ANNUAL
REPORT
2017/2018
BlueScope Steel Limited ABN 16 000 011 058
CHAIRMAN’S
message
BlueScope’s performance
for the 2018 fi nancial year
shows that the Company’s
straightforward strategy
across our international
portfolio of businesses is
working very well.
Early in the year we had a smooth
transition to a new Managing
Director & CEO, Mark Vassella,
following the retirement of Paul
O’Malley. Mark and his Executive
Leadership Team are committed
to pursuing growth opportunities
in line with our strategy to deliver
returns to shareholders, and they
delivered outstanding performance
in the 2018 financial year.
A different kind of steel building products company
The transformation of BlueScope in recent years has resulted
in a more diversified business with a greater contribution
from value-added products, principally focused on building
and construction markets. Today, we also enjoy greater
geographic diversity that provides growth opportunities and
a broader spread of earnings, and both of these factors have
given rise to more even profitability. In short, we have
created a steel building products company that is
differentiated from its peers by six factors:
1
2
3
4
5
6
Technology, branding and channels – We continue
to invest in research and development to maintain
our leadership position in steel coating and painting
technologies. We have a portfolio of well-known
and respected brands in building materials and home
appliance steel, with a clear focus on knowing our end-
customers and maintaining strong channels to market.
Business diversification – The Company’s geographic
diversity in 18 countries – a mix of rich developed and
developing economies – provides significant growth
opportunities to expand the contribution from our high
value-added products made in-country.
Cost competitiveness – Our strategy calls for us to
be cost breakeven through the cycle. BlueScope’s
Australian steelmaking operations are now breakeven
at minimum recent spreads, but must maintain a sharp
eye on costs. North Star has the leading EBIT margin
amongst US steelmakers and is a world class asset.
Disciplined growth – We evaluate growth opportunities
rigorously, and approach them with discipline.
Cash generation and capital management – Under
our capital management framework we seek to
maintain safe and reliable operations; maintain
balance sheet strength, invest to grow and optimize
shareholder returns.
Approach to sustainability – We have conducted a
materiality assessment to identify the sustainability
topics that matter most to our stakeholders. These are:
safety, health and wellness; climate change and energy;
supply chain sustainability; governance and business
conduct; and diversity and inclusion.
Financial performance in FY2018
The Company achieved an outstanding Earnings Before
Interest & Tax (EBIT) performance in FY2018 – a $1,269.3
million result. The return on invested capital was 20.0 per
cent, delivering a net cash position on the balance sheet.
This result also included the return of a further $362 million
to shareholders during the year through dividends and the
share buy-back.
Looking across a sample of our portfolio:
North Star BlueScope Steel continues to operate at full
capacity and to pursue incremental volume growth initiatives.
Performance in 2H FY2018 strengthened, driven by increases
in selling prices and spreads, fuelled by US Government
trade measures and the strength of the US economy.
The performance of our Building Products joint venture with
Nippon Steel Sumitomo Metal Corporation was affected by
slower project activity in some Asian nations. By contrast,
the North America, China and India businesses performed well.
Business in Asia is a long term process, and our focus is to
further grow in the region, which is seeing a rapid rise in the
wealth of the middle class. For example, we continue to
diversify our marketing offering by growing our retail and
home appliance segments in Asia.
In Buildings North America sales for end-use applications
such as logistics facilities and warehousing and data centres
have been particularly strong. The order intake was strong,
leading to robust volumes and margins during 2H FY2018.
The Building Properties Group in the US made an unusually
high $16.4 million EBIT contribution to the Buildings business
during FY2018. This business develops industrial properties,
such as warehouses and distribution centres, and gives
Buildings North America direct access to this growing
market, driven by strength in ecommerce and consumer
goods activities. In addition, it creates value for our
2000-strong North America builder network by providing
access to new projects.
The Australian Steel Products business has done an excellent
job in boosting profitability in the last three years. The business
delivered good results in FY2018, however we must not be
complacent in our pursuit of continued productivity improvements
and long-term sustainability of our steelmaking operations.
Demand for premium branded coated and painted product
continues to be strong. The team is pursuing a number of
specific inter-material product and innovation opportunities
in new markets – such as TRUECORE® steel framing.
New Zealand and Pacific Islands delivered a strong
underlying EBIT performance, primarily through productivity
and cost improvement initiatives and higher realised selling
prices. Our New Zealand steelmaking operations have also
made good headway on productivity initiatives and cost
savings – a constant essential focus for the business.
In line with our strategy, commodity steelmaking in Australia
and New Zealand is a valuable option for BlueScope, provided
it can deliver target returns and is cash flow breakeven at
the bottom of the cycle. These businesses must remain cost
competitive in their markets to ensure their future viability.
FY2018 FINANCIAL HIGHLIGHTS
Reported net profi t after tax (NPAT)
$1,569.1 million – 119% or $853.2 million increase
on FY2017
− including unusual and one-off benefi ts of
$743.1 million
Underlying NPAT
$826.0 million
Underlying EBIT
$1,269.3 million up 15 per cent on FY2017
− 2H FY2018 underlying EBIT $745.0 million – up
$220.7 million on the fi rst half driven by strong
demand and steel spreads in Australasian and
US markets and an unusually high $18.3 million
contribution from BlueScope Properties Group.
Our best half since December 2008
The balance sheet is in good shape, reaching a $63.6 million
net cash position at 30 June 2018 – improved from $262.1 million
net debt at 31 December 2017, and progressing towards our
target of $200 million to $400 million of net cash. Across the
business we continue to maintain a focus on controllable costs.
Capital management
The Board approved the payment of a final dividend of
8.0 cents per share and an on-market share buy-back of
$250 million to be conducted during 1H FY2019.
Our capital management framework focuses on ROIC and
Earnings Per Share growth to drive shareholder returns.
An important priority is to distribute 30 to 50 per cent of free
cash flow to shareholders in the form of consistent dividends
and buybacks. The Company will continue to review its
capital management approach, having regard to the balance
sheet, credit metrics and investment priorities.
In April, two credit ratings agencies, S&P and Moody’s,
upgraded the Company to an investment grade credit rating.
We have subsequently refinanced our capital markets and
syndicated bank debt to deliver improved cost, scale and
tenor. This is just another example of the “new BlueScope”.
Strategy
Sustainability
BlueScope’s strategy and focus on shareholder returns is
delivering results. Since completing our transformational
cost saving initiatives in Australasia and the acquisition of
the 50 per cent of North Star we did not own, we have now
delivered underlying EBIT of over $1.1 billion in each of the last
two years.
The BlueScope balance sheet is robust, with great flexibility,
and we have a clear capital management framework in
place. Capital expenditure principles focus on investing to
maximise value from ‘best in class’ assets, investing for
growth in premium branded products, and investing in
customer, technology and innovation.
There are many organic growth opportunities across our
portfolio of businesses and we place a strong focus on
sustainability, innovation and diversity as we implement our
plans. We continue to review further appropriate growth
opportunities that fit our strategy in markets as diverse as
India, ASEAN, the US, and Australia and New Zealand.
We have initiated a comprehensive study to examine an
expansion at our successful North Star business to add at
least 600,000 to 900,000 tonnes per annum of steelmaking
capacity. The project under evaluation involves adding a
third electric arc furnace and second slab caster, and
may cost in the range of US$500 million to US$700 million.
If this project proceeds, it would take two to three years
to develop. We believe the project may deliver BlueScope
compelling results through the cycle, which the study will
seek to confirm.
Examples of other growth opportunities include nVision in
Buildings North America – game changing design and detail
software; the launch of Next Generation ZINCALUME® steel
and the rollout of retail outlets in Building Products Asia; and
inter-material growth in light gauge steel framing through
TRUECORE® steel. We expect commercial production on the
third metal coating line with in-line painting in Thailand to
begin early in the second half of FY2019.
To BlueScope, sustainability means developing, manufacturing
and selling steel products and solutions in a manner that
provides for a sustainable future.
During the year we strengthened our approach to
sustainability governance, modifying the Board committee
structure to create a Risk and Sustainability Committee.
The Risk and Sustainability Committee has oversight of
BlueScope’s environmental, social and governance (ESG)
responsibilities and reporting, including reviewing and
recommending to the Board the Company’s annual Corporate
Governance Statement and Sustainability Report.
We also established a Sustainability Council comprised
of members of the Executive Leadership Team and senior
management. This Council is responsible for understanding
our sustainability exposures, engaging with key stakeholders
and directing the consistent implementation of sustainability
initiatives across our global businesses. The Sustainability
Council reports quarterly to the Board through the Risk and
Sustainability Committee.
BlueScope’s vision and strategy for health, safety and
environment continue to be guided by the Board Health,
Safety and Environment (HSE) Committee. Each member of
the Board is a member of this Committee, which reviews and
recommends actions to the Board with respect to policy, plans,
performance against targets, risks and emerging issues.
We continue to focus our attention on the five priority areas
of importance to our business, and on adopting a more
mature approach to sustainability reporting and governance.
Safety, health and wellness – The safety and health of
all our people is central to the way we work. BlueScope
is a global leader in safety performance, recording a
30 per cent improvement in the Lost Time Injury Frequency
Rate to 0.62, which remains below 1.0 for the fourteenth
consecutive year. The Medically Treated Injury Frequency
Rate improved 5 per cent to 5.4. Across the business,
health and safety teams continue to seek out opportunities
to ensure the effectiveness of safety risk controls, to
engage all BlueScope people in the lessons learnt and
value gained from safety audits, and to better understand
and manage health and wellness in the workplace.
Climate change and energy – BlueScope has adopted four
pillars of commitment to action on climate change:
− We support Australia’s 2030 emissions target under the
2015 Paris agreement, as well as the commitments made
for all the countries where we operate. In FY2017 the
average emissions intensity of our three steelmaking
facilities fell by 8 per cent, and we have used this
performance to develop continuous improvement targets
for the future. We are implementing energy efficiency
and emissions reduction projects, such as the 2017
self-generation upgrade at Port Kembla Steelworks
which reduced electricity grid demand by 7 per cent.
− We believe our steel products play a key role in
sustainable development, given their strength, versatility,
longevity and endless recyclability. In Australian and
New Zealand steelmaking, around 20 per cent recycled
scrap content is used as manufacturing feed, while in
the US the North Star mini mill uses around 75 per cent
recycled scrap content. We are building a culture of
sustainability with extensive recycling of by-products
produced by manufacturing operations.
− We acknowledge steelmaking produces emissions, and
are working hard to reduce the impact. Recently, we
announced a landmark seven-year Power Purchase
Agreement (PPA), where BlueScope will offtake 66 per cent
of the 133MW of energy generated from our partner’s
500,000 solar panel farm. This PPA is one of Australia’s
largest corporate offtake agreements, and is the largest
with a solar farm to date. It complements our firm
electricity supply arrangements, which provide the reliable
electricity supply we need for manufacturing processes
that must operate around the clock. The PPA will help
keep downward pressure on our energy costs, and will
support the gradual transition to renewable energy. The
volume under the agreement is equivalent to 20 per cent
of BlueScope’s total Australian electricity purchases.
− In addition to the new governance structures highlighted
above which ensure we understand climate risk and
manage it effectively, we are aligning climate change
reporting with the global Task Force on Climate-related
Financial Disclosure.
Supply chain sustainability – BlueScope is committed to
respecting human rights, and during the year we published a
Statement on Human Rights and a Responsible Sourcing
Standard. A risk assessment of the Company’s ESG profile
has been completed, as has an analysis of supply chain
management processes. A significant project is underway
to segment the Company’s supply chain on a risk-based
approach, and to develop plans to ensure that suppliers
are committed to operating in line with the values
expressed in Our Bond.
Governance and Business Conduct – At BlueScope, the
Board, management, employees, contractors and agents
are all expected to behave in line with Our Bond and all
policies and standards. Systems are in place to report
and investigate any cases of misconduct, including an
externally managed business conduct hotline available
to all employees to anonymously report issues. In FY2018,
12 reports of alleged misconduct were reported and
investigated. So far this has resulted in disciplinary
action being taken against two employees.
As disclosed last year, the Australian Competition and
Consumer Commission (ACCC) is investigating potential
cartel conduct by BlueScope relating to the supply of
steel products in Australia, that allegedly involved a small
number of BlueScope employees in the period from late
2013 to mid-2014. It is not known when the ACCC’s
investigation will be completed, or what the outcome might
be. Possible outcomes include the commencement of
either civil or criminal proceedings or no action being
taken. BlueScope has co-operated and continues to
co-operate with the ACCC’s investigation.
Diversity and inclusion – We maintain a strong focus on
BlueScope’s diversity goal: that our workplaces reflect the
communities where we operate. Strategies implemented to
increase gender diversity have seen the percentage of
women recruited to permanent roles increase to 40 per cent,
and in operator and trade roles women now comprise one
third of all new recruits. Women now make up 19 per cent
of BlueScope’s global workforce of around 14,300 people,
and one third of each of our Board and Executive
Leadership Team.
BlueScope’s FY2018 Sustainability Report will be published
in October.
Board composition
BlueScope recently announced the appointment of Mark
Hutchinson as a non-executive director, effective 1 October
2018. Mark has extensive business and leadership experience
at the senior executive level, having held various roles at GE
over a 25 year career, most recently as President and Chief
Executive Officer China (2010–2014) and Europe (2014–2017).
The Directors are very pleased to welcome Mark onto the
Board. He brings with him a global perspective including
direct operational experience in Asia. He also has extensive
experience in companies which have used technology and
digital to undertake transformational change which will
benefit BlueScope in the execution of its strategy.
As advised to shareholders at the 2017 Annual General
Meeting, Mr Ken Dean and Mr Daniel Grollo will be retiring
at the 2018 AGM and will not stand for re-election. Together
with the rest of the Board, I would like to thank Ken and
Daniel for their invaluable service to BlueScope over a
number of years. They have both been outstanding Board
members, and Chairs of the Audit Committee and the Health,
Safety and Environment Committee respectively. They have
also been instrumental in helping guide BlueScope through
its challenging times, and have helped shape the “new
BlueScope”. On behalf of the Board I wish them well in their
future endeavours.
Conclusion
BlueScope’s performance in FY2018 reflects the continued
hard work of management and employees, and I thank them
all for their commitment to the Company’s success.
I thank my fellow Directors for their continued support, and
join with all shareholders in looking forward to BlueScope
continuing to prosper in FY2019 and beyond.
John Bevan, Chairman
BLUESCOPE STEEL
ANNUAL REPORT 2017/2018
Directors’
REPORT
BlueScope Steel Limited ABN 16 000 011 058
Directors’ Report for the year ended 30 June 2018
The Directors of BlueScope Steel Limited (‘the Company’) present their report on the consolidated entity (‘BlueScope’ or ’the Group’) consisting of
BlueScope Steel Limited and its controlled entities for the year ended 30 June 2018.
OPERATING AND FINANCIAL REVIEW
DESCRIPTION OF OPERATIONS
BlueScope is a technology leader in, and the largest global producer
of, metal coated and painted steel building products. Principally
focused on the Asia-Pacific region, the Group manufactures and
markets a wide range of branded products that include pre-painted
COLORBOND® steel, zinc/aluminium alloy-coated ZINCALUME® steel
and the LYSAGHT® range of building products.
BlueScope is Australia’s largest steel manufacturer, and New
Zealand’s only steel manufacturer. BlueScope’s vertically integrated
operations for flat steel products in Australia and New Zealand
produce value-added metallic coated and painted products, together
with hot rolled coil, cold rolled coil, steel plate and pipe and tube.
BlueScope manufactures and sells long steel products in New Zealand
through its Pacific Steel business. In Australia and New Zealand,
in the building and construction,
BlueScope serves customers
manufacturing, automotive and transport, agricultural and mining
industries. In Australia, BlueScope’s steel products are sold directly to
customers from our steel mills and through a national network of
service centres and steel distribution businesses.
The Group has an extensive footprint of metallic coating, painting and
steel building product operations in China, India, Indonesia, Thailand,
Vietnam, Malaysia and North America, primarily servicing the
residential and non-residential building and construction industries
across Asia, and the non-residential construction industry in North
America. BlueScope operates this business across ASEAN and the
west coast of North America in partnership with Nippon Steel &
Sumitomo Metal Corporation (NSSMC) and in India with Tata Steel.
Both are 50/50 joint ventures with BlueScope controlling and therefore
consolidating the joint venture with NSSMC, and jointly controlling
and therefore equity accounting the joint venture with Tata Steel.
North Star BlueScope Steel (NSBSL) is a low cost regional supplier of
hot rolled coil, based in Ohio, in the United States of America. NSBSL
is highly efficient, operates at industry leading utilisation rates and is
strategically located near its customers and in one of the largest scrap
markets of North America.
BlueScope is a leading supplier of engineered building solutions (EBS)
to industrial and commercial markets. Its EBS value proposition is
based on speed of construction, low total cost of ownership and global
delivery capability. Leading brands, including BUTLER®, VARCO
PRUDEN® and PROBUILD®, are supplied
from BlueScope’s
manufacturing and engineering centres in North America and China.
OUR VALUES, GOALS AND STRATEGY
Our Bond, our strategy, our financial principles and approach to sustainability guide what we aim to achieve and how we do it.
OUR BOND – GUIDING OUR VALUES FOR OVER 16 YEARS
WE AND OUR CUSTOMERS PROUDLY BRING INSPIRATION, STRENGTH AND COLOUR TO COMMUNITIES WITH BLUESCOPE
Our customers are our partners – Our success depends on our customers and suppliers choosing us. Our strength lies in working closely
with them to create value and trust, together with superior products, service and ideas.
Our people are our strength - Our success comes from our people. We work in a safe and satisfying environment. We choose to treat each
other with trust and respect and maintain a healthy balance between work and family life. Our experience, teamwork and ability to deliver
steel inspired solutions are our most valued and rewarded strengths.
Our shareholders are our foundations – Our success is made possible by the shareholders and lenders who choose to invest in us. In
return, we commit to continuing profitability and growth in value, which together make us all stronger.
Our communities are our homes – Our success relies on communities supporting our business and products. In turn, we care for the
environment, create wealth, respect local values and encourage involvement. Our strength is in choosing to do what is right.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 1
OUR STRATEGY
BlueScope’s target is to deliver top quartile shareholder returns with safe operations.
There are many organic growth opportunities across our portfolio of businesses and we place a strong focus on sustainability, innovation and
diversity, as we implement our plans. We continue to review further appropriate growth opportunities that fit our strategy in markets as diverse
as India, ASEAN, the U.S. and Australia and New Zealand.
The Directors of BlueScope Steel Limited (‘the Company’) present their report on the consolidated entity (‘BlueScope’ or ’the Group’) consisting of
BlueScope Steel Limited and its controlled entities for the year ended 30 June 2018.
BlueScope Steel Limited ABN 16 000 011 058
Directors’ Report for the year ended 30 June 2018
OPERATING AND FINANCIAL REVIEW
DESCRIPTION OF OPERATIONS
BlueScope is a technology leader in, and the largest global producer
Vietnam, Malaysia and North America, primarily servicing the
of, metal coated and painted steel building products. Principally
residential and non-residential building and construction industries
focused on the Asia-Pacific region, the Group manufactures and
across Asia, and the non-residential construction industry in North
markets a wide range of branded products that include pre-painted
America. BlueScope operates this business across ASEAN and the
COLORBOND® steel, zinc/aluminium alloy-coated ZINCALUME® steel
west coast of North America in partnership with Nippon Steel &
and the LYSAGHT® range of building products.
BlueScope is Australia’s largest steel manufacturer, and New
Zealand’s only steel manufacturer. BlueScope’s vertically integrated
operations for flat steel products in Australia and New Zealand
Sumitomo Metal Corporation (NSSMC) and in India with Tata Steel.
Both are 50/50 joint ventures with BlueScope controlling and therefore
consolidating the joint venture with NSSMC, and jointly controlling
and therefore equity accounting the joint venture with Tata Steel.
produce value-added metallic coated and painted products, together
North Star BlueScope Steel (NSBSL) is a low cost regional supplier of
with hot rolled coil, cold rolled coil, steel plate and pipe and tube.
hot rolled coil, based in Ohio, in the United States of America. NSBSL
BlueScope manufactures and sells long steel products in New Zealand
through its Pacific Steel business. In Australia and New Zealand,
BlueScope serves customers
in the building and construction,
is highly efficient, operates at industry leading utilisation rates and is
strategically located near its customers and in one of the largest scrap
markets of North America.
manufacturing, automotive and transport, agricultural and mining
BlueScope is a leading supplier of engineered building solutions (EBS)
industries. In Australia, BlueScope’s steel products are sold directly to
to industrial and commercial markets. Its EBS value proposition is
customers from our steel mills and through a national network of
based on speed of construction, low total cost of ownership and global
service centres and steel distribution businesses.
The Group has an extensive footprint of metallic coating, painting and
steel building product operations in China, India, Indonesia, Thailand,
delivery capability. Leading brands, including BUTLER®, VARCO
PRUDEN® and PROBUILD®, are supplied
from BlueScope’s
manufacturing and engineering centres in North America and China.
OUR VALUES, GOALS AND STRATEGY
Our Bond, our strategy, our financial principles and approach to sustainability guide what we aim to achieve and how we do it.
OUR FINANCIAL PRINCIPLES
Financial principles guide our measurement of performance and capital allocation.
OUR BOND – GUIDING OUR VALUES FOR OVER 16 YEARS
WE AND OUR CUSTOMERS PROUDLY BRING INSPIRATION, STRENGTH AND COLOUR TO COMMUNITIES WITH BLUESCOPE
Our customers are our partners – Our success depends on our customers and suppliers choosing us. Our strength lies in working closely
with them to create value and trust, together with superior products, service and ideas.
Our people are our strength - Our success comes from our people. We work in a safe and satisfying environment. We choose to treat each
other with trust and respect and maintain a healthy balance between work and family life. Our experience, teamwork and ability to deliver
steel inspired solutions are our most valued and rewarded strengths.
Our shareholders are our foundations – Our success is made possible by the shareholders and lenders who choose to invest in us. In
return, we commit to continuing profitability and growth in value, which together make us all stronger.
Our communities are our homes – Our success relies on communities supporting our business and products. In turn, we care for the
environment, create wealth, respect local values and encourage involvement. Our strength is in choosing to do what is right.
Note (1): EBITDA less stay in business capital expenditure
BlueScope Steel Limited – FY2018 Directors’ Report
Page 1
BlueScope Steel Limited – FY2018 Directors’ Report
Page 2
OUR APPROACH TO SUSTAINABILITY
BlueScope is committed to building a sustainable business that operates with sustainable business practices. Our sustainability reports cover this
in detail; the FY2017 Sustainability Report was released earlier in 2018 and our FY2018 report is targeted for release in October 2018.
We have identified five areas of sustainability with the highest materiality for BlueScope: climate change and energy; safety, health and
wellness; supply chain sustainability; diversity and inclusion; and governance and business conduct. The following sets out an update on our
progress in each of these areas.
1. Climate Change and Energy
BlueScope has four pillars of commitment to action on climate change.
2. Safety, Health and Wellness
Continuing our journey towards Zero Harm.
MTIFR (medically treated injuries per million man-hours worked) also remained at low levels, below FY2017 performance, at 5.4.
In FY2018, LTIFR (lost time injuries per million man-hours worked) of 0.62, remained at low levels.
3. Supply Chain Sustainability
Committed to respecting human rights.
Completed ESG risk assessment and analysis of Supply Chain management processes.
Designed a risk-prioritised approach to engaging suppliers regarding our standards and expectations, and undertaking verification exercises.
Published Statement on Human Rights and Responsible Sourcing Standard earlier this year.
4. Diversity and Inclusion
Strong focus and effective strategies creating demonstrable improvement in workforce diversity.
Women made up 40% of total new recruitment in FY2018, nearly double that of FY2016 at 23%.
Of this new recruitment, women made up one third of new recruits into operations and trade based roles, nearly 5 times the levels of FY2016.
Female participation in the total BSL workforce has increased from 17% in FY2016 to 19% in FY2018.
5. Governance and Business Conduct
All employees have access to an externally managed business conduct hotline for anonymous reporting of issues. In FY2018:
12 reports of alleged misconduct were reported to the hotline
All allegations were taken seriously and investigated by an independent panel
Disciplinary actions were taken against two employees.
FY2018 Sustainability Report
In our FY2018 Sustainability Report, targeted for release in October 2018, we intend to provide:
further enhanced disclosure on material sustainability topics
further TCFD-based disclosure, in particular, on the organisation’s resilience under different climate-related scenarios
an expanded discussion of progress on supply chain sustainability.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 3
OUR APPROACH TO SUSTAINABILITY
BlueScope is committed to building a sustainable business that operates with sustainable business practices. Our sustainability reports cover this
in detail; the FY2017 Sustainability Report was released earlier in 2018 and our FY2018 report is targeted for release in October 2018.
We have identified five areas of sustainability with the highest materiality for BlueScope: climate change and energy; safety, health and
wellness; supply chain sustainability; diversity and inclusion; and governance and business conduct. The following sets out an update on our
progress in each of these areas.
1. Climate Change and Energy
BlueScope has four pillars of commitment to action on climate change.
BLUESCOPE – STEEL BUILDING PRODUCTS
BlueScope’s focus is on steel building products. Why are we different?
1. Technology, Branding and Channels: Continued investment in research & development to maintain leadership in steel coating and painting
technologies, a portfolio of many well-known and respected brands, a clear focus on knowing our end customers and maintaining strong
channels to market.
2. Business Diversification: Geographic diversity in earnings and increasing contribution from value-added products.
In FY2018, LTIFR (lost time injuries per million man-hours worked) of 0.62, remained at low levels.
MTIFR (medically treated injuries per million man-hours worked) also remained at low levels, below FY2017 performance, at 5.4.
3. Cost Competitiveness: Australian steelmaking is cash breakeven at ‘bottom of the cycle’ spreads; North Star operates at the highest margin
amongst its six major U.S. steelmaker peers, based on CY2017 performance.
2. Safety, Health and Wellness
Continuing our journey towards Zero Harm.
3. Supply Chain Sustainability
Committed to respecting human rights.
Published Statement on Human Rights and Responsible Sourcing Standard earlier this year.
Completed ESG risk assessment and analysis of Supply Chain management processes.
Designed a risk-prioritised approach to engaging suppliers regarding our standards and expectations, and undertaking verification exercises.
4. Diversity and Inclusion
Strong focus and effective strategies creating demonstrable improvement in workforce diversity.
Female participation in the total BSL workforce has increased from 17% in FY2016 to 19% in FY2018.
Women made up 40% of total new recruitment in FY2018, nearly double that of FY2016 at 23%.
Of this new recruitment, women made up one third of new recruits into operations and trade based roles, nearly 5 times the levels of FY2016.
5. Governance and Business Conduct
All employees have access to an externally managed business conduct hotline for anonymous reporting of issues. In FY2018:
12 reports of alleged misconduct were reported to the hotline
All allegations were taken seriously and investigated by an independent panel
Disciplinary actions were taken against two employees.
FY2018 Sustainability Report
In our FY2018 Sustainability Report, targeted for release in October 2018, we intend to provide:
further enhanced disclosure on material sustainability topics
further TCFD-based disclosure, in particular, on the organisation’s resilience under different climate-related scenarios
an expanded discussion of progress on supply chain sustainability.
5. Cash Generation and Capital Management: With a disciplined, returns focused process, we seek to drive competition for capital across
investments in the business, M&A and returns to shareholders. Strong free cash flow in the last three years has allowed the Company to deliver
returns to shareholders while simultaneously reducing debt.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 3
BlueScope Steel Limited – FY2018 Directors’ Report
Page 4
6. Approach to Sustainability: BlueScope is committed to building a sustainable business that operates with sustainable business practices.
We are making progress across key sustainability areas identified by stakeholders.
to maximise value from “Best in Class” assets
for growth in premium branded products
in customer, technology and innovation.
4. Disciplined Growth: We have a disciplined approach to growth and will invest:
GROUP FINANCIAL REVIEW
HIGHLIGHTS
Sales from continuing operations
$11,497.8M
9% on FY2017
2H result $6,049.4M, up $566.3M
Underlying EBIT
$1,269.3M
15% on FY2017
2H result $745.0M, up $220.7M
Capital management
8.0cps final dividend (6.0cps interim)
$300M buy-back completed in FY2018
$250M buy-back announced for 1H FY2019
FINANCIAL SUMMARY
Table 1: Financial summary
$M unless marked
Sales revenue from continuing operations
EBITDA – underlying 1
EBIT – reported
EBIT – underlying 1
Return (underlying EBIT) on invested capital (%)
NPAT – reported
NPAT – underlying 1
Final ordinary dividend (cents)
Reported earnings per share (cents)
Underlying earnings per share (cents)
Net debt / (cash)
Gearing (%)
Leverage (ND / proforma underlying EBITDA)
Reported net profit after tax
$1,569.1M
119% on FY2017
2H result $1,127.9M, up $771.2M
Underlying return on invested capital
20.0%
from 18.5%
Net cash
$63.6M
from $232.2M net debt Jun 17
FY2018
11,497.8
1,644.6
1,462.9
1,269.3
20.0%
1,569.1
826.0
8.0 cps
281.8 cps
148.3cps
(63.6)
N/A – net cash
N/A – net cash
FY2017
10,529.8
1,484.4
1,044.5
1,105.4
18.5%
715.9
652.4
5.0 cps
125.3 cps
114.2 cps
232.2
4.0%
0.16x
Variance %
9%
11%
40%
15%
+1.5%
119%
27%
60%
125%
30%
(127%)
N/A
N/A
1 Underlying results in this report are categorised as non-IFRS financial information provided to assist readers to better understand the financial performance of the underlying
operating business. Underlying adjustments included discontinued operations, acquisitions and disposals of businesses, asset impairments/write-backs and restructuring costs.
Tables 11, 12 and 13 explain why the Company has disclosed underlying results and provide reconciliations of underlying earnings to reported earnings.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 5
GROUP FINANCIAL REVIEW
HIGHLIGHTS
Sales from continuing operations
$11,497.8M
9% on FY2017
2H result $6,049.4M, up $566.3M
Underlying EBIT
$1,269.3M
15% on FY2017
2H result $745.0M, up $220.7M
Capital management
8.0cps final dividend (6.0cps interim)
$300M buy-back completed in FY2018
$250M buy-back announced for 1H FY2019
FINANCIAL SUMMARY
Table 1: Financial summary
$M unless marked
Sales revenue from continuing operations
EBITDA – underlying 1
EBIT – reported
EBIT – underlying 1
NPAT – reported
NPAT – underlying 1
Return (underlying EBIT) on invested capital (%)
Final ordinary dividend (cents)
Reported earnings per share (cents)
Underlying earnings per share (cents)
Net debt / (cash)
Gearing (%)
Leverage (ND / proforma underlying EBITDA)
Reported net profit after tax
$1,569.1M
119% on FY2017
2H result $1,127.9M, up $771.2M
Net cash
$63.6M
from $232.2M net debt Jun 17
FY2018
11,497.8
1,644.6
1,462.9
1,269.3
20.0%
1,569.1
826.0
8.0 cps
281.8 cps
148.3cps
(63.6)
N/A – net cash
N/A – net cash
FY2017
10,529.8
1,484.4
1,044.5
1,105.4
18.5%
715.9
652.4
5.0 cps
125.3 cps
114.2 cps
232.2
4.0%
0.16x
Variance %
9%
11%
40%
15%
+1.5%
119%
27%
60%
125%
30%
(127%)
N/A
N/A
REVENUE
The 9% increase in total revenue was principally due to higher steel
prices in all regions; increased sales volumes in the ASP segment; and
unfavourable translation impacts from a stronger Australian dollar
exchange rate (AUD:USD).
Underlying return on invested capital
20.0%
from 18.5%
EARNINGS BEFORE INTEREST AND TAX
The 15% increase in underlying EBIT reflects:
$216.4M spread increase, primarily due to:
increased domestic and export prices due to higher global
steel prices, partly offset by the unfavourable influence of a
stronger AUD:USD ($735.1M)
higher raw material costs – higher coal and iron ore costs
partly offset by higher contribution from export coke and a
$32.1M one-off benefit from the settlement of an historical
coal supply dispute at ASP, higher scrap and pig iron costs
at North Star and higher steel feed costs at BP and BNA
($518.7M)
$107.8M unfavourable movement in costs, comprised of:
$122.9M cost improvement initiatives across all segments
$59.9M higher utility costs mainly driven by rate increases
$93.5M unfavourable impact of other cost escalation
including higher remuneration expense linked to financial
performance of the Group, consumables and other costs
$77.3M unfavourable movement in other costs mainly
provision changes, market development costs and other one-
off costs
$53.5M benefit from volume and mix due to higher despatches
at ASP, NZPac and North Star partly offset by lower volumes at
BNA and BP
$1.8M favourable movement in other items, including the
unfavourable impact of foreign exchange translation partly offset
by a one-off recognition of a previously unrecognised deferred tax
asset following a sustained period of taxable profits at Tata
BlueScope Steel ($10.7M).
The $418.4M (40%) increase in reported EBIT reflects the movement
in underlying EBIT discussed above and $254.5M favourable
movement in underlying adjustments primarily in relation to the full
write-back of previously impaired plant and equipment at ASP
($216.0M). The adjustments are explained in Tables 12 and 13.
FINANCE COSTS AND FUNDING
During the last six months, the Company was upgraded to an
investment grade credit rating by both S&P Global Ratings (BBB-) and
Moody’s (Baa3). In light of the improved ratings and decreasing net
debt, initiatives were undertaken to improve cost, scale and tenor of
debt funding:
the US$500M of 144A Notes with 6.5% pa coupon were replaced
with US$300M of Reg-S five-year notes with a 4.625% pa coupon
syndicated bank debt facilities of $850M were refinanced by new
$500M facilities on improved terms in August 2018.
The $15.0M increase in net finance costs was largely due to:
the one-off cost of early redemption of the US$500M May 2021
Senior Unsecured Notes (144A Notes), replaced with the smaller
and lower cost issuance of Reg-S notes
partly offset by a decrease in average gross borrowings and cost
of drawn debt.
TAX
The FY2018 tax credit of $269.5M (FY2017 $181.8M tax expense) was
favourably impacted by two significant one-off items. At 30 June 2018,
$325.7M of previously unbooked Australian tax losses were fully
recognised in tax expense following a sustained period of improved
taxable income. In addition, due to the passing of the U.S. tax reform
bill in December 2017, a $76.3M tax expense gain was booked
(consisting of an initial $52.1M estimate in 1H FY2018 and $24.2M
true-up in 2H FY2018) arising from a downward revision in deferred tax
liabilities offset by a tolling charge and withholding tax payable on
distributable U.S. foreign earnings currently held in China. BlueScope
has also benefitted from a 7% rate reduction on U.S. derived earnings
in FY2018 and will benefit by an 11% tax rate reduction thereafter.
After adjusting for these one-off impacts, the tax expense primarily
relates to income generated in businesses outside of Australia and
New Zealand. In Australia and New Zealand, the Group has utilised
previously unrecognised tax losses to offset taxable income generated
during the period. As at 30 June 2018 the BlueScope Australian
consolidated tax group is estimated to have carried forward tax losses
of approximately $1.84Bn. There will be no Australian income tax
payments until these losses are recovered
The Group has now recognised all previously impaired Australian tax
losses but continues to defer the recognition of past tax losses in New
Zealand until a history of taxable profits has been demonstrated. New
Zealand tax losses are able to be carried forward indefinitely.
