of a kind referred to in Class order 98/0100, issued by the Australian Securities and Investments Commission (ASIC), relating to the ‘rounding off’ of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars. 2. corporate information The full financial report of BlueScope Steel Limited for the year ended 30 June 2010 was authorised for issue in accordance with a resolution of the Directors on 13 August 2010. BlueScope Steel Limited is a Company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The registered office of the Company is Level 11, 120 Collins Street, Melbourne, Victoria, Australia 3000. The nature of the operations and principal activities of the Group are described in note 4 and the Directors’ Report. 3. fUll financial report 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. 4. seGment information (a) Description of segments The Group has six reportable operating segments: Coated & Industrial Products Australia, Australia Distribution & Solutions, New Zealand & Pacific Steel Products, Coated & Building Products Asia, Hot Rolled Products North America, and Coated & Building Products North America. coated & industrial products australia Coated & Industrial Products Australia includes the Port Kembla Steelworks, a steel making operation with an annual production capacity of approximately 5.2 million tonnes of crude steel. The Port Kembla Steelworks is the leading supplier of flat steel in Australia, manufacturing slab, hot rolled coil and plate products. The segment also comprises two main metallic coating and painting facilities located in Springhill, New South Wales and Western Port, Victoria together with steel painting facilities in western Sydney and Acacia Ridge, Queensland. Steel from the Port Kembla Steelworks is processed by these facilities to produce a range of COLORBOND® pre-painted steel and ZINCALUME® zinc/aluminium branded products. Export offices are also incorporated within this segment to trade steel manufactured at these facilities on global markets. australia Distribution & solutions Australia Distribution & Solutions contains a network of service centres and distribution sites from which it forms a key supplier to the Australian building and construction industry, automotive sector, major white goods manufacturers and general manufacturers. The operating segment also holds the Lysaght steel solutions business, providing a range of LYSAGHT® branded products to the building and construction sector and BlueScope’s water business containing rain storage tank solutions. new Zealand & pacific steel products 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 approximately 0.6 million tonnes. The segment also includes facilities in New Caledonia, Fiji and Vanuatu, which manufacture and distribute the LYSAGHT® range of products. coated & Building products asia Coated & Building Products Asia manufactures and distributes a range of metallic coated, painted steel products and pre-engineered steel building systems primarily to the building and construction industry and to some sections of the manufacturing industry across Asia. 54 55 BLUESCOPE STEEL LIMITED notes to tHe financial statements 30 JUne 2010 4. seGment information (continueD) Hot rolled products north america Hot Rolled Products North America 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. coated & Building products north america Coated & Building Products North America includes the North American Buildings Group, which designs, manufactures and markets pre-engineered steel buildings and component systems; Steelscape, producer of metal coated and painted steel coils; Metl-Span, manufacturer of insulated steel panels for commercial, industrial and cold storage buildings; and ASC Profiles, manufacturer of building components including architectural roof and wall systems and structural roof and decking. Geographical information The Group’s geographical regions are determined based on the location of markets and customers. The Group operates in four main geographical regions being Australia, New Zealand, Asia and North America. (a) reportable segments The segment information provided to the Managing Director and Chief Executive Officer