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
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a $192 million profit turnaround
from the previous year.
conservative gearing and strong
liquidity positions bluescope well
to manage through the steel cycle
and support growth initiatives.
2
0
0
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d
e
c
improved profitaBility
in the december quarter –
a result of cost reductions,
improved demand and
better margins.
2
0
0
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d
e
c
during the global financial
crisis, a series of major
initiatives implemented to
protect the Balance sheet,
improve liquidity, manage
inventory and reduce capital
expenditure and costs.
2
0
0
7
n
o
v
launched Blueprint, our guide
to business performance and
growth. its focus – staying safe,
protecting our balance sheet,
building brands, improving
efficiencies and enhancing
customer service.
taBle of contents
02 chairman’s message
04 managing director and ceo’s report
08 board of directors
09 safety
10 performance overview
12 our bond
curvaceous weathering steel panels, crafted by
bluescope facade solutions, reflect the deep red ochre
of outback australia on the award-winning australian
pavilion at shanghai expo. architects: wood marsh.
cover: rising cloud-like above melbourne’s skyline is the
distinctive aami park stadium rooftop. hot rolled coil from
bluescope was formed into structural hollow sections
by orrcon steel to support the stadium’s cutting-edge
bioframe design. stadium designed by cox architects
and constructed by grocon.
five year performance*
*reported results
ORDINARY DIVIDEND(CENTS PER SHARE)554947440910080706REVENUE ($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
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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
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