FINANCIAL POSITION
Net assets increased $1,348.9M to $6,887.6M at 30 June 2018 from
$5,538.7M at 30 June 2017. Significant movements were:
$327.6M increase in property, plant and equipment including the
write-back of previously impaired plant and equipment at ASP
$327.5M full recognition of previously unbooked Australian tax
losses
$295.8M decrease in net debt through strong cash flow
$280.2M increase in inventory driven by higher unit costs and
volume combined with the weaker AUD:USD exchange rate
$121.7M increase in receivables.
DIVIDEND & CAPITAL MANAGEMENT
During FY2018, BlueScope paid dividends totalling 11.0 cents per
share and bought back $300.0M of shares on-market.
The Board of Directors has approved payment of a final dividend of 8.0
cents per share and a $250M on-market buy-back for 1H FY2019. The
final dividend will be unfranked for Australian and New Zealand tax
purposes and is declared to be conduit foreign income. BlueScope’s
dividend reinvestment plan will not be active for the final dividend.
Ex-dividend share trading commences: 7 September 2018.
Relevant dates for the final dividend are as follows:
Record date for dividend: 10 September 2018.
Payment of dividend: 16 October 2018.
BlueScope’s capital management policy:
BlueScope will continue to seek to retain strong credit metrics,
and will target positive net cash of ~$200M to $400M.
The Company will drive competition for capital between
investments in the business and returns to shareholders with a
disciplined, returns focused process.
1 Underlying results in this report are categorised as non-IFRS financial information provided to assist readers to better understand the financial performance of the underlying
operating business. Underlying adjustments included discontinued operations, acquisitions and disposals of businesses, asset impairments/write-backs and restructuring costs.
Tables 11, 12 and 13 explain why the Company has disclosed underlying results and provide reconciliations of underlying earnings to reported earnings.
Financial liquidity was $2,135.7M at 30 June 2018 ($1,932.4M at 30
June 2017), comprised of $1,191.3M committed undrawn bank debt
capacity and $944.4M cash. Liquidity in the NS BlueScope Coated
Products JV was $383.5M; included in the group liquidity measure.
BlueScope’s off balance sheet receivables securitisation programs
were drawn to $396.5M at 30 June 2018 ($377.4M at 30 June 2017).
Having regard to the above, our existing policy is to distribute
30% to 50% of free cash flow to shareholders in the form of
consistent dividends and buy-backs, reflecting no present
franking availability.
The Company will continue to review its capital management
approach having regard to its balance sheet, credit metrics and
investment priorities.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 5
BlueScope Steel Limited – FY2018 Directors’ Report
Page 6
BUSINESS UNIT REVIEWS
AUSTRALIAN STEEL PRODUCTS (ASP)
ASP produces and markets a range of high value coated and painted
flat steel products for Australian building and construction customers,
together with providing a broader offering of commodity flat steel
products. Products are sold mainly to the Australian domestic markets,
with some volume exported. Key brands include zinc/aluminium alloy-
coated ZINCALUME® steel and galvanised and zinc/aluminium alloy-
coated pre-painted COLORBOND® steel. The segment’s main
manufacturing facilities are at Port Kembla (NSW) and Western Port
(Victoria).
ASP also operates pipe and tube manufacturing, and a network of
rollforming and distribution sites throughout Australia, acting as a
major steel product supplier to the building and construction,
manufacturing, transport, agriculture and mining industries.
KEY FINANCIAL & OPERATIONAL MEASURES
Table 2: Segment financial performance
$M
FY2018
FY2017
Var %
Sales revenue
5,423.2
4,918.7
Reported EBIT
Underlying EBIT
803.4
587.4
459.5
459.4
NOA (pre-tax)
2,478.5
2,140.6
10%
75%
28%
16%
2H
FY2018
2,857.4
541.7
325.7
2,478.5
Underlying ROIC
24.6%
20.5%
+4.1%
26.6%
Table 3: Steel sales volume
000 tonnes
FY2018
FY2017
Var %
2H
FY2018
Domestic
- ex-mill
- ext sourced
Export
Total
2,204.7
2,109.6
5%
1,108.4
162.6
749.3
143.9
13%
837.2
(10%)
79.5
413.5
3,116.6
3,090.7
1%
1,601.3
Chart 1: ASP domestic steel sales volume mix FY2018
Total: 2,367.3Kt
HRC
Plate
CRC
Metal coated
Painted
Ext sourced
Other
FINANCIAL PERFORMANCE – FY2018 VS. FY2017
Sales revenue
The increase in sales revenue was primarily due to:
higher domestic and export prices driven by higher global steel
prices, partly offset by a stronger AUD:USD exchange rate
higher domestic volumes, particularly hot rolled coil and plate into
the distribution and manufacturing sectors and painted products.
EBIT performance
The increase in underlying EBIT was largely due to:
higher steelmaking spread with the impact of higher global steel
prices offsetting higher coal, iron ore, coating metals and scrap
purchase prices
higher domestic volumes, particularly hot rolled coil and plate into
the distribution and manufacturing sectors and painted products
higher contribution from export coke
one-off $32.1M benefit from settlement of an historical coal
supply dispute during 1H FY2018.
These were partly offset by higher costs driven by cost escalation,
particularly utility rate increases, partly offset by lower unit costs with
higher production volumes.
Underlying adjustments in reported EBIT are set out in tables 12 and 13.
Return on invested capital
Underlying ROIC increased to 24.6% driven by stronger EBIT offsetting
higher net operating assets. Net operating assets were $337.9M
higher than at 30 June 2017 primarily due to:
higher fixed assets due to the write-back of previously impaired
plant and equipment during the period
higher inventories driven by higher raw material input prices and
activity levels
offset by higher creditors.
MARKETS AND OPERATIONS
Sales direct to Australian building sector
Domestic building sector direct sales volumes remained at high
levels in FY2018, increasing marginally compared to FY2017.
Activity within residential construction continued to remain
strong in FY2018.
New residential building approvals have held up firmly and
development activity has remained at solid levels, supported
by strong population growth, low interest rates, and
strengthening economic conditions.
Strong investment within VIC, QLD, NSW, and SA delivered
positive sales growth, particularly in metropolitan markets.
WA was softer than FY2017 with this state still feeling the
effects of the decline in mining investment. There are signs
that the WA market is stabilising with 2H FY2018 volumes
broadly in line with 2H FY2017 and 1H FY2018.
Alterations and additions activity continued its slow and
steady improvement, up marginally in FY2018.
Sales of COLORBOND® steel
increased, supported
predominantly by growth in activity across the eastern
seaboard.
FY2018 saw the relaunch of TRUECORE® steel with new
targeted at
branding and an advertising campaign
consumers, builders and fabricators. Growth in this area has
exceeded forecasts, with a number of builders having
already converted, or are in the process of trialling the
product.
Non-residential construction activity has continued to improve
supported mainly by growth in commercial and industrial.
buildings, warehouses
Demand
and
accommodation has strengthened, influenced by increased
activity across the eastern states.
office
for
Social and
institutional construction also
improved
supported by investment in education, aged care, and
defence related projects.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 7
BUSINESS UNIT REVIEWS
AUSTRALIAN STEEL PRODUCTS (ASP)
EBIT performance
ASP produces and markets a range of high value coated and painted
flat steel products for Australian building and construction customers,
together with providing a broader offering of commodity flat steel
products. Products are sold mainly to the Australian domestic markets,
with some volume exported. Key brands include zinc/aluminium alloy-
coated ZINCALUME® steel and galvanised and zinc/aluminium alloy-
coated pre-painted COLORBOND® steel. The segment’s main
manufacturing facilities are at Port Kembla (NSW) and Western Port
(Victoria).
ASP also operates pipe and tube manufacturing, and a network of
rollforming and distribution sites throughout Australia, acting as a
major steel product supplier to the building and construction,
manufacturing, transport, agriculture and mining industries.
2H
FY2018
2,857.4
541.7
325.7
2,478.5
2H
FY2018
KEY FINANCIAL & OPERATIONAL MEASURES
Table 2: Segment financial performance
$M
FY2018
FY2017
Var %
Sales revenue
5,423.2
4,918.7
Reported EBIT
Underlying EBIT
803.4
587.4
459.5
459.4
NOA (pre-tax)
2,478.5
2,140.6
10%
75%
28%
16%
Underlying ROIC
24.6%
20.5%
+4.1%
26.6%
Table 3: Steel sales volume
000 tonnes
FY2018
FY2017
Var %
Domestic
- ex-mill
- ext sourced
Export
Total
2,204.7
2,109.6
5%
1,108.4
162.6
749.3
143.9
13%
837.2
(10%)
79.5
413.5
3,116.6
3,090.7
1%
1,601.3
Chart 1: ASP domestic steel sales volume mix FY2018
Total: 2,367.3Kt
HRC
Plate
CRC
Metal coated
Painted
Ext sourced
Other
FINANCIAL PERFORMANCE – FY2018 VS. FY2017
Sales revenue
The increase in sales revenue was primarily due to:
higher domestic and export prices driven by higher global steel
prices, partly offset by a stronger AUD:USD exchange rate
higher domestic volumes, particularly hot rolled coil and plate into
the distribution and manufacturing sectors and painted products.
The increase in underlying EBIT was largely due to:
higher steelmaking spread with the impact of higher global steel
prices offsetting higher coal, iron ore, coating metals and scrap
purchase prices
higher domestic volumes, particularly hot rolled coil and plate into
the distribution and manufacturing sectors and painted products
higher contribution from export coke
one-off $32.1M benefit from settlement of an historical coal
supply dispute during 1H FY2018.
These were partly offset by higher costs driven by cost escalation,
particularly utility rate increases, partly offset by lower unit costs with
higher production volumes.
Underlying adjustments in reported EBIT are set out in tables 12 and 13.
Return on invested capital
Underlying ROIC increased to 24.6% driven by stronger EBIT offsetting
higher net operating assets. Net operating assets were $337.9M
higher than at 30 June 2017 primarily due to:
higher fixed assets due to the write-back of previously impaired
plant and equipment during the period
higher inventories driven by higher raw material input prices and
activity levels
offset by higher creditors.
MARKETS AND OPERATIONS
Sales direct to Australian building sector
Domestic building sector direct sales volumes remained at high
levels in FY2018, increasing marginally compared to FY2017.
Activity within residential construction continued to remain
strong in FY2018.
New residential building approvals have held up firmly and
development activity has remained at solid levels, supported
by strong population growth, low interest rates, and
strengthening economic conditions.
Strong investment within VIC, QLD, NSW, and SA delivered
positive sales growth, particularly in metropolitan markets.
WA was softer than FY2017 with this state still feeling the
effects of the decline in mining investment. There are signs
that the WA market is stabilising with 2H FY2018 volumes
broadly in line with 2H FY2017 and 1H FY2018.
Alterations and additions activity continued its slow and
steady improvement, up marginally in FY2018.
Sales of COLORBOND® steel
increased, supported
predominantly by growth in activity across the eastern
FY2018 saw the relaunch of TRUECORE® steel with new
branding and an advertising campaign
targeted at
consumers, builders and fabricators. Growth in this area has
exceeded forecasts, with a number of builders having
already converted, or are in the process of trialling the
seaboard.
product.
Non-residential construction activity has continued to improve
supported mainly by growth in commercial and industrial.
Demand
for
office
buildings, warehouses
and
accommodation has strengthened, influenced by increased
activity across the eastern states.
Social and
institutional construction also
improved
supported by investment in education, aged care, and
defence related projects.
Sales direct to domestic non-building sector customers
Sales volumes to distributors, pipe and tube makers and
manufacturers were strong in FY2018, with automotive declining.
Increased public and private based infrastructure spending
has strengthened market conditions during FY2018.
Solid global demand together with a stable Australian dollar
delivered favourable conditions for local manufacturing
activity.
Sales to distributors strengthened through:
increased demand for steel plate from project activity in
roads and bridges
initiatives targeting growth in residential steel fabrication
activity
other growth initiatives focused on increasing the flexibility
of our service offerings as well as improving our price
competitiveness.
Sales to pipe and tube makers increased in FY2018 due to:
growth in project activity with the Broken Hill Pipeline
Project commencing in October 2017
increased customer capacity levels
customer restocking activity supported by improved pricing
conditions.
Despite the lift in sales activity, pipe and tube makers and
manufacturing continue to feel margin pressure driven by
competition from imported finished goods.
Sales to manufacturers improved during FY2018 supported by
initiatives targeting the substitution of imported finished goods
with locally manufactured steel. Business conditions across some
categories have improved within manufacturing with this sector
benefiting from:
mining expansion in gold, zinc and copper as well as tunnel
civil activity increasing growth in friction bolts, trucks and
buckets.
the uplift in residential construction activity
Sales to the automotive industry were lower due to both Toyota
and GMH closing in October 2017, resulting in the full closure of
automotive manufacturing in Australia.
Mill sales to export markets
Despatches to export market customers in FY2018 were 749.3kt,
10% lower than FY2017 due to higher domestic demand.
Prices in export markets were higher in FY2018 than the prior
corresponding period supported by higher global steel prices.
Operations
ASP’s main facilities continued to operate well. FY2018 saw
finished steel despatches of 3,116.6kt, a record under single blast
furnace operations.
No stave-exchange activities were required during FY2018, nor
are any expected during FY2019.
NORTH STAR BLUESCOPE STEEL
North Star is a single site electric arc furnace producer of hot rolled
coil in Ohio, in the U.S. On 30 October 2015, BlueScope acquired the
50% of North Star that was previously owned by Cargill.
KEY FINANCIAL & OPERATIONAL MEASURES
Table 4: Segment performance
FY2018
FY2017
Var %
$M unless
marked
Sales revenue
Reported EBIT
Underlying EBIT
1,923.9
1,700.9
430.6
430.6
433.3
406.6
2H
FY2018
1,063.3
285.4
285.4
1,820.8
13%
(1%)
6%
5%
NOA (pre-tax)
1,820.8
1,735.6
Underlying ROIC
24.8%
22.4%
+2.4%
32.7%
Despatches (kt)
2,104.7
2,093.0
1%
1,067.2
Table 5: Segment performance in US$M
FY2017
FY2018
US$M unless
marked
Sales revenue
1,488.4
1,282.5
Underlying EBITDA
374.4
348.3
Var %
16%
7.5%
2H
FY2018
817.9
239.9
FINANCIAL PERFORMANCE – FY2018 VS. FY2017
Sales revenue
The increase in sales revenue was primarily due to higher regional
steel prices. This was partly offset by unfavourable foreign exchange
translation rate impacts due to a stronger AUD:USD exchange rate.
EBIT performance
The $24.0M increase in underlying EBIT was largely due to higher steel
spread, due mainly to rises in Midwest U.S. steel prices in excess of
raw material cost increases. This was partly offset by unfavourable
foreign exchange translation rate impacts due to a stronger AUD:USD
exchange rate.
Underlying adjustments in reported EBIT are set out in tables 12 and 13.
Return on invested capital
Underlying ROIC was 24.8% driven by strong EBIT contribution
offsetting higher net operating assets. Net operating assets at 30 June
2018 were $85.2M higher than at 30 June 2017 primarily due to the
foreign exchange translation impact of a weaker AUD:USD.
MARKETS AND OPERATIONS
North Star sells approximately 90% of its production in the
Midwest U.S., with its end customer segment mix being broadly
50% automotive, 35% construction, 5% agricultural and 10%
manufacturing/industrial applications.
North Star continues to benefit from strength in the automotive
sector as well as in the construction sector.
Service centre inventory levels being maintained at the low end
of normal has led to more consistent purchasing patterns.
Uncertainty around imports associated with section 232 as well
improving world prices has helped support higher domestic
prices.
High capacity utilisation rates have been maintained through an
ability to retain existing customers and win new customers by
consistent high performance in on-time delivery, service and
quality.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 7
BlueScope Steel Limited – FY2018 Directors’ Report
Page 8
The continuous improvement program has delivered over $10M
per annum in margin improvement over the last several years.
Some cost pressure is being felt due to recent increases in market
pricing of graphite electrodes, refractories and alloys.
Initiation of capacity expansion review
A comprehensive study has been initiated to evaluate adding
between 600,000 to 900,000 metric tonnes per annum of
steelmaking capacity, through the addition of a third electric arc
furnace and second caster. The project may also open up further
debottlenecking options.
The preliminary estimate of capital cost is a range of US$500M
to US$700M.
The assessment will need to confirm compelling through-cycle
economics.
The project is expected to take two or three years to develop if
we proceed.
We expect to provide an update in 2H FY2019.
BUILDING PRODUCTS ASIA AND NORTH
AMERICA
BlueScope is a technology leader in metal coated and painted steel
building products, principally focused on the Asia-Pacific region, with
include pre-painted
a wide range of branded products that
COLORBOND® steel, zinc/aluminium alloy-coated ZINCALUME® steel
and the LYSAGHT® range of building products.
The Company has an extensive footprint of metallic coating, painting
and steel building product operations in Thailand, Indonesia, Vietnam,
Malaysia, India and North America, primarily servicing the residential
and non-residential building and construction industries across Asia,
and the non-residential construction industry in North America.
BlueScope operates in ASEAN and North America in partnership with
Nippon Steel & Sumitomo Metal Corporation (NSSMC) and in India
with Tata Steel. Both are 50/50 joint ventures, with BlueScope
controlling and therefore consolidating the joint venture with NSSMC,
and jointly controlling and therefore equity accounting the joint venture
with Tata Steel.
This segment also includes Building Products China, comprising metal
coating, painting and Lysaght operations, and Engineered Buildings
Solutions (EBS).
KEY FINANCIAL & OPERATIONAL MEASURES
Table 6: Segment performance
FY2018
FY2017
Var %
$M unless
marked
Sales revenue
2,693.8
2,459.9
10%
Reported EBIT
Underlying EBIT
188.3
184.5
89.2
208.7
111%
(12%)
2H
FY2018
1,384.6
78.6
76.2
NOA (pre-tax)
1,445.8
1,205.9
20%
1,445.8
Underlying ROIC
13.3%
16.1%
-2.8%
Despatches (kt)
1,758.1
1,780.0
(1%)
10.6%
877.9
Chart 2: Segment geographic sales revenue FY2018, $M 1
Total: $2,719.5M
560.5
532.9
330.4
825.2
266.3
204.2
Thailand
Indonesia
Malaysia
Vietnam
North America
China
1) Chart does not include $25.7M of eliminations (which balances back to total
segment revenue of $2,693.8M). Chart also does not include India, which is equity
accounted.
FINANCIAL PERFORMANCE – FY2018 VS. FY2017
Sales revenue
The $233.9M increase in sales revenue was mainly due to higher
regional steel prices favourably impacting all countries partly offset by
unfavourable foreign exchange translation rate impacts (against the
AUD) in most countries.
EBIT performance
The $24.2M decrease in underlying EBIT was largely due to:
lower margins across most countries, including North America
where FY2017 benefitted from a one-off favourable inventory
pricing effect arising from the timing of raw material purchases
higher costs.
These were partly offset by recognition of a previously unrecognised
deferred tax asset at Tata BlueScope Steel ($10.7M BlueScope
share).
Underlying adjustments in reported EBIT are set out in tables 12 and 13.
Return on invested capital
Underlying ROIC decreased to 13.3% driven by lower EBIT and higher
net operating assets, mainly reflecting higher net fixed assets due to
the Thailand coating line investment and higher receivables and
inventory.
MARKETS AND OPERATIONS
North America (Steelscape & ASC Profiles)
Strong earnings driven by domestic demand, improved product
pricing and favourable inventory cost effect arising from the
timing of raw materials purchases.
Steelscape’s refreshed strategy execution is in progress, focusing
on delivering a differentiated customer offering, enhanced
painted product mix and achieving operational efficiencies
through automation.
The business has pursued a comprehensive sourcing strategy to
navigate changes in trade rules and deliver cost-effective feed
supply.
ASC Profiles’ (building components) performance was supported
by robust volumes into the decking construction segment
combined with materially improved pricing and margins. The
manufacturing footprint restructure remains in progress to deliver
additional productivity and cost benefits.
China
Chinese economic activity levels remained robust throughout
FY2018 demonstrating resilience in the face of rising global trade
tensions. However, the China construction market generally, and
specifically the premium project segment in which we participate,
BlueScope Steel Limited – FY2018 Directors’ Report
Page 9
Chart 2: Segment geographic sales revenue FY2018, $M 1
Total: $2,719.5M
have seen some softening driven by tightening local credit
conditions and slower infrastructure spending across both private
and government sectors.
Indonesia:
Initiation of capacity expansion review
560.5
532.9
The continuous improvement program has delivered over $10M
per annum in margin improvement over the last several years.
Some cost pressure is being felt due to recent increases in market
pricing of graphite electrodes, refractories and alloys.
A comprehensive study has been initiated to evaluate adding
between 600,000 to 900,000 metric tonnes per annum of
steelmaking capacity, through the addition of a third electric arc
furnace and second caster. The project may also open up further
debottlenecking options.
The preliminary estimate of capital cost is a range of US$500M
to US$700M.
economics.
we proceed.
The assessment will need to confirm compelling through-cycle
The project is expected to take two or three years to develop if
We expect to provide an update in 2H FY2019.
BUILDING PRODUCTS ASIA AND NORTH
AMERICA
BlueScope is a technology leader in metal coated and painted steel
building products, principally focused on the Asia-Pacific region, with
a wide range of branded products that
include pre-painted
COLORBOND® steel, zinc/aluminium alloy-coated ZINCALUME® steel
and the LYSAGHT® range of building products.
The Company has an extensive footprint of metallic coating, painting
and steel building product operations in Thailand, Indonesia, Vietnam,
Malaysia, India and North America, primarily servicing the residential
and non-residential building and construction industries across Asia,
and the non-residential construction industry in North America.
BlueScope operates in ASEAN and North America in partnership with
Nippon Steel & Sumitomo Metal Corporation (NSSMC) and in India
with Tata Steel. Both are 50/50 joint ventures, with BlueScope
controlling and therefore consolidating the joint venture with NSSMC,
and jointly controlling and therefore equity accounting the joint venture
with Tata Steel.
Solutions (EBS).
This segment also includes Building Products China, comprising metal
coating, painting and Lysaght operations, and Engineered Buildings
KEY FINANCIAL & OPERATIONAL MEASURES
Table 6: Segment performance
$M unless
marked
FY2018
FY2017
Var %
Sales revenue
2,693.8
2,459.9
10%
Reported EBIT
Underlying EBIT
188.3
184.5
89.2
208.7
111%
(12%)
Underlying ROIC
13.3%
16.1%
-2.8%
Despatches (kt)
1,758.1
1,780.0
(1%)
2H
FY2018
1,384.6
78.6
76.2
10.6%
877.9
330.4
825.2
266.3
204.2
Thailand
Indonesia
Malaysia
Vietnam
North America
China
1) Chart does not include $25.7M of eliminations (which balances back to total
segment revenue of $2,693.8M). Chart also does not include India, which is equity
accounted.
FINANCIAL PERFORMANCE – FY2018 VS. FY2017
Sales revenue
The $233.9M increase in sales revenue was mainly due to higher
regional steel prices favourably impacting all countries partly offset by
unfavourable foreign exchange translation rate impacts (against the
AUD) in most countries.
EBIT performance
The $24.2M decrease in underlying EBIT was largely due to:
lower margins across most countries, including North America
where FY2017 benefitted from a one-off favourable inventory
pricing effect arising from the timing of raw material purchases
higher costs.
These were partly offset by recognition of a previously unrecognised
deferred tax asset at Tata BlueScope Steel ($10.7M BlueScope
share).
Underlying adjustments in reported EBIT are set out in tables 12 and 13.
Return on invested capital
Underlying ROIC decreased to 13.3% driven by lower EBIT and higher
net operating assets, mainly reflecting higher net fixed assets due to
the Thailand coating line investment and higher receivables and
inventory.
MARKETS AND OPERATIONS
North America (Steelscape & ASC Profiles)
Strong earnings driven by domestic demand, improved product
pricing and favourable inventory cost effect arising from the
timing of raw materials purchases.
Steelscape’s refreshed strategy execution is in progress, focusing
on delivering a differentiated customer offering, enhanced
painted product mix and achieving operational efficiencies
through automation.
The business has pursued a comprehensive sourcing strategy to
navigate changes in trade rules and deliver cost-effective feed
ASC Profiles’ (building components) performance was supported
by robust volumes into the decking construction segment
combined with materially improved pricing and margins. The
manufacturing footprint restructure remains in progress to deliver
additional productivity and cost benefits.
China
Chinese economic activity levels remained robust throughout
FY2018 demonstrating resilience in the face of rising global trade
tensions. However, the China construction market generally, and
specifically the premium project segment in which we participate,
Buildings China delivered a strong performance which has offset
some weakness in the coated business. Buildings continues to
deliver on sales force effectiveness, plant restructuring and
productivity improvement initiatives. This has delivered a 17%
increase in FY2018 sales revenue compared to FY2017 and a
$22.1M increase in underlying EBIT (FY2017 $17.3M loss; FY2018
$4.8M).
Coated steel despatch volumes decreased by 2% compared to
FY2017 mainly due to softness in the project segment. Soft
demand combined with an increase in local supply availability has
placed downwards pressure on coated margins. Sales and
marketing activities have been focused on increasing penetration
into the distribution and pre-engineering buildings channel to
assist with off-setting market softness. Further benefit from these
initiatives is expected throughout FY2019.
Compared to 1H FY2018, the overall performance of the China
business was negatively impacted by a substantial bad debt
write-off.
ASEAN
We remain optimistic around the growth potential of our ASEAN
businesses – a region that is witnessing significant growth in
demand from the emerging middle-class. BlueScope’s footprint,
brands, channels are strongly positioned to capture and lead the
market despite some common issues impacting their performance
during the year.
Margins across all nations have tightened, with incomplete
pass-through of rapidly rising regional steel prices; this is
typically however a matter of timing with realised price
moves ‘catching up’ through the cycle.
Some additional competitive pressure from higher import
levels and some local capacity additions have been
observed.
The higher margin project markets have been impacted by
political uncertainty, particularly in Thailand and Malaysia.
The timing of elections in Thailand is uncertain, and
Malaysia has just been through significant elections and the
new government and bureaucracy regime is still being
established. Once political dynamics have stabilised, project
spending is expected to pick up.
We have seen growth in the retail segment and continue to
invest in our brands and channels to develop a sustainable
position in this significant market. However, as this segment
typically delivers
lower margins, there has been an
unfavourable product mix impact on margins
NOA (pre-tax)
1,445.8
1,205.9
20%
1,445.8
supply.
Thailand:
The project segment performed well albeit overall demand
continues to be softer due to the political climate resulting
in lower private and foreign direct investment.
The retail segment impacted by the competitive environment
with import volumes expanding placing pressure on margins
and the volume/mix trade off. The business continued to roll-
out the Authorised Dealer retail channel and invest in
consumer brand and connect with local builders.
Home appliance steels:
-
-
-
The market opportunity remains attractive.
Customer uptake continues but at a slower rate than
expected.
Substantial progress in manufacturing quality has been
made to increase the rate of customer uptake.
Overall despatches were 2% lower than FY2017
The third metal coating line expansion is progressing with
first commercial despatch expected in early 2H FY2019.
The business is continuing to focus on expanding Retail
distribution footprint across the diverse archipelago with
continuing investment in brand and engagement with end
user and small local builders
Positive developments on steel feed sourcing initiatives with
improved diversification of suppliers,
together with
increased optionality to lower feed-costs once the Australia
– Indonesia free trade agreement is finalised.
FY2018 volume was 4.3% lower than FY2017, largely caused
by subdued project segment demand.
Vietnam
Demand in the Project segment remained strong. However,
competition with imports mainly from China, and new
coating entrants has impacted margins.
The business continues to focus on growing the retail
channel, whilst expanding BlueScope distribution footprint,
enhancing brand value and building customer loyalty.
FY2018 volume was 11% lower than FY2017, due to lower
exports as a result of the trade restrictions.
Malaysia
Demand in both the Project and Retail segments remain
subdued during the election year with renewed confidence
by year end with surprise election result.
The business continued to focus on strengthening our market
leading position in the Project segment whilst developing
the newer retail Authorised Dealer channel and brand.
FY2018 volume was 9% lower than FY2017, mainly coming
from lower exports despatches to the U.S. as a result of the
trade restrictions.
Myanmar:
Lysaght roll-forming facility saw continued growth.
India (in joint venture with Tata Steel (50/50) for all
operations)
The joint venture delivered underlying EBIT of $58.3M (100%
basis), compared to $50.9M in FY2017, driven by higher sales
volumes and favourable product mix.
Revenue grew by 13% in FY2018 driven by higher sales volumes.
Domestic prime coated steel sales volume grew by 16%
compared to FY2017 with 24% growth in bare products and 12%
growth in painted products. The paint line continues to operate at
full capacity.
Market dynamics remain positive with the coated and pre-painted
steel markets growing at 9% during FY2018. The joint venture
experienced ongoing success in the Retail segment, where
volumes increased 21% due to continued strength of the
DURASHINE® brand and market channels including the Tata
Shaktee dealer network. Project segment volume growth was
more moderate at 8% with some impact felt from the introduction
of the Goods and Services Tax from June 2017.
Restructuring of the underperforming Engineered Buildings
business has been completed,
including manufacturing
reconfiguration and exit of unprofitable customer accounts. The
business is stabilising under the new operating model.
Reflecting the current and expected future performance of the
business, a $21.3M (100%) previously unrecognised deferred tax
asset was recognised for the first time at December 2017 and
TBSL commenced recognising tax expense. The deferred tax
asset at 30 June 2018 was $13.0M (100%) or $6.5M recognised
in BlueScope's equity accounted 50% share.
Our joint venture partner in India, Tata Steel, has acquired
Bhushan Steel, which includes coating and painting assets.
BlueScope is considering the implications of this acquisition in
relation to our TBSL joint venture. As a result, the feasibility study
on additional paint line capacity at TBSL has been paused.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 9
BlueScope Steel Limited – FY2018 Directors’ Report
Page 10
Table 7: India performance
$M unless
marked
Tata BlueScope Steel (100% basis)
FY2018
FY2017
Sales revenue
386.4
340.5
Underlying EBIT
Underlying NPAT1
58.3
57.8
50.9
30.9
Despatches (kt)
254.5
239.2
BlueScope share (50% basis)
Var %
2H
FY2018
13%
15%
87%
6%
206.8
30.2
16.2
133.8
MARKETS AND OPERATIONS
Following soft order intake in Q4 FY2017 and Q1 FY2018, order
intake recovered strongly from Q2 FY2018 leading to robust
volumes and margins during 2H FY2018.
Sales of buildings for end-use applications such as logistics and
warehousing, and data centres have been particularly strong.
Ongoing productivity improvements and cost saving initiatives,
including the sale of the Laurinburg manufacturing facility and
centralised engineering services more than offset lower despatch
volumes in FY2018.
Underlying equity
accounted profit2
29.7
16.2
83%
8.5
1) FY2018 includes recognition of a previously unrecognised deferred tax asset of
$21.3M.
2) FY2018 includes recognition of a previously unrecognised deferred tax asset of
$10.7M.
BUILDINGS NORTH AMERICA
Buildings North America (BNA) is a leader in engineered building
solutions (EBS), servicing the low-rise non-residential construction
needs of customers in North America. This segment also includes the
BlueScope Properties Group
industrial
properties, predominantly warehouses and distribution centres.
(BPG) which develops
KEY FINANCIAL & OPERATIONAL MEASURES
Table 8: Segment performance
FY2018
FY2017
Var %
$M unless
marked
Sales revenue
1,106.4
1,173.9
Reported EBIT
Underlying EBIT
73.7
74.6
49.8
57.5
NOA (pre-tax)
369.6
338.5
(6%)
48%
30%
9%
2H
FY2018
583.1
48.2
48.2
369.6
Underlying ROIC
19.7%
16.2%
+3.5%
25.5%
Despatches (kt)
237.7kt
246.9kt
(4%)
121.5kt
FINANCIAL PERFORMANCE – FY2018 VS. FY2017
Sales revenue
The $67.5M decrease in sales revenue was mainly due to lower
despatches and unfavourable foreign exchange translation rate
impacts due to a stronger AUD:USD exchange rate. This was partly
offset by higher selling prices.
EBIT performance
The $17.1M increase in underlying EBIT was largely due to:
higher margins mainly due to higher regional steel prices partly
offset by lower despatch volumes
continuous improvement program offsetting escalation, however
some unfavourable one off costs during the period
an unusually high $16.4M profit from the sale of developments at
BlueScope Properties Group.
Continued investment in innovative solutions aimed to create
differentiation and additional value to the extensive BNA builder
networks, such as new engineering systems, customer focussed
apps and projects focusing on lead time reduction.
The Building Properties Group (BPG) business made an unusually
high $16.4M EBIT contribution during FY2018:
BPG develops, leases and sells industrial warehouse and
distribution properties throughout the United States and
Canada.
It provides direct access to the growing warehouse and
distribution centre market, which is driven by strength in
eCommerce, Food/Beverage, Consumer Goods and Medical
Supply industries.
The business creates value for the BNA Builder network by
providing builders access
leased
development projects.
tenant-based
to
BPG earnings are expected to be modest relative to the total
BNA segment, but can be lumpy due to the project nature of
its activities.
Risks are managed:
-
-
-
BPG completes extensive due diligence prior to
committing to any development.
The BNA Builder network constructs the projects.
All projects must satisfy leasing and hurdle rate
requirements prior to commencement.
BPG recently completed projects include the 441,000 square
foot, two building facility at Park 429 in Orlando, FL and a
206,000 square foot distribution centre in Laredo, Texas,
both of which were sold shortly after construction
completion. Current projects under development are located
in Canton, Ohio and a second project in Laredo, Texas.
NEW ZEALAND AND PACIFIC STEEL
New Zealand and Pacific Steel consists of three business areas: New
Zealand Steel; Pacific Steel; and BlueScope Pacific Islands.
New Zealand Steel is the only steel producer in New Zealand,
producing slab, billet, hot rolled coil and value-added coated and
painted products for both domestic and export markets across the
Pacific Region. Operations include the manufacture and distribution of
the LYSAGHT® range of products in Fiji, New Caledonia and Vanuatu.
Supplied with billet from New Zealand Steel, Pacific Steel is the sole
producer of long steel products such as rod, bar, reinforcing coil and
wire in New Zealand.
Underlying adjustments in reported EBIT are set out in tables 12 and 13.
Return on invested capital
Underlying ROIC increased to 19.7% driven by higher EBIT partly offset
by an increase in net operating assets, primarily due to the foreign
exchange translation impact of a weaker AUD:USD.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 11
Table 7: India performance
MARKETS AND OPERATIONS
$M unless
marked
FY2018
FY2017
Var %
2H
FY2018
Following soft order intake in Q4 FY2017 and Q1 FY2018, order
intake recovered strongly from Q2 FY2018 leading to robust
volumes and margins during 2H FY2018.
Sales of buildings for end-use applications such as logistics and
warehousing, and data centres have been particularly strong.
Ongoing productivity improvements and cost saving initiatives,
including the sale of the Laurinburg manufacturing facility and
centralised engineering services more than offset lower despatch
volumes in FY2018.
Continued investment in innovative solutions aimed to create
differentiation and additional value to the extensive BNA builder
networks, such as new engineering systems, customer focussed
apps and projects focusing on lead time reduction.
The Building Properties Group (BPG) business made an unusually
high $16.4M EBIT contribution during FY2018:
BPG develops, leases and sells industrial warehouse and
distribution properties throughout the United States and
Canada.
It provides direct access to the growing warehouse and
distribution centre market, which is driven by strength in
eCommerce, Food/Beverage, Consumer Goods and Medical
Supply industries.