for operating segments for the year ended 30 June 2010 is as follows: coated & industrial products australia $m australia Distribution & solutions $m new Zealand & pacific steel products $m coated & Building products asia $m hot rolled products north america $m coated & Building products north america $m Discontinued operations $m 30 June 2010 Total segment sales revenue Intersegment revenue revenue from external customers segment eBit Depreciation and amortisation Impairment (write-back) of non current assets Share of profit (loss) from associates and joint venture partnerships 4,744.5 (1,072.5) 3,672.0 84.3 197.2 – – 1,761.6 (3.0) 1,758.6 11.9 30.7 (0.2) 0.1 1,241.9 618.1 (89.6) 528.5 72.9 34.1 (1.0) 3.0 607.4 1,348.6 (8.9) 1,339.7 115.6 41.4 – – – – 60.7 – 1.3 1,306.8 (8.3) 1,298.5 (21.3) 44.9 – (3.2) 1,220.2 62.5 172.3 0.5 1,183.4 total segment assets 4,423.4 Total assets includes: Investments in associates and joint venture partnerships Additions to non-current assets (other than financial assets and deferred tax) total segment liabilities 56 – 3.0 6.7 64.6 171.0 3.1 228.2 959.0 23.2 360.4 37.3 209.2 48.0 321.0 – – 25.0 377.3 total $m 9,780.3 (1,182.3) 8,598.0 331.1 348.3 0.1 62.9 8,848.9 248.4 361.7 2,240.1 0.7 – 0.7 7.0 – – – 0.3 – – 13.2 4. seGment information (CONTINUED) (a) reportable segments (continued) coated & industrial products australia $m australia Distribution & solutions $m new Zealand & pacific steel products $m coated & Building products asia $m hot rolled products north america $m coated & Building products north america $m Discontinued operations $m 5,290.7 (1,375.7) 3,915.0 206.3 195.9 3.1 2,120.7 (6.2) 2,114.5 (23.3) 31.2 8.1 – 4,187.3 – 1,238.5 694.9 (96.3) 598.6 65.1 30.2 19.8 2.8 534.0 1,542.8 (54.8) 1,488.0 (94.1) 49.5 36.4 – – – (58.0) – 2.3 2,188.8 (2.8) 2,186.0 (93.2) 57.3 – (6.8) 1,074.0 (56.4) 182.6 4.1 1,272.5 0.2 – 0.2 14.2 – (5.6) – 4.5 total $m 11,838.1 (1,535.8) 10,302.3 17.0 364.1 64.1 (56.3) 8,493.4 – 3.0 5.9 69.2 180.0 4.3 – 262.4 576.4 865.5 24.8 312.6 31.7 187.7 63.7 241.1 – – 62.6 353.9 – 18.9 759.2 1,979.7 30 June 2009 Total segment sales revenue Intersegment revenue revenue from external customers segment eBit Depreciation and amortisation Impairment (write-back) of non-current assets Share of profit (loss) from associates and joint venture partnerships total segment assets Total assets includes: Investments in associates and joint venture partnerships Additions to non-current assets (other than financial assets and deferred tax) total segment liabilities (b) Geographical information Australia New Zealand Asia North America Other segment revenues from sales to external customers non-current assets 2010 $m 4,515.3 331.1 1,858.7 1,431.6 461.3 8,598.0 2009 $m 5,130.2 390.0 1,878.7 2,374.7 528.7 10,302.3 2010 $m 3,601.8 324.6 688.8 1,027.7 4.6 5,647.5 Segment revenues are allocated based on the country in which the customer is located. Segment non-current assets excludes deferred tax assets and are allocated based on where the assets are located. 2009 $m 3,556.9 317.5 698.6 1,112.9 4.7 5,690.6 57 BLUESCOPE STEEL LIMITED notes to tHe financial statements 30 JUne 2010 4. seGment information (CONTINUED) (c) other segment information (i) segment revenue Sales between segments are carried out at arm’s length and are eliminated on consolidation. The revenue from external parties is measured in a manner consistent with that in the statement of comprehensive income. Segment revenue reconciles to total revenue from continuing operations as follows: total segment revenue Intersegment eliminations Revenue attributable to discontinued operations Other revenue (note 5) total revenue from continuing operations (ii) segment eBit consoliDateD 2010 $m 9,780.3 (1,182.3) (0.7) 25.8 8,623.1 2009 $m 11,838.1 (1,535.8) (0.2) 26.6 10,328.7 4 . seGment information (CONTINUED) (iii) segment assets Segment assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Cash is not considered to be a segment asset as it is managed by the Group’s centralised treasury function. As the segment information is focused on EBIT, deferred tax assets, which by their nature do not contribute towards EBIT, are not allocated to