The business creates value for the BNA Builder network by
providing builders access
to
tenant-based
leased
development projects.
BPG earnings are expected to be modest relative to the total
BNA segment, but can be lumpy due to the project nature of
its activities.
Risks are managed:
-
-
-
BPG completes extensive due diligence prior to
committing to any development.
The BNA Builder network constructs the projects.
All projects must satisfy leasing and hurdle rate
requirements prior to commencement.
BPG recently completed projects include the 441,000 square
foot, two building facility at Park 429 in Orlando, FL and a
206,000 square foot distribution centre in Laredo, Texas,
both of which were sold shortly after construction
completion. Current projects under development are located
in Canton, Ohio and a second project in Laredo, Texas.
New Zealand and Pacific Steel consists of three business areas: New
Zealand Steel; Pacific Steel; and BlueScope Pacific Islands.
New Zealand Steel is the only steel producer in New Zealand,
producing slab, billet, hot rolled coil and value-added coated and
painted products for both domestic and export markets across the
Pacific Region. Operations include the manufacture and distribution of
the LYSAGHT® range of products in Fiji, New Caledonia and Vanuatu.
Supplied with billet from New Zealand Steel, Pacific Steel is the sole
producer of long steel products such as rod, bar, reinforcing coil and
wire in New Zealand.
Tata BlueScope Steel (100% basis)
Sales revenue
386.4
340.5
Underlying EBIT
Underlying NPAT1
58.3
57.8
50.9
30.9
Despatches (kt)
254.5
239.2
BlueScope share (50% basis)
13%
15%
87%
6%
206.8
30.2
16.2
133.8
29.7
16.2
83%
8.5
1) FY2018 includes recognition of a previously unrecognised deferred tax asset of
2) FY2018 includes recognition of a previously unrecognised deferred tax asset of
Underlying equity
accounted profit2
$21.3M.
$10.7M.
BUILDINGS NORTH AMERICA
Buildings North America (BNA) is a leader in engineered building
solutions (EBS), servicing the low-rise non-residential construction
needs of customers in North America. This segment also includes the
BlueScope Properties Group
(BPG) which develops
industrial
properties, predominantly warehouses and distribution centres.
KEY FINANCIAL & OPERATIONAL MEASURES
Table 8: Segment performance
$M unless
marked
FY2018
FY2017
Var %
Sales revenue
1,106.4
1,173.9
Reported EBIT
Underlying EBIT
73.7
74.6
49.8
57.5
NOA (pre-tax)
369.6
338.5
(6%)
48%
30%
9%
2H
FY2018
583.1
48.2
48.2
369.6
Underlying ROIC
19.7%
16.2%
+3.5%
25.5%
Despatches (kt)
237.7kt
246.9kt
(4%)
121.5kt
Sales revenue
The $67.5M decrease in sales revenue was mainly due to lower
despatches and unfavourable foreign exchange translation rate
impacts due to a stronger AUD:USD exchange rate. This was partly
offset by higher selling prices.
EBIT performance
The $17.1M increase in underlying EBIT was largely due to:
higher margins mainly due to higher regional steel prices partly
offset by lower despatch volumes
continuous improvement program offsetting escalation, however
some unfavourable one off costs during the period
an unusually high $16.4M profit from the sale of developments at
BlueScope Properties Group.
Underlying adjustments in reported EBIT are set out in tables 12 and 13.
Return on invested capital
Underlying ROIC increased to 19.7% driven by higher EBIT partly offset
by an increase in net operating assets, primarily due to the foreign
exchange translation impact of a weaker AUD:USD.
FINANCIAL PERFORMANCE – FY2018 VS. FY2017
NEW ZEALAND AND PACIFIC STEEL
KEY FINANCIAL & OPERATIONAL MEASURES
Table 9: Segment financial performance
FY2017
FY2018
Var %
$M
Sales revenue
Reported EBIT
Underlying EBIT
NOA (pre-tax)
833.6
111.7
111.7
346.4
747.5
87.2
61.1
336.4
12%
28%
83%
3%
2H
FY2018
446.8
70.7
70.7
346.4
Underlying ROIC
31.6%
26.7%
+4.9%
39.0%
Table 10: Steel sales volume
FY2018
000 tonnes
FY2017
Var %
Domestic flats
Domestic longs
Domestic (steel)
Export flat
Export longs
Export (steel)
259.6
183.4
443.0
172.4
34.7
207.1
270.7
183.1
453.8
129.0
22.1
151.1
(4%)
0
(2%)
34%
57%
37%
2H
FY2018
128.0
85.9
213.9
116.5
12.2
128.7
FINANCIAL PERFORMANCE – FY2018 VS. FY2017
Sales revenue
The increase in sales revenue was primarily due to higher domestic
and export prices driven by higher global steel prices and higher
despatch volumes. This was partly offset by unfavourable foreign
exchange translation.
EBIT performance
The $50.6M increase in underlying EBIT was primarily due to:
productivity improvements and cost savings, mainly volume
benefit from plant throughput improvements
increased steel selling prices on higher regional steel prices, and
vanadium prices
partly offset by higher coal and coating metal costs.
Underlying adjustments in reported EBIT are set out in tables 12 and 13.
Return on invested capital
Underlying ROIC increased to 31.6% primarily driven by higher EBIT.
MARKETS & OPERATIONS
Domestic market
FY2018 sales volume was strong with continued momentum
in the building and construction segments. Metal coated and
COLORSTEEL® formed the basis for solid performance.
New dwelling consents continued their robust momentum in
FY2018, however construction continues to be constrained
by land availability and labour resourcing.
Construction activity in the agricultural segment is robust.
Long products sales remained strong. Robust infrastructure
demand continues with civil works performed under the
government's Roads of National Significance
(RONS)
scheme across the country.
Export market
Export steel and vanadium prices improved driven by
increases in global steel and vanadium commodity markets.
Export volumes experiencing strong growth enabled by
higher production and increased demand throughout the
APAC region.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 11
BlueScope Steel Limited – FY2018 Directors’ Report
Page 12
OUTLOOK, FUTURE PROSPECTS AND RISKS
1H FY2019 OUTLOOK
Expectations for the performance of our businesses in 1H FY2019 are
as follows:
ASP:
Expect benchmark spreads improving with stronger regional
HRC prices and improvement in raw material prices,
particularly coal.
Expect a range of offsetting factors:
-
Increased depreciation charge following asset write-
up.
Assumed lower coke margins.
Impact of specific raw materials mix relative to
benchmark.
-
-
North Star:
Average benchmark spread through 1H FY2019 expected to
be ~US$90/t higher than 2H FY2018, noting specific sales
mix relative to benchmark.
Expect lower despatch volumes on seasonality.
Expect ~US$10M of incremental consumables cost –
electrodes, refractories and alloys.
BP:
Expect continuing strong performance across North America,
China and India.
Expect soft demand in projects segment in South East Asia
combined with selling prices lagging feed cost rises.
Continued roll-out of retail networks and home appliance
steel uptake.
BNA:
Expect continuation of strong building demand.
Expect negligible contribution from BlueScope Properties
Group.
NZPac:
Expect prices and domestic demand similar.
Expect modest increase in raw material cost.
Group outlook:
The Company currently expects 1H FY2019 underlying EBIT to be
around 10% higher than 2H FY2018 underlying EBIT (which was
$745.0M). This is based on assumptions of average (all prices on
a metric tonne basis):
East Asian HRC price of ~US$575/t
62% Fe iron ore price of ~US$65/t CFR China
Hard coking coal price of ~US$180/t FOB Australia
U.S. mini-mill spreads to be US$90/t higher than 2H FY2018
AUD:USD at US$0.76
Underlying net finance costs in 1H FY2019 are expected to be
lower than 2H FY2018; expect a slightly lower underlying tax rate
and similar profit attributable to non-controlling interests to 2H
FY2018.
Expectations are subject to spread, FX and market conditions.
MATTERS SUBSEQUENT TO YEAR END
The Board has approved an on-market share buy-back of up to $250M.
FUTURE PROSPECTS AND RISKS
BlueScope operates in markets which are impacted by economic cycles
and short-term volatility which can affect the Group’s financial
performance and financial outcomes both positively and negatively. On
the negative side, periods of slower demand for its products, lower
global commodity steel prices relative to raw material costs, and
unfavourable exchange rate movements, in particular a stronger
Australian dollar relative to the U.S. dollar are some of the
macroeconomic factors to which the Group is exposed.
BlueScope considers a number of recognised external forecasters
when assessing possible future operating and market conditions.
These forecasters expect modest growth in steel demand impacting
our Australian business over the next few years, particularly driven by
growth in non-residential construction, decline in Asian commodity
steel prices relative to iron ore and coking coal raw material costs, and
a relatively stable Australian dollar relative to the US dollar. In
addition, recognised external forecasters expect North America
commodity steel prices relative to scrap and pig iron raw material costs
to decrease from the current historically high levels in the next few
years.
Key macroeconomic and market risk factors for BlueScope include:
a) Economic downturn or weaker economic conditions.
An economic downturn in developed economies or significantly
slower growth in emerging economies, particularly China, could
have a material adverse effect on the global steel industry which
may affect demand for the Group’s products and financial
prospects.
b) A significant cyclical or permanent downturn in the industries in
which the Group supplies its products.
The Group’s financial prospects are sensitive to the level of
activity in a number of industries, but principally the building,
construction and manufacturing industries. These industries are
cyclical in nature, with the timing, extent and duration of these
economic cycles unpredictable. As many of the Group’s costs are
fixed, it may not readily be able to reduce its costs in proportion
to an economic downturn and therefore any significant, extended
or permanent downturn could negatively affect the Group’s
financial prospects.
c) Declines in the price of steel, or any significant and sustained
increase in the price of raw materials in the absence of
corresponding steel price increases.
The Group’s financial prospects are sensitive to the long-term
price trajectory of international steel products and key raw
material prices. A significant and sustained increase in the price
of raw materials, in particular iron ore and coking coal, with no
corresponding increase in steel prices, would have an adverse
impact on the Group’s financial prospects. A decline in the price
of steel with no corresponding decrease in the price of raw
materials would have the same effect.
A sustained decline could impact the long term competitiveness
of supply of steel from our Australian and New Zealand
steelmaking businesses and impact ongoing reinvestment.
In addition to these long-term trends, the price of raw materials
and steel products can fluctuate significantly in a reasonably
short period of time affecting the Group’s short-term financial
performance. In particular this relates to commodity products
such as slab, plate, hot rolled coil, cold rolled coil, and some
metallic coated steel products.
d) The Group is exposed to the effects of exchange rate fluctuations.
The Group’s financial prospects are sensitive to foreign exchange
rate movements, in particular the Australian dollar relative to the
U.S. dollar. A stronger Australian dollar relative to the U.S. dollar
has adverse effects on the Group.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 13
Expect continuing strong performance across North America,
prospects.
OUTLOOK, FUTURE PROSPECTS AND RISKS
1H FY2019 OUTLOOK
Expectations for the performance of our businesses in 1H FY2019 are
steel uptake.
BNA:
Group.
NZPac:
Group outlook:
as follows:
ASP:
Expect benchmark spreads improving with stronger regional
HRC prices and improvement in raw material prices,
particularly coal.
Expect a range of offsetting factors:
Increased depreciation charge following asset write-
Assumed lower coke margins.
Impact of specific raw materials mix relative to
up.
-
-
-
benchmark.
North Star:
Average benchmark spread through 1H FY2019 expected to
be ~US$90/t higher than 2H FY2018, noting specific sales
mix relative to benchmark.
Expect lower despatch volumes on seasonality.
Expect ~US$10M of incremental consumables cost –
electrodes, refractories and alloys.
BP:
China and India.
Expect soft demand in projects segment in South East Asia
combined with selling prices lagging feed cost rises.
Continued roll-out of retail networks and home appliance
Expect continuation of strong building demand.
Expect negligible contribution from BlueScope Properties
Expect prices and domestic demand similar.
Expect modest increase in raw material cost.
The Company currently expects 1H FY2019 underlying EBIT to be
around 10% higher than 2H FY2018 underlying EBIT (which was
$745.0M). This is based on assumptions of average (all prices on
a metric tonne basis):
East Asian HRC price of ~US$575/t
62% Fe iron ore price of ~US$65/t CFR China
Hard coking coal price of ~US$180/t FOB Australia
U.S. mini-mill spreads to be US$90/t higher than 2H FY2018
AUD:USD at US$0.76
Underlying net finance costs in 1H FY2019 are expected to be
lower than 2H FY2018; expect a slightly lower underlying tax rate
and similar profit attributable to non-controlling interests to 2H
FY2018.
Expectations are subject to spread, FX and market conditions.
MATTERS SUBSEQUENT TO YEAR END
The Board has approved an on-market share buy-back of up to $250M.
FUTURE PROSPECTS AND RISKS
BlueScope operates in markets which are impacted by economic cycles
and short-term volatility which can affect the Group’s financial
performance and financial outcomes both positively and negatively. On
the negative side, periods of slower demand for its products, lower
global commodity steel prices relative to raw material costs, and
unfavourable exchange rate movements, in particular a stronger
Australian dollar relative to the U.S. dollar are some of the
macroeconomic factors to which the Group is exposed.
BlueScope considers a number of recognised external forecasters
when assessing possible future operating and market conditions.
These forecasters expect modest growth in steel demand impacting
our Australian business over the next few years, particularly driven by
growth in non-residential construction, decline in Asian commodity
steel prices relative to iron ore and coking coal raw material costs, and
a relatively stable Australian dollar relative to the US dollar. In
addition, recognised external forecasters expect North America
commodity steel prices relative to scrap and pig iron raw material costs
to decrease from the current historically high levels in the next few
years.
Key macroeconomic and market risk factors for BlueScope include:
a) Economic downturn or weaker economic conditions.
An economic downturn in developed economies or significantly
slower growth in emerging economies, particularly China, could
have a material adverse effect on the global steel industry which
may affect demand for the Group’s products and financial
b) A significant cyclical or permanent downturn in the industries in
which the Group supplies its products.
The Group’s financial prospects are sensitive to the level of
activity in a number of industries, but principally the building,
construction and manufacturing industries. These industries are
cyclical in nature, with the timing, extent and duration of these
economic cycles unpredictable. As many of the Group’s costs are
fixed, it may not readily be able to reduce its costs in proportion
to an economic downturn and therefore any significant, extended
or permanent downturn could negatively affect the Group’s
financial prospects.
c) Declines in the price of steel, or any significant and sustained
increase in the price of raw materials in the absence of
corresponding steel price increases.
The Group’s financial prospects are sensitive to the long-term
price trajectory of international steel products and key raw
material prices. A significant and sustained increase in the price
of raw materials, in particular iron ore and coking coal, with no
corresponding increase in steel prices, would have an adverse
impact on the Group’s financial prospects. A decline in the price
of steel with no corresponding decrease in the price of raw
materials would have the same effect.
A sustained decline could impact the long term competitiveness
of supply of steel from our Australian and New Zealand
steelmaking businesses and impact ongoing reinvestment.
In addition to these long-term trends, the price of raw materials
and steel products can fluctuate significantly in a reasonably
short period of time affecting the Group’s short-term financial
performance. In particular this relates to commodity products
such as slab, plate, hot rolled coil, cold rolled coil, and some
metallic coated steel products.
d) The Group is exposed to the effects of exchange rate fluctuations.
The Group’s financial prospects are sensitive to foreign exchange
rate movements, in particular the Australian dollar relative to the
U.S. dollar. A stronger Australian dollar relative to the U.S. dollar
has adverse effects on the Group.
This is because in the Australian market a strong Australian dollar
makes imported steel products less expensive to Australian
customers, potentially resulting in more imports of steel products
and/or lower domestic prices. These are offset in part by a
significant amount of raw material purchases being denominated
in U.S. dollars.
In addition, earnings from BlueScope’s international businesses
must be translated into Australian dollars for financial reporting
purposes.
e) Competition from other materials and from other steel producers
could significantly reduce market prices and demand for the
Group’s products.
In many applications, steel competes with other materials such
as aluminium, concrete, composites, plastic and wood.
Improvements
technology, production, pricing or
acceptance of these competitive materials relative to steel could
result in a loss of market share or margins.
the
in
The global steel industry is also currently characterised by
significant excess capacity and the Group faces competition from
imports into most of the countries in which it operates. Increases
in steel imports could negatively impact demand for or pricing of
the Group’s products.
An increase in trade restrictions such as tariffs or unique local
standards could also disadvantage our business model, including
the indirect effect of other steel producers redirecting product to
markets currently supplied by BlueScope e.g. the Group is
monitoring China’s response to increased US tariffs.
BlueScope monitors and responds to the above risks as required
through business diversification, market and product development,
cost control, operational restructuring and maintaining adequate
liquidity.
In addition to these external macroeconomic and market factors,
BlueScope is also exposed to a range of other market, operating,
compliance and financial risks.
The Group has risk management and internal control systems which
identify and manage risk across five broad categories: Markets &
Products; Social & Environment; Compliance & Conduct; Operations;
and Financial. BlueScope’s systems are designed to ensure the Group
understands its appetite for risk across each of these broad categories,
monitors tolerance metrics, identifies current and emerging risks, and
implements internal controls and mitigating actions.
The nature and potential impact of risks are by their nature uncertain
and change over time. The risks identified as having the potential to
materially impact the achievement of the Group’s strategies and future
prospects include, but are not limited to:
Markets & Products:
Political, social and economic policies and uncertainties specific
to the countries in which we operate.
Potential product warranty claims.
Social & Environment:
Loss of key Board, management or operational personnel, or an
inability to secure the technical and management skills required
to deliver strategic plans and manage risk.
Industrial disputes with unions that disrupt operations.
Failure to maintain effective occupational health and safety
systems.
Not adapting and appropriately responding to climate change,
including physical risk to our facilities and supply chain as well as
the possible implications on demand for our products. Note that
our FY2017 Sustainability Report, released in March 2018,
contains more information on climate change related risk. Our
FY2018 Sustainability Report which is expected to be released in
October 2018, will further build on this.
Compliance & Conduct:
As disclosed last year, the Australian Competition and Consumer
Commission (ACCC) is investigating potential cartel conduct by
BlueScope relating to the supply of steel products in Australia,
that allegedly involved a small number of BlueScope employees
in the period from late 2013 to mid-2014. It is not known when
the ACCC’s investigation will be completed, or what the outcome
might be. Possible outcomes include the commencement of
either civil or criminal proceedings or no action being taken.
BlueScope has co-operated and continues to co-operate with the
ACCC's investigation.
Complying with extensive government laws and regulation,
including environmental, greenhouse gas emissions,
tax,
accounting, occupational health and safety, competition law and
trade restrictions in each of the countries in which it operates.
The Group is also subject to the risk of regulatory investigations
into compliance with these laws and regulations which could be
lengthy and costly.
The conduct of our employees and other participants in the supply
chain not complying with regulatory requirement or our ethical
standards.
Disruptive behaviours by external parties, including cyber-attack
and special interest groups, impacting our business or supply
chain.
Potential legal claims.
Operations:
An inability to maintain a competitive cost base, particularly at
Port Kembla and Glenbrook, including maintaining, extending or
renewing key raw materials, wages, operational supplies,
services and funding on acceptable terms.
Energy pricing and security of supply.
A major operational failure or disruption to our manufacturing
facilities or commercial systems.
Supply chain disruption including security of supply for raw
materials.
Financial:
Not being able to realise or sustain expected benefits of internal
restructuring, project developments, joint ventures or future
acquisitions.
Significant asset impairment, particularly if market conditions
deteriorate.
Substantial company contributions to its employees’ defined
benefit funds, which are currently underfunded.
For an expanded discussion on social, environment, compliance and
conduct matters please refer to the Sustainability and Governance
areas of BlueScope’s website.
This document sets out information on the business strategies and
prospects for future financial years, and refers to likely developments
in BlueScope’s operations and the expected results of those operations
in future financial years. This information is provided to enable
shareholders to make an informed assessment about the business
strategies and prospects of BlueScope for future financial years. Detail
that could give rise to likely material detriment to BlueScope, for
example, information that is commercially sensitive, confidential or
could give a third party a commercial advantage has not been included.
Other than the information set out in this document, information about
other likely developments in BlueScope’s operations in future financial
years has not been included.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 13
BlueScope Steel Limited – FY2018 Directors’ Report
Page 14
DETAILED EXPLANATORY TABLES
A. DETAILED INCOME STATEMENT
The BlueScope Steel Group comprises five reportable operating segments: Australian Steel Products (ASP); North Star BlueScope Steel (North Star);
Buildings North America (BNA); Building Products Asia & North America (BP); and New Zealand & Pacific Steel (NZPac).
Table 11: Detailed income statement
$M
Sales revenue/EBIT3
Australian Steel Products
North Star BlueScope Steel
Building Products Asia & North America
Buildings North America
New Zealand & Pacific Steel
Discontinued operations
Segment revenue/EBIT
Inter-segment eliminations
Revenue
Reported Result 1
Underlying Result 2
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
5,423.2
1,923.9
2,693.8
1,106.4
833.6
51.9
4,918.7
1,700.9
2,459.9
1,173.9
747.5
205.5
803.4
430.6
188.3
73.7
111.7
(25.3)
459.5
433.3
89.2
49.8
87.2
17.7
587.4
430.6
184.5
74.6
111.7
0.0
459.4
406.6
208.7
57.5
61.1
0.0
12,032.8
11,206.4
1,582.4
1,136.7
1,388.8
1,193.3
(483.1)
(471.1)
(11.0)
1.1
(11.0)
1.1
Segment external revenue/EBIT
11,549.7
10,735.3
1,571.4
1,137.8
1,377.8
1,194.4
Other revenue/(net unallocated expenses)
28.5
22.3
(108.5)
(93.3)
(108.5)
(89.0)
11,578.2
10,757.6
1,462.9
1,044.5
1,269.3
1,105.4
Total revenue/EBIT
Finance costs
Interest revenue
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
(112.5)
8.7
1,359.1
269.5
1,628.6
(59.5)
(95.0)
6.2
955.7
(181.8)
773.9
(58.0)
715.9
125.3
(80.7)
8.7
(86.4)
6.2
1,197.3
1,025.2
(308.9)
(289.5)
888.4
(62.4)
826.0
148.3
735.7
(83.3)
652.4
114.2
Net profit/(loss) attributable to equity holders of BlueScope Steel Limited
1,569.1
Basic earnings per share (cents)
281.8
1) The financial report has been prepared in accordance with the Australian Accounting Standards issued by the Australian Accounting Standards Board. References to ‘reported’
financial information throughout this report are consistent with IFRS financial information disclosed in the financial report.
2) References to ‘underlying’ information are to non-IFRS financial information prepared in accordance with ASIC Regulatory Guide 230 (Disclosing non-IFRS financial information)
issued in December 2011. Non-IFRS financial information, while not subject to audit or review, has been extracted from the financial report, which has been audited by our external
auditors.
3) Performance of operating segments is based on EBIT which excludes the effects of interest and tax. The Company considers this a useful and appropriate segment performance
measure because Group financing (including interest expense and interest income) and income taxes are managed on a Group basis and are not allocated to operating segments.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 15
DETAILED EXPLANATORY TABLES
A. DETAILED INCOME STATEMENT
The BlueScope Steel Group comprises five reportable operating segments: Australian Steel Products (ASP); North Star BlueScope Steel (North Star);
Buildings North America (BNA); Building Products Asia & North America (BP); and New Zealand & Pacific Steel (NZPac).
Table 11: Detailed income statement
Building Products Asia & North America
$M
Sales revenue/EBIT3
Australian Steel Products
North Star BlueScope Steel
Buildings North America
New Zealand & Pacific Steel
Discontinued operations
Segment revenue/EBIT
Inter-segment eliminations
Revenue
Reported Result 1
Underlying Result 2
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
5,423.2
1,923.9
2,693.8
1,106.4
833.6
51.9
4,918.7
1,700.9
2,459.9
1,173.9
747.5
205.5
803.4
430.6
188.3
73.7
111.7
(25.3)
587.4
430.6
184.5
74.6
111.7
0.0
459.4
406.6
208.7
57.5
61.1
0.0
12,032.8
11,206.4
1,582.4
1,136.7
1,388.8
1,193.3
(483.1)
(471.1)
(11.0)
1.1
(11.0)
1.1
Segment external revenue/EBIT
11,549.7
10,735.3
1,571.4
1,137.8
1,377.8
1,194.4
Other revenue/(net unallocated expenses)
28.5
22.3
(108.5)
(93.3)
(108.5)
(89.0)
11,578.2
10,757.6
1,462.9
1,044.5
1,269.3
1,105.4
Total revenue/EBIT
Finance costs
Interest revenue
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
(112.5)
8.7
1,359.1
269.5
1,628.6
(59.5)
281.8
(80.7)
8.7
(86.4)
6.2
1,197.3
1,025.2
(308.9)
(289.5)
888.4
(62.4)
826.0
148.3
735.7
(83.3)
652.4
114.2
Net profit/(loss) attributable to equity holders of BlueScope Steel Limited
1,569.1
Basic earnings per share (cents)
1) The financial report has been prepared in accordance with the Australian Accounting Standards issued by the Australian Accounting Standards Board. References to ‘reported’
financial information throughout this report are consistent with IFRS financial information disclosed in the financial report.
2) References to ‘underlying’ information are to non-IFRS financial information prepared in accordance with ASIC Regulatory Guide 230 (Disclosing non-IFRS financial information)
issued in December 2011. Non-IFRS financial information, while not subject to audit or review, has been extracted from the financial report, which has been audited by our external
auditors.
3) Performance of operating segments is based on EBIT which excludes the effects of interest and tax. The Company considers this a useful and appropriate segment performance
measure because Group financing (including interest expense and interest income) and income taxes are managed on a Group basis and are not allocated to operating segments.
459.5
433.3
89.2
49.8
87.2
17.7
(95.0)
6.2
955.7
(181.8)
773.9
(58.0)
715.9
125.3
B. RECONCILIATION OF UNDERLYING EARNINGS TO REPORTED EARNINGS
Table 12: Reconciliation of Underlying Earnings to Reported Earnings
The Company has provided an analysis of unusual items included in the reported IFRS financial information. These items have been considered in
relation to their size and nature, and have been adjusted from the reported information to assist readers to better understand the financial
performance of the underlying operating business. Throughout this report the Company has used the term ‘reported’ to reference IFRS financial
information and ‘underlying’ to reference non-IFRS financial information. These adjustments are assessed on a consistent basis from period to
period and include both favourable and unfavourable items. Non-IFRS financial information while not subject to audit or review has been extracted
from the financial report which has been audited by our external auditors. An explanation of each adjustment and reconciliation to the reported
IFRS financial information is provided in the table below.
Reported earnings
Underlying adjustments:
Net (gains) / losses from businesses
discontinued 1
Asset impairments 2
Asset impairment write back 3
Business development, transaction and pre-
operating costs 4
Restructure and redundancy costs 5
Asset sales 6
Debt restructuring costs 7
Tax asset impairment / (write back) 8
US tax reform one-off impact 9
EBITDA $M
EBIT $M
NPAT $M
EPS $ 10
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
1,839.5
1,425.0
1,462.9
1,044.5
1,569.1
715.9
2.82
1.25
24.1
(19.2)
25.3
(17.7)
23.3
(12.8)
0.04
(0.02)
0.0
(216.0)
0.0
3.9
(6.8)
0.0
0.0
0.0
98.9
0.0
4.3
32.3
(57.0)
0.0
0.0
0.0
0.0
(216.0)
0.0
3.9
(6.8)
0.0
0.0
0.0
98.9
0.0
4.3
32.3
(57.0)
0.0
0.0
0.0
0.0
(216.0)
0.0
1.8
(3.6)
30.9
73.7
0.0
3.0
28.2
(47.7)
2.2
(503.2)
(110.2)
(76.3)
826.0
0.0
652.4
0.00
(0.39)
0.00
0.00
(0.01)
0.06
(0.90)
(0.14)
1.48
0.13
0.00
0.01
0.05
(0.08)
0.00
(0.19)
0.00
1.14
Underlying Operational Earnings
1,644.6
1,484.4
1,269.3
1,105.4
1)
2)
3)
4)
5)
6)
7)
8)
9)
FY2018 mainly includes losses from the discontinued Engineered Buildings ASEAN business ($27.2M pre-tax – includes asset impairment recognised in December 2017) partly
offset by residual profits relating to the previously sold Taharoa iron sands operations ($2.5M pre-tax). FY2017 mainly includes profits from the disposed Taharoa iron sands
operations ($19.2M pre-tax – this is net of the fixed asset write off of $7.0M recognised in December 2016).
FY2017 includes the following asset impairments:
Building Products: fixed assets write off at PT NS BlueScope Indonesia ($50.3M pre-tax) recognised in June 2017 due to the uncertain regulatory environment and ongoing
margin compression.
Building Products: write off at Engineered Buildings China ($43.9M pre-tax) in relation to assets that will no longer be required, goodwill and other intangibles.
Building Products: fixed asset write off at the India joint venture ($4.7M pre-tax) in relation to engineered building solutions business assets that will no longer be required.
FY2018 reflects the full reversal of previously impaired plant and equipment at Australian Steel Products due to improved earnings and increased confidence that the cash flows
necessary to support the uplifted asset values are sustainable.
FY2017 reflects corporate transaction costs ($4.3 pre-tax).
FY2018 reflects staff redundancy and restructuring costs at Buildings North America ($5.3M pre-tax) relating to the cost reduction program, partly offset by Building Products
($1.5M pre-tax). FY2017 reflects staff redundancy and restructuring costs at Buildings North America ($7.6M pre-tax) relating to the cost reduction program, Building Products
($20.5M pre-tax) and ASP ($4.2M pre-tax).
FY2018 reflects the profit on the sale of assets at Buildings North America ($4.4M pre-tax) and profit on sale of assets at Building Products ($2.4M pre-tax). FY2017 reflects the
profit on the sale of BSL’s 47.5% interest in Castrip in North America ($26.6M pre-tax), profit on sale of the Taharoa iron sands business ($26.1M pre-tax) and the reversal of a
provision relating to the sale of an intangible asset in ASP in FY2013 ($3.4M pre-tax) and property, plant and equipment ($0.8M pre-tax) in ASP.
FY2018 reflects the make whole payment on the re-issue of US$110M 144A senior unsecured notes ($21.6M) and the write-off of unamortised borrowing costs ($9.3M). FY2017
reflects the early redemption premium on the US$110M 144A senior unsecured notes due in May 2018 and the write-off of unamortised borrowing costs.
FY2018 reflects the utilisation of carried forward tax losses against current year taxable income in Australia and New Zealand ($177.5M) and full recognition of previously unbooked
Australian tax losses at 30 June 2018 ($325.7M).
FY2018 reflects a one-off tax accounting adjustment relating to impacts of U.S. tax reform announced in December 2017 ($76.3M). The company has benefitted from a 7% rate
reduction on U.S. derived earnings in FY2018 with an 11% tax rate reduction thereafter. The tax rate reduction has necessitated a downward revision in deferred tax liabilities
currently held on the balance sheet, with a corresponding reduction in income tax expense in the period. This has been partially offset by a tolling charge and withholding tax
payable on distributable U.S. foreign earnings currently held in China associated with the tax reform.
10) Earnings per share are based on the average number of shares on issue during the respective reporting periods (556.8m in FY2018 vs. 571.1m in FY2017).
BlueScope Steel Limited – FY2018 Directors’ Report
Page 15
BlueScope Steel Limited – FY2018 Directors’ Report
Page 16
Table 13: Segmental underlying EBITDA and underlying EBIT
FY2018 underlying EBIT
adjustments $M
Net (gains) / losses from
businesses discontinued
Asset Impairments
Restructure and redundancy
costs
Asset sales
ASP
0.0
(216.0)
0.0
0.0
Underlying Adjustments
(216.0)
North
Star
0.0
0.0
0.0
0.0
0.0
BP
0.0
0.0
(1.4)
(2.4)
(3.8)
BNA
NZPac
Corp
Discon
Ops
Elims
Total
0.0
0.0
5.3
(4.4)
0.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
25.3
0.0
0.0
0.0
25.3
0.0
0.0
0.0
0.0
0.0
25.3
(216.0)
3.9
(6.8)
(193.7)
C. CASH FLOW STATEMENT
Table 14: Consolidated cash flow statement
$M
Reported EBITDA
Add cash/(deduct non-cash) items
- Share of profits from associates and joint venture
partnership not received as dividends
- Expensing of share-based employee benefits
- Impaired assets
- Foreign exchange reserve transferred to P&L
- Net (gain) loss on sale of assets
Cash EBITDA
Changes in working capital
Gross operating cash flow
Finance costs
Interest received
Tax received / (paid)1
Net cash from operating activities
Capex: payments for P, P & E and intangibles
Other investing cash flows
Net cash flow before financing
Equity issues / (buy-backs)
Dividends to non-controlling interests 2
Dividends to BlueScope Steel Limited shareholders
Transactions with non-controlling interests
Net drawing/(repayment) of borrowings
Net increase/(decrease) in cash held
FY2018
1,839.5
FY2017
1,425.0
Variance %
29%
(29.5)
16.2
(208.0)
0.2
(7.2)
1,611.2
(308.1)
1,303.1
(104.7)
8.7
(66.4)
1,140.7
(409.9)
29.5
760.3
(300.3)
(64.9)
(61.7)
0.0
(154.6)
178.8
(4.8)
24.0
101.2
0.0
(51.0)
1,494.4
(119.0)
1,375.3
(90.8)
6.1
(158.3)
1,132.4
(383.0)
(25.3)
724.2
(150.4)
(63.4)
(40.2)
0.0
(254.7)
215.4
(515%)
(33%)
(306%)
N/A
86%
8%
(159%)
(5%)
(15%)
43%
58%
1%
(7%)
217%
5%
(100%)
(2%)
(53%)
100%
39%
(17%)
1) The BlueScope Steel Australian tax consolidated group is estimated to have carry forward tax losses, as at 30 June 2018, of approximately $1.84Bn. There will be no Australian
income tax payments until these are recovered.
2) These dividend payments primarily relate to dividend payments to Nippon Steel & Sumitomo Metal Corporation (NSSMC) in respect of NS BlueScope Coated Products joint venture.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 17
Table 13: Segmental underlying EBITDA and underlying EBIT
FY2018 underlying EBIT
adjustments $M
Net (gains) / losses from
businesses discontinued
Asset Impairments
Restructure and redundancy
costs
Asset sales
ASP
0.0
(216.0)
0.0
0.0
North
Star
0.0
0.0
0.0
0.0
0.0
BP
0.0
0.0
(1.4)
(2.4)
(3.8)
Underlying Adjustments
(216.0)
BNA
NZPac
Corp
Elims
Total
0.0
0.0
5.3
(4.4)
0.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Discon
Ops
25.3
0.0
0.0
0.0
25.3
0.0
0.0
0.0
0.0
0.0
25.3
(216.0)
3.9
(6.8)
(193.7)
C. CASH FLOW STATEMENT
Table 14: Consolidated cash flow statement
$M
Reported EBITDA
Add cash/(deduct non-cash) items
- Share of profits from associates and joint venture
partnership not received as dividends
- Expensing of share-based employee benefits
- Impaired assets
- Foreign exchange reserve transferred to P&L
- Net (gain) loss on sale of assets
Cash EBITDA
Changes in working capital
Gross operating cash flow
Finance costs
Interest received
Tax received / (paid)1
Net cash from operating activities
Capex: payments for P, P & E and intangibles
Other investing cash flows
Net cash flow before financing
Equity issues / (buy-backs)
Dividends to non-controlling interests 2
Dividends to BlueScope Steel Limited shareholders
Transactions with non-controlling interests
Net drawing/(repayment) of borrowings
Net increase/(decrease) in cash held
FY2018
1,839.5
FY2017
1,425.0
Variance %
29%
(29.5)
16.2
(208.0)
0.2
(7.2)
1,611.2
(308.1)
1,303.1
(104.7)
8.7
(66.4)
1,140.7
(409.9)
29.5
760.3
(300.3)
(64.9)
(61.7)
0.0
(154.6)
178.8
(4.8)
24.0
101.2
0.0
(51.0)
1,494.4
(119.0)
1,375.3
(90.8)
6.1
(158.3)
1,132.4
(383.0)
(25.3)
724.2
(150.4)
(63.4)
(40.2)
0.0
(254.7)
215.4
(515%)
(33%)
(306%)
N/A
86%
8%
(159%)
(5%)
(15%)
43%
58%
1%
(7%)
217%
5%
(100%)
(2%)
(53%)
100%
39%
(17%)
1) The BlueScope Steel Australian tax consolidated group is estimated to have carry forward tax losses, as at 30 June 2018, of approximately $1.84Bn. There will be no Australian
income tax payments until these are recovered.
2) These dividend payments primarily relate to dividend payments to Nippon Steel & Sumitomo Metal Corporation (NSSMC) in respect of NS BlueScope Coated Products joint venture.
ABBREVIATIONS
1H
1H FY2017
1H FY2018
1H FY2019
2H
2H FY2017
2H FY2018
ASEAN
ASP
A$, $
BNA
BP or Building Products
BPG
BlueScope or the Group
the Company
DPS
EBIT
EBITDA
EBS
EPS
FY2017
FY2018
FY2019
Gearing ratio
HRC
IFRS
Leverage, or leverage ratio
LTM
Net debt, or ND
n/m
NOA
North Star
NPAT
NSSMC
NZD
NZPac
ROIC
TBSL
U.S.
US$
Six months ended 31 December in the relevant financial year
Six months ended 31 December 2016
Six months ended 31 December 2017
Six months ended 31 December 2018
Six months ended 30 June in the relevant financial year
Six months ending 30 June 2017
Six months ending 30 June 2018
Association of South East Asian Nations
Australian Steel Products segment
Australian dollar
Buildings North America segment
Building Products Asia and North America segment
BlueScope Properties Group
BlueScope Steel Limited and its subsidiaries (ie. the consolidated group)
BlueScope Steel Limited (ie. the parent entity)
Dividend per share
Earnings before interest and tax
Earnings before interest, tax, depreciation and amortisation
Engineered building solutions, a key product offering of the Buildings North America and
Building Products segments
Earnings per share
12 months ending 30 June 2017
12 months ending 30 June 2018
12 months ending 30 June 2019
Net debt divided by the sum of net debt and equity
Hot rolled coil steel
International Financial Reporting Standards
Net debt over LTM underlying EBITDA
Last twelve months
Gross debt less cash
Not meaningful
Net operating assets pre-tax
North Star BlueScope Steel
Net profit after tax
Nippon Steel & Sumitomo Metal Corporation
New Zealand dollar
New Zealand & Pacific Steel segment
Return on invested capital (or ROIC) – underlying EBIT (annualised in case of half year
comparison) over average monthly capital employed
Tata BlueScope Steel
United States of America
United States dollar
BlueScope Steel Limited – FY2018 Directors’ Report
Page 17
BlueScope Steel Limited – FY2018 Directors’ Report
Page 18
BOARD COMPOSITION
The following persons were Directors of the Company during the whole of the financial year and up to the date of this Directors’ Report, except as
otherwise stated:
John Andrew Bevan (Chairman)
Daniel Bruno Grollo
Kenneth Alfred Dean
Penelope Bingham-Hall
Ewen Graham Wolseley Crouch AM
Lloyd Hartley Jones
Rebecca Patricia Dee-Bradbury
Jennifer Margaret Lambert
Appointed 1 September 2017
Mark Royce Vassella
Paul Francis O’Malley
Appointed Managing Director and Chief Executive Officer 1 January 2018
Retired 31 December 2017
Particulars of the skills, experience, expertise and special responsibilities of the Directors in office at the date of this report are set out below.
DIRECTORS’ BIOGRAPHIES
John Bevan, Chairman (Independent)
Age 61, BCom (Mkt)
Director since: March 2014
Directorships of other Australian listed entities in the past three years: Non-executive director of Ansell Limited (August 2012 to date), Nuplex
Industries Limited (September 2015 to September 2016) and Alumina Limited (from January 2018 to date).
Mr Bevan was CEO and a director of Alumina Limited from 2008 to 2014. Before joining Alumina Limited in 2008 Mr Bevan spent 29 years in a
variety of senior management roles with BOC Group, including as a director on The BOC Group plc Board, Chief Executive Process Gas Solutions
with responsibility for the bulk and tonnage business for the entire BOC group, Chief Executive Asia and country lead roles in the United Kingdom,
Thailand and Korea. Mr Bevan is also the Deputy Chairman of Ansell Limited. In July 2017, Mr Bevan was appointed to the Board of the Humpty
Dumpty Foundation.
He brings to the Board extensive experience in international business and heavy industrial operations.
Mr Bevan is Chair of the Nomination Committee and is a member of the Remuneration and Organisation Committee and the Health, Safety and
Environment Committee.
Mark Vassella, Managing Director & Chief Executive Officer
Age 55, BCom, MBA
Director since: January 2018
Directorships of other Australian listed entities in the past three years: Nil
Mark Vassella was appointed Managing Director and Chief Executive Officer of BlueScope in January 2018.
He joined the Company following BlueScope's 2007 acquisition of Smorgon Steel Distribution where he was the Chief Executive. He was
appointed Chief Executive Australian Distribution and Solutions before moving to the US as President, BlueScope Steel North America in 2008.
He returned to Australia in 2011 to take up the role of Chief Executive BlueScope Australia and New Zealand.
Mr Vassella is a past Board member, President and Treasurer of the Family Life charitable organisation.
Mr Vassella is a member of the Health, Safety and Environment Committee.
Daniel Grollo, Non-executive Director (Independent)
Age 48
Director since: September 2006
Directorships of other listed entities in the past three years: Nil
Mr Grollo is Executive Chairman of Grocon Group Holdings Pty Ltd, one of Australia's largest privately owned development and construction
companies. He brings extensive knowledge of the building and construction industry to the Board.
Mr Grollo has previously held positions as Chairman of the Green Building Council of Australia and National President of the Property Council of
Australia and Member of the Prime Minister’s Business Advisory Council.
Mr Grollo was Chair of the Health, Safety and Environment Committee until 30 June 2018. He remains a member of this Committee and is also a
member of the Remuneration and Organisation Committee and the Nomination Committee.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 19
The following persons were Directors of the Company during the whole of the financial year and up to the date of this Directors’ Report, except as
BOARD COMPOSITION
otherwise stated:
John Andrew Bevan (Chairman)
Daniel Bruno Grollo
Kenneth Alfred Dean
Penelope Bingham-Hall
Ewen Graham Wolseley Crouch AM
Lloyd Hartley Jones
Rebecca Patricia Dee-Bradbury
Jennifer Margaret Lambert
Appointed 1 September 2017
Mark Royce Vassella
Paul Francis O’Malley
Appointed Managing Director and Chief Executive Officer 1 January 2018
Retired 31 December 2017
Particulars of the skills, experience, expertise and special responsibilities of the Directors in office at the date of this report are set out below.
DIRECTORS’ BIOGRAPHIES
John Bevan, Chairman (Independent)
Age 61, BCom (Mkt)
Director since: March 2014
Directorships of other Australian listed entities in the past three years: Non-executive director of Ansell Limited (August 2012 to date), Nuplex
Industries Limited (September 2015 to September 2016) and Alumina Limited (from January 2018 to date).
Mr Bevan was CEO and a director of Alumina Limited from 2008 to 2014. Before joining Alumina Limited in 2008 Mr Bevan spent 29 years in a
variety of senior management roles with BOC Group, including as a director on The BOC Group plc Board, Chief Executive Process Gas Solutions
with responsibility for the bulk and tonnage business for the entire BOC group, Chief Executive Asia and country lead roles in the United Kingdom,
Thailand and Korea. Mr Bevan is also the Deputy Chairman of Ansell Limited. In July 2017, Mr Bevan was appointed to the Board of the Humpty
He brings to the Board extensive experience in international business and heavy industrial operations.
Mr Bevan is Chair of the Nomination Committee and is a member of the Remuneration and Organisation Committee and the Health, Safety and
Dumpty Foundation.
Environment Committee.
Age 55, BCom, MBA
Director since: January 2018
Mark Vassella, Managing Director & Chief Executive Officer
Directorships of other Australian listed entities in the past three years: Nil
Mark Vassella was appointed Managing Director and Chief Executive Officer of BlueScope in January 2018.
He joined the Company following BlueScope's 2007 acquisition of Smorgon Steel Distribution where he was the Chief Executive. He was
appointed Chief Executive Australian Distribution and Solutions before moving to the US as President, BlueScope Steel North America in 2008.
He returned to Australia in 2011 to take up the role of Chief Executive BlueScope Australia and New Zealand.
Mr Vassella is a past Board member, President and Treasurer of the Family Life charitable organisation.
Mr Vassella is a member of the Health, Safety and Environment Committee.
Daniel Grollo, Non-executive Director (Independent)
Age 48
Director since: September 2006
Directorships of other listed entities in the past three years: Nil
Mr Grollo is Executive Chairman of Grocon Group Holdings Pty Ltd, one of Australia's largest privately owned development and construction
companies. He brings extensive knowledge of the building and construction industry to the Board.
Mr Grollo has previously held positions as Chairman of the Green Building Council of Australia and National President of the Property Council of
Australia and Member of the Prime Minister’s Business Advisory Council.
Mr Grollo was Chair of the Health, Safety and Environment Committee until 30 June 2018. He remains a member of this Committee and is also a
member of the Remuneration and Organisation Committee and the Nomination Committee.
Ken Dean, Non-executive Director (Independent)
Age 65, BCom (Hons), FCPA, FAICD
Director since: April 2009
Directorships of other Australian listed entities in the past three years: Non-executive director of Santos Limited (February 2005 to May 2016) and
Virgin Australia Holdings Limited (December 2016 to date)
Mr Dean is Chairman of Mission Australia, a director of Energy Australia Holdings Ltd, Virgin Australia Holdings Ltd and is a member of the
Director Advisory Panel of the Australian Securities & Investments Commission. He has held directorships with Santos Limited, Alcoa of
Australia Limited, Woodside Petroleum Limited and Shell Australia Limited. He 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 Chief Executive Officer of Shell
Finance Services based in London.
Mr Dean was Chief Financial Officer of Alumina Limited from 2005 to 2009. He brings extensive international financial and commercial experience
to the Board.
Mr Dean was Chair of the Audit Committee until 28 February 2018. He remains a member of the Audit Committee and is also a member of the Risk
and Sustainability Committee, the Health Safety and Environment Committee and the Nomination Committee.
Penny Bingham-Hall, Non-executive Director (Independent)
Age 58, BA (Ind.Des) FAICD, SF(Fin)
Director since: March 2011
Directorships of other Australian listed entities in the past three years: Non-executive director of Dexus Funds Management Limited (responsible
entity for the Dexus Property Group) (June 2014 to date) and Fortescue Metals Group Ltd (November 2016 to date)
Ms Bingham-Hall is a director of Dexus Property Group, Fortescue Metals Group Ltd, the Port Authority of NSW and Macquarie Specialised Asset
Management, and is a former director of Australia Post and The Global Foundation. She is a director of Taronga Conservation Society Australia and
has previously held non-executive directorships with other industry and community organisations, including the Tourism & Transport Forum,
Infrastructure Partnerships Australia and as the inaugural Chairman of Advocacy Services Australia. Ms Bingham-Hall is a member of Chief
Executive Women and of the WomenCorporateDirectors Foundation.
Ms Bingham-Hall spent more than 20 years in a variety of roles with Leighton Holdings (now Cimic Group) prior to retiring from the company at the
end of 2009. Senior positions held with Leighton include Executive General Manager Strategy, responsible for Leighton Group's overall business
strategy and Executive General Manager Corporate, responsible for business planning and corporate affairs. She brings extensive knowledge of
the building and construction industry in both Australia and Asian markets.
Ms Bingham-Hall is Chair of the Remuneration and Organisation Committee and is a member of the Risk and Sustainability Committee, the Health,
Safety and Environment Committee and the Nomination Committee.
Ewen Crouch AM, Non-executive Director (Independent)
Age 62, BEc (Hons) LLB, FAICD
Director since: March 2013
Directorships of other listed entities in the past three years: Non-executive director of Westpac Banking Corporation (February 2013 to date)
Mr Crouch is a director of Westpac Banking Corporation. He is a member of the Commonwealth Remuneration Tribunal, a Fellow of the Australian
Institute of Company Directors and a member of its Law Committee. Mr Crouch is also a board member of Sydney Symphony Orchestra and Jawun.
Mr Crouch was a Partner at Allens from 1998 to 2013 where his roles included Chairman of Partners, Co-Head Mergers and Acquisitions and Equity
Capital markets, Executive Partner – Asian Offices and Deputy Managing Partner, as well as 11 years’ service on its board.
He was a member of the Takeovers Panel from 2010 to 2015 and served as a director of Mission Australia between 1995 and 2016 including 7
years as its chairman.
Mr Crouch brings to the Board the breadth of his experience in service industries, financial markets, governance and risk management together
with his knowledge of strategic mergers, acquisitions and capital markets transactions.
Mr Crouch is Chair of the Risk & Sustainability Committee and is a member of the Audit Committee, the Health, Safety and Environment Committee
and the Nomination Committee.
Lloyd Jones, Non-executive Director (Independent)
Age 65, BEng, MBA, GAICD
Director since: September 2013
Directorships of other Australian listed entities in past three years: Non-executive director of RCR Tomlinson Ltd (November 2013 to date)
Mr Jones is a director of RCR Tomlinson Ltd. He is also a member of the Advisory Council to the Dean of Engineering & Mathematical Sciences at
the University of Western Australia. Mr Jones was a director of Myer Family Investments Pty Ltd from November 2010 to October 2016 and was
an advisory director to a division of Deutsche Bank in Australia between 2012 and 2017.
Mr Jones is a qualified engineer and spent 25 years of his career in a variety of senior management roles with Alcoa including General Manager
of WA Operations, President of US Smelting and President Asia Pacific (based in Tokyo and Beijing). Most recently Mr Jones has served as President
of Cerberus Capital Management's Asia Advisors Unit. Cerberus Capital is a $35B New York based private equity company. His experience
encompasses metals, smelting and roll forming, plant operations, energy, construction, mergers and acquisitions, corporate affairs and finance.
Mr Jones is Chair of the Health, Safety and Environment Committee since 1 July 2018 and is a member of the Audit Committee and the Nomination
Committee.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 19
BlueScope Steel Limited – FY2018 Directors’ Report
Page 20
Rebecca Dee-Bradbury, Non-executive Director (Independent)
Age 50, BBus (Mkt), GAICD
Director since: April 2014
Directorships of other Australian listed entities in the past three years: Non-executive director of TOWER Limited (August 2014 to September
2016) and GrainCorp Limited (September 2014 to date)
Ms Dee-Bradbury was Chief Executive Officer/President Developed Markets Asia Pacific and ANZ for Kraft/Cadbury from 2010 to 2014, leading the
business through significant transformational change. Before joining Kraft/Cadbury Ms Dee-Bradbury was Group CEO of the global Barbeques
Galore group, and has held other senior executive roles in organisations including Maxxium, Burger King Corporation and Lion Nathan/Pepsi Cola
Bottlers.
Ms Dee-Bradbury is a director of GrainCorp Limited, Energy Australia Holdings Ltd and former director of TOWER Limited. She is also an inaugural
Member of the Business Advisory Board for the Monash Business School, a member of Chief Executive Women and of the
WomenCorporateDirectors Foundation, and a former member of the Federal Government's Asian Century Strategic Advisory Board. Ms Dee-
Bradbury brings to the Board significant experience in strategic brand marketing, customer relationship management and innovation.
Ms Dee-Bradbury is a member of the Audit Committee, the Remuneration and Organisation Committee, the Health, Safety and Environment
Committee and the Nomination Committee.
Jennifer Lambert, Non-executive Director (Independent)
Age 51, BBus, MEc, CA, FAICD
Director since: September 2017
Directorships of other Australian listed entities in the past three years: Nil
Ms Lambert is a non-executive director of Investa Office Management Pty Ltd, Place Management NSW (part of Property NSW) and Mission
Australia. She is a Fellow of the Australian Institute of Company Directors and a member of its Reporting Committee. Ms Lambert is also on the
Council of the Sydney Church of England Grammar School and is the Chairman of Mosman Church of England Preparatory School.
Ms Lambert has extensive business and leadership experience at the senior executive and board level. Ms Lambert was Group Chief Financial
Officer of 151 Property (previously known as Valad Property Group) from 2003 to 2016, where her responsibilities included operational and strategic
finance, tax, treasury, legal and compliance. Prior to this, Ms Lambert was a director at PricewaterhouseCoopers specialising in capital raisings,
and structuring and due diligence for acquisitions and disposals across various industries.
Ms Lambert brings more than 25 years of financial management and accounting experience, along with over 15 years specialising in the property
industry.
Ms Lambert is Chair of the Audit Committee since 1 March 2018 and is a member of the Risk and Sustainability Committee, the Health, Safety
and Environment Committee and the Nomination Committee.
COMPANY SECRETARIES
The following are Company Secretaries of BlueScope Steel Limited:
Debra Counsell, BA, LLB
Responsible for the legal affairs of BlueScope and for company secretarial matters. Appointed Chief Legal Officer on 1 January 2017 and the
Company Secretary on 1 July 2017. Prior to that occupied position of General Counsel – Corporate at BlueScope since 2014, following 23 years of
private practice in Australia, Asia and Europe.
Penny Grau, BCom, LLB, LLM
Appointed Group Counsel – Secretariat with BlueScope on 6 November 2017 and appointed a company secretary on 27 November 2017. Previously
occupied positions of general counsel and company secretary of a number of listed companies for 10 years, and prior to this practised as a corporate
lawyer for 18 years.
PARTICULARS OF DIRECTORS' INTERESTS IN SHARES AND OPTIONS OF
BLUESCOPE STEEL LIMITED
As at the date of this Directors’ Report the interests of the Directors in shares and options of the Company are:
Director
J A Bevan
M R Vassella
D B Grollo
K A Dean
P Bingham-Hall
Ordinary shares
Share rights
55,326
471,479
38,447
40,488
57,834
-
921,581
-
-
-
Director
E G W Crouch
L H Jones
R P Dee-Bradbury
J M Lambert
BlueScope Steel Limited – FY2018 Directors’ Report
Ordinary shares
Share rights
32,500
46,245
27,300
4,100
-
-
-
-
Page 21
Rebecca Dee-Bradbury, Non-executive Director (Independent)
Age 50, BBus (Mkt), GAICD
Director since: April 2014
2016) and GrainCorp Limited (September 2014 to date)
Ms Dee-Bradbury was Chief Executive Officer/President Developed Markets Asia Pacific and ANZ for Kraft/Cadbury from 2010 to 2014, leading the
business through significant transformational change. Before joining Kraft/Cadbury Ms Dee-Bradbury was Group CEO of the global Barbeques
Galore group, and has held other senior executive roles in organisations including Maxxium, Burger King Corporation and Lion Nathan/Pepsi Cola
Bottlers.
Ms Dee-Bradbury is a director of GrainCorp Limited, Energy Australia Holdings Ltd and former director of TOWER Limited. She is also an inaugural
Member of the Business Advisory Board for the Monash Business School, a member of Chief Executive Women and of the
WomenCorporateDirectors Foundation, and a former member of the Federal Government's Asian Century Strategic Advisory Board. Ms Dee-
Bradbury brings to the Board significant experience in strategic brand marketing, customer relationship management and innovation.
Ms Dee-Bradbury is a member of the Audit Committee, the Remuneration and Organisation Committee, the Health, Safety and Environment
Committee and the Nomination Committee.
Jennifer Lambert, Non-executive Director (Independent)
Age 51, BBus, MEc, CA, FAICD
Director since: September 2017
Directorships of other Australian listed entities in the past three years: Nil
Ms Lambert is a non-executive director of Investa Office Management Pty Ltd, Place Management NSW (part of Property NSW) and Mission
Australia. She is a Fellow of the Australian Institute of Company Directors and a member of its Reporting Committee. Ms Lambert is also on the
Council of the Sydney Church of England Grammar School and is the Chairman of Mosman Church of England Preparatory School.
Ms Lambert has extensive business and leadership experience at the senior executive and board level. Ms Lambert was Group Chief Financial
Officer of 151 Property (previously known as Valad Property Group) from 2003 to 2016, where her responsibilities included operational and strategic
finance, tax, treasury, legal and compliance. Prior to this, Ms Lambert was a director at PricewaterhouseCoopers specialising in capital raisings,
and structuring and due diligence for acquisitions and disposals across various industries.
Ms Lambert brings more than 25 years of financial management and accounting experience, along with over 15 years specialising in the property
industry.
Ms Lambert is Chair of the Audit Committee since 1 March 2018 and is a member of the Risk and Sustainability Committee, the Health, Safety
and Environment Committee and the Nomination Committee.
COMPANY SECRETARIES
The following are Company Secretaries of BlueScope Steel Limited:
Debra Counsell, BA, LLB
private practice in Australia, Asia and Europe.
Penny Grau, BCom, LLB, LLM
lawyer for 18 years.
Responsible for the legal affairs of BlueScope and for company secretarial matters. Appointed Chief Legal Officer on 1 January 2017 and the
Company Secretary on 1 July 2017. Prior to that occupied position of General Counsel – Corporate at BlueScope since 2014, following 23 years of
Appointed Group Counsel – Secretariat with BlueScope on 6 November 2017 and appointed a company secretary on 27 November 2017. Previously
occupied positions of general counsel and company secretary of a number of listed companies for 10 years, and prior to this practised as a corporate
PARTICULARS OF DIRECTORS' INTERESTS IN SHARES AND OPTIONS OF
BLUESCOPE STEEL LIMITED
Ordinary shares
Share rights
Ordinary shares
Share rights
Director
J A Bevan
M R Vassella
D B Grollo
K A Dean
P Bingham-Hall
55,326
471,479
38,447
40,488
57,834
921,581
L H Jones
Director
E G W Crouch
R P Dee-Bradbury
J M Lambert
-
-
-
-
32,500
46,245
27,300
4,100
-
-
-
-
Directorships of other Australian listed entities in the past three years: Non-executive director of TOWER Limited (August 2014 to September
Attendance of the Directors at Board and Board Committee meetings from 1 July 2017 to 30 June 2018 is as follows:
MEETINGS OF DIRECTORS
Board meetings
Audit & Risk Committee3
Remuneration &
Organisation Committee
Health, Safety &
Environment Committee
A
14
8
6
14
14
14
14
14
14
11
B
14
7
6
12
14
14
14
14
12
11
A
-
-
-
-
4
-
4
4
4
3
B
42
41
21
-
4
-
4
4
3
3
A
7
-
-
7
-
7
-
-
7
-
B
7
41
31
7
22
7
22
22
6
-
A
4
2
2
4
4
4
4
4
4
3
B
4
2
2
4
4
4
4
4
3
3
Nomination Committee
Risk & Sustainability
Committee3
Other Sub-Committees
Annual General Meeting
A
7
-
-
7
7
7
7
7
7
5
B
7
11
41
7
7
7
7
7
6
5
A
-
-
-
-
8
8
8
-
-
4
B
72
31
51
-
8
8
8
-
-
4
A
9
2
-
-
5
4
7
2
2
2
B
9
61
21
12
5
54
7
34
34
2
A
1
1
-
1
1
1
1
1
1
1
B
1
1
-
1
1
1
1
1
1
1
J A Bevan
P F O’Malley
M R Vassella
D B Grollo
K A Dean
P Bingham-Hall
E G W Crouch
L H Jones
R P Dee-Bradbury
J M Lambert
J A Bevan
P F O’Malley
M R Vassella
D B Grollo
K A Dean
P Bingham-Hall
E G W Crouch
L H Jones
R P Dee-Bradbury
J M Lambert
With the exception of Ms Lambert and Messrs O’Malley and Vassella, all current Directors have held office for the entire year ended 30 June 2018.
A = Number of meetings held in the period 1 July 2017 to 30 June 2018 during which time the relevant Director was a member of the Board or
the Committee, as the case may be.
B = Number of meetings attended by the relevant Director from 1 July 2017 to 30 June 2018.
(1)
(2)
(3)
The Managing Director and Chief Executive Officer is not a Committee member and attends by invitation as required.
The Director is not a Committee member and attended pursuant to their standing invitation.
In September 2017, the Audit & Risk Committee was separated into two committees, with the existing Committee being renamed the Audit
Committee and a separate Risk & Sustainability Committee established.
(4) Director attended those sub-committee meetings for which they were a member as well as an additional sub-committee meeting pursuant to
their standing invitation.
As at the date of this Directors’ Report the interests of the Directors in shares and options of the Company are:
Directors meet regularly in the absence of management.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 21
BlueScope Steel Limited – FY2018 Directors’ Report
Page 22
REMUNERATION REPORT (AUDITED)
FY2018 has been a strong year of performance for the BlueScope business. It has also been a year
of change, with the appointment of Mark Vassella our new Managing Director and Chief Executive
Officer, and changes to the Executive Leadership Team. The Board is confident that the successful
transition of the leadership team positions us well to continue to execute our strategy and deliver
zero harm and sustainable profitability.
The new remuneration framework approved at our AGM last year better aligns remuneration
outcomes with our long-term strategy and the shareholder experience. The outcomes for FY2018
reflect the outstanding performance achieved, and the strong Group performance in recent years
means that executives have been rewarded through the vesting of prior equity awards.
Dear fellow shareholder,
On behalf of the Directors of BlueScope Steel Limited, I am pleased to present our Remuneration Report for FY2018.
FY2018 PERFORMANCE & REWARD OUTCOMES
BlueScope’s performance shows the Group’s strategy and focus on shareholder returns is producing results. Since delivering transformational
cost saving initiatives in Australasia and the acquisition of the other 50 per cent of North Star, we have now delivered underlying EBIT of over
$1.1 billion in each of the last two years. The BlueScope balance sheet is robust, with great flexibility, and we have a clear capital management
framework in place. Whilst we remain focussed on further efficiencies to counter inflationary pressures such as energy costs, there are many
organic growth opportunities across our portfolio of businesses. We continue to review opportunities that fit our strategy in markets as diverse as
India, ASEAN, the U.S., Australia and New Zealand, and we place a strong emphasis on sustainability, innovation and diversity as we implement
our plans.
Performance against the key Short Term Incentive (STI) financial measures was at stretch for underlying Return on Invested Capital (ROIC) and
above target for cashflow. Despite the gateway condition for the safety objective being achieved (no fatalities and a Lost Time Injury Frequency
Rate (LTIFR) less than one), no STI was paid in respect of this measure as the performance against the Medical Treatment Injury Frequency Rate
(MTIFR) measure, while better than in FY2017, was below threshold. Due to the safety result, the Board decided to reduce the maximum STI that
could be awarded from 150 per cent to 145 per cent. The actual STI awarded for the Managing Director and Chief Executive Officer (MD&CEO)
was 145 per cent of target, and for other executive KMP between 128 per cent and 145 per cent of target. The Board is satisfied that this result
appropriately reflects both Group and individual performance for the year.
The performance conditions for the Long Term Incentive (LTI) plan granted in FY2015 and the remainder of the FY2014 plan were tested in August
2017 and, based on performance of Total Shareholder Return (TSR) relative to the ASX100 at the 95th percentile and 93rd percentile respectively,
both awards vested in full.
Awards under the FY2016 LTI plan are subject to a relative TSR and compound annual growth in Earnings Per Share (EPS) hurdle. Performance
against the EPS hurdle exceeded the maximum performance level set by the Board and accordingly that portion will vest in full. Performance
against the TSR hurdle for this award will be assessed in September 2018 and the results disclosed at the 2018 Annual General Meeting (AGM).
EXECUTIVE CHANGES
On 21 August 2017, BlueScope announced the appointment of new Managing Director and CEO Mark Vassella, following Paul O’Malley’s
retirement. The details of Mr Vassella’s remuneration and Mr O’Malley’s termination arrangements were disclosed at the time of the
announcement, and are outlined again in this report.
In FY2018 we announced the reorganisation of the executive team. Details of these appointments are also outlined further in this report.
CHANGES TO THE REMUNERATION FRAMEWORK IN FY2018
Following a detailed review of our remuneration strategy in FY2017, we have introduced a new remuneration framework. These changes were
made following extensive consultation with major shareholders, the Australian Shareholders’ Association, and proxy advisors, and we are
pleased that they were strongly supported and approved at our AGM last year.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 23
REMUNERATION REPORT (AUDITED)
FY2018 has been a strong year of performance for the BlueScope business. It has also been a year
of change, with the appointment of Mark Vassella our new Managing Director and Chief Executive
Officer, and changes to the Executive Leadership Team. The Board is confident that the successful
transition of the leadership team positions us well to continue to execute our strategy and deliver
zero harm and sustainable profitability.
The new remuneration framework approved at our AGM last year better aligns remuneration
outcomes with our long-term strategy and the shareholder experience. The outcomes for FY2018
reflect the outstanding performance achieved, and the strong Group performance in recent years
means that executives have been rewarded through the vesting of prior equity awards.
Dear fellow shareholder,
On behalf of the Directors of BlueScope Steel Limited, I am pleased to present our Remuneration Report for FY2018.
FY2018 PERFORMANCE & REWARD OUTCOMES
BlueScope’s performance shows the Group’s strategy and focus on shareholder returns is producing results. Since delivering transformational
cost saving initiatives in Australasia and the acquisition of the other 50 per cent of North Star, we have now delivered underlying EBIT of over
$1.1 billion in each of the last two years. The BlueScope balance sheet is robust, with great flexibility, and we have a clear capital management
framework in place. Whilst we remain focussed on further efficiencies to counter inflationary pressures such as energy costs, there are many
organic growth opportunities across our portfolio of businesses. We continue to review opportunities that fit our strategy in markets as diverse as
India, ASEAN, the U.S., Australia and New Zealand, and we place a strong emphasis on sustainability, innovation and diversity as we implement
our plans.
Performance against the key Short Term Incentive (STI) financial measures was at stretch for underlying Return on Invested Capital (ROIC) and
above target for cashflow. Despite the gateway condition for the safety objective being achieved (no fatalities and a Lost Time Injury Frequency
Rate (LTIFR) less than one), no STI was paid in respect of this measure as the performance against the Medical Treatment Injury Frequency Rate
(MTIFR) measure, while better than in FY2017, was below threshold. Due to the safety result, the Board decided to reduce the maximum STI that
could be awarded from 150 per cent to 145 per cent. The actual STI awarded for the Managing Director and Chief Executive Officer (MD&CEO)
was 145 per cent of target, and for other executive KMP between 128 per cent and 145 per cent of target. The Board is satisfied that this result
appropriately reflects both Group and individual performance for the year.
The performance conditions for the Long Term Incentive (LTI) plan granted in FY2015 and the remainder of the FY2014 plan were tested in August
2017 and, based on performance of Total Shareholder Return (TSR) relative to the ASX100 at the 95th percentile and 93rd percentile respectively,
both awards vested in full.
Awards under the FY2016 LTI plan are subject to a relative TSR and compound annual growth in Earnings Per Share (EPS) hurdle. Performance
against the EPS hurdle exceeded the maximum performance level set by the Board and accordingly that portion will vest in full. Performance
against the TSR hurdle for this award will be assessed in September 2018 and the results disclosed at the 2018 Annual General Meeting (AGM).
EXECUTIVE CHANGES
On 21 August 2017, BlueScope announced the appointment of new Managing Director and CEO Mark Vassella, following Paul O’Malley’s
retirement. The details of Mr Vassella’s remuneration and Mr O’Malley’s termination arrangements were disclosed at the time of the
announcement, and are outlined again in this report.
In FY2018 we announced the reorganisation of the executive team. Details of these appointments are also outlined further in this report.
CHANGES TO THE REMUNERATION FRAMEWORK IN FY2018
Following a detailed review of our remuneration strategy in FY2017, we have introduced a new remuneration framework. These changes were
made following extensive consultation with major shareholders, the Australian Shareholders’ Association, and proxy advisors, and we are
pleased that they were strongly supported and approved at our AGM last year.
The changes to the remuneration framework have been made in order to provide a stronger link between executive and shareholder outcomes
through incentive plans which create a greater level of share ownership for executives. Performance measures for the STI plan focus on annual
financial, safety and strategic objectives. The focus of the LTI plan is on sustainable long-term earnings, appropriately managing costs and debt,
and reducing volatility in business performance. Vesting of the LTI remains dependent on a minimum level of business performance, to ensure
shareholder value. Furthermore, the higher weighting to equity in the mix of total reward, combined with the minimum shareholding
requirements, means that executive remuneration outcomes will be directly aligned to the shareholder experience.
In summary, the key changes to the remuneration framework for FY2018 are:
The prior LTI plan has been replaced with Alignment Rights, which vest subject to individual adherence to Our Bond, and achievement of a
threshold level of Return on Invested Capital (ROIC) and a maximum debt leverage hurdle.
The mix of total reward has changed, with a higher weighting to long-term equity and a reduction in the total quantum of STI.
The deferred component of the STI has been effectively reallocated to Alignment Rights, with a vesting period of three years (compared to one
year in the previous STI deferral).
The quantum of LTI and total remuneration has also been reduced, reflecting the increased likelihood of equity vesting compared to the prior
plan.
The minimum shareholding requirements have doubled, for both the MD & CEO and other executive KMP.
The Board is confident that the changes made to the remuneration framework will deliver greater value to shareholders at less
cost, maintain a deliberate and continued focus by executives on financial fundamentals, and provide for more perceived value to
executives despite a significant reduction in quantum of incentives to both the MD & CEO and other executive KMP.
GOVERNANCE, RISK & CULTURE
Appropriate governance and proper business conduct is crucial to the ongoing success of our business. Accordingly, the Board and all employees,
including KMP, are required to behave in accordance with Our Bond and BlueScope policies and standards. We have clear and consistent
practices in place for managing misconduct and the Board and our Remuneration and Organisation Committee (ROC) take any breaches very
seriously. Our remuneration framework supports this by ensuring that Alignment Rights can only vest when executives conduct themselves in
accordance with Our Bond, with an individual assessment made by the Board each year.
The Board, through the ROC, retains discretion to limit, defer or cancel any awards granted under the STI or Alignment Rights plans. In FY2018,
the Board exercised this discretion in a small number of instances for senior leaders below KMP, forfeiting some or all the LTI and STI awards.
In addition, the weighting towards equity in the total remuneration offer, and the requirement for executives to hold a significant portion of
equity, provides strong alignment between remuneration and the management of longer term risk, business reputation and conduct.
I trust that the FY2018 Remuneration Report clearly outlines the links between our strategy, performance and executive remuneration outcomes.
We welcome your feedback on our remuneration practices and disclosures, and look forward to your continued support at our AGM in November.