operating segments. Reportable segment assets are reconciled to total assets as follows: segment assets Intersegment eliminations Unallocated: Deferred tax assets Cash Corporate operations consoliDateD 2010 $m 8,848.9 (220.4) 84.9 251.4 32.8 2009 $m 8,493.4 (109.5) 79.5 369.2 32.0 Performance of the operating segments is based on EBIT. This measurement basis excludes the effects of interest and taxes. Interest income and expense are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group. total assets as per the statement of financial position 8,997.6 8,864.6 A reconciliation of total segment EBIT to operating profit before income tax is provided as follows: (iv) segment liabilities total segment eBit Intersegment eliminations Interest income Finance costs EBIT (gain) loss attributable to discontinued operations Corporate operations profit (loss) before income tax from continuing operations consoliDateD 2010 $m 331.1 (19.8) 9.4 (112.1) (7.0) (71.3) 130.3 2009 $m 17.0 126.4 6.2 (134.4) (14.2) (128.3) (127.3) 58 Segment liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment. Liabilities arising from borrowing and funding initiatives are not considered to be segment liabilities due to these being managed by the Group’s centralised treasury function. As the segment information is focused on EBIT, tax liabilities, which by their nature do not impact EBIT, are not allocated to operating segments. Reportable segment liabilities are reconciled to total liabilities as follows: segment liabilities Intersegment eliminations Unallocated: Current interest bearing liabilities Non-current interest bearing liabilities Current tax liabilities Deferred tax liabilities Accrued borrowing costs payable Corporate operations total liabilities as per the statement of financial position consoliDateD 2010 $m 2,240.1 (192.5) 140.9 853.0 7.4 134.3 16.9 41.8 3,241.9 2009 $m 1,979.7 (101.4) 236.7 888.1 2.7 143.2 12.8 39.5 3,201.3 59 BLUESCOPE STEEL LIMITED notes to tHe financial statements 30 JUne 2010 5. reVenUe From continuing operations SALES REVENUE Sale of goods Services OTHER REVENUE Interest external Interest related parties Royalties external Rental external Other revenue Total revenue from continuing operations From discontinued operations Sales revenue Total revenue from discontinuing operations consoliDateD 2010 $m 2009 $m 8,575.6 21.7 8,597.3 10,283.0 19.1 10,302.1 7.6 1.8 1.6 6.8 8.0 25.8 3.7 2.5 1.8 6.8 11.8 26.6 8,623.1 10,328.7 0.7 0.7 0.2 0.2 6. DiscontinUeD operations (a) Description In June 2007, the Group closed its loss-making tinplate manufacturing operation, which was the major component of its Packaging Products cash-generating unit. Following a series of construction contract losses in the financial year 2006, the Group closed down and sold the assets of its Lysaght Taiwan business. The financial information for these operations identified as discontinued operations is set out below and is reported in this financial report as discontinued operations. (b) financial performance of discontinued operations The results of discontinued operations for the year are presented below. consoliDateD 2010 lysaght taiwan $m packaging $m total $m packaging $m 2009 lysaght taiwan $m – – – 3.1 – – 3.1 (0.9) 2.2 0.7 4.0 (0.7) – – (0.5) 3.5 – 3.5 0.7 4.0 (0.7) 3.1 – (0.5) 6.6 (0.9) 5.7 – – (0.3) – 5.6 – 5.3 (1.6) 3.7 0.2 3.1 – 5.6 – (0.3) 8.6 – 8.6 total $m 0.2 3.1 (0.3) 5.6 5.6 (0.3) 13.9 (1.6) 12.3 Revenue Other income – insurance recovery Expenses other than finance costs Unutilised provisions written back Impairment reversal (i) Finance costs Profit (loss) before income tax Income tax (expense) benefit Profit (loss) after income tax from discontinued operations (i) reversal of impairment loss In March 2009, Packaging Products recognised an impairment reversal for $5.6M against property, plant and equipment after securing a contract for the sale of the previously impaired No.2 Temper Mill. (c) cash flow information – discontinued operations The net cash flow of discontinued operations held are as follows: Net cash inflow (outflow) from operating activities Net cash inflow (outflow) from investing activities Net cash inflow (outflow) from