Penny Bingham-Hall
Chair of the Remuneration & Organisation Committee
BlueScope Steel Limited – FY2018 Directors’ Report
Page 23
BlueScope Steel Limited – FY2018 Directors’ Report
Page 24
CONTENTS
Remuneration Report Snapshot ........................................................................................................................................................................................... 26
1. Executive Remuneration Changes ................................................................................................................................................................................ 28
2. Business Performance ................................................................................................................................................................................................... 30
3. Performance and Remuneration Outcomes .................................................................................................................................................................. 31
4. Remuneration Governance ............................................................................................................................................................................................ 34
5. Executive Remuneration ................................................................................................................................................................................................ 36
6. Executive Remuneration Tables .................................................................................................................................................................................... 39
7. Related party Transactions............................................................................................................................................................................................ 42
8. Non-executive Director remuneration .......................................................................................................................................................................... 43
The Directors of BlueScope Steel Limited present the Remuneration Report prepared in accordance with section 300A of the Corporations Act
2001 for the Company and the consolidated entities for the year ended 30 June 2018. 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.
This Report outlines the remuneration strategy, framework and other conditions of employment for the Key Management Personnel (KMP) of the
Company, and sets out the role and accountabilities of the Board and relevant Committees that support the Board on these matters. In this report,
KMP include those members of the Executive Leadership Team who have the authority and responsibility for planning, directing and controlling
the activities of the Group.
KEY MANAGEMENT PERSONNEL
Name
Senior Executives
Mr Paul O'Malley
Mr Mark Vassella
Ms Tania Archibald
Mr Sanjay Dayal
Mr Charlie Elias
Mr Pat Finan
Mr John Nowlan
Ms Gretta Stephens
Non-executive Directors
Mr John Bevan
Ms Penny Bingham-Hall
Mr Ewen Crouch AM
Mr Ken Dean
Ms Rebecca Dee-Bradbury
Mr Daniel Grollo
Mr Lloyd Jones
Position
Managing Director & CEO (until 31 December 2017)1
Managing Director & CEO (from 1 January 2018)
Chief Executive BlueScope Australia and New Zealand (until 31 December 2017)
Chief Financial Officer (from 1 March 2018)2
Chief Executive, NS BlueScope (until 28 February 2018)3
Chief Executive, NS BlueScope (from 1 March 2018)
Chief Financial Officer (until 28 February 2018)
Chief Executive, BlueScope Buildings
Chief Executive, Australian Steel Products (from 1 January 2018)4
Chief Executive, New Zealand Steel and Pacific Islands (from 25 June 2018)5
Chairman of the Board
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Ms Jennifer Lambert
Non-Executive Director (from 1 September 2017)6
1) Mr O’Malley ceased to be KMP on 31 December 2017, and ceased full time employment with the Company on 23 February 2018. See Section 1: Executive Remuneration Changes
2) Ms Archibald was appointed Chief Financial Officer on 1 March 2018 and became KMP at this date.
3) Mr Dayal ceased to be KMP on 28 February 2018 and subsequently left the Company on 30 June 2018.
4) Mr Nowlan was appointed Chief Executive Australian Steel Products on 1 January 2018 and became KMP at this date.
5) Ms Stephens was appointed Chief Executive New Zealand Steel and Pacific Islands on 25 June 2018 and became KMP at this date.
6) Ms Lambert was appointed a Non-Executive Director of the Company on 1 September 2017.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 25
CONTENTS
Remuneration Report Snapshot ........................................................................................................................................................................................... 26
1. Executive Remuneration Changes ................................................................................................................................................................................ 28
2. Business Performance ................................................................................................................................................................................................... 30
3. Performance and Remuneration Outcomes .................................................................................................................................................................. 31
4. Remuneration Governance ............................................................................................................................................................................................ 34
5. Executive Remuneration ................................................................................................................................................................................................ 36
6. Executive Remuneration Tables .................................................................................................................................................................................... 39
7. Related party Transactions............................................................................................................................................................................................ 42
8. Non-executive Director remuneration .......................................................................................................................................................................... 43
The Directors of BlueScope Steel Limited present the Remuneration Report prepared in accordance with section 300A of the Corporations Act
2001 for the Company and the consolidated entities for the year ended 30 June 2018. 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.
This Report outlines the remuneration strategy, framework and other conditions of employment for the Key Management Personnel (KMP) of the
Company, and sets out the role and accountabilities of the Board and relevant Committees that support the Board on these matters. In this report,
KMP include those members of the Executive Leadership Team who have the authority and responsibility for planning, directing and controlling
the activities of the Group.
KEY MANAGEMENT PERSONNEL
Position
Name
Senior Executives
Mr Paul O'Malley
Mr Mark Vassella
Ms Tania Archibald
Mr Sanjay Dayal
Mr Charlie Elias
Mr Pat Finan
Mr John Nowlan
Ms Gretta Stephens
Non-executive Directors
Mr John Bevan
Ms Penny Bingham-Hall
Mr Ewen Crouch AM
Mr Ken Dean
Ms Rebecca Dee-Bradbury
Mr Daniel Grollo
Mr Lloyd Jones
Managing Director & CEO (until 31 December 2017)1
Managing Director & CEO (from 1 January 2018)
Chief Executive BlueScope Australia and New Zealand (until 31 December 2017)
Chief Financial Officer (from 1 March 2018)2
Chief Executive, NS BlueScope (until 28 February 2018)3
Chief Executive, NS BlueScope (from 1 March 2018)
Chief Financial Officer (until 28 February 2018)
Chief Executive, BlueScope Buildings
Chief Executive, Australian Steel Products (from 1 January 2018)4
Chief Executive, New Zealand Steel and Pacific Islands (from 25 June 2018)5
Chairman of the Board
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Ms Jennifer Lambert
Non-Executive Director (from 1 September 2017)6
REMUNERATION REPORT SNAPSHOT
OBJECTIVE AND GUIDING PRINCIPLES
E
V
I
T
C
E
J
B
O
S
E
L
P
I
C
N
I
R
P
To pay fairly for delivering on our strategy and to create value over time in the
eyes of internal and external stakeholders.
RETENTION
Keeps the right people
OWNERS
Encourages executives to
behave like owners
STRATEGY
Enables the delivery of
the strategy
FAIR
Feels fair over the cycle
for all stakeholders
SIMPLE
Remuneration framework can
be easily explained
REMUNERATION FRAMEWORK
FIXED PAY
Salary and other benefits
(including statutory superannuation)
SHORT TERM INCENTIVE
Annual incentive opportunity
delivered in cash, equity or a
mixture of both
(as elected by each executive)
ALIGNMENT RIGHTS
Three year incentive opportunity
delivered through share rights, with
vesting dependent on achievement
of threshold measures
PERFORMANCE MEASURES
Considerations:
Skills, experience, accountability.
Role and responsibility.
Market benchmarking around 55th
percentile against peer group noted at
Section 5.1.
Financial Performance (50% of total):
Group underlying Return on Invested
Capital (ROIC) (2/3).
Cash flow from operations (1/3).
Zero Harm (5% of total):
Gateway of no fatalities and LTIFR <1
MTIFR
Strategic objectives (45% of total):
Measures based on the execution and
implementation of strategic business
priorities.
values).
Gateway Condition:
Adherence to ‘Our Bond’ (company
Vesting Conditions:
Minimum 10% rolling three-year
average underlying ROIC.
Average debt leverage of Net Debt to
EBITDA ratio of <1.0x over three years.
REMUNERATION STRATEGY/
PERFORMANCE LINK
Set to attract and retain experienced and
capable leaders.
Drive and reward the achievement of
annual growth and performance targets.
Significant proportion of outcomes are
subject to the achievement of financial
targets.
Threshold, target and stretch levels for
each measure are set by the Board to
ensure that they are both challenging yet
meaningful.
The Board has the discretion to adjust
STI outcomes up or down to ensure that
individual outcomes are appropriate.
Achieve shareholder alignment through
equity ownership by executives
Awards vest on achievement of hurdles
that are set at a threshold level and are
expected to vest regularly.
The plan incentivises executives to
behave as owners of the business,
providing the optimum form of
shareholder alignment.
The measures are set to ensure the
Group is well placed to weather
downturns in the cycle.
CHANGES IN FY2018
New MD & CEO’s fixed pay was set at
15% below his predecessor.
New Executive Leadership Team
appointments (including Mr Elias) were
set based on competitive benchmarking
and capability & experience of
individuals.
Reduction in overall STI opportunity by
at least one third.
Given the reduction in STI opportunity
and the equivalent increase in long term
deferral through the Alignment Rights
(of three years), there is no additional
deferral of STI.
Replaces performance rights granted
under the previous LTI plan.
Underlying ROIC and Net Debt to
underlying EBITDA ratio replace the
relative TSR and CAGR EPS measures in
the prior LTI plan.
No re-testing provisions.
Total quantum has been reduced, to
reflect the greater potential for vesting.
1) Mr O’Malley ceased to be KMP on 31 December 2017, and ceased full time employment with the Company on 23 February 2018. See Section 1: Executive Remuneration Changes
2) Ms Archibald was appointed Chief Financial Officer on 1 March 2018 and became KMP at this date.
3) Mr Dayal ceased to be KMP on 28 February 2018 and subsequently left the Company on 30 June 2018.
4) Mr Nowlan was appointed Chief Executive Australian Steel Products on 1 January 2018 and became KMP at this date.
5) Ms Stephens was appointed Chief Executive New Zealand Steel and Pacific Islands on 25 June 2018 and became KMP at this date.
6) Ms Lambert was appointed a Non-Executive Director of the Company on 1 September 2017.
TOTAL REMUNERATION
Overall, total remuneration is designed to attract and retain capable and experienced executives, reward them for creating long term, sustainable
value and provide a direct link between the interests of executives and shareholders.
MINIMUM SHAREHOLDING REQUIREMENT
Non-executive Directors: 100% of base fees | MD & CEO: 200% of fixed pay | Executive KMP: 100% of fixed pay
BlueScope Steel Limited – FY2018 Directors’ Report
Page 25
BlueScope Steel Limited – FY2018 Directors’ Report
Page 26
REMUNERATION REPORT SNAPSHOT
TOTAL REMUNERATION CHANGES FROM FY2017
The de-emphasis on STI coupled with increased frequency of payout inherent in the Alignment Rights results in a reduction in maximum
performance pay levels for the MD & CEO of 41% compared to the previous MD & CEO.
MD & CEO
FY2017 ($)
MD & CEO
from 1 January
2018 ($)
%
5
1
2,116,000
2,228,000
2,878,000
1,800,000
1,200,000
1,800,000
41% reduction compared to
MD & CEO FY2017 package
Reduction in fixed
pay for the MD & CEO from 1
January 2018
Former LTI
(allocated at face value)
Fixed pay
Maximum STI
Alignment Rights
(allocated at face value)
Represents the reduction in
performance pay quantum
FY2017 ($)
1,000,000
790,000
700,000
FY2018 ($)
1,000,000
530,000
660,000
21% reduction
O
E
C
&
D
M
P
M
K
E
L
P
M
A
S
37.5%
37.5%
25.0%
Fixed pay
Alignment
Rights
STI
30.1%
45.7%
24.2%
FY2018 STI OUTCOMES
Safety
There were no fatalities in FY2018, and LTIFR was 0.62, meeting the gateway
conditions for our safety objective. While MTIFR was 5.38, an improvement on
FY2017, it was below the threshold of 5.18 and accordingly no STI was awarded for
this measure.
Cash Flow
The performance of cash flow was between target and stretch in FY2018.
Underlying ROIC
We delivered strong underlying ROIC in FY2018, achieving a ROIC of 20% which was
a stretch level of performance.
FY2018 LTI OUTCOMES
• The FY2014 LTI was retested and the remainder of the award vested.
• The FY2015 LTI was tested and vested in full.
• The FY2016 LTI was tested against the EPS hurdle at the end of FY2018 and achieved above the maximum. The relative TSR hurdle will be tested
following the release of the FY2018 Remuneration Report and the result disclosed in the FY2019 Report.
BlueScope Total Shareholder Return
(1)
Relative TSR ranking against peer group
Proportion of award vested
(2)
FY2014 LTIP
169.6%
93rd percentile
100%
FY2015 LTIP
129.2%
95th percentile
100%
(1)
(2)
Absolute TSR measured over the period 1 September 2013 to 31 August 2017 for FY2014 LTIP and 1 September 2014 to 31 August 2017 for the FY2015 LTIP
The peer group consists of the ASX100
BlueScope Steel Limited – FY2018 Directors’ Report
Page 27
WHAT’S CHANGED?
WHY?
In addition, the new framework will provide more value to shareholders through:
improving alignment of shareholder and executive outcomes from a higher weighting to equity in the mix of total reward combined with
doubling the minimum shareholding requirements for executives.
reduced volatility in executive reward outcomes.
less cost to shareholders due to an overall reduction in executive remuneration.
a continued focus on sustainable long-term earnings, measured by three-year average Underlying ROIC.
1,800,000
1,200,000
1,800,000
41% reduction compared to
MD & CEO FY2017 package
Reduction in fixed
pay for the MD & CEO from 1
January 2018
Former LTI
(allocated at face value)
Alignment Rights
(allocated at face value)
Represents the reduction in
performance pay quantum
Fixed pay
Maximum STI
STI
1. EXECUTIVE REMUNERATION CHANGES
REVIEW OF REMUNERATION FRAMEWORK
The Board believes that executive remuneration is a key enabler of the delivery of the Group’s strategy for the benefit of shareholders, customers,
employees and our communities. After extensive internal and external consultation, the Board determined that an incentive plan which has less
extreme peaks and troughs whilst enabling greater share ownership would better align executive and shareholder interests. The framework was
supported by shareholders and approved at the 2017 AGM.
reducing the impact of cyclicality in business performance.
The FY2018 remuneration framework will support the delivery of BlueScope’s strategy by aligning reward outcomes based on:
maintaining cost control, debt management, and balance sheet integrity.
growing the business and delivering ROIC and cash flow targets annually.
REMUNERATION REPORT SNAPSHOT
TOTAL REMUNERATION CHANGES FROM FY2017
The de-emphasis on STI coupled with increased frequency of payout inherent in the Alignment Rights results in a reduction in maximum
performance pay levels for the MD & CEO of 41% compared to the previous MD & CEO.
2,116,000
2,228,000
2,878,000
37.5%
37.5%
MD & CEO
FY2017 ($)
MD & CEO
from 1 January
2018 ($)
%
5
1
O
E
C
&
D
M
P
M
K
E
L
P
M
A
S
FY2018 STI OUTCOMES
25.0%
Fixed pay
Alignment
Rights
24.2%
FY2018 LTI OUTCOMES
• The FY2014 LTI was retested and the remainder of the award vested.
• The FY2015 LTI was tested and vested in full.
• The FY2016 LTI was tested against the EPS hurdle at the end of FY2018 and achieved above the maximum. The relative TSR hurdle will be tested
following the release of the FY2018 Remuneration Report and the result disclosed in the FY2019 Report.
FY2017 ($)
1,000,000
790,000
700,000
30.1%
45.7%
FIXED PAY
FY2018 ($)
1,000,000
530,000
660,000
21% reduction
Safety
this measure.
Cash Flow
Underlying ROIC
There were no fatalities in FY2018, and LTIFR was 0.62, meeting the gateway
conditions for our safety objective. While MTIFR was 5.38, an improvement on
FY2017, it was below the threshold of 5.18 and accordingly no STI was awarded for
The performance of cash flow was between target and stretch in FY2018.
We delivered strong underlying ROIC in FY2018, achieving a ROIC of 20% which was
a stretch level of performance.
SHORT TERM INCENTIVE
ALIGNMENT RIGHTS
New MD & CEO’s pay is 15% lower than his
predecessor.
New Executive Leadership Team appointments
(and previous CFO increase) were set based on
competitive benchmarking and capability and
experience of individuals.
Opportunity reduced by at least one third.
Underlying ROIC now a key component of financial
hurdles which include threshold and stretch
performance.
Executives can elect to be paid STI in cash, equity
or a combination of both.
For FY2018, the MD & CEO elected to take his full
STI award in rights
Alignment rights replace the prior LTI plan.
Total quantum has been reduced to reflect the
greater potential for vesting
Requirement to adhere to Our Bond, the key
principles that guide the way we operate.
Relative TSR and CAGR EPS measures have been
replaced by:
minimum 10% rolling three year average
underlying ROIC
average net debt to EBITDA ratio of <1.0x
over three years
Retest provisions have been removed.
BlueScope Total Shareholder Return
Relative TSR ranking against peer group
Proportion of award vested
(1)
(2)
(1)
(2)
The peer group consists of the ASX100
Absolute TSR measured over the period 1 September 2013 to 31 August 2017 for FY2014 LTIP and 1 September 2014 to 31 August 2017 for the FY2015 LTIP
FY2014 LTIP
169.6%
93rd percentile
100%
FY2015 LTIP
129.2%
95th percentile
100%
SHAREHOLDING REQUIREMENT
The minimum shareholding requirement has been
increased:
from 100 per cent of base pay to 200 per cent
of fixed pay for the MD & CEO
from 50 per cent of base pay to 100 per cent
of fixed pay for other executive KMP.
Lower fixed pay for new MD & CEO reflects
market practice for the appointment of new CEOs.
Fixed pay will continue to be benchmarked
against BlueScope’s industry peer group.
Fixed pay for new KMP set with reference to the
competitive market, the role, and skills and
experience of each incumbent.
Retains an incentive component focused on the
delivery of annual growth, business performance
targets and safety.
Underlying ROIC performance is the key driver of
business performance.
Allows executives to choose the mix of cash or
equity for STI.
The key driver is to build executive share
ownership in order to align reward outcomes with
shareholder experience.
At threshold, the ROIC hurdle achieves top
quartile performance compared to major steel
companies, and median performance compared
with the ASX100.
The Net Debt to Underlying EBITDA ratio hurdle
ensures executives focus on sustainable
investment and balance sheet protection.
The focus on the two measures (and adherence to
Our Bond) are designed to ensure we are able to
weather downturns in the cycle.
The Board is able to reduce the quantum prior to
vesting to protect against unforeseen events and
anomalous outcomes.
The requirement for executives to build ownership
and hold shares is the most effective means of
aligning the interests of executives with those of
shareholders.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 27
BlueScope Steel Limited – FY2018 Directors’ Report
Page 28
EXECUTIVE LEADERSHIP CHANGES
MD & CEO Transition
Retirement of Mr O’Malley
In August 2017, Mr O’Malley announced his intention to retire as MD & CEO effective 31 December 2017.
Following his retirement as Managing Director and Chief Executive Officer on 31 December 2017, Mr
O’Malley continued to work out his notice period on a full-time basis to 23 February 2018.
From 24 February 2018, Mr O’Malley commenced a part-time employment agreement (up to two days per
month) with BlueScope to assist with the transition to the new MD & CEO, and to provide specialist advice
to the Group as required. Mr O’Malley receives a fixed pay of $5,000 per month (inclusive of
superannuation), and will not be entitled to any incentives. His part-time employment will cease on 28
September 2019. Mr O’Malley will continue to be subject to a non-compete restraint for 12 months after
ceasing employment with BlueScope. No termination payments will be made at that time.
Mr O’Malley did not receive an STI award in FY2018. No share rights were granted to Mr O’Malley in
FY2018 and no further share rights will be granted to Mr O’Malley in the future. Mr O’Malley’s unvested
share rights granted under previous Long Term Incentive Plans (LTIPs) will remain and will be subject to the
relevant performance hurdles before any vesting occurs.
From his appointment as MD & CEO on 1 January 2018, Mr Vassella is entitled to the following
remuneration:
Fixed pay of $1,800,000 (inclusive of superannuation)
Target STI opportunity of $800,000, and maximum STI opportunity of $1,200,000
LTI in the form of Alignment Rights opportunity (at face value) of $1,800,000
Mr Vassella’s STI and LTI have been pro-rated for FY2018 to reflect the period of employment as MD & CEO
and his prior role as Chief Executive BlueScope Australia & New Zealand.
Appointment of Mr Vassella
Other KMP Changes
Appointment of Chief
Financial Officer
Ms Archibald was appointed to the role of Chief Financial Officer from 1 March 2018, from her previous role
as Chief Financial Officer of BlueScope ANZ.
Appointment of Chief
Executive NS BlueScope
After 10 years as BlueScope Chief Financial Officer, Mr Elias was appointed Chief Executive of NS
BlueScope on 1 March 2018.
Chief Executive Australian
Steel Products
Mr Nowlan was appointed to the role of Chief Executive Australian Steel Products from 1 January 2018,
from his previous role of General Manager Manufacturing and General Manager New Zealand & Pacific
Islands. He also continued to act in the role of Chief Executive New Zealand and Pacific Islands until 24
June 2018.
Chief Executive New
Zealand & Pacific Islands
Ms Stephens was appointed to the role of Chief Executive New Zealand and Pacific Islands and commenced
on 25 June 2018. Ms Stephens joins BlueScope from New Zealand’s Aluminium Smelters, a joint venture
between Pacific Aluminium and Sumitomo Chemical Company.
Former Chief Executive NS
BlueScope
Mr Dayal moved from the role of Chief Executive NS BlueScope to the role of Chief Executive Strategy and
Optimisation effective 28 February 2018, and ceased to be KMP from this date. Mr Dayal subsequently left
the Group on 30 June 2018.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 29
2. BUSINESS PERFORMANCE
BlueScope’s performance in FY2018 demonstrates the Group’s clear and sustainable strategy across a complex and diverse business is working.
The businesses are generating strong cash earnings and the balance sheet is in good shape. Achievements for the year are set out below.
FY2018 GROUP FINANCIAL PERFORMANCE
(1)
(2)
(3)
Includes $32.1M one-off benefit from settlement of historical coal dispute (cash settlement and reversal of prior year provisions) and an unusually high $16.4M contribution
from BlueScope Properties Group
Includes contribution from BlueScope Properties Group
Includes unusual and one-off benefits of $743.1M.
FY2018 SEGMENT FINANCIAL PERFORMANCE – UNDERLYING EBIT3
Includes $32.1M one-off benefit from settlement of historical coal dispute (cash settlement and reversal of prior year provisions)
Includes an unusually high $16.4M contribution from BlueScope Properties Group
(1)
(2)
(3) Excludes Corporate and Eliminations underlying EBIT of ($120M)
The table and graph below summarises the Company’s performance for FY2018 and the previous four years.
Share price at end of period ($)
Dividend per Ordinary Share (cents)
Buybacks ($M)
Earnings per Share (cents)
FY2014
5.42
0
-
-14.8
FY2015
3.00
6
-
24.3
FY2016
6.37
6
-
62.1
FY2017
13.21
9
150
125.3
FY2018
17.26
14
300
281.8
1) Underlying earnings (NPAT and EBIT) are categorised as non-IFRS financial information prepared in accordance with ASIC Regulatory Guide 230 – Disclosing non-IFRS financial
information, issued in December 2011. Non-IFRS financial information while not subject to audit or review has been extracted from the financial report which has been audited by
our external auditors. Underlying adjustments have been considered in relation to their size and nature, to assist readers to better understand the financial performance of the
underlying business. These adjustments are assessed on a consistent basis from period to period and include both favourable and unfavourable items.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 30
3. PERFORMANCE AND REMUNERATION OUTCOMES
3.1 FIXED PAY ADJUSTMENTS
The new MD & CEO’s fixed pay was set at a level 15 per cent below that of his predecessor, reflecting the reward principles and the Board’s
desire to ensure pay levels reflect competitive benchmarking, and capability and experience of individuals in roles.
In FY2018, fixed pay continued to be frozen for all KMP, other than Mr Elias who received an increase in his role of CFO and a further adjustment
on appointment to his new role.
Fixed pay for executive appointments made throughout the year was set with reference to BlueScope’s comparator market, and the capability
and experience of the individuals.
3.2 SHORT TERM INCENTIVE (STI) OUTCOMES
The STI plan is designed such that a proportion of executives’ remuneration is at risk, to be delivered based on the achievement of performance
measures linked to annual business objectives. The STI scorecards for the MD & CEO for FY2018 are shown below, reflecting the proportion of
the year he spent as Chief Executive BlueScope Australia and New Zealand and as MD & CEO. The scorecards outline the weighting and results
of each of the STI performance measures that were set by the Board at the beginning of the financial year. Performance for each measure is
assessed on a range from threshold, being the minimum acceptable level of performance for which an award can be made, to stretch, being the
level at which outstanding performance justifies the maximum STI to be paid.
MD & CEO - 1 January to 30 June 2018
Objective
Target
Weighting
BlueScope Financials
Achievement
Result
Commentary
Underlying ROIC
35%
Stretch
70%
Free Cash Flow
Safety
MTIFR
Strategic Objectives
15%
5%
Aligned to business
strategy
45%
25%
0%
60%
Target to
stretch
Below
threshold
Target
Target to
stretch
Target
Target to
stretch
The Group delivered underlying ROIC for the year
ended 30 June 2018 of 20% which was at the
maximum hurdle for underlying ROIC
Free cash flow performance (excluding BlueScope
dividends and share buy-backs for the year) was
$731m, which was above target
No fatalities and LTIFR below 1.0, however the
MTIFR performance was 5.38 compared to the
threshold of 5.18
Create a step change In Felt Leadership on Safety,
with visible intervention on policy and practice
and demonstrated change from the Executive
Leadership Team.
Transition – ensure that no momentum is lost
through organisational change and that all teams
continue to deliver on the strategy.
Strategy Execution – Deliver a capital allocation
strategy to support the long term growth of the
organisation.
Strategy execution – implement corporate
strategy objectives delivering material benefits to
BlueScope.
Total Awarded
100%
145%
Note: total reduced to a maximum outcome of 145%
BlueScope Steel Limited – FY2018 Directors’ Report
Page 31
3. PERFORMANCE AND REMUNERATION OUTCOMES
3.1 FIXED PAY ADJUSTMENTS
The new MD & CEO’s fixed pay was set at a level 15 per cent below that of his predecessor, reflecting the reward principles and the Board’s
desire to ensure pay levels reflect competitive benchmarking, and capability and experience of individuals in roles.
In FY2018, fixed pay continued to be frozen for all KMP, other than Mr Elias who received an increase in his role of CFO and a further adjustment
Chief Executive BlueScope Australia and New Zealand – 1 July to 31 December 2017
Objective
Target
Weighting
BlueScope Financials
Achievement
Result
Commentary
Underlying ROIC
16.5%
Free Cash Flow
8.5%
Stretch
Target to
stretch
33%
14%
As above
As above
Fixed pay for executive appointments made throughout the year was set with reference to BlueScope’s comparator market, and the capability
BlueScope Australia and New Zealand Financials
Underlying ROIC
16.5%
Stretch
33%
Free Cash Flow
8.5%
Threshold to
target
Safety
MTIFR
5%
Below
threshold
Strategic Objectives
Aligned to
business
strategy
45%
Target to
stretch
Stretch
Target
Target
7%
0%
63%
BlueScope Australia and New Zealand achieved
underlying ROIC at stretch for the first half of the
financial year.
BlueScope Australia and New Zealand delivered free
cash flow above threshold for the first half of the
financial year.
No fatalities and LTIFR below 1.0, however the
MTIFR performance was 5.38 compared to the
threshold of 5.18.
BlueScope Australia and New Zealand safety
leadership.
Deliver cost savings associated with Australia
Steelmaking sustainability.
Deliver cost savings associated with New Zealand
Steelmaking sustainability.
Successful execution of strategy for Coated and
Painted Australia.
Total Awarded
100%
145%
Note: total reduced to a maximum outcome of 145%
The performance against the FY2018 STI objectives resulted in the individual awards shown below.
KMP
Mark Vassella
Tania Archibald3
John Nowlan3
Charlie Elias
Pat Finan
Gretta Stephens
Paul O'Malley
Sanjay Dayal3
% of maximum STI
achieved
Value of cash STI
for FY2018 ($)
Value of equity STI
for FY2018 ($)1
STI forfeited % of
maximum
Award as % of
FY2018 Fixed Pay2
97
97
97
97
93
-
-
85
-
124,676
228,375
560,957
394,917
-
-
323,282
846,356
-
-
-
-
-
-
-
3
3
3
3
7
-
-
15
56
41
51
51
51
-
-
45
1. The value of equity STI is valued in accordance with AASB 2 Share Based Payment.
2.
3. The value of the cash STI for FY2018 is pro-rated to reflect the period that Ms Archibald, Mr Nowlan and Mr Dayal were KMP.
Fixed pay includes Salary and Fees, Other and Superannuation as show in in section 6.1.
on appointment to his new role.
and experience of the individuals.
MD & CEO - 1 January to 30 June 2018
Target
Weighting
BlueScope Financials
Free Cash Flow
Safety
MTIFR
Strategic Objectives
15%
5%
Aligned to business
strategy
45%
3.2 SHORT TERM INCENTIVE (STI) OUTCOMES
The STI plan is designed such that a proportion of executives’ remuneration is at risk, to be delivered based on the achievement of performance
measures linked to annual business objectives. The STI scorecards for the MD & CEO for FY2018 are shown below, reflecting the proportion of
the year he spent as Chief Executive BlueScope Australia and New Zealand and as MD & CEO. The scorecards outline the weighting and results
of each of the STI performance measures that were set by the Board at the beginning of the financial year. Performance for each measure is
assessed on a range from threshold, being the minimum acceptable level of performance for which an award can be made, to stretch, being the
level at which outstanding performance justifies the maximum STI to be paid.
Objective
Achievement
Result
Commentary
Underlying ROIC
35%
Stretch
70%
ended 30 June 2018 of 20% which was at the
The Group delivered underlying ROIC for the year
maximum hurdle for underlying ROIC
Free cash flow performance (excluding BlueScope
25%
dividends and share buy-backs for the year) was
$731m, which was above target
No fatalities and LTIFR below 1.0, however the
0%
MTIFR performance was 5.38 compared to the
threshold of 5.18
Create a step change In Felt Leadership on Safety,
with visible intervention on policy and practice
and demonstrated change from the Executive
Leadership Team.
Transition – ensure that no momentum is lost
through organisational change and that all teams
60%
continue to deliver on the strategy.
Strategy Execution – Deliver a capital allocation
strategy to support the long term growth of the
Strategy execution – implement corporate
strategy objectives delivering material benefits to
organisation.
BlueScope.
Target to
stretch
Below
threshold
Target
Target to
stretch
Target
Target to
stretch
Total Awarded
100%
145%
Note: total reduced to a maximum outcome of 145%
BlueScope Steel Limited – FY2018 Directors’ Report
Page 31
BlueScope Steel Limited – FY2018 Directors’ Report
Page 32
3.3 LONG TERM INCENTIVE (LTI) OUTCOMES
In FY2016 the Board set EPS growth targets which at the time were considered very challenging levels. The target was set with reference to
long-term business plans and financial projections, market practice and consensus forecasts. The outstanding result reflects the hard work of the
leadership team in turning around our business. The Board is pleased that the growth in EPS at BlueScope has been so strong, and executives
can be rewarded for the achievement of this result through vesting of the EPS component of the FY2016 Long Term Incentive Plan. Outcomes for
the LTI plans tested during the year are shown in the table below.
Plan
Performance
Measure
Result
Proportion of total
award vested / to vest
Commentary
FY2014
Relative TSR against
the ASX 100
93rd percentile
100%
FY2015
Relative TSR against
the ASX 100
95th percentile
100%
CAGR EPS at 15% or
higher
74%
50%
FY2016
The performance condition was retested in
September 2017, following the release of the FY2017
Remuneration Report. Due to the result, 100 per cent
of the remaining 43.05 per cent of the award vested.
The performance condition for the FY2015 LTI plan
was tested in September 2017, following the release
of the FY2017 Remuneration Report. Due to the
result, 100 per cent of the award vested.
Awards under the FY2016 LTI plan are subject to TSR
and CAGR EPS hurdles. The CAGR EPS maximum was
15% which has been exceeded.
Relative TSR against
the ASX 100
To be tested in
September
2018
50%
The TSR hurdle will be tested following the release
of the FY2018 remuneration report and the result
disclosed at the AGM.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 33
3.3 LONG TERM INCENTIVE (LTI) OUTCOMES
4. REMUNERATION GOVERNANCE
In FY2016 the Board set EPS growth targets which at the time were considered very challenging levels. The target was set with reference to
long-term business plans and financial projections, market practice and consensus forecasts. The outstanding result reflects the hard work of the
leadership team in turning around our business. The Board is pleased that the growth in EPS at BlueScope has been so strong, and executives
can be rewarded for the achievement of this result through vesting of the EPS component of the FY2016 Long Term Incentive Plan. Outcomes for
the LTI plans tested during the year are shown in the table below.
Plan
Performance
Measure
Result
Proportion of total
award vested / to vest
Commentary
FY2014
Relative TSR against
the ASX 100
93rd percentile
100%
FY2015
Relative TSR against
the ASX 100
95th percentile
100%
CAGR EPS at 15% or
higher
74%
50%
FY2016
The performance condition was retested in
September 2017, following the release of the FY2017
Remuneration Report. Due to the result, 100 per cent
of the remaining 43.05 per cent of the award vested.
The performance condition for the FY2015 LTI plan
was tested in September 2017, following the release
of the FY2017 Remuneration Report. Due to the
result, 100 per cent of the award vested.
Awards under the FY2016 LTI plan are subject to TSR
and CAGR EPS hurdles. The CAGR EPS maximum was
15% which has been exceeded.
Relative TSR against
the ASX 100
To be tested in
September
2018
50%
The TSR hurdle will be tested following the release
of the FY2018 remuneration report and the result
disclosed at the AGM.
4.1 ROLE OF THE REMUNERATION AND ORGANISATION COMMITTEE
The Board oversees the BlueScope human resources strategy, both directly and through the Remuneration and Organisation Committee of the
Board (the Committee). The Committee consists entirely of independent Non-executive Directors.
The Committee seeks input from the MD & CEO and the Executive General Manager People, who attend Committee meetings, except where
matters relating to their own remuneration are considered.
Board
The Board is responsible for:
defining BlueScope’s remuneration strategy
determining the quantum of remuneration for Non-executive Directors and Executive
Directors.
The Board has overarching discretion with respect to any awards made under the Company’s
incentive plans.
Audit Committee
The Audit Committee supports the
ROC by:
reviewing earnings figures
which form the basis for STI
awards.
Risk & Sustainability Committee
The Risk & Sustainability
Committee supports the ROC by:
providing advice relating to
material risk issues, behaviours
and / or compliance breaches
that may affect deliberations.
Remuneration and Organisation Committee
(ROC)
The ROC is delegated responsibility by the Board
to review and make recommendations on:
the Human Resources strategy
monitoring and measuring culture
remuneration policies and framework for the
Company’s Directors and Executives
Executive Leadership Team succession
planning
Executive Leadership Team terms of
appointment
performance and remuneration outcomes for
the Executive Leadership Team
diversity and inclusion principles and
objectives.
Consultation with shareholders
and other stakeholders
Remuneration consultants and
other external advisors
Provide independent advice,
information and
recommendations relevant to
remuneration decisions.
In performing its duties and
making recommendations to the
Board, the Chairman of the ROC
seeks independent advice from
external advisors on various
remuneration related matters.
Any advice provided by external
advisors is used to assist the
Board – it is not a substitute for
the Board and ROC procedures.
Management
Provides information relevant to remuneration decisions and makes recommendations to
the ROC.
Obtains remuneration information from external advisors to assist the ROC (i.e. market
data, legal, tax and accounting advice).
Management may seek its own
independent advice with respect
to information and
recommendations relevant to
remuneration.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 33
BlueScope Steel Limited – FY2018 Directors’ Report
Page 34
4.2 INDEPENDENT REMUNERATION CONSULTANT
The Committee engages and considers advice from independent remuneration consultants where appropriate in relation to remuneration matters
and Director fees at BlueScope. Remuneration consultants are engaged by, and report directly to, the Committee. Potential conflicts of interest
are considered when remuneration consultants are selected and their terms of engagement regulate their level of access to, and require
independence from, BlueScope’s management. Any advice from external consultants is used as a guide, and is not a substitute for thorough
consideration of all the issues by the Committee. The Chairman of the Board does not participate in any discussions relating to the determination
of his own fees.
During FY2018, the Remuneration and Organisation Committee employed the services of PwC to provide information and advice on remuneration
strategy and structure including market practice which covers Executive KMP. No remuneration recommendations as defined in section 9B of
the Corporations Act 2001 were provided.
4.3 BOARD DISCRETION
The Committee and the Board consider it critical that they are able to exercise appropriate discretion in order to ensure that remuneration
outcomes for executives appropriately reflect the performance of the Group and individuals, and meet the expectations of shareholders. Some of
the ways that this discretion can be exercised are outlined below.
Forfeiture
In the event of serious misconduct by management which undermines the Company’s performance, financial soundness and/or reputation, the
Board has absolute discretion to cancel and withdraw any unvested STI or LTI awards that executives elect to take in cash or equity. These
events include misrepresentation or material misstatements due to errors, omissions or negligence.
Change of Control
The Board may permit Share Rights or Alignment Rights to vest if, at any time while there are Share Rights or Alignment Rights which have not
lapsed or vested, a takeover bid is made to acquire the whole of the issued ordinary share capital of the Company or a transaction is announced
by the Company which, if implemented, would result in a person owning all of the issued shares in the Company. The Company must permit the
Share Rights and Alignment Rights to vest if a person acquires more than 50 per cent of the issued share capital of the Company provided that
the Board determines that the performance hurdles have been satisfied as assessed at that time having regard to the shorter performance
period.
Variable reward outcomes
The Board retains the discretion to limit, defer or cancel any STI or LTI awards in exceptional circumstances, including determining that a
reduced award or even no award should be paid/vest.
In FY2018, the Board exercised this discretion in a small number of instances for senior leaders below KMP, forfeiting some or all of the LTI and
STI awards for a number of individuals.
4.4 SECURITIES TRADING POLICY
The BlueScope Securities Trading Policy prohibits employees from dealing in BlueScope securities while in possession of material non-public
information relevant to the entity. In addition, nominated employees, including KMP, are:
prohibited from dealing in BlueScope Steel Limited securities outside prescribed trading periods
prohibited from hedging or entering into any margin lending arrangement, or entering into any other encumbrances over the securities of
BlueScope Steel Limited at any time.
4.5 MINIMUM SHAREHOLDING REQUIREMENTS
A key principle for the design of the remuneration framework is to encourage executives to behave like owners. The Board believes that the
interests of all KMP should be closely aligned to those of shareholders through significant exposure to BlueScope Steel Limited’s share price and
dividends.
Accordingly, the following minimum shareholding requirements are in place:
the value of 100 per cent of fixed pay for non-executive directors
the value of 200 per cent of fixed pay for the MD & CEO
the value of 100 per cent of fixed pay for the Executive Leadership Team, including KMP.
The Executive Leadership Team, including KMP are expected to build their shareholding on a progressive basis over a reasonable period of time.
The Board regularly monitors the shareholding of KMP and executives. The newly introduced Alignment Rights plan is an important mechanism
to drive executive share ownership through the regular vesting of rights on the achievement of the performance hurdles.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 35
4.2 INDEPENDENT REMUNERATION CONSULTANT
The Committee engages and considers advice from independent remuneration consultants where appropriate in relation to remuneration matters
and Director fees at BlueScope. Remuneration consultants are engaged by, and report directly to, the Committee. Potential conflicts of interest
are considered when remuneration consultants are selected and their terms of engagement regulate their level of access to, and require
independence from, BlueScope’s management. Any advice from external consultants is used as a guide, and is not a substitute for thorough
consideration of all the issues by the Committee. The Chairman of the Board does not participate in any discussions relating to the determination
During FY2018, the Remuneration and Organisation Committee employed the services of PwC to provide information and advice on remuneration
strategy and structure including market practice which covers Executive KMP. No remuneration recommendations as defined in section 9B of
of his own fees.
the Corporations Act 2001 were provided.
4.3 BOARD DISCRETION
The Committee and the Board consider it critical that they are able to exercise appropriate discretion in order to ensure that remuneration
outcomes for executives appropriately reflect the performance of the Group and individuals, and meet the expectations of shareholders. Some of
the ways that this discretion can be exercised are outlined below.
Forfeiture
In the event of serious misconduct by management which undermines the Company’s performance, financial soundness and/or reputation, the
Board has absolute discretion to cancel and withdraw any unvested STI or LTI awards that executives elect to take in cash or equity. These
events include misrepresentation or material misstatements due to errors, omissions or negligence.
Change of Control
The Board may permit Share Rights or Alignment Rights to vest if, at any time while there are Share Rights or Alignment Rights which have not
lapsed or vested, a takeover bid is made to acquire the whole of the issued ordinary share capital of the Company or a transaction is announced
by the Company which, if implemented, would result in a person owning all of the issued shares in the Company. The Company must permit the
Share Rights and Alignment Rights to vest if a person acquires more than 50 per cent of the issued share capital of the Company provided that
the Board determines that the performance hurdles have been satisfied as assessed at that time having regard to the shorter performance
The Board retains the discretion to limit, defer or cancel any STI or LTI awards in exceptional circumstances, including determining that a
In FY2018, the Board exercised this discretion in a small number of instances for senior leaders below KMP, forfeiting some or all of the LTI and
period.
Variable reward outcomes
reduced award or even no award should be paid/vest.
STI awards for a number of individuals.
4.4 SECURITIES TRADING POLICY
The BlueScope Securities Trading Policy prohibits employees from dealing in BlueScope securities while in possession of material non-public
information relevant to the entity. In addition, nominated employees, including KMP, are:
prohibited from dealing in BlueScope Steel Limited securities outside prescribed trading periods
prohibited from hedging or entering into any margin lending arrangement, or entering into any other encumbrances over the securities of
BlueScope Steel Limited at any time.
4.5 MINIMUM SHAREHOLDING REQUIREMENTS
A key principle for the design of the remuneration framework is to encourage executives to behave like owners. The Board believes that the
interests of all KMP should be closely aligned to those of shareholders through significant exposure to BlueScope Steel Limited’s share price and
dividends.
Accordingly, the following minimum shareholding requirements are in place:
the value of 100 per cent of fixed pay for non-executive directors
the value of 200 per cent of fixed pay for the MD & CEO
the value of 100 per cent of fixed pay for the Executive Leadership Team, including KMP.
The Executive Leadership Team, including KMP are expected to build their shareholding on a progressive basis over a reasonable period of time.
The Board regularly monitors the shareholding of KMP and executives. The newly introduced Alignment Rights plan is an important mechanism
to drive executive share ownership through the regular vesting of rights on the achievement of the performance hurdles.
5. EXECUTIVE REMUNERATION
5.1 FIXED PAY
Fixed pay recognises the market value of an individual’s skills, experience, accountability and their expected sustained contribution in delivering
the requirements of their role. In order to attract and retain skilled leaders, BlueScope aims to maintain a competitive position for fixed pay –
around the 55th percentile of the peer group noted below. Fixed pay includes base pay and superannuation.
Remuneration Peer Group
The Board has selected (and reviews annually) a peer group of companies for the purposes of benchmarking remuneration that reflects the size
and complexity of BlueScope with similarities on one or more of the following dimensions: operate in multiple geographies, have manufacturing
or logistics operations in Australia, are involved in the building and construction industry, have similar number of employees, have similar
revenue, or similar market capitalisation on the ASX. The peer group is not solely based on market capitalisation, as the Board believes that this
would lead to unmanageable fluctuations in executive remuneration, and could result in an inability to attract and retain the skills required to
manage a business operating in the complex and volatile environment in which BlueScope operates globally.
The peer group for FY2018 remains the same as last year and is listed below:
Adelaide Brighton Ltd
AGL Energy Ltd
Amcor Ltd
Aurizon Holdings Ltd
Brambles Ltd
Boral Ltd
Caltex Australia Ltd
CIMIC Group Ltd
CSR Ltd
Downer EDI Ltd
Fletcher Building Ltd
Incitec Pivot Ltd
Lend Lease Corp Ltd
Orica Ltd
Origin Energy Ltd
Orora Ltd
Qantas Airways Ltd
South32 Ltd
WorleyParsons Ltd
5.2 SHORT TERM INCENTIVE (STI)
The following table summarises the STI plan that applied in FY2018.
Feature
Purpose
Description
To achieve BlueScope’s overall strategic objectives by motivating executives to deliver on annual team-
based outcomes.
Eligibility
All members of the Executive Leadership Team, including KMP Executives disclosed in this report.
Value/opportunity
Target STI levels are set having regard to appropriate levels in the market and are shown below.
% of fixed pay
MD & CEO
Other KMP Executives
Target
Maximum
44%
35%
67%
52.5%
Performance conditions
The performance measures and relative weightings for the FY2018 STI Plan are shown below:
Performance measures
MD & CEO
weighting
Other KMP
Executives
weighting
Financial
performance
Zero harm
Strategic
objectives
BSL underlying ROIC (2/3), Cash Flow from
Operations (1/3)
Business Unit underlying ROIC (2/3),
Cash Flow from Operations (1/3)
Safety performance measures, including LTIFR
and MTIFR
Performance measures based on results from the
execution and implementation of business
priorities included in the strategic plan
50%
0%
5%
45%
25%
25%
5%
45%
Financial Measures
Financial measures are selected in order to align with BlueScope’s annual budget, targets and longer-term
plan. They are designed to reinforce and drive business strategy.
Safety-related Measures
Safety remains BlueScope’s number one priority. A gateway of no fatality and a LTIFR less than one is in
place for the safety measure. If this is achieved, MTIFR improvement is assessed against targets set with
reference to the previous year’s performance.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 35
BlueScope Steel Limited – FY2018 Directors’ Report
Page 36
Feature
Description
For individual business units, a benchmark (Best practice LTIFR and MTIFR) is set at the highest business
level (NS BlueScope, BlueScope Buildings North America, China, North Star BlueScope Steel, New Zealand
& Pacific Islands or Australian Steel Products) based on the previous year’s results. Business Units whose
performance is worse than the best practice benchmark are required to maintain improvement targets
focused on output (LTIFR/MTIFR) measures. Business Units performing at or better than the best practice
benchmark can substitute output measures with input measures best suited to their individual
circumstances and drive improved performance.
Strategic Measures
The strategic measures vary by role and from year to year for each individual. They are primarily linked to
the successful achievement of material and strategic projects with long term impact on BlueScope’s
success. Projects can be either corporate or business unit driven.
Performance targets for the STI, including Threshold, Target and Stretch levels of performance, are set by
the Board at the beginning of the year for all Executive KMP. Threshold is the minimum level of
performance at which a payment can be made, and stretch is the level at which the maximum STI for that
measure is awarded. The Board takes care to set threshold, target and stretch performance at levels that
are challenging yet sufficiently motivating to drive executive performance towards the objectives.
Targets are set with reference to annual budgets and business plans, economic conditions and market
outlook, and are set with a range between threshold to stretch to enable outperformance to be rewarded.
All performance conditions under the STI are defined and measurable. The MD & CEO sets the targets and
determines the extent to which the targets have been met for the Executive Leadership Team, including
other Executive KMP, with consideration of the advice of the ROC. These outcomes are approved by the
ROC.
The Board, on recommendation from the ROC, approves the targets and assesses the performance
outcomes of the MD & CEO. The Board has adopted a rigorous process for assessing performance under
the STI plan, which includes verification of financial results by the Audit Committee.
The Board has discretion to adjust STI outcomes up or down to ensure that they accurately reflect the
achievement of results that are consistent with BlueScope’s strategic priorities, are in line with Our Bond
and enhance shareholder value.
Each Executive KMP may elect (at the beginning of the year) to take none, 50 per cent or 100 per cent of
their potential STI payment in equity, with the remainder in cash. The equity, if selected, is in the form of
rights, which are awarded based on face value at a price determined as the volume weighted average price
of BlueScope shares over the three month period to 31 August at the beginning of each financial year.
Given the reduction in STI opportunity from previous years, and the equivalent increase in long term
deferral through the Alignment Rights (of three years), there is no additional deferral of STI.
In FY2018 the MD & CEO elected for 100 per cent of his STI payment to be delivered in equity.
Target setting
Performance assessment
Payment/deferral
5.3 LONG TERM INCENTIVE (LTI)
The following table summarises the LTI plan that applied in FY2018.
Feature
Purpose
Description
LTI, in the form of Alignment Rights, rewards executives for the delivery of sustainable financial
performance over the cycle and aligns executive outcomes with the creation of value for shareholders. The
vesting conditions provide a minimum level at which the Board believes the Company will continue to
produce acceptable returns for shareholders through industry and economic cycles, and provides executives
with a more consistent award of shares if this performance is achieved.
Eligibility
All members of the Executive Leadership Team, including Executive KMP disclosed in this report.
Value/opportunity
The quantum of the Alignment Rights has been reduced compared to the prior LTI plan to reflect the
greater potential for payment (subject to performance conditions being met).
The LTI award level for the MD & CEO is 100 per cent of fixed pay and for other Executive KMP is 65 per
cent of fixed pay. The allocation of share rights is based on face value.
The quantum of LTI awards is calculated based on the percentage of fixed pay divided by the face value of
shares using the volume weighted average price over the three months prior to the commencement of the
performance period. No amount is payable by participants on exercise.
Instrument
Each Alignment Right vests into one fully paid ordinary BlueScope Steel Limited share subject to time and
performance conditions being met. No dividends are payable on unvested Alignment Rights.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 37
Feature
Description
Vesting conditions
Target setting
The hurdles for Alignment Rights are aligned with the delivery of sustainable earnings over a three-year
period. The vesting conditions are:
as a ‘gateway’ condition, to be eligible for any vesting, executives must conduct themselves in
accordance with Our Bond, with an individual assessment made by the Board each year
minimum 10% rolling three-year average Underlying Return on Invested Capital (ROIC), which
achieves our weighted average cost of capital (WACC), top quartile performance compared to major
steel companies, and median performance compared to the ASX100
average net debt to EBITDA ratio of <1.0x over three years, which ensures executives focus on
sustainable investment, and protection of the Company’s balance sheet.
If each of the above conditions is met, all Alignment Rights in the relevant year will vest. If they are not
achieved then no Rights will vest. Board discretion continues to apply to protect against unintended
outcomes.
There are no re-testing provisions under the Alignment Rights plan.
Targets for the Alignment Rights have been deliberately set at a level of minimum performance
expectations to deliver vesting to participants and alignment with shareholders through the performance
cycle. As a result, whilst the Board, on recommendation from the ROC, considers and approves the targets
at the commencement of the performance period, they are not expected to fluctuate significantly from year
to year. The plan is designed to encourage participants to focus on the key performance drivers which
underpin sustainable and consistent shareholder value and to achieve alignment through executive equity
ownership.
Performance assessment
The Board, on recommendation from the ROC, assesses the performance outcomes after the end of the
performance period.
Each participant is subject to an individual assessment of their conduct against Our Bond, which is
undertaken by the MD & CEO for the Executive Leadership Team (including KMP), and by the ROC in
respect of the MD & CEO. Performance against the financial measures includes verification of financial
results by the Audit Committee.
The Board has discretion to adjust LTI outcomes up or down to ensure that they accurately reflect the
achievement of results that are consistent with BlueScope’s strategic priorities, are in line with Our Bond
and enhance shareholder value.
Hedging
Executives are not permitted to hedge (such as ‘cap and collar’ arrangements) LTI awards.
5.4 EXECUTIVE SERVICE AGREEMENTS
The following table outlines the summary terms of employment for the MD & CEO and other executive KMP.
Role
Term of agreement
MD & CEO
Open
Other Executive KMP
Open
Notice period by
executive
Notice period by
Company
12 months
6 months
12 months
6 months
Termination Benefits
12 months fixed pay
12 months fixed pay
Agreements are also in place for executive KMP detailing the approach the Group 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.
Executives are also subject to restraints which will apply upon cessation of their employment to protect the business interests of BlueScope. No
separate amount is payable in relation to these restraints over and above the contractual entitlements outlined above.
The maximum payment on termination (including notice) is capped at 12 months fixed pay.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 38
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6.2 SHARE RIGHTS AWARDED AS REMUNERATION AND HOLDINGS
The numbers of rights over ordinary shares in the Company held during the financial year by each Director of BlueScope Steel Limited and other
KMP Executives, including their related parties, as well as the value of share rights granted and exercised, are set out in the tables which follow.
Vesting is subject to achieving challenging performance targets over a two to four year period consistent with the terms approved by
shareholders. During the year the following equity awards vested:
The FY2016 and FY2017 STI Plan were assessed at the end of FY2017 and 100% of the awards vested as a result of performance against
objectives. Full details of performance achievement were included in the FY2017 Remuneration Report.
The FY2014 and remainder of the FY2015 LTIP awards also vested in full reflecting the Company’s top quartile relative TSR performance during
the vesting periods.
There were no options or rights vested and unexercisable at the end of FY2018.
Share Rights holdings for FY2018
Balance at
30 June 2017
Granted in
year ended
30 June 2018 1
Vested and
exercised in
year ended
30 June 20182
Lapsed in
year ended 30
June 2018
Balance at
30 June 2018
Vested and
not yet
exercised in
year ended 30
June 2018
Total Share
Rights vested
in year ended
30 June 2018
Value of Share
Rights granted
during the year
at grant date 3
Value of Share
Rights exercised
during the year 4
Unvested at
30 June 2018
#
#
#
#
#
#
#
#
$
$
Executive Director
M R Vassella
KMP Executives
T Archibald 5
J Nowlan 5
S R Elias
P J Finan
G Stephens 6
Previous KMP
P F O'Malley 7
S Dayal 7
1,093,071
175,481
346,971
225,388
189,620
993,156
889,538
-
3,737,664
1,145,456
-
-
56,420
43,380
-
-
-
-
606,276
526,958
-
2,051,144
56,520
699,236
-
-
-
-
-
-
-
-
921,581
225,388
189,620
443,300
405,960
-
1,686,520
502,740
-
-
-
-
-
-
921,581
346,971
2,084,779
1,714,117
225,388
189,620
443,300
405,960
-
-
-
606,276
526,958
-
1,686,520
2,051,144
-
-
640,367
492,363
-
-
502,740
699,236
641,502
-
-
2,240,406
1,957,230
-
7,575,124
2,583,938
1) The number of share rights granted includes rights awarded under the FY2018 Long Term Incentive (LTI) Alignment Right Award which are subject to Company performance
hurdles. The MD & CEO also received share rights under the FY18 Short Term Incentive (STI) Award.
2) 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. Due to restrictions relating to awards
of equity in Singapore, Mr Dayal was awarded Cash Rights in 2014 which delivered a cash payment on vesting.
3) External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of share rights awarded in the year ended 30 June 2018. The
valuation has been made using the Black-Scholes Option Pricing Model (BSM) that includes a Monte Carlo simulation analysis.
4) Shares Rights vested during the year under the FY2016 & FY2017 STI Awards, FY2017 STI Award, FY2014 Long Term Incentive Plan and FY2015 Long Term Incentive Plan.
5) T Archibald and J Nowlan commenced as KMP effective 1 March 2018 and 1 January 2018 respectively. The opening balance is reflected on these dates.
6) G Stephens commenced as KMP effective 25 June 2018. G Stephens was not awarded any Share Rights in FY2018.
7) P O’Malley and S Dayal ceased to be KMP effective 31 December 2017 and 28 February 2018 respectively. The closing balance is reflected from these dates.
The table below sets out the details of each specific share right tranche and awards granted and vested during FY2018 for each executive KMP.
Number of
Share Rights
awarded
% vested in year
ended
30 June 2018
% forfeited in
year ended
30 June 2018
Share Rights
yet to vest
Financial year in
which awards
may vest
Date of grant
2018
Award Details
Executive Director
M R Vassella FY14 LTI Award (TSR) - 3 yr 1
FY15 LTI Award (TSR) - 3 yr 1
167,560
01-Sep-13
147,725
01-Sep-14
FY16 LTI Award (TSR) - 3 yr
186,525
26-Nov-15
FY16 LTI Award (EPS) - 3 yr
186,525
26-Nov-15
FY17 LTI Award (TSR) - 4 yr
186,525
26-Nov-15
FY17 LTI Award (EPS) - 4 yr
FY17 STI Award - 1 yr 1
186,525
26-Nov-15
127,111
01-Sep-16
FY18 LTI AR Award - 3 yr
102,770
01-Sep-17
FY18 STI Award - 1 yr
72,711
01-Sep-17
43.05
100
-
-
-
-
100
-
-
-
-
-
-
-
-
-
-
-
-
-
186,525
186,525
186,525
186,525
-
102,770
72,711
2018
2018
2019
2019
2020
2020
2018
2021
2019
BlueScope Steel Limited – FY2018 Directors’ Report
Page 40
2018
Award Details
KMP Executives
Number of
Share Rights
awarded
% vested in year
ended
30 June 2018
% forfeited in
year ended
30 June 2018
Share Rights
yet to vest
Financial year in
which awards
may vest
Date of grant
S R Elias
P J Finan
FY14 LTI Award (TSR) - 3 yr 1
FY15 LTI Award (TSR) - 3 yr 1
FY16 & FY17 STI Award - 2 yr 1
130,385
01-Sep-13
114,905
01-Sep-14
435,240
26-Nov-15
FY16 LTI Award (TSR) - 3 yr
96,720
26-Nov-15
FY16 LTI Award (EPS) - 3 yr
96,720
26-Nov-15
FY17 LTI Award (TSR) - 4 yr
96,720
26-Nov-15
FY17 LTI Award (EPS) - 4 yr
96,720
26-Nov-15
FY18 LTI AR Award - 3 yr
56,420
01-Sep-17
FY14 LTI Award (TSR) - 3 yr 1
FY15 LTI Award (TSR) - 3 yr 1
FY16 & FY17 STI Award - 2 yr 1
90,750
01-Sep-13
79,990
01-Sep-14
407,900
26-Nov-15
FY16 LTI Award (TSR) - 3 yr
90,645
26-Nov-15
FY16 LTI Award (EPS) - 3 yr
90,645
26-Nov-15
FY17 LTI Award (TSR) - 4 yr
90,645
26-Nov-15
FY17 LTI Award (EPS) - 4 yr
90,645
26-Nov-15
FY18 LTI AR Award - 3 yr
43,380
01-Sep-17
Previous KMP
P F O'Malley
FY14 LTI Award (TSR) - 3 yr 1
FY15 LTI Award (TSR) - 3 yr 1
FY16 & FY17 STI Award - 2 yr 1
FY16 LTI Award (TSR) - 3 yr
FY16 LTI Award (EPS) - 3 yr
FY17 LTI Award (TSR) - 4 yr
FY17 LTI Award (EPS) - 4 yr
568,126
500,885
1,305,680
421,630
421,630
421,630
421,630
14-Nov-13
01-Sep-14
26-Nov-15
26-Nov-15
26-Nov-15
26-Nov-15
26-Nov-15
S Dayal 2
FY14 LTI Award (TSR) - 3 yr 1
FY15 LTI Award (TSR) - 3 yr 1
FY16 & FY17 STI Award - 2 yr 1
150,315
01-Sep-13
132,525
01-Sep-14
502,000
26-Nov-15
FY16 LTI Award (TSR) - 3 yr
111,555
26-Nov-15
FY16 LTI Award (EPS) - 3 yr
111,555
26-Nov-15
FY17 LTI Award (TSR) - 4 yr
111,555
26-Nov-15
FY17 LTI Award (EPS) - 4 yr
111,555
26-Nov-15
FY18 LTI AR Award - 3 yr
56,520
01-Sep-17
43.05
100
100
-
-
-
-
-
43.05
100
100
-
-
-
-
-
43.05
100
100
-
-
-
-
43.05
100
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
96,720
96,720
96,720
96,720
56,420
-
-
-
90,645
90,645
90,645
90,645
43,380
-
-
-
421,630
421,630
421,630
421,630
-
-
-
111,555
111,555
111,555
111,555
56,520
2018
2018
2018
2019
2019
2020
2020
2021
2018
2018
2018
2019
2019
2020
2020
2021
2018
2018
2018
2019
2019
2020
2020
2018
2018
2018
2019
2019
2020
2020
2021
1)
Following year end and based on performance against targets, the Board approved vesting of share rights granted under the FY2014 LTI Award, FY2015 LTI Award and FY2016 &
FY2017 STI Award. Refer Section 3.3 for further details.
2) Due to restrictions relating to awards of equity in Singapore, S Dayal was awarded Cash Rights in FY2014 which delivered a cash payment on vesting.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 41
6.3 SHAREHOLDINGS IN BLUESCOPE STEEL LIMITED
The numbers of shares in the Company held during the financial year by each Director of BlueScope Steel Limited and other KMP of the Group,
including their personally related parties are set out below.
Name
Non-executive Directors
J A Bevan
D B Grollo
K A Dean
P Bingham-Hall
E G W Crouch
L H Jones
R P Dee-Bradbury
J Lambert 3
Executive Director
M R Vassella
KMP Executives
T Archibald 4
J Nowlan 4
S R Elias
P J Finan
G Stephens 4
Previous KMP
P F O'Malley 5
S Dayal 6
Ordinary shares held as at 30
June 2017
Received during the year on the
exercise of share rights1
Shares granted as
compensation
Net changes (other)2
Ordinary shares held as at
30 June 2018
52,746
38,447
40,488
57,834
32,500
42,000
27,300
-
344,368
11,250
239,131
315,043
241,699
-
683,172
24,878
-
-
-
-
-
-
-
-
346,971
-
-
606,276
526,958
-
2,051,144
634,525
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,580
-
-
-
-
4,245
-
4,100
(219,860)
-
(15,250)
(499,985)
(298,904)
-
(632,936)
-
55,326
38,447
40,488
57,834
32,500
46,245
27,300
4,100
471,479
11,250
223,881
421,334
469,753
-
2,101,380
659,403
1)
2)
3)
4)
5)
6)
Exercise of share rights awarded under the FY2014 Long Term Incentive Plan, FY2015 Long Term Incentive Plan and FY2016 & FY2017 STI Plan.
These amounts represent on market acquisitions and disposals of shares including shares sold to fund payment of income tax liabilities arising from vesting of share right
awards.
J Lambert was appointed to the Board with effect from 1 September 2017.
T Archibald, J Nowlan and G Stephens commenced as KMP effective 1 March 2018, 1 January 2018 and 25 June 2018 respectively. The opening shareholding is represented as
at these dates.
P F O'Malley retired as MD & CEO effective 31 December 2017. The shareholding is represented as at 31 December 2017.
S Dayal ceased to be a KMP effective 28 February 2018. The shareholding is represented as at 28 February 2018.
7. RELATED PARTY TRANSACTIONS
7.1 LOANS TO KEY MANAGEMENT PERSONNEL
There have been no loans granted to directors and executives or their related entities.
7.2 OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
In the normal course of business the Group occasionally enters into transactions with various entities that have directors in common with
BlueScope Steel Limited. Transactions with these entities are made on commercial arm’s length terms and conditions. The relevant directors do
not participate in any decisions regarding these transactions.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 42
8. NON-EXECUTIVE DIRECTOR REMUNERATION
8.1 POLICY AND APPROACH
Non-executive Directors receive a base fee in relation to their service
as a Director of the Company, and an additional fee for membership of,
or for chairing a Committee. The Chairman, considering the greater time
commitment required, receives a higher fee but does not receive any
additional payment for service on committees. There was no increase in
the base fees payable to Non-Executive Directors during FY2018.
As a result of changes to the legislation governing the payment of
superannuation, we have updated our remuneration policy to reflect a
Total Fixed Remuneration approach, being total fees inclusive of
superannuation. These fees are presented in the table opposite and
apply from 1 July 2018. It should be noted that this is not a change in
the total amount paid to Non-executive Directors, but a change in the
way that we communicate the applicable base fees and
superannuation.
Fees are normally reviewed annually on 1 January. Following a review
this year, the Board decided that there would be no increase in
Chairman or Director’s base fees. Effective 1 January 2018, Committee
fees were aligned for all Committees.
Role
Chairman1
Non-executive Director
Audit Committee
Chair
Member
Remuneration and Organisation Committee
Chair
Member
Health, Safety and Environment Committee
Chair
Risk and Sustainability Committee
Member
Chair
Member
Fees
effective
Jan 2018
$506,530
$178,030
$41,000
$21,000
$41,000
$21,000
$41,000
$21,000
$41,000
$21,000
1) Additional fees are not payable to the Chairman for membership of Committees
Non-executive Directors are expected to build a shareholding in the Company equivalent to one year’s base fees.
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 2018 amounted to $2,150,427 (FY2017 $1,841,879). This is reflective of
the change in Board headcount (one additional Director) and the introduction of the Risk and Sustainability Committee.
Compulsory superannuation contributions per Director are paid on behalf of each Director with no other retirement benefits provided.
corporation.
8.2 DIRECTORS’ REMUNERATION
Details of the audited remuneration for FY2018 for each Non-Executive Director of BlueScope are set out in the following table.
Name
Year
Non-executive Directors
Short-term benefits
Fees1
$
Non-monetary
$
Sub-total
$
Post-employment benefits 2
$
Total
$
J A Bevan
D B Grollo
K A Dean 3
P Bingham-Hall
E G W Crouch 3
L H Jones
R P Dee-Bradbury
J Lambert 4
Total 2018
Total 2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
486,000
479,224
215,500
206,481
232,373
213,990
230,265
207,990
239,104
193,990
198,000
193,990
218,000
211,485
176,284
-
1,995,526
1,707,150
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
486,000
479,224
215,500
206,481
232,373
213,990
230,265
207,990
239,104
193,990
198,000
193,990
218,000
211,485
176,284
-
1,995,526
1,707,150
20,049
19,616
20,049
19,416
20,049
19,616
20,035
19,607
20,049
18,429
18,810
18,429
20,049
19,616
15,811
-
154,901
134,729
506,049
498,840
235,549
225,897
252,422
233,606
250,300
227,597
259,153
212,419
216,810
212,419
238,049
231,101
192,095
-
2,150,427
1,841,879
1) There was no increase in Chairman or Director's base fees. Effective 1 January 2018, Committee fees were aligned for all Committees.
2) Non-executive Directors receive statutory superannuation contributions in line with the Superannuation Guarantee. No other post-employment benefits apply.
3) Additional fee was payable to K A Dean and E G W Crouch for the establishment of the Risk & Sustainability Committee.
4) J Lambert was appointed to the Board with effect from 1 September 2017.
OTHER MATTERS
ENVIRONMENTAL REGULATION
BlueScope's Australian manufacturing operations are subject to significant environmental reporting. Throughout its Australian operations in the
12 months to 30 June 2018, the Group notified relevant authorities of 5 incidents resulting in non-compliances. No penalty infringement notices
Boundary remediation has continued during FY2018 at the Group’s former Stainless Steel manufacturing site at Port Kembla, which had been
previously notified to the NSW EPA and declared by it to be "significantly contaminated”. This work will continue throughout FY2019. The NSW
EPA has confirmed that BlueScope’s other sites at Port Kembla, including the main Steelworks site, do not require regulation under the
contaminated land legislation. BlueScope will regularly report to the NSW EPA on the results of contamination monitoring at its Port Kembla
were received.
sites.
BlueScope submits annual reports under the National Greenhouse Gas and Energy Reporting Scheme (greenhouse gas emissions and energy
consumption for all Australian facilities), and the National Pollutant Inventory (substance emissions to air and water for a number of facilities).
Each year the Company publishes a Sustainability Report, which is available on our website. The report provides further details of the Group’s
environmental performance and initiatives.
INDEMNIFICATION AND INSURANCE OF OFFICERS
The Company 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 the Company along with the current Directors of
the Company (listed on page 22). Executive officers and employees of the Company and its related bodies corporate are also covered.
In accordance with Rule 21 of its Constitution, the Company 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 the Company 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 the Company or its subsidiaries as a trustee or as a Director, officer or employee of another
Current and previous Directors of the Company and the previous Chief Financial Officer and the Chief Legal Officer and Company Secretary have
entered into an Access, Insurance and Indemnity Deed (Deed) with the Company. The Deed addresses some or all of the matters set out in Rule 21
of the Constitution and includes, among other things, provisions requiring the Company to indemnify an officer 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 the period while they are in
office and seven years after ceasing to hold office. It is the Company’s practice that its employees should be protected from any liability they incur
as a result of acting in the course of their employment, while acting in good faith. In FY2018 the Company has paid reasonable legal costs incurred
by an officer of the Company acting in that capacity.
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.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement
agreement against claims by third parties arising from the audit. No payment has been made to indemnify Ernst & Young during or since the
financial year.
PROCEEDINGS ON BEHALF OF THE COMPANY
As at the date of this Report, there are no leave applications or proceedings made in respect of the Company or that a person has brought or
intervened in on behalf of the Company under section 237 of the Corporations Act 2001.
ROUNDING OF AMOUNTS
Amounts in the Directors' Report are presented in Australian dollars with values rounded to the nearest hundred thousand dollars, or in certain
cases, the nearest dollar, in accordance with the Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’
Reports) instrument 2016/191.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 43
BlueScope Steel Limited – FY2018 Directors’ Report
Page 44
8. NON-EXECUTIVE DIRECTOR REMUNERATION
8.1 POLICY AND APPROACH
Non-executive Directors receive a base fee in relation to their service
as a Director of the Company, and an additional fee for membership of,
Role
or for chairing a Committee. The Chairman, considering the greater time
commitment required, receives a higher fee but does not receive any
additional payment for service on committees. There was no increase in
the base fees payable to Non-Executive Directors during FY2018.
As a result of changes to the legislation governing the payment of
superannuation, we have updated our remuneration policy to reflect a
Total Fixed Remuneration approach, being total fees inclusive of
superannuation. These fees are presented in the table opposite and
apply from 1 July 2018. It should be noted that this is not a change in
the total amount paid to Non-executive Directors, but a change in the
way that we communicate the applicable base fees and
superannuation.
Fees are normally reviewed annually on 1 January. Following a review
this year, the Board decided that there would be no increase in
Chairman or Director’s base fees. Effective 1 January 2018, Committee
Chairman1
Non-executive Director
Audit Committee
Remuneration and Organisation Committee
Chair
Health, Safety and Environment Committee
Chair
Risk and Sustainability Committee
Chair
Member
Member
Member
Chair
Member
Fees
effective
Jan 2018
$506,530
$178,030
$41,000
$21,000
$41,000
$21,000
$41,000
$21,000
$41,000
$21,000
fees were aligned for all Committees.
1) Additional fees are not payable to the Chairman for membership of Committees
Non-executive Directors are expected to build a shareholding in the Company equivalent to one year’s base fees.
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 2018 amounted to $2,150,427 (FY2017 $1,841,879). This is reflective of
the change in Board headcount (one additional Director) and the introduction of the Risk and Sustainability Committee.
Compulsory superannuation contributions per Director are paid on behalf of each Director with no other retirement benefits provided.
8.2 DIRECTORS’ REMUNERATION
Details of the audited remuneration for FY2018 for each Non-Executive Director of BlueScope are set out in the following table.