financing activities Net increase in cash generated by the operation consoliDateD 2010 2009 packaging $m lysaght taiwan $m total $m packaging $m lysaght taiwan $m total $m (2.8) 4.0 (1.2) – 3.0 – 0.2 4.0 (3.0) (4.2) – – (10.3) (11.3) (21.6) 1.6 8.7 – – 11.3 – 1.6 20.0 – 60 61 BLUESCOPE STEEL LIMITED notes to tHe financial statements 30 JUne 2010 7. DiViDenDs 8. earninGs per sHare (a) ordinary shares No final dividend was declared for the year ended 30 June 2009. In the comparative period, a final dividend for the year ended 30 June 2008 of 27 cents per fully paid share was paid on 22 October 2008 Final fully franked based on tax paid @ 30% No interim dividend was declared for the year ended 30 June 2010. In the comparative period, an interim dividend for the year ended 30 June 2009 of 5 cents per fully paid share was paid on 31 March 2009 Fully franked based on tax paid @ 30% Total dividends provided for or paid (b) Dividends not recognised at year end For the year ended 30 June 2010 the directors recommended the payment of a final dividend of 5 cents per fully paid ordinary share, fully franked based on tax paid at 30%. No dividends were declared at 30 June 2009. The amount not recognised at 30 June 2010 in relation to this dividend was: (c) franked dividends Actual franking account balance as at the reporting date Franking credits that will arise from the payment (receipt) of income tax payable as at the reporting date Franking credits available for subsequent financial years based on a tax rate of 30% parent 2010 $m 2009 $m – – – 206.3 45.3 251.6 91.2 – 124.7 (17.3) 107.4 145.0 (20.3) 124.7 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: (a) franking credits (debits) that will arise from the payment (receipt) of the amount of the provision for income tax (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. (d) Dividend cash flows The total cash paid to shareholders in respect of dividends during the period is $Nil (2009: $182.0M) as presented in the statement of cash flows. In the comparative period, dividend amounts of $57.8M and $12.0M were reinvested through the Company’s dividend reinvestment plan for the respective 2008 final and 2009 interim dividends. (a) Basic earnings (loss) per share From continuing operations attributable to the ordinary equity holders of the Company From discontinued operations Total basic earnings (loss) per share attributable to the ordinary equity holders of the Company (b) Diluted earnings (loss) per share From continuing operations attributable to the ordinary equity holders of the Company From discontinued operations Total diluted earnings (loss) per share attributable to the ordinary equity holders of the Company (c) reconciliation of earnings used in calculating earnings (loss) per share Basic and diluted earnings per share Profit (loss) attributable to the ordinary equity holders of the Group used in calculating earnings per share: From continuing operations From discontinued operations (d) weighted average number of shares used as the denominator Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Weighted average number of share rights Weighted average number of ordinary shares and potential ordinary shares used in calculating diluted earnings per share consoliDateD 2010 cents 2009 cents 6.6 0.3 6.9 6.6 0.3 6.9 (8.5) 1.4 (7.1) (8.5) 1.4 (7.1) consoliDateD 2010 $m 2009 $m 120.3 5.7 126.0 (78.7) 12.3 (66.4) consoliDateD 2010 number 2009 number 1,823,309,479 930,570,633 36,926 570,909 1,823,346,405 931,141,542 62 63 BLUESCOPE STEEL LIMITED notes to tHe financial statements 30 JUne 2010 8. earninGs per sHare (CONTINUED) (e) information concerning the calculation of earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing net profit (loss) attributable to the ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. (ii) Diluted earnings per share Diluted earnings per share is calculated by dividing the net profit (loss) attributable to the ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued upon the conversion of all dilutive potential ordinary shares into ordinary shares. Share rights granted to eligible senior managers under the Long Term Incentive Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent that they are expected to vest based on current TSR (Total Shareholder Return) ranking as per the 30 June 2010 Remuneration Report. There are 13,083,887 share rights relating to the 2006, 2007, 2008 & 2009 LTIPs that are not included in the calculation of diluted earnings per share because they are not dilutive for the year ended 30 June 2010. These share rights could potentially dilute basic earnings per share in the future. 