Name
Year
Non-executive Directors
Short-term benefits
Fees1
$
Non-monetary
$
Sub-total
$
Post-employment benefits 2
$
Total
$
J A Bevan
D B Grollo
K A Dean 3
P Bingham-Hall
E G W Crouch 3
L H Jones
R P Dee-Bradbury
J Lambert 4
Total 2018
Total 2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
486,000
479,224
215,500
206,481
232,373
213,990
230,265
207,990
239,104
193,990
198,000
193,990
218,000
211,485
176,284
-
1,995,526
1,707,150
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
486,000
479,224
215,500
206,481
232,373
213,990
230,265
207,990
239,104
193,990
198,000
193,990
218,000
211,485
176,284
-
1,995,526
1,707,150
20,049
19,616
20,049
19,416
20,049
19,616
20,035
19,607
20,049
18,429
18,810
18,429
20,049
19,616
15,811
-
154,901
134,729
506,049
498,840
235,549
225,897
252,422
233,606
250,300
227,597
259,153
212,419
216,810
212,419
238,049
231,101
192,095
-
2,150,427
1,841,879
1) There was no increase in Chairman or Director's base fees. Effective 1 January 2018, Committee fees were aligned for all Committees.
2) Non-executive Directors receive statutory superannuation contributions in line with the Superannuation Guarantee. No other post-employment benefits apply.
3) Additional fee was payable to K A Dean and E G W Crouch for the establishment of the Risk & Sustainability Committee.
4) J Lambert was appointed to the Board with effect from 1 September 2017.
OTHER MATTERS
ENVIRONMENTAL REGULATION
BlueScope's Australian manufacturing operations are subject to significant environmental reporting. Throughout its Australian operations in the
12 months to 30 June 2018, the Group notified relevant authorities of 5 incidents resulting in non-compliances. No penalty infringement notices
were received.
Boundary remediation has continued during FY2018 at the Group’s former Stainless Steel manufacturing site at Port Kembla, which had been
previously notified to the NSW EPA and declared by it to be "significantly contaminated”. This work will continue throughout FY2019. The NSW
EPA has confirmed that BlueScope’s other sites at Port Kembla, including the main Steelworks site, do not require regulation under the
contaminated land legislation. BlueScope will regularly report to the NSW EPA on the results of contamination monitoring at its Port Kembla
sites.
BlueScope submits annual reports under the National Greenhouse Gas and Energy Reporting Scheme (greenhouse gas emissions and energy
consumption for all Australian facilities), and the National Pollutant Inventory (substance emissions to air and water for a number of facilities).
Each year the Company publishes a Sustainability Report, which is available on our website. The report provides further details of the Group’s
environmental performance and initiatives.
INDEMNIFICATION AND INSURANCE OF OFFICERS
The Company 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 the Company along with the current Directors of
the Company (listed on page 22). Executive officers and employees of the Company and its related bodies corporate are also covered.
In accordance with Rule 21 of its Constitution, the Company 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 the Company 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 the Company or its subsidiaries as a trustee or as a Director, officer or employee of another
corporation.
Current and previous Directors of the Company and the previous Chief Financial Officer and the Chief Legal Officer and Company Secretary have
entered into an Access, Insurance and Indemnity Deed (Deed) with the Company. The Deed addresses some or all of the matters set out in Rule 21
of the Constitution and includes, among other things, provisions requiring the Company to indemnify an officer 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 the period while they are in
office and seven years after ceasing to hold office. It is the Company’s practice that its employees should be protected from any liability they incur
as a result of acting in the course of their employment, while acting in good faith. In FY2018 the Company has paid reasonable legal costs incurred
by an officer of the Company acting in that capacity.
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.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement
agreement against claims by third parties arising from the audit. No payment has been made to indemnify Ernst & Young during or since the
financial year.
PROCEEDINGS ON BEHALF OF THE COMPANY
As at the date of this Report, there are no leave applications or proceedings made in respect of the Company or that a person has brought or
intervened in on behalf of the Company under section 237 of the Corporations Act 2001.
ROUNDING OF AMOUNTS
Amounts in the Directors' Report are presented in Australian dollars with values rounded to the nearest hundred thousand dollars, or in certain
cases, the nearest dollar, in accordance with the Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’
Reports) instrument 2016/191.
BlueScope Steel Limited – FY2018 Directors’ Report
Page 43
BlueScope Steel Limited – FY2018 Directors’ Report
Page 44
AUDITOR INDEPENDENCE DECLARATION
Ernst & Young was appointed as auditor for BlueScope at the 2002 Annual General Meeting.
AUDITOR INDEPENDENCE
The Auditor’s Independence Declaration for the year ended 30 June 2018 has been received from Ernst & Young. This is set out at page 49 of the
Directors’ Report.
NON-AUDIT SERVICES
Ernst & Young provided $1,023,000 of non-audit services during the year ended 30 June 2018, comprising:
$373,000 for taxation compliance services;
$383,000 for assurance services; and
$267,000 for 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.
J A BEVAN
Chairman
M VASSELLA
Managing Director and Chief Executive Officer
Melbourne
13 August 2018
BlueScope Steel Limited – FY2018 Directors’ Report
Page 45
The Auditor’s Independence Declaration for the year ended 30 June 2018 has been received from Ernst & Young. This is set out at page 49 of the
AUDITOR INDEPENDENCE DECLARATION
Ernst & Young was appointed as auditor for BlueScope at the 2002 Annual General Meeting.
AUDITOR INDEPENDENCE
Directors’ Report.
NON-AUDIT SERVICES
$373,000 for taxation compliance services;
$383,000 for assurance services; and
$267,000 for advisory services.
Ernst & Young provided $1,023,000 of non-audit services during the year ended 30 June 2018, comprising:
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.
J A BEVAN
Chairman
M VASSELLA
Managing Director and Chief Executive Officer
Melbourne
13 August 2018
BlueScope Steel Limited – FY2018 Directors’ Report
Page 45
46
BLUESCOPE STEEL
ANNUAL REPORT 2017/2018
Financial
REPORT
BlueScope Steel Limited ABN 16 000 011 058
Annual Financial Report - 30 JUNE 2018
Contents
Financial statements
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
About this report
Notes to the consolidated financial statements
Financial
Working capital
performance
and provisions
Invested capital
structure and
Group structure
Unrecognised
Other
items
information
1.Segment
information
receivables
and equipment
equivalents
6.Trade and other
12.Property, plant
15.Cash and cash
20.Subsidiaries
24.Contingencies
27.Share-based
Capital
financing
2.Revenue
7.Inventories
13.Intangible
16.Borrowings
21.Investment in
25.Commitments
28.Related party
3.Other income
8.Operating
14.Carrying value
17.Contributed
22.Investment in
26.Events
29.Parent entity
intangible assets
of non-financial
equity
joint ventures
occurring after
balance date
financial
information
assets
assets
4.Income tax
9.Trade and other
18.Reserves
23.Discontinued
payables
operations
5.Earnings (loss)
10.Provisions
19.Dividends
per share
and non-
controlling
interests
associates
Page
2
3
4
5
6
7
payments
transactions
30.Deed of cross -
guarantee
31.Financial
instruments and
risk
32.Remuneration
of auditors
33.Other
accounting
policies
67
68
11.Retirement
benefit obligations
Signed Reports
Directors' declaration
Independent audit report to the members
‐ 1 ‐
BlueScope Steel Limited ABN 16 000 011 058
Annual Financial Report - 30 JUNE 2018
Contents
Financial statements
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
About this report
Notes to the consolidated financial statements
Financial
performance
Working capital
and provisions
Invested capital
1.Segment
information
6.Trade and other
receivables
12.Property, plant
and equipment
Capital
structure and
financing
15.Cash and cash
equivalents
2.Revenue
7.Inventories
3.Other income
4.Income tax
5.Earnings (loss)
per share
8.Operating
intangible assets
9.Trade and other
payables
10.Provisions
11.Retirement
benefit obligations
13.Intangible
assets
14.Carrying value
of non-financial
assets
16.Borrowings
17.Contributed
equity
18.Reserves
19.Dividends
Signed Reports
Directors' declaration
Independent audit report to the members
Page
2
3
4
5
6
7
Group structure
Unrecognised
items
Other
information
20.Subsidiaries
and non-
controlling
interests
21.Investment in
associates
22.Investment in
joint ventures
23.Discontinued
operations
24.Contingencies
27.Share-based
payments
25.Commitments
26.Events
occurring after
balance date
28.Related party
transactions
29.Parent entity
financial
information
30.Deed of cross -
guarantee
31.Financial
instruments and
risk
32.Remuneration
of auditors
33.Other
accounting
policies
67
68
‐ 1 ‐
Statement of Comprehensive Income
BLUESCOPE STEEL LIMITED
FOR THE YEAR ENDED 30 JUNE 2018
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
Net impairment write-back (expense) of non-current assets
Freight on external despatches
External services
Net restructuring costs
Finance costs
Other expenses
Share of net profits of associates and joint venture partnerships
accounted for using the equity method
Profit before income tax
Income tax benefit (expense)
Profit from continuing operations
Profit (loss) from discontinued operations after income tax
Net profit for the year
Items that may be reclassified to profit or loss
Net gain (loss) on cash flow hedges
- Income tax (expense) benefit
Net gain (loss) on net investments in foreign subsidiaries
- Income tax (expense) benefit
Exchange fluctuations on translation of foreign operations attributable
to BlueScope Steel Limited
Exchange fluctuations transferred to profit on translation of
foreign operations disposed
Items that will not be reclassified to profit or loss
Actuarial gain (loss) on defined benefit superannuation plans
- Income tax (expense)
Exchange fluctuations on translation of foreign operations attributable
to non-controlling interests
Other comprehensive income for the year
Total comprehensive income for the year
Profit is attributable to:
Owners of BlueScope Steel Limited
Non-controlling interests
Total comprehensive income for the year is attributable to:
Owners of BlueScope Steel Limited
Non-controlling interests
Earnings per share for profit attributable to ordinary equity holders
of the Company from:
Continuing operations:
Basic earnings (loss) per share
Diluted earnings (loss) per share
Total operations:
Basic earnings (loss) per share
Diluted earnings (loss) per share
Notes
2
3
12, 13
14(f),22(e)
10(e)
16(f)
21(a),22(a)
4(a)
23(b)
18(a)
18(a)
18(a)
11(i)
20
20
Consolidated
2018
$M
11,526.3
42.0
113.9
(6,801.6)
(1,679.7)
(375.3)
216.0
(496.5)
(838.9)
(1.6)
(112.4)
(239.9)
32.6
1,384.9
270.0
1,654.9
(26.3)
1,628.6
3.5
(0.1)
32.9
(25.1)
77.8
0.2
(4.3)
(13.2)
29.6
101.3
1,729.9
1,569.1
59.5
1,628.6
1,639.6
90.3
1,729.9
*Restated
2017
$M
10,551.9
92.6
179.9
(6,096.5)
(1,636.2)
(378.9)
(94.2)
(473.3)
(874.1)
(15.2)
(90.2)
(231.4)
.
9.1
943.5
(181.7)
761.8
12.1
773.9
(4.2)
0.7
(15.8)
-
(48.3)
1.7
118.4
(36.2)
(13.0)
3.3
777.2
715.9
58.0
773.9
733.3
43.9
777.2
Notes
2018
Cents
*Restated
2017
Cents
5
5
5
5
285.8
279.8
281.8
275.8
127.4
123.7
125.3
121.6
*Certain amounts shown here have been restated to reflect retrospective changes made to discontinued operations (refer to note 23).
- 2 -
Statement of Financial Position
BLUESCOPE STEEL LIMITED
AS AT 30 JUNE 2018
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Operating intangible assets
Derivative financial instruments
Deferred charges and prepayments
Non-current assets classified as held for sale
x
Total current assets
Non-current assets
Trade and other receivables
Inventories
Operating intangible assets
Derivative financial instruments
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Deferred tax assets
Deferred charges and prepayments
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Deferred income
Derivative financial instruments
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Deferred tax liabilities
Provisions
Retirement benefit obligations
Deferred income
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits (losses)
Parent entity interest
Non-controlling interests
Total equity
- 3 -
Notes
15
6
7
8
31(d)
12(a)
6
7
8
31(d)
21,22
12
13
4(c)
9
16
10
31(d)
9
16
4(c)
10
11
17(a)
18
20
Consolidated
2018
$M
2017
$M
944.4
1,454.3
1,945.9
28.2
4.7
112.2
4,489.7
4.0
753.0
1,331.5
1,658.8
24.0
2.0
98.5
3,867.8
5.3
4,493.7
3,873.1
31.3
67.5
42.6
7.0
72.7
4,049.3
1,676.2
487.7
3.0
6,437.3
10,931.0
1,797.8
95.9
38.7
446.7
227.2
1.9
2,608.2
67.4
784.9
158.9
139.5
280.9
3.6
1,435.2
4,043.4
6,887.6
4,311.2
272.8
1,809.8
6,393.8
493.8
6,887.6
32.4
74.4
25.8
5.3
44.2
3,721.7
1,639.9
155.3
3.3
5,702.3
9,575.4
1,802.9
53.2
5.0
419.0
163.1
4.8
2,448.0
44.9
932.0
175.9
152.4
281.0
2.5
1,588.7
4,036.7
5,538.7
4,554.4
174.7
341.3
5,070.4
468.3
5,538.7
Balance at 30 June 2018
4,311.2
272.8
1,809.8
493.8
6,887.6
Statement of Changes in Equity
BLUESCOPE STEEL LIMITED
AS AT 30 JUNE 2018
Consolidated - 30 June 2018
x
Balance at 1 July 2017
Profit for the period
Other comprehensive income (loss)
Total comprehensive income
for the year
Transactions with owners in their
capacity as owners:
Issue of share awards
Share-based payment expense
Share buybacks
Dividends paid
Tax credit recognised directly in equity
Other
17(b),18(a)
18(a)
17(c)
17(b)
Consolidated - 30 June 2017
x
Balance at 1 July 2016
Profit for the period
Other comprehensive income (loss)
Total comprehensive income (loss)
for the year
Transactions with owners in their
capacity as owners:
Issue of share awards
Share-based payment expense
Share buybacks
Dividends paid
Tax credit recognised directly in equity
Other
17(b),18(a)
18(a)
17(c)
17(b)
Balance at 30 June 2017
Contributed
equity
$M
Reserves
$M
Retained
profits
$M
Notes
Non-
controlling
interests
$M
Total
$M
4,554.4
174.7
341.3
468.3
5,538.7
-
-
-
27.6
-
(300.3)
-
29.5
-
(243.2)
-
87.9
87.9
(27.6)
16.3
-
-
-
21.5
10.2
1,569.1
(17.4)
1,551.7
-
-
-
(61.7)
-
(21.5)
(83.2)
59.5
30.8
90.3
-
-
-
(64.9)
-
0.1
(64.8)
1,628.6
101.3
1,729.9
-
16.3
(300.3)
(126.6)
29.5
0.1
(381.0)
Contributed
equity
$M
Reserves
$M
Retained
profits
$M
Notes
Non-
controlling
interests
$M
Total
$M
4,688.1
224.9
(415.8)
488.1
4,985.3
-
(65.0)
(65.0)
(10.2)
24.0
-
-
-
1.0
14.8
174.7
715.9
82.4
798.3
-
-
-
(40.2)
-
(1.0)
(41.2)
341.3
58.0
(14.1)
43.9
-
-
-
(63.4)
-
(0.3)
(63.7)
773.9
3.3
777.2
0.5
24.0
(150.4)
(103.6)
6.0
(0.3)
(223.8)
468.3
5,538.7
-
-
-
10.7
-
(150.4)
-
6.0
(133.7)
4,554.4
- 4 -
Statement of Cash Flows
BLUESCOPE STEEL LIMITED
FOR THE YEAR ENDED 30 JUNE 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Associate dividends received
Interest received
Other revenue
Finance costs paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for disposal of subsidiary
Payments for property, plant and equipment
Payments for intangibles
Proceeds from sale of property, plant and equipment
Proceeds from sale of investments
Proceeds from sale of subsidiaries
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to Company's shareholders
Dividends paid to non-controlling interests in subsidiaries
Share buybacks
Net cash inflow (outflow) from financing activities
Net increase 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
Reconciliation of liabilities arising from financing activities
Financing arrangements
Non-cash financing activities
Consolidated
2018
$M
2017
$M
Notes
11,924.8
(10,647.3)
1,277.5
3.1
8.7
22.5
(104.7)
(66.4)
1,140.7
3.1
(395.4)
(14.5)
15.3
-
11.1
(380.4)
1,672.3
(1,826.9)
(61.7)
(64.9)
(300.3)
(581.5)
178.8
751.9
12.3
943.0
11,149.3
(9,813.0)
1,336.3
4.3
6.1
34.8
(90.8)
(158.3)
1,132.4
(55.1)
(368.7)
(14.3)
3.2
26.6
-
(408.3)
1,261.5
(1,516.2)
(40.2)
(63.4)
(150.4)
(508.7)
215.4
548.9
(12.4)
751.9
15(a)
3(a)(i)
3(a)(iii)
19(a)
17(c)
15
16(a)
16(c)
16(g)
- 5 -
BlueScope Steel Limited
30 June 2018
ABOUT THIS REPORT
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 1(a) and the Directors'
Report.
The financial report of BlueScope Steel Limited for the year ended 30 June 2018 was authorised for issue in accordance with a
resolution of the Directors on 13 August 2018.
Basis of preparation
This financial report is a general purpose financial report, prepared by a for-profit entity, which:
• Has been prepared in accordance with the requirements of the Australian Corporations Act 2001 , Australian Accounting
Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
• Includes consolidated financial statements, incorporating the assets and liabilities of all subsidiaries of BlueScope Steel
Limited ('the Company' or 'parent entity') as at 30 June 2018 and the results of all subsidiaries for the year then ended.
BlueScope Steel Limited and its subsidiaries together are referred to in this financial report as 'the Group'.
• Has been prepared on a historical cost basis, except for derivative financial instruments which have been measured at
fair value.
• Is presented in Australian dollars with values rounded to the nearest hundred thousand dollars or in certain cases, the
nearest dollar, in accordance with the Australian Securities and Investments Commission Corporations (Rounding in
Financial/Directorsʼ Reports) Instrument 2016/191.
• Presents comparative information where required for consistency with the current year's presentation.
• Adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the
operations of the Group and effective for reporting periods beginning on or after 1 July 2017 as disclosed in note 33(a).
• Does not early adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet
effective as disclosed in note 33(b).
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are
presented in Australian dollars, which is BlueScope Steel Limited's functional and presentation currency.
Key estimates and judgements
In the process of applying the Group's accounting policies, management has made a number of judgements and applied
estimates of future events. The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed in the following notes:
Note 4
Note 10
Note 11
Note 12
Note 14
Note 27
Income tax
Provisions
Retirement benefit obligations
Property, plant and equipment
Carrying value of non-financial assets
Share-based payments
- 6 -
Contents of the notes to the consolidated financial statements
Page
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
Segment information
Revenue
Other income
Income tax
Earnings (loss) per share
Financial Performance
1
2
3
4
5
Working capital and provisions
Trade and other receivables
6
Inventories
7
Operating intangible assets
8
Trade and other payables
9
Provisions
10
Retirement benefit obligations
11
Invested capital
12
Property, plant and equipment
Intangible assets
13
Carrying value of non-financial assets
14
Capital structure and financing activities
15
Cash and cash equivalents
Borrowings
16
Contributed equity
17
Reserves
18
19
Dividends
Group structure
20
21
22
23
Unrecognised items
Contingencies
24
Commitments
25
26
Events occurring after balance date
Other information
27
28
29
30
31
32
33
Share-based payments
Related party transactions
Parent entity financial information
Deed of cross - guarantee
Financial instruments and risk
Remuneration of auditors
Other accounting policies
Subsidiaries and non-controlling interests
Investment in associates
Investment in joint ventures
Discontinued operations
8
12
12
13
16
17
19
19
19
20
22
25
27
28
31
32
36
38
39
40
44
45
47
48
50
51
52
54
55
57
59
63
64
- 7 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
FINANCIAL PERFORMANCE
This section of the notes includes segment information and provides further information on key line items relevant to financial
performance that the Directors consider most relevant, including accounting policies, key judgements and estimates relevant to
understanding these items.
1 Segment information
(a) Description of segments
The Group's operating segments are reported in a manner which is materially consistent with the internal reporting provided to the
chief operating decision maker. The Managing Director and Chief Executive Officer is responsible for allocating resources and
assessing performance of the operating segments.
Restated comparatives for retrospective changes
(i) As announced in June 2018, the China businesses now form part of the broader Building Products Asia and North America
segment (previously named Building Products ASEAN, North America & India). BlueScope Buildings previous segment is now
called Buildings North America.
(ii) BlueScope Buildings ASEAN has been included as part of discontinued operations following management's decision to close
the business on 12 March 2018.
Segment
Australian
Steel Products
North Star
BlueScope
Steel
Building
Products
Asia and
North America
Buildings North
America
New Zealand
& Pacific Steel
Description
• Produces and markets a range of high value coated and painted flat steel products for Australian building
and construction customers as well as providing a broader offering of commodity flat steel products.
• Products are primarily sold to the Australian domestic market, with some volume exported.
• Key brands include zinc/aluminium alloy coated - ZINCALUME® steel and galvanised and zinc/aluminium
alloy-coated pre-painted COLORBOND® steel.
• Main manufacturing facilities are at Port Kembla (NSW) and Western Port (Victoria).
• Segment also operates a network of roll-forming and distribution sites throughout Australia, acting as a major
steel product supplier to the building and construction, manufacturing, transport, agriculture
and mining industries.
• North Star BlueScope Steel is a single site electric arc furnace producer of hot rolled coil in Ohio US. It is
strategically located near its customers and in one of the largest scrap markets in North America.
• Technology leader in metal coated and painted steel building products, principally focused on the Asia-Pacific
region, with a wide range of branded products that include pre-painted COLORBOND® steel, zinc/aluminium
alloy-coated ZINCALUME® steel and the LYSAGHT® range of products.
• Segment has an extensive footprint of metallic coating, painting and steel building product operations in
Thailand, Indonesia, Vietnam, Malaysia, India and North America, primarily servicing the residential and
non-residential building and construction industries across Asia, and the non-residential building and
construction industry in North America.
• BlueScope operates in ASEAN and North America in partnership with Nippon Steel & Sumitomo Metal
Corporation (NSSMC) and in India with Tata Steel. Both are 50/50 joint ventures, with BlueScope controlling
and therefore consolidating the joint venture with NSSMC, and jointly controlling and therefore equity
accounting the joint venture with Tata Steel.
• This segment also includes Building Products China, comprising metal coating, painting, Lysaght operations
and Engineered Building Solutions.
• Leader in engineered building solutions (EBS), servicing the low-rise non-residential construction needs of
customers from an engineering and manufacturing base in North America.
• This segment also includes the BlueScope Properties Group which develops industrial properties,
predominantly warehouses and distribution centres.
• Consists of three primary business areas: New Zealand Steel, Pacific Steel and BlueScope Pacific Islands.
• New Zealand Steel is the only steel producer in New Zealand, producing slab, billet, hot rolled coil and value
added coated and painted products for both domestic and export markets across the Pacific Region.
Operations include the manufacture and distribution of the LYSAGHT® range of products in Fiji, New
Caledonia and Vanuatu.
• Pacific Steel is the sole producer of long steel products such as rod, bar, reinforcing coil and wire in
New Zealand.
• Segment also includes the Waikato North Head iron sands mine which supplies iron sands to the Glenbrook
Steelworks and for export.
- 8 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
1 Segment information (continued)
(b) Reportable segments
The segment information provided to the Managing Director and Chief Executive Officer for the reportable segments for the year
ended 30 June 2018 is as follows:
30 June 2018
Australian
Steel
Products
$M
North Star
BlueScope
Steel
$M
Building
Products
Asia &
North
America
$M
New
Zealand
&
Pacific
Steel
$M
Buildings
North
America
$M
Discontinued
Operations
$M
Total
$M
Total segment sales revenue
Intersegment revenue
Revenue from external customers
5,423.2
(303.9)
5,119.3
1,923.9
-
1,923.9
2,693.8
(97.2)
2,596.6
1,106.4
(0.9)
1,105.4
833.6
(81.1)
752.5
51.9
-
51.9
12,032.8
(483.1)
11,549.6
Segment EBIT
803.4
430.6
188.3
73.7
111.7
(25.3)
1,582.4
Depreciation and amortisation
Impairment expense (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
30 June 2017
182.0
54.9
74.1
19.5
44.4
(216.0)
-
-
-
-
-
3,716.6
-
2,206.3
29.6
2,115.8
0.3
742.5
2.7
733.9
1.2
8.0
-
38.3
376.1
(208.0)
32.6
9,553.4
-
-
65.8
1.5
5.4
-
72.7
170.4
1,238.1
26.9
385.6
132.0
670.0
22.8
372.9
36.9
387.5
0.1
25.5
389.1
3,079.6
Australian
Steel
Products
$M
North Star
BlueScope
Steel
$M
Building
Products
Asia &
North
America
$M
(Restated)
Buildings
North
America
$M
(Restated)
New
Zealand
&
Pacific
Steel
$M
Discontinued
Operations
$M
(Restated)
Total
$M
Total segment sales revenue
Intersegment revenue
Revenue from external customers
4,918.7
(271.7)
4,647.0
1,700.9
-
1,700.9
2,459.9
(138.6)
2,321.3
1,173.8
(1.2)
1,172.6
Segment EBIT
Depreciation and amortisation
Impairment expense of
non-current assets
Share of profit (loss) from associates
and joint venture partnerships
Total segment assets
Total assets includes:
Investments in associates and joint
venture partnerships
Additions to non-current assets (other
than financial assets and deferred tax)
Total segment liabilities
459.5
433.3
178.2
55.0
-
-
89.2
82.8
98.9
49.8
20.3
-
747.5
(59.5)
688.0
87.2
42.1
205.5
-
205.5
11,206.3
(471.0)
10,735.3
17.7
1,136.7
1.5
379.9
-
7.0
105.9
-
3,342.2
-
2,054.3
5.6
1,881.8
1.1
688.2
2.4
725.6
-
45.8
9.1
8,737.9
-
-
37.1
2.2
4.9
-
44.2
206.1
1,201.7
37.8
318.7
78.0
675.9
17.9
349.7
34.0
389.2
16.3
29.4
390.1
2,964.6
- 9 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
1 Segment information (continued)
(c) Geographical information
The Group's geographical regions are based on the location of markets and customers. Segment non-current assets exclude tax
assets and are allocated based on where the assets are located.
2018 Segment revenue ($M) 2017
636.1
309.1
296.6
427.8
4,299.5
4,049.9
3,838.1
3,763.3
Australia
Asia
North America
New Zealand
Other
2,255.1
2,409.6
2018 Non-current assets ($M) 2017
14.1
386.8
14.7
392.6
2,492.0
2,128.1
921.4
Australia
Asia
North America
New Zealand
Other
2,425.2
1,928.5
785.9
(d) 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 that is consistent with the statement of comprehensive income.
Note
23(b)
Consolidated
2018
$M
12,032.8
(483.1)
(51.9)
28.5
11,526.3
Restated
2017
$M
11,206.3
(471.0)
(205.5)
22.1
10,551.9
Total segment sales revenue
Intersegment eliminations
Discontinued operations
Other revenue
Total revenue from continuing operations
- 10 -
1 Segment information (continued)
(ii) Segment EBIT
Performance of the operating segments is based on EBIT which excludes the effects of Group financing (including interest
expense and interest income) and income taxes as these items are managed on a Group basis.
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Total segment EBIT
Intersegment eliminations
Interest income
Finance costs
Discontinued operations
Corporate operations
Profit before income tax from continuing operations
Consolidated
2018
$M
Restated
2017
$M
1,582.4
(11.0)
8.7
(112.4)
25.3
(108.1)
1,384.9
1,136.7
2.6
6.2
(90.2)
(17.7)
(94.1)
943.5
(iii) Segment assets and liabilities
Segment assets and liabilities are measured in a manner consistent with the financial statements and are allocated based on the
operations.
Cash and liabilities arising from borrowing and funding initiatives, including deferred purchase price on business acquisitions, are
not considered to be segment assets and liabilities respectively due to these being managed by the Group's centralised treasury
function.
Consolidated
2018
$M
2017
$M
9,553.4
(298.6)
487.7
944.4
244.1
10,931.0
8,737.9
(257.9)
155.3
753.0
187.1
9,575.4
Consolidated
2018
$M
2017
$M
3,079.6
(286.3)
880.8
38.7
158.9
4.0
167.7
4,043.4
2,964.6
(256.6)
985.2
5.0
175.9
7.0
155.6
4,036.7
Segment assets
Intersegment eliminations
Unallocated:
Deferred tax assets
Cash
Corporate operations
Total assets
Segment liabilities
Intersegment eliminations
Unallocated:
Borrowings
Current tax liabilities
Deferred tax liabilities
Accrued borrowing costs payable
Corporate operations
Total liabilities
- 11 -
2 Revenue
Sales revenue
Other revenue
Interest
Other
Total revenue from continuing operations
From discontinued operations
Sales revenue
Other revenue
Total revenue from discontinued operations
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
Note
2018
$M
*Restated
2017
$M
11,497.8
10,529.8
8.7
19.8
28.5
6.1
16.0
22.1
11,526.3
10,551.9
23(b)
51.9
-
51.9
205.5
0.2
205.7
*Certain amounts shown here have been restated to reflect retrospective changes made to discontinued operations (refer to note
23).
(a) Recognition and measurement
Sales revenue is measured at the fair value of the consideration received or receivable and is presented net of returns, trade
allowances, rebates and amounts collected on behalf of third parties.
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. This is
considered to have occurred when legal title of the product is transferred to the customer and the Group is no longer responsible
for the product. The point at which title is transferred is dependent upon the specific terms and conditions of the contract of sale.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met.
Contract revenue is recognised using the percentage of completion method.
Advance payments received from customers are recognised as a liability on the Statement of Financial Position as deferred
income, until goods have been sold or services rendered.
3 Other income
Net gain on disposal of non-current assets
Net gain on sale of subsidiaries
Net gain on sale of investment
Carbon permit income
Government grant - other
Insurance recoveries
Foreign exchange gains (net)
Litigation settlement
Notes
3(a)(i)(ii)
3(a)(iii)
Consolidated
2018
$M
2017
$M
5.1
2.1
-
29.0
0.8
-
5.0
-
42.0
-
26.7
26.6
18.0
0.6
3.6
3.2
13.9
92.6
- 12 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
3 Other income (continued)
(a) Net gain on sale of investments
(i) New Zealand Steel Mining
On 1 May 2017, BlueScope sold 100% of its share in New Zealand Steel Mining Limited, its Taharoa export iron sands
businesses, to Taharoa Mining Investments Limited (TMIL), recognising NZ$30.3M (A$26.7M) net gain in June 2017. As part of
completion, a NZ$1.3M(A$1.1M) working capital adjustment gain less additional selling costs was recognised during the year.
(ii) Buildings China
Current period includes a $1.0M (A$2.7M cash inflow) net gain recognised from the sale of Lysaght Chengdu, associated with the
restructuring of the engineered buildings businesses.
(iii) Castrip
On 8 July 2016, the Group sold its 47.5% interest in Castrip for US$20M (A$26.6M). The investment in Castrip was held at $Nil
value.
4 Income tax
(a) Income tax (benefit) expense
Current tax
Deferred tax
Hedge of net investment in subsidiaries
Adjustments for current tax of prior periods
Income tax (benefit) expense is attributable to:
Continuing operations
Discontinued operations
Total income tax (benefit) expense
(b) Reconciliation of income tax (benefit) expense to prima facie tax payable
Profit from continuing operations before income tax expense
Profit (loss) from discontinuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (2017 - 30.0%)
Tax effect of amounts which are not deductible/(taxable):
Manufacturing credits
Research and development incentive
Withholding tax
Non-taxable gains
Share of net profits of associates
US tax reform
Sundry items
Difference in overseas tax rates
Adjustments for current tax of prior periods
Temporary differences and tax losses not recognised
Deferred tax restatement
Previously unrecognised tax losses now recouped
Temporary differences and tax losses now recognised
Deferred tax assets now derecognised
Income tax (benefit) expense
Note
18(a)
Note
23(b)
4(b)(i)
Consolidated
2018
$M
2017
$M
134.8
(371.4)
(25.1)
(7.8)
(269.5)
(270.0)
0.5
(269.5)
154.0
24.9
-
2.9
181.8
181.7
0.1
181.8
Consolidated
2018
$M
*Restated
2017
$M
1,384.9
(25.8)
1,359.1
407.7
(9.0)
(2.9)
3.1
(14.7)
(11.0)
(76.3)
8.7
305.6
(8.0)
(7.8)
4.6
-
(178.9)
(390.5)
5.5
(269.5)
943.5
12.2
955.7
286.7
(9.9)
(4.8)
4.6
(23.6)
(2.6)
-
6.5
256.9
18.4
2.9
28.9
(5.2)
(131.4)
-
11.3
181.8
*Certain amounts shown here have been restated to reflect retrospective changes made to discontinued operations (refer to note 23).
- 13 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
4 Income tax (continued)
(i) US Tax reform
In late December 2017 the US tax reform bill was passed. BlueScope has benefited from a 7% rate reduction on US earnings in
FY 2018 with a 11% rate reduction thereafter. The tax rate reductions have necessitated a downwards revision to deferred tax
liabilities, with a corresponding reduction in income tax expense, which has been partially offset by a tolling charge and witholding
tax on distributable US foreign earnings in China. The one-off reduction to income tax expense for the year was $76.3M.
(c) Deferred tax assets (DTA) and liabilities (DTL)
The balance comprises temporary differences attributable to:
Employee benefits provision
Other provisions
Depreciation
Foreign exchange (gains) losses
Intangible assets
Inventory
Tax losses
Other
Movements:
Opening balance at 1 July
Charged/credited:
Charged (credited) to profit or loss
Charged (credited) to other comprehensive income
Exchange fluctuation
Closing balance at 30 June
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit
Consolidated
DTA
2018
$M
2017
$M
DTL
2018
$M
2017
$M
146.6
32.8
(249.5)
(22.6)
5.3
(2.4)
573.4
4.1
487.7
137.8
32.4
(224.2)
(10.5)
(4.2)
(20.0)
236.4
7.6
155.3
(42.1)
(6.7)
80.0
-
111.1
4.6
(7.3)
19.3
158.9
(66.6)
(6.0)
98.1
0.1
167.4
(4.3)
(21.4)
8.6
175.9
Consolidated
DTA
2018
$M
2017
$M
DTL
2018
$M
2017
$M
155.3
328.8
4.9
(1.3)
487.7
196.7
(15.6)
(25.5)
(0.3)
155.3
175.9
(42.6)
18.2
7.4
158.9
162.4
9.3
10.1
(5.9)
175.9
Consolidated
2018
$M
2017
$M
190.7
51.5
1,764.2
522.2
(i) Australia
As at 30 June 2018, $155.2M (2017: $124.2M) of Australian tax losses has been utilised within tax expense. At 30 June 2018, the
$325.7M remaining unbooked Australian tax assets were recognised through tax expense following ongoing improved operating
performance.The Australian consolidated tax Group has $1.84 billion of carried forward booked tax losses which are able to be
carried forward indefinitely.
(ii) New Zealand
For the year ended 30 June 2018, $21.1M (2017: $4.2M) of New Zealand deferred tax assets has been utilised within tax expense.
The Company has deferred the recognition of any further New Zealand tax credits until a sustainable return to taxable profits has
been demonstrated. New Zealand tax losses of A$127.5M (gross NZ$138.6M) are able to be carried forward indefinitely.
(iii) China
The Group also has unrecognised tax losses arising in China of $63.2M (2017: $43.4M) which are able to be offset against taxable
profits within five years of being incurred.