9. continGencies (a) contingent liabilities The Company had contingent liabilities at 30 June 2010 in respect of: outstanding legal matters Contingencies for various minor legal disputes consoliDateD 2010 $m 2.1 2.1 2009 $m 2.5 2.5 A range of outstanding legal matters exist that are contingent on court decisions, arbitration rulings and private negotiations to determine amounts required for settlement. It is not practical to provide disclosure requirements relating to each and every case. In addition to the above minor contingencies, the following material litigation cases are outstanding: — Two suppliers have commenced legal proceedings seeking damages for alleged breaches of contract totalling approximately USD 137M (approximately AUD 160M). As the Group believes there has been no breach of contract in either case, no provision has been raised in the accounts. Guarantees In Australia, BlueScope Steel Limited has given $138.8M (2009: $139.1M) in guarantees to various state workers’ compensation authorities as a prerequisite for self insurance. An amount, net of recoveries, of $90.6M (2009: $88.3M) has been recorded in the consolidated financial statements as recommended by independent actuarial advice. Bank guarantees have been provided to customers in respect of the performance of goods and services supplied. Bank guarantees outstanding at 30 June 2010 totalled $25.2M (2009: $17.5M). 9. continGencies (CONTINUED) taxation The BlueScope Steel Group operates in many countries across the world, each with separate taxation authorities, which results in significant complexity. At any point in time there are tax computations which have been submitted but not agreed by those tax authorities and matters which are under discussion between Group companies and the tax authorities. The Group provides for the amount of tax it expects to pay taking into account those discussions and professional advice it has received. While conclusion of such matters may result in amendments to the original computations, the Group does not believe that such adjustments will have a material adverse effect on its financial position, though such adjustments may be significant to any individual year’s income statement. (b) contingent assets No assets have been booked in relation to the recovery of any of the following claims due to the inherent uncertainty surrounding these amounts: — The Group has lodged a claim for the cumulation of workers compensation in insurance recoveries on old ‘pre-demerger’ policies. The insurance company’s position is unclear and therefore recoveries remain uncertain. 10. non-casH inVestinG anD financinG actiVities Acquisition of property, plant and equipment by means of finance leases (i) Dividend reinvestment plan (ii) consoliDateD 2010 $m 49.0 – 49.0 2009 $m – 69.8 69.8 (i) Port Kembla entered into a finance lease agreement for $35.6M in relation to plant and machinery during the period. Additionally, the Group entered into several property sale and finance leaseback transactions within Australia during the period for $12.9M. The lease periods range from 15 to 25 years, with the Group reserving the right to purchase the properties at the expiration date or renegotiate new lease terms. (ii) The Company has a formal dividend reinvestment plan that enables participating shareholders to receive dividends as ordinary BlueScope Steel Limited shares instead of cash. No dividends were paid during the year ending 30 June 2010. In the comparative period a total of 13,833,380 shares were issued under the dividend reinvestment plan instead of cash. 11. eVents occUrrinG after tHe Balance Date There were no significant events occurring between the end of the financial year 30 June 2010 and the date this report was authorised for issue. 64 65 BLUESCOPE STEEL LIMITED Directors’ Declaration 30 JUne 2010 Directors’ Declaration The directors declare that in their opinion, the concise financial report of the consolidated entity for the year ended 30 June 2010 as set out in pages 51–65 complies with Accounting Standard AASB 1039 Concise Financial Reports. The concise financial report is an extract from the full financial report for the year ended 30 June 2010. The financial statements and specific disclosures included in the concise financial report have been derived from the full financial report. 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 is available on request. This declaration is made in accordance with a resolution of the directors. g J Kraehe ao Chairman p F o’malley Managing Director & CEO Melbourne 13 August 2010 inDepenDent aUDitor’s report to tHe memBers of BlUescope steel limiteD report on the concise financial report The accompanying concise financial report of BlueScope Steel Limited comprises the statement of financial position as at 30 June 2010, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and related notes, derived from the audited financial report of BlueScope Steel Limited for the year ended 30 June 2010. The concise financial report does not contain all the disclosures required by the Australian Accounting Standards. Directors’ responsibility for the concise financial report The Directors are responsible for the preparation and presentation of the concise financial report in accordance with Accounting Standard AASB 1039 Concise Financial Reports, and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation of the concise financial report; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. auditor’s responsibility Our responsibility is to express an opinion on the concise financial report based on our audit procedures. We have conducted an independent audit, in accordance with Australian Auditing Standards, of the financial report of BlueScope Steel Limited for the year ended 30 June 2010. Our audit report on the financial report for the year was signed on 13 August 2010 and was not subject to any modification. The Australian Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report for the year is free from material misstatement. Our procedures in respect of the concise financial report included testing that the information in the concise financial report is derived from, and is consistent with, the financial report for the year, and examination on a test basis, of evidence supporting the amounts and other disclosures which were not directly derived from the financial report for the year. These procedures have been undertaken to form an opinion whether, in all material respects, the concise financial report complies with Accounting Standard AASB 1039 Concise Financial Reports. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. auditor’s opinion In our opinion, the concise financial report of BlueScope Steel Limited for the year ended 30 June 2010 complies with Accounting Standard AASB 1039 Concise Financial Reports. report on the remuneration report The following paragraphs are copied from our Report on the Remuneration Report for the year ended 30 June 2010. We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2010. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. auditor’s opinion In our opinion the Remuneration Report of BlueScope Steel Limited for the year ended 30 June 2010, complies with section 300A of the Corporations Act 2001. ERNST & YOUNG B R MEEHAN Partner Melbourne 13 August 2010 Liability limited by a scheme approved under Professional Standards Legislation 66 67 SHaREHOLDER INFORmaTION CORPORATE DIRECTORY CORPORATE DIRECTORY 2 0 DISTRIBUTION SCHEDULE (aS aT 3 SEpTEmBER 2010) 0 8 D E C 2 0 0 8 D E C Ranges 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 50,000 50,001 to 100,000 2 100,001 and Over 0 0 Total 7 N O V % of Issued Capital No. of shares DURING THE GLOBAL FINANCIAL DURING THE GLOBAL FINANCIAL CRISIS, A SERIES OF MAJOR CRISIS, A SERIES OF MAJOR No. of holders INITIATIVES IMPLEMENTED TO INITIATIVES IMPLEMENTED TO PROTECT THE BALANCE SHEET, PROTECT THE BALANCE SHEET, 87,222 IMPROVE LIQUIDITY, MANAGE IMPROVE LIQUIDITY, MANAGE 68,692 INVENTORY AND REDUCE CAPITAL INVENTORY AND REDUCE CAPITAL 19,173 12,374 EXPENDITURE AND COSTS. EXPENDITURE AND COSTS. 830 469 188,760 38,965,660 171,086,940 141,346,086 237,588,962 58,243,872 1,176,090,497 1,823,322,017 2 0 0 7 N O The number of shareholders holding less than a marketable parcel of 223 securities ($2.24 on 3/09/2010) is 23,905 and they V hold 3,069,846. LAUNCHED BLUEPRINT, OUR GUIDE LAUNCHED BLUEPRINT, OUR GUIDE TO BUSINESS PERFORMANCE AND TO BUSINESS PERFORMANCE AND GROWTH. ITS FOCUS – STAYING SAFE, GROWTH. ITS FOCUS – STAYING SAFE, PROTECTING OUR BALANCE SHEET, PROTECTING OUR BALANCE SHEET, BUILDING BRANDS, IMPROVING BUILDING BRANDS, IMPROVING EFFICIENCIES AND ENHANCING EFFICIENCIES AND ENHANCING CUSTOMER SERVICE. CUSTOMER SERVICE. TWENTY LaRGEST REGISTERED (aS aT 3 SEpTEmBER 2010) Rank Name of shareholder Total Units % Issued Capital NATIONAL NOMINEES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED 270,605,569 249,968,605 249,914,576 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 CITICORP NOMINEES PTY LIMITED ANZ NOMINEES LIMITED COGENT NOMINEES PTY LIMITED RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED UBS NOMINEES PTY LTD AUSTRALIAN REWARD INVESTMENT ALLIANCE TASMAN ASSET MANAGEMENT LTD AMP LIFE LIMITED QUEENSLAND INVESTMENT CORPORATION RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED CITICORP NOMINEES PTY LIMITED UCA GROWTH FUND LIMITED RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED CITICORP NOMINEES PTY LIMITED RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED Total Balance of Register Grand TOTAL Curvaceous weathering steel panels, crafted by Curvaceous weathering steel panels, crafted by BlueScope Facade Solutions, reflect the deep red ochre BlueScope Facade Solutions, reflect the deep red ochre of outback Australia on the award-winning Australian of outback Australia on the award-winning Australian Pavilion at Shanghai Expo. Architects: Wood Marsh. Pavilion at Shanghai Expo. Architects: Wood Marsh. 76,123,079 42,156,734 41,171,238 17,655,387 17,039,935 13,346,085 12,005,149 11,271,026 11,023,780 7,907,834 6,784,569 5,230,000 5,113,199 3,000,000 2,825,732 2,766,830 2,444,579 TABLE OF CONTENTS TABLE OF CONTENTS 02 CHAIRMAN’S MESSAGE 02 CHAIRMAN’S MESSAGE 04 MANAGING DIRECTOR AND CEO’S REPORT 04 MANAGING DIRECTOR AND CEO’S REPORT 08 BOARD OF DIRECTORS 08 BOARD OF DIRECTORS 09 SAFETY 09 SAFETY 10 PERFORMANCE OVERVIEW 10 PERFORMANCE OVERVIEW 12 OUR BOND 12 OUR BOND Cover: Rising cloud-like above Melbourne’s skyline is the Cover: Rising cloud-like above Melbourne’s skyline is the distinctive AAMI Park stadium rooftop. Hot rolled coil from distinctive AAMI Park stadium rooftop. Hot rolled coil from BlueScope was formed into structural hollow sections BlueScope was formed into structural hollow sections by Orrcon Steel to support the stadium’s cutting-edge by Orrcon Steel to support the stadium’s cutting-edge bioframe design. Stadium designed by Cox Architects bioframe design. Stadium designed by Cox Architects and constructed by Grocon. and constructed by Grocon. 1,048,353,906 774,968,111 1,823,322,017 2.14 9.38 7.75 13.03 3.19 64.50 100.00 14.84% 13.71% 13.71% 4.17% 2.31% 2.26% 0.97% 0.93% 0.73% 0.66% 0.62% 0.60% 0.43% 0.37% 0.29% 0.28% 0.16% 0.15% 0.15% 0.13% 57.50% 42.50% 100.00% FIVE YEAR PERFORMANCE* FIVE YEAR PERFORMANCE* SUBSTaNTIaL SHaREHOLDERS (aS aT 3 SEpTEmBER 2010) As at 3 September 2010, BlueScope Steel has not been notified of any substantial shareholdings. REVENUE ($M) REVENUE ($M) EBIT ($M) EBIT ($M) NET PROFIT AFTER TAXTT NET PROFIT AFTER TAXTT ($M) ($M) 10 VOTING RIGHTS FOR ORDINaRY SHaRES 09 The Constitution provides for votes to be cast: 08 (a) on a show of hands, one vote for each shareholder; and 07 06 (b) on a poll, one vote for each fully paid ordinary share. 8624 10329 10495 8913 8031 8624 10329 10495 8913 8031 10 09 08 07 06 10 09 08 07 06 10 09 08 07 06 240 240 15 15 1063 1063 1099 1099 556 556 10 09 08 07 06 10 09 08 07 06 126 -66 596 686 338 126 -66 596 686 338 *REPORTED RESULTS *REPORTED RESULTS 68 DIRECTORS DIRECTORS G J Kraehe AO Chairman G J Kraehe AO Chairman R J McNeilly Deputy Chairman R J McNeilly Deputy Chairman P F O’Malley Managing Director and Chief Executive Officer P F O’Malley Managing Director and Chief Executive Officer D J Grady AM D J Grady AM H K McCann AM H K McCann AM Y P Tan Y P Tan D B Grollo D B Grollo K A Dean K A Dean SECRETARY SECRETARY M G Barron M G Barron EXECUTIVE EXECUTIVE LEADERSHIP TEAM LEADERSHIP TEAM P F O’Malley Managing Director and Chief Executive Officer P F O’Malley Managing Director and Chief Executive Officer M G Barron Chief Legal Officer and Company Secretary M G Barron Chief Legal Officer and Company Secretary N H Cornish Chief Executive, Australian & New Zealand Steel Manufacturing Businesses N H Cornish Chief Executive, Australian & New Zealand Steel Manufacturing Businesses I R Cummin Executive General Manager, People and Organisation Performance I R Cummin Executive General Manager, People and Organisation Performance S Dayal Chief Executive, Asia S Dayal Chief Executive, Asia S R Elias Chief Financial Officer S R Elias Chief Financial Officer K Mitchelhill Chief Executive, Australian Distribution & Solutions K Mitchelhill Chief Executive, Australian Distribution & Solutions P E O’Keefe Chief Executive, Australian Coated & Industrial Markets P E O’Keefe Chief Executive, Australian Coated & Industrial Markets M R Vassella President, North America M R Vassella President, North America NOTICE OF ANNUAL GENERAL MEETING NOTICE OF ANNUAL GENERAL MEETING The Annual General Meeting of BlueScope Steel Limited will be held at Melbourne The Annual General Meeting of BlueScope Steel Limited will be held at Melbourne Convention and Exhibition Centre, 2 Clarendon Street, Southbank, Victoria at 2.00 pm Convention and Exhibition Centre, 2 Clarendon Street, Southbank, Victoria at 2.00 pm on Thursday 11 November 2010 on Thursday 11 November 2010 REGISTERED OFFICE REGISTERED OFFICE Level 11, 120 Collins Street, Melbourne, Victoria 3000 Level 11, 120 Collins Street, Melbourne, Victoria 3000 Telephone: +61 3 9666 4000 Telephone: +61 3 9666 4000 Fax: +61 3 9666 4111 Fax: +61 3 9666 4111 Email: bluescopesteel@linkmarketservices.com.au Email: bluescopesteel@linkmarketservices.com.au Postal Address: PO Box 18207, Collins Street East, Melbourne, Victoria 8003 Postal Address: PO Box 18207, Collins Street East, Melbourne, Victoria 8003 SHARE REGISTRAR SHARE REGISTRAR Link Market Services Limited Link Market Services Limited Level 12, 680 George Street, Sydney, NSW 2000 Level 12, 680 George Street, Sydney, NSW 2000 Postal address: Locked Bag A14, Sydney South, NSW 1235 Postal address: Locked Bag A14, Sydney South, NSW 1235 Telephone (within Australia): 1300 855 998 Telephone (within Australia): 1300 855 998 Telephone (outside Australia): +61 2 8280 7760 Telephone (outside Australia): +61 2 8280 7760 Fax: +61 2 9287 0303 Fax: +61 2 9287 0303 Email: bluescopesteel@linkmarketservices.com.au Email: bluescopesteel@linkmarketservices.com.au AUDITOR AUDITOR Ernst & Young 8 Exhibition Street, Melbourne, Victoria 3000 Ernst & Young 8 Exhibition Street, Melbourne, Victoria 3000 STOCK EXCHANGE STOCK EXCHANGE BlueScope Steel Limited shares are quoted on the Australian Securities Exchange (ASX code: BSL) BlueScope Steel Limited shares are quoted on the Australian Securities Exchange (ASX code: BSL) WEBSITE ADDRESS WEBSITE ADDRESS www.bluescopesteel.com www.bluescopesteel.com Design and production: ERD Photography: Jean-Marc LaRoque, Peter Bennetts and Patrick Bingham-Hall. Printing: Geon Impact Printing Paper: Monza Satin and Pacesetter Laser from Spicers Paper Design and production: ERD Photography: Jean-Marc LaRoque, Peter Bennetts and Patrick Bingham-Hall. Printing: Geon Impact Printing Paper: Monza Satin and Pacesetter Laser from Spicers Paper Cert no. SGS-COC-002774 Cert no. SGS-COC-002774 69 69 69 ThE TUrnarOUnD ThE POTEnTIaL BlUeScope Steel limited aBn 16 000 011 058 level 11, 120 collinS Street melBoUrne, victoria 3000 aUStralia www.BlUeScopeSteel.com BLUESCOPE STEEL LIMITED financial report 2009/2010 B L U E S C O P E S T E E L L I M I T E D f i n a n c i a l r e p o r t 2 0 0 9 / 2 0 1 0 

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