- 14 -
4 Income tax (continued)
(e) Unrecognised temporary differences
Temporary difference relating to investment in subsidiaries for which
deferred tax liabilities have not been recognised
Tax effect of the above unrecognised temporary differences
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
2018
$M
2017
$M
136.7
20.6
131.3
18.7
Overseas subsidiaries have undistributed earnings, which, if paid out as dividends, would be subject to withholding tax. An
assessable temporary difference exists, however no deferred tax liability has been recognised as the parent entity is able to control
the timing of distributions from its subsidiaries and is not expected to distribute these profits in the foreseeable future.
Unrecognised deferred tax assets for the Group totalling $156.1M (2017: $210.4M) in respect of temporary differences have not
been recognised as they are not probable of realisation.
(f) Recognition and measurement
Current taxes
The income tax expense for the period is the tax payable on the current period's taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to
unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred taxes
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not
recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the
Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not
reverse in the foreseeable future.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset when deferred tax balances relate to the same taxation authority and there is a legally
enforceable right to offset current tax assets and liabilities.
- 15 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
4 Income tax (continued)
(g) Key judgements and estimates
The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where
the final tax outcome of these matters is different from the amounts that were initially recorded, these differences will impact the
current and deferred tax provisions in the period in which the determination is made.
In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future forecast taxable profits are available to utilise those temporary differences and losses, and the tax losses continue to be
available having regard to the relevant tax legislation associated with their recoupment.
The Australian consolidated tax group has recognised a $412.1M deferred tax asset at 30 June 2018 (2017: $84.6M). As at 30
June 2018, $327.5M of previously unbooked Australian tax losses were fully recognised following continued improved operating
performances.
New Zealand Steel has recognised a NZ$56.4M deferred tax asset at 30 June 2018 (2017:NZ$50.4M). The utilisation of the
deferred tax asset amount depends upon future taxable amounts in excess of profits arising from the reversal of temporary
differences. The Group believes these amounts to be recoverable based on taxable income projections. The Group has deferred
the recognition of any further tax credits for New Zealand tax group until a sustainable return to taxable profits has been
demonstrated.
5 Earnings (loss) per share
Continuing operations
Discontinued operations
Earnings per share
(a) Earnings used in calculating earnings (loss) per share
Profit (loss) used in calculating basic earnings (loss) per share:
Continuing operations
Discontinued operations
(b) Weighted average number of shares used as denominator
Weighted average number of ordinary shares (Basic)
Weighted average number of share rights
Weighted average number of ordinary and potential
ordinary shares (Diluted)
(c) Earnings (loss) per share restated
Consolidated
Basic
Diluted
2018
Cents
Restated
2017
Cents
2018
Cents
Restated
2017
Cents
285.8
(4.0)
281.8
127.4
(2.1)
125.3
279.8
(4.0)
275.8
123.7
(2.1)
121.6
Consolidated
2018
$M
Restated
2017
$M
1,591.6
(22.5)
1,569.1
728.0
(12.1)
715.9
Consolidated
2017
Number
571,146,269
17,457,466
588,603,735
Note
23(b)
2018
Number
556,843,500
12,009,323
568,852,823
The comparative earnings (loss) per share calculations have been restated for the retrospective adjustment made to discontinued
operations (refer to note 23).
- 16 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
5 Earnings (loss) per share (continued)
(d) Calculation of earnings per share
(i) Basic earnings (loss) per share
Calculated as net profit (loss) attributable to the ordinary equity holders of the Company divided by the weighted average number
of ordinary shares outstanding during the period.
(ii) Diluted earnings (loss) per share
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.
WORKING CAPITAL AND PROVISIONS
This section of the notes provides further information about the Group's working capital and provisions, including accounting
policies and key judgements and estimates relevant to understanding these items.
6 Trade and other receivables
Trade receivables
Provision for impairment of trade receivables
Loans to related parties - associates
Workers compensation receivables
Sale of receivables
Other receivables
Provision for impairment of sundry receivables
(a) Provision for impairment of receivables
At 1 July
Additional provision recognised
Amounts used during the period
Unutilised provision written back
Exchange fluctuations
Notes
6(a)
28(d)
10(g)
6(c)
6(a)
Consolidated
2018
2017
Current
$M
Non-
current
$M
Current
$M
Non-
current
$M
1,321.3
(18.6)
1,302.7
1.2
-
70.4
80.4
(0.4)
151.6
1,454.3
-
-
-
-
20.5
-
10.8
-
31.3
31.3
1,190.4
(19.5)
1,170.9
1.3
-
81.5
77.8
-
160.6
1,331.5
-
-
-
-
24.0
-
8.4
-
32.4
32.4
Consolidated
2018
$M
2017
$M
19.5
10.1
(4.5)
(7.0)
0.9
19.0
18.0
7.0
(4.4)
(0.6)
(0.5)
19.5
- 17 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
6 Trade and other receivables (continued)
(b) Past due but not impaired
Jun-18 $M
Jun-17 $M
133.8
112.8
16.0
17.5
5.0
9.2
7.7
10.0
Within 30 days
31 - 60 days
61 - 90 days
Over 90 days
None of the non-current receivables are impaired or past due.
(c) Transferred financial assets that are derecognised
The Group has two receivables securitisation programs for $440M (2017: $460M) in total, maturing in September and December
2019. These programs involve the sale of relevant trade receivables across its Australian businesses, New Zealand Steel and
North Star BlueScope Steel. The business acts as a servicer under the programs and continues to collect cash from its customers
for which a fee is received.
The receivables securitisation programs qualify for derecognition of trade receivables in their entirety. The Group has transferred
the significant risks and rewards of the trade receivables. The Group maintains a continuing involvement in the de-recognised
financial assets by virtue of reserving requirements under the programs. The maximum exposure to loss for the Group from its
continuing involvement is $70.4M which is determined by the amount of reserves funded by BlueScope, less customer collections
during the month. Interest income is earned on this financial asset. Total net costs from selling the receivables and running the
program were $10.3M (2017: $11.1M).
In the event bad or doubtful debts exceed a specified limit, the Group will have to recognise the trade receivables on the balance
sheet. Current experience and bad debt history is below this level. The carrying amount of the trade receivables de-recognised as
at 30 June 2018 is $396.5M (2017: $377.4M) which is reflected by a decrease in trade receivables of $185.0M (2017: $148.9M),
an increase in sundry payables of $281.9M (2017: $310.0M) offset by a $70.4M (2017: $81.5M) increase in sundry receivables
which approximates fair value.
(d) Recognition and measurement
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. Trade receivables are generally due for settlement within 30 to 90 days.
Impairment of trade receivables
Debts which are known to be uncollectible are written off when identified. A provision for impairment is recognised when there is
objective evidence that amounts due may not be received. Significant financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade
receivable is impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the
present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term
receivables are not discounted if the effect of discounting is immaterial.
- 18 -
7 Inventories
At lower of cost and net realisable value:
Raw materials and stores
Work in progress
Finished goods
Spares and other
(a) Inventory expense
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
2018
2017
Current
$M
Non-
current
$M
Current
$M
Non-
current
$M
581.9
520.7
730.7
112.6
1,945.9
-
-
-
67.5
67.5
409.6
585.3
569.0
94.9
1,658.8
-
-
-
74.4
74.4
During the year, $8.8M (2017: $1.1M write-back) was recognised as a write-back for inventories carried at net realisable value. The
write-back has been included in ʻraw materials and consumables usedʼ in the profit and loss.
(b) Recognition and measurement
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost
comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being
allocated on the basis of normal operating capacity. Cost includes the transfer from equity of any gains/losses on qualifying cash
flow hedges relating to purchases of raw materials. Costs are assigned to inventory on the basis of weighted average costs. Costs
of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs to sell.
8 Operating intangible assets
Consolidated
2018
2017
Current
$M
Non-
current
$M
Current
$M
Non-
current
$M
Emission unit permits - not held for trading
28.2
42.6
24.0
25.8
(a) Recognition and measurement
Emission unit (EU) permits which are not held for trading are classified as intangible assets and are carried at cost. Intangible EU
assets are not amortised or subject to impairment as the economic benefits are realised from surrendering the rights to settle
obligations arising from the ETS.
9 Trade and other payables
Trade payables
Sale of receivables
Other payables
(a) Recognition and measurement
Note
6(c)
Consolidated
2018
2017
Current
$M
1,400.3
281.9
115.6
1,797.8
Non-
current
$M
-
-
67.4
67.4
Current
$M
1,381.7
310.0
111.2
1,802.9
Non-
current
$M
-
-
44.9
44.9
Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior
to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 to 62 days of recognition.
- 19 -
10 Provisions
Annual leave (d) (i)
Long service leave (d) (i)
Redundancy (d) (ii)
Other employee benefits (d) (iii)
Restructure (e)
Product claims (f)
Workers compensation (g)
Restoration and rehabilitation (h)
Carbon emissions (i)
Other provisions
Total provisions
(a) Movements in provisions
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
2018
2017
Current
$M
Non-
current
$M
Current
$M
Non-
current
$M
75.0
121.1
3.4
178.2
12.8
19.4
11.0
10.0
10.0
5.8
446.7
-
14.3
-
12.6
12.3
10.0
66.1
23.2
-
1.0
139.5
71.2
120.7
4.6
145.1
15.5
21.5
11.3
8.8
7.0
13.3
419.0
-
16.7
-
11.2
16.3
12.0
71.6
23.5
-
1.1
152.4
Movement in significant provisions, other than employee benefits, are set out below.
Consolidated - 2018 ($M)
Current and non-current
Carrying amount at start of the year
Additional provisions recognised
Unutilised provisions written back
Amounts used during the period
Exchange fluctuations
Transfers
Unwinding of discount
Carrying amount end of year
(b) Recognition and measurement
Restructure
Product
claims
Workers
compensation
Restoration
and
rehabilitation
31.8
16.3
(6.5)
(15.8)
0.2
(1.2)
0.3
25.1
33.5
12.0
(8.7)
(9.5)
0.4
1.2
0.5
29.4
82.9
14.0
(5.6)
(12.0)
0.2
(3.5)
1.1
77.1
32.3
3.4
(0.8)
(2.0)
-
-
0.3
33.2
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not
recognised for future operating losses. Where the Group expects some or all of a provision to be reimbursed, for example under
an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.
(c) Key judgements and estimates
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to
the passage of time is recognised as interest expense.
(d) Employee benefits
(i) Annual leave and long service leave
The liability for annual leave and long service leave expected to be settled after 12 months is measured as the present value of
expected future payments to be made in respect of services provided by employees up to the end of the reporting period.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using interest rates on high quality corporate bonds other than New Zealand where
Government bonds are used, with terms to maturity and currency that match, as closely as possible, the estimated future cash
outflows.
Employee benefit on-costs are recognised and included in employee benefit liabilities and costs when the employee benefits to
which they relate are recognised as liabilities.
- 20 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
10 Provisions (continued)
Amounts not expected to be settled within 12 months for current leave provisions
The current provision for long service leave includes all unconditional entitlements where employees have completed the required
period of service. The entire annual leave amount and vested portion of long service leave are presented as current. Since the
Group does not have an unconditional right to defer settlement, based on past experience, the Group does not expect all
employees to take the full amount of accrued annual leave and long service leave or require payment within the next 12 months.
Current annual leave and long service leave obligation expected to be settled after 12 months is $115.0M (2017: $112.9M).
(ii) Termination benefits
Liabilities for termination benefits, not in connection with a business combination or the closure of an operation, are recognised
when the Group is demonstrably committed to either terminating the employment of current employees according to a formal plan
without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy.
Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
The employee redundancy provision balance reflects a range of internal reorganisations. All redundancies are expected to take
effect within 12 months of the reporting date.
(iii) Short Term Incentive plans (STI)
The Group recognises a liability and an expense for STI plan payments made to employees. The Group recognises a provision
where past practice and current performance indicates that a probable constructive obligation exists.
(e) Restructuring costs
Liabilities arising directly from undertaking a restructuring program, defined as the closure of an operating site, are recognised
when a detailed plan of the restructuring activity has been developed and implementation of the restructuring program as planned
has commenced, by either entering into contracts to undertake the restructuring activities or making a detailed announcement
such that affected parties are in no doubt the restructuring program will proceed.
The restructuring provisions primarily relate to Australian Steel Products segment to cover estimated future costs of site closures.
The provisions are to be utilised over various terms up to a maximum period of 15 years.
(f) Product claims
Provision for claims is based on modelled data combining sales volumes with past experiences of repair and replacement levels in
conjunction with any specifically identified product faults.
(g) Workers compensation
In Australia and North America, the Company is a registered self-insurer for workers compensation. Provisions are recognised
based on calculations performed by an external actuary in relation to the expectation of future events. A contingent liability exists in
relation to guarantees given to various state workers compensation authorities, due to self-insurance prerequisites (refer to note
24(a)(ii)).
For the Group, an actuarially determined asset of $20.5M (2017: $24.0M) has been recognised for expected future
reimbursements associated with workers compensation recoveries from third parties. This amount is included in non-current other
receivables (refer to note 6) as there is no legal right offset against the workers compensation provision.
(h) Restoration and rehabilitation
Restoration and rehabilitation provisions includes $4.3M (2017: $4.2M) for New Zealand & Pacific Steel segment in relation to its
operation of its iron sands mine in Waikato North Head. The provision has been classified as non-current as the timing of
payments to remedy the site will not be made until cessation of its operation, which is not expected for many years.
The balance of the provision relates to leased sites that require rectification and restoration work at the end of their respective
lease periods.
Recognising restoration, remediation and rehabilitation provisions requires assumptions to be made as to the application of
environmental legislation, site closure dates, available technologies and engineering cost estimates. These uncertainties may
result in future actual expenditure differing from the amounts currently provided.
- 21 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
10 Provisions (continued)
(i) Carbon emissions
The Group is a participant in the New Zealand Governmentʼs uncapped Emissions Trading Scheme (ETS).
The emissions liability is recognised as a provision for carbon and is measured at the carrying amount of Emission Units (EUs)
held with excess units, if any, held for trading measured at the current market value of EUs. ETS costs passed through from
suppliers are included as part of the underlying cost of the good or service rendered. The liability is either included within trade
creditors or recorded as an emissions liability within the carbon provision account when an agreement has been reached with the
supplier to settle the ETS cost by transferring EUs.
When EUs are delivered to the government or a third party, the EU asset along with the corresponding carbon provision is
derecognised from the statement of financial position.
11 Retirement benefit obligations
(a) Defined contribution plans
The Group makes superannuation contributions to defined contribution funds in respect of the entityʼs employees located in
Australia and other countries. As at 30 June 2018, the defined contribution expense recognised in the profit and loss amounted to
$103.4M (2017: $87.4M).
The defined contribution plans receive fixed contributions from Group companies with the Group's legal obligation limited to these
contributions. Contributions to defined contribution funds are recognised as an expense as they become payable.
(b) Defined benefit plans
x
x
Country
New Zealand
Fund type
Description
Pension Fund and Retirement Savings Plan
(closed to new participants)
New Zealand employees are members of the
New Zealand Steel Pension Fund.
North America
Butler Manufacturing Base Retirement Plan
(closed to new participants)
Employees previously belonging to the Butler
Manufacturing Company are members of the
Butler Manufacturing Base Retirement Plan.
Defined benefit funds provide defined lump sum benefits based on years of service and final or average salary. Actuarial
assessments of the defined benefit funds are made at no more than three-yearly intervals, with summary assessments performed
annually. The last formal actuarial assessments were made of the New Zealand Steel Pension Fund as at 30 June 2018, and the
Butler Base Retirement Plan as at 1 January 2018.
(c) Statement of financial position amounts
Present value of the defined benefit obligation
Fair value of defined benefit plan assets
Net (liability) in the statement of financial position
Consolidated
2018
$M
2017
$M
(955.7)
674.8
(280.9)
(1,011.3)
730.3
(281.0)
- 22 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
11 Retirement benefit obligations (continued)
(d) Defined benefit funds to which BlueScope Steel employees belong
$M
Present value of the defined benefit obligation
Fair value of defined benefit plan assets
Net (liability) in the statement of financial
position
Defined benefit expense
Employer contribution
Average duration of defined benefit plan obligation
(years)
Significant actuarial assumptions
Discount rate (gross of tax)
Future salary increases (i)
New Zealand Pension
Fund
2018
(581.6)
415.1
(166.5)
13.7
13.1
2017
(588.1)
433.1
(155.0)
19.2
14.6
Butler Manufacturing
Base Retirement Plan
2017
(423.2)
297.2
2018
(374.1)
259.7
(114.4)
10.9
15.5
(126.0)
9.7
2.3
13.2
13.5
11.9
12.3
%
3.2
2.0
3.3
2.0
%
4.1
-
3.7
-
Total
2018
(955.7)
674.8
(280.9)
24.6
28.6
2017
(1,011.3)
730.3
(281.0)
28.9
16.9
(i) Building Products North America has frozen future salary increases for the purpose of contributions to the superannuation fund
as at 30 June 2013.
The net liability is not immediately payable. Any plan surplus will be realised through reduced future Group contributions.
(e) Categories of plan assets
Cash
Equity instruments
Debt instruments
Property
Other assets
(f) Actuarial assumptions and sensitivity
Discount rate
Salary growth rate
Consolidated
2018
$M
2017
$M
7.8
219.8
402.0
37.6
7.6
674.8
8.2
242.4
419.9
51.4
8.4
730.3
Impact on defined benefit
obligation
Increase in
assumption
$M
Decrease in
assumption
$M
Change in
assumption
+/-1%
+/-1%
(138.7)
16.7
158.3
(16.0)
The sensitivity analyses above have been determined based on a method that extrapolates the impact on the net defined benefit
obligation as a result of reasonable changes in key assumptions for the year ended 30 June 2018.
- 23 -
11 Retirement benefit obligations (continued)
(g) Reconciliations
Balance at the beginning of the year
Current service cost
Interest income (net of tax paid)
Interest cost
Actuarial losses (gains) arising from changes in
demographic assumptions
Actuarial losses (gains) arising from changes in
financial assumptions
Foreign currency exchange rate changes
Benefits paid
Allowance for contributions tax on net liability
Contributions by the Group
Tax on employer contributions
Contributions by plan participants
Plan expenses
Gain on curtailment - North America
Balance at the end of the year
(h) Amounts recognised in profit or loss
Current service cost
Contributions by plan participants
Net interest
Plan expenses
Allowance for contributions tax
Gain on curtailment - North America
Total included in employee benefits expense
Actual return on plan assets
(i) Amounts recognised in other comprehensive income
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
Plan assets
Defined benefit obligation
2018
$M
2017
$M
2018
$M
2017
$M
730.3
-
17.7
-
-
(0.8)
(3.1)
(90.7)
-
28.9
(4.3)
1.9
(5.1)
-
674.8
718.7
-
18.8
-
-
41.9
(9.9)
(48.7)
-
16.9
(4.8)
2.3
(4.9)
-
730.3
1,011.3
8.7
-
24.0
0.3
3.2
(3.2)
(90.7)
0.2
-
-
-
-
1.9
955.7
1,109.5
11.1
-
27.6
1.6
(78.1)
(13.2)
(48.7)
1.5
-
-
-
-
-
1,011.3
Consolidated
2018
$M
2017
$M
8.7
(1.9)
6.3
5.1
4.5
1.9
24.6
11.8
11.1
(2.3)
8.8
4.9
6.4
-
28.9
55.8
Consolidated
2018
$M
2017
$M
Actuarial gains (losses) recognised in other comprehensive income during the year - DB plans
Cumulative actuarial (losses) recognised in other comprehensive income
(4.3)
(412.7)
118.4
(408.4)
(j) Employer contributions
Employer contributions to the defined benefit section of the Group's plans are based on recommendations by the planʼs actuaries.
The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time
they become payable.
Total employer contributions expected to be paid for the year ending 30 June 2019 are $32.1M.
- 24 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
11 Retirement benefit obligations (continued)
(k) Recognition and measurement
A liability or asset in respect of defined benefit superannuation plans is measured as the present value of the defined benefit
obligation less the fair value of the superannuation fundʼs assets. The present value of the defined benefit obligation is based on
expected future payments which arise from membership of the fund to the end of the reporting period, calculated half yearly by
independent actuaries using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service.
Expected future payments are discounted using market yields on government or corporate bonds where a deep market exists, with
terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period
in which they occur, in other comprehensive income.
Past service costs are recognised in profit or loss, unless the changes to the superannuation plan are conditional on the
employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are
amortised on a straight-line basis over the vesting period.
Future taxes that are funded by the entity and are part of the provision of the existing benefit obligation (e.g. taxes on investment
income and employer contributions) are taken into account in measuring the net liability or asset.
This section of the notes provides further information about property, plant and equipment, non-current intangibles assets and
carrying amount of these non-financial assets, including accounting policies, key judgements and estimates relevant to
understanding these items.
INVESTED CAPITAL
12 Property, plant and equipment
Year ended 30 June 2018
Opening net book amount
Additions
Depreciation charge
Disposals
Disposal of subsidiary
Impairment (charge) write-back
Asset reclassifications
Assets reclassified to held for sale from PP&E (a)
Asset reclassifications to computer software
Exchange fluctuations
Closing net book amount
At 30 June 2018
Cost
Accumulated depreciation and impairment
Net book amount
Note
14(f)
Plant,
machinery
and
equipment
$M
Land and
Buildings
$M
743.9
9.2
(37.3)
(4.7)
(1.5)
(3.7)
10.8
1.5
-
26.2
744.4
2,977.8
365.4
(286.9)
(2.3)
-
211.8
(10.8)
-
(3.7)
53.6
3,304.9
Total
$M
3,721.7
374.6
(324.2)
(7.0)
(1.5)
208.1
-
1.5
(3.7)
79.8
4,049.3
1,495.3
(750.9)
744.4
10,968.8
(7,663.9)
3,304.9
12,464.1
(8,414.8)
4,049.3
Assets under construction included above:
0.6
309.0
309.6
- 25 -
12 Property, plant and equipment (continued)
At 1 July 2016
Cost
Accumulated depreciation and impairment
Net book amount
Year ended 30 June 2017
Opening net book amount
Additions
Depreciation charge
Disposals
Disposal of subsidiary
Impairment charge
Asset reclassifications
Assets reclassified to held for sale from PP&E (a)
Asset reclassifications to computer software
Exchange fluctuations
Closing net book amount
At 30 June 2017
Cost
Accumulated depreciation and impairment
Net book amount
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Land and
Buildings
$M
Note
Plant,
machinery
and
equipment
$M
Total
$M
14(f)
1,519.0
(714.5)
804.5
10,681.7
(7,652.1)
3,029.6
12,200.7
(8,366.6)
3,834.1
804.5
20.4
(39.9)
(0.4)
(3.1)
(16.7)
3.5
(5.3)
-
(19.1)
743.9
3,029.6
355.3
(288.0)
(4.4)
(1.4)
(69.3)
(3.5)
-
(3.5)
(37.0)
2,977.8
3,834.1
375.7
(327.9)
(4.8)
(4.5)
(86.0)
-
(5.3)
(3.5)
(56.1)
3,721.7
1,451.8
(707.9)
743.9
10,622.4
(7,644.6)
2,977.8
12,074.2
(8,352.5)
3,721.7
Assets under construction included above:
0.1
297.7
297.8
(a) Assets held for sale
Buildings China reclassified $4.0M (2017: $5.3M) from land and buildings to assets held for sale, associated with the restructuring
of the engineered building solutions businesses.
(b) Leases
Total property, plant and equipment includes the following amounts where the Group is a lessee under a finance lease:
Leasehold assets
Cost
Accumulation depreciation and impairment
Net book amount
(c) Sale and disposal of property, plant and equipment
Consolidated
2018
$M
2017
$M
184.6
(108.7)
75.9
195.4
(106.7)
88.7
Consolidated
2018
$M
2017
$M
Net (loss) on sale and disposal of property, plant and equipment
5.1
(2.3)
(d) Recognition and measurement
Property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment. Cost
includes expenditure that is directly attributable to the acquisition of the items. Cost also includes transfers from equity of any gains
or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
- 26 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
12 Property, plant and equipment (continued)
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of a replaced part is derecognised. All other repairs and maintenance are charged to profit or loss
during the reporting period in which they are incurred.
Depreciation
Property, plant and equipment is depreciated on a straight-line basis over their estimated useful lives or, in the case of leasehold
improvements and finance leases, the shorter lease term, unless there is reasonable certainty that the Group will obtain ownership
at the end of the lease term.
The useful lives of major categories of property, plant and equipment are as follows:
Category
Useful Life
Land
Buildings
Iron and steel making plant and machinery
Coating lines
Building components plant and equipment
Other plant and equipment
Not depreciated
30-40 years
20-40 years
20-30 years
12-18 years
5-15 years
Derecognition
Property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is expected to bring no
future economic benefits.
(e) Key estimates
The estimation of the useful lives of plant and machinery has been based on historical experience and judgement with respect to
technical obsolescence, physical deterioration and usage capacity of the asset in addition to any legal restrictions on usage. The
condition of the asset is assessed at least once a year and considered against the remaining useful life.
13 Intangible assets
Consolidated
Year 30 June 2018
Opening net book amount
Additions
Amortisation charge
Impairment charge
Reclassifications from PP&E
Exchange fluctuations
Closing net book amount
Patents,
trademarks
and other
rights
$M
Computer
software
$M
Customer
relation-
ships
$M
Other
intangible
assets
$M
Note
Goodwill
$M
14(f)
1,156.6
-
-
-
-
53.6
1,210.2
5.9
-
(0.6)
-
-
0.2
5.5
83.5
14.5
(21.6)
(0.1)
3.7
2.4
82.4
360.4
-
(28.4)
-
-
15.1
347.1
33.5
-
(1.7)
-
-
(0.8)
31.0
Total
$M
1,639.9
14.5
(52.3)
(0.1)
3.7
70.5
1,676.2
At 30 June 2018
Cost
Accumulated amortisation and impairment
Net book amount
1,725.3
(515.1)
1,210.2
21.6
(16.1)
5.5
355.9
(273.5)
82.4
491.0
(143.9)
347.1
41.1
(10.1)
31.0
2,634.9
(958.7)
1,676.2
- 27 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
13 Intangible assets (continued)
Consolidated
Notes
Goodwill
$M
Patents,
trademarks
and other
rights
$M
Computer
software
$M
Customer
relation-
ships
$M
Other
intangible
assets
$M
At 1 July 2016
Cost
Accumulated amortisation and impairment
Net book amount
Year 30 June 2017
Opening net book amount
Additions
Amortisation charge
Impairment charge
Reclassifications from PP&E
Exchange fluctuations
Closing net book amount
At 30 June 2017
Cost
Accumulated amortisation and impairment
Net book amount
(a) Recognition and measurement
14(f)
1,704.6
(502.1)
1,202.5
21.3
(14.4)
6.9
321.6
(230.8)
90.8
1,202.5
-
-
(12.0)
-
(33.9)
1,156.6
6.9
-
(0.9)
-
-
(0.1)
5.9
90.8
14.4
(20.3)
(3.2)
3.5
(1.7)
83.5
483.4
(82.5)
400.9
400.9
-
(29.6)
-
-
(10.9)
360.4
1,668.3
(511.7)
1,156.6
20.8
(14.9)
5.9
326.6
(243.1)
83.5
470.1
(109.7)
360.4
42.2
(6.8)
35.4
35.4
-
(1.7)
-
-
(0.2)
33.5
41.9
(8.4)
33.5
Total
$M
2,573.1
(836.6)
1,736.5
1,736.5
14.4
(52.5)
(15.2)
3.5
(46.8)
1,639.9
2,527.7
(887.8)
1,639.9
(i) Goodwill
Goodwill represents the excess of the cost to purchase a business less the fair market value of the tangible assets, identifiable
intangible assets and the liabilities obtained in the purchase. Goodwill is not amortised. Instead, goodwill is tested for impairment
annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses.
(ii) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a
business combination is their fair market value at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less amortisation and any impairment losses. Intangible assets
with finite lives are amortised on a straight line basis over their useful life. The amortisation period and method is reviewed at each
financial year end.
A summary of the useful lives of intangible assets is as follows:
Category
Patents, trademarks and other rights
Computer software
Customer relationships
Useful Life
Indefinite and finite (7-15 years)
Finite (3-10 years)
Finite (10-20 years)
(iii) Research and development
Research expenditure is recognised as an expense as incurred. For the year ended 30 June 2018, $24.7M (2017: $26.2M) was
recognised for research and development expenditure in the profit and loss. Costs incurred on development projects are
recognised as intangible assets when it is probable that the project will, after considering its commercial and technical feasibility,
be completed and generate future economic benefits and its costs can be measured reliably.
14 Carrying value of non-financial assets
(a) Recognition and measurement
The Group tests property, plant and equipment (note 12) and intangible assets with definite useful lives (note 13) when there is an
indicator of impairment. Goodwill and other intangible assets with indefinite useful lives are tested at least annually for any
impairment.
- 28 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
14 Carrying value of non-financial assets (continued)
For assets excluding goodwill, an assessment is made at each reporting period to determine whether there is an indication that
previously recognised impairment losses no longer exist or have decreased. A previously recognised impairment loss is reversed
only if there has been a change in the asset's recoverable amount since the last impairment loss was recognised. The reversal is
limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
(b) Allocation of goodwill and intangible assets with indefinite useful lives to cash generating units
Goodwill is allocated to the Groupʼs cash generating units (CGUs) for impairment testing purposes as follows:
Cash generating units
Reportable segments
Building Products North America
Buildings North America
North Star BlueScope Steel LLC
Buildings China
Total goodwill
Building Products Asia and North America
BlueScope Buildings North America
North Star BlueScope Steel
Building Products Asia and North America
2018
$M
3.8
297.9
905.2
3.3
1,210.2
2017
$M
3.6
284.7
865.0
3.3
1,156.6
The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from the
business combination in which the goodwill arose. In addition to goodwill, the Group has other intangible assets with indefinite
useful lives of $3.9M (2017: $3.8M) allocated to the Buildings North America CGU which primarily relates to the Varco Pruden
trade names acquired in February 2008. All of the above CGUs were tested for impairment at the reporting date.
(c) Key assumptions and estimates
The recoverable amount of each CGU is determined on the basis of value-in-use (VIU), unless there is evidence to support a
higher fair value less cost to sell. The following table describes assumptions on which the Group has based its projections when
determining the recoverable amount of each CGU.
Key assumptions
Future cash
flows
Basis of estimation
• VIU calculations use pre-tax cash flows, inclusive of working capital movements which are based on financial
projections approved by the Group covering a three-year period, being the basis of the Groupʼs forecasting
and planning processes, or up to five years where circumstances pertaining to a specific CGU support a
longer period.
• Cash flows beyond the projection period are extrapolated to provide a maximum of 30 years of cash flows
with adjustments where necessary to reflect changes in long-term operating conditions. No terminal value
is calculated.
Growth rate
• The growth rate used to extrapolate the cash flows for each CGU beyond the forecast period does not
exceed 2.5% (2017: 2.5%).
• The growth rate represents a steady indexation rate which does not exceed the Group's expectations of the
long-term average growth rate for the business in which each CGU operates.
Discount rate
Raw material
costs
Selling prices
• The discount rate applied to the cash flow projections has been assessed to reflect the time value of money
and the perceived risk profile of the industry in which each CGU operates.
• The base post-tax discount rates range from 7.8% to 8.9% (2017: 8.4% to 9.3%).
• Given the differing characteristics, currencies and geographical locations of the Group's CGUs, where
appropriate the base discount rate is adjusted by a country risk premium (CRP) to reflect country specific
risks. Such adjustments do not reflect risks for which cash flow forecasts have already been adjusted. The
CRP is derived from a range of externally sourced foreign country risk ratings.
• The adjusted post-tax discount rate is translated to a pre-tax rate for each CGU based on the specific tax rate
applicable to where the CGU operates.
• All foreign currency cash flows are discounted using a discount rate appropriate for that currency.
• Based on commodity price forecasts derived from a range of external commodity forecasters.
• Based on management forecasts, taking into account commodity steel price forecasts derived from a range
of external commodity forecasters.
Sales volume
• Based on management forecasts, taking into account external forecasts of underlying economic activity for
the market sectors and geographies in which each CGU operates.
AUD:USD and • Based on forecasts derived from a range of external banks.
NZD:USD
- 29 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
14 Carrying value of non-financial assets (continued)
(d) Cash generating units with significant goodwill
Buildings North America
Buildings North America is tested for impairment on a VIU basis using three year cash flow projections, followed by a long-term
growth rate of 2.5% for a further 27 years. Pre-tax VIU cash flows are discounted utilising a 10.3% pre-tax discount rate (2017:
13.3%).
At 30 June 2018 the recoverable amount of this CGU is 3.0 times (2017: 2.1 times) the carrying amount of $465.4M (2017:
$452.0M), including non-current assets and net working capital. This CGU is most sensitive to assumptions in relation to North
American non-residential building and construction activity. Taking into account external forecasts, the Group expects non-
residential building and construction activity to increase 3.8% per annum (2017: 4.4%) from the 2017/18 financial year over the
three-year projection period.
However, the timing and extent of this increase is uncertain. To illustrate the sensitivity of these assumptions, if they were to differ
such that the expected cash flow forecasts for Buildings North America were to decrease by 66% (2017: 51%) across the forecast
period, without implementation of mitigation plans, the recoverable amount would be equal to the carrying amount.
North Star BlueScope Steel LLC
The Company acquired a controlling interest in North Star BlueScope Steel LLC on 30 October 2015. This is tested for impairment
on a VIU basis using three year cash flow projections, followed by a long-term growth rate of 2.5% for a further 27 years. Pre-tax
VIU cash flows are discounted utilising pre-tax discount rate of 11.3% (2017: 13.6%).
At 30 June 2018 the recoverable amount of the CGU is 1.9 times (2017: 1.6 times) the carrying amount of $1,820.8M (2017:
$1,735.6M), including non-current assets and net working capital. This CGU is most sensitive to assumptions in relation to the
spread between North American hot rolled coil and purchased scrap prices. Taking into account external forecasts, the Group
expects the spread to decrease from the current historically high levels over the term of the three-year projection period. To
illustrate the sensitivity of these assumptions, if they were to decrease further, such that the expected cash flow forecasts for North
Star BlueScope Steel LLC were to decrease by 46% (2017: 37%) across the forecast period, without implementation of mitigation
plans, the recoverable amount would be equal to the carrying amount.
(e) Sensitivity of carrying amounts
The carrying value of property, plant and equipment of the Group is most sensitive to cash forecasts for the Group's largest CGU,
Australian Steel Products (ASP) and New Zealand & Pacific Steel (NZPac) as they are exposed to global steel macroeconomic
factors. The carrying amount of these CGUs is determined taking into account the key assumptions set out above.
For ASP, recognised external forecasters estimate the US dollar relative to the Australian dollar to remain around the average
2017/18 level and a decrease in Asian commodity steel prices relative to iron ore and coking coal costs. The Group believes that
the long term assumptions adopted are appropriate. ASP is exposed to variable macroeconomic factors and to illustrate the
sensitivity of these assumptions, if they were to differ such that the expected cash flow forecasts were to decrease by 58% (2017:
36%) across the forecast period, without implementation of mitigation plans, the recoverable amount would be equal to the
carrying amount.
For NZPac, recognised external forecasters estimate the US dollar relative to the New Zealand dollar to remain around the
average 2017/18 level and a decrease in global commodity steel prices relative to the average 2017/18. The Group believes that
the long term assumptions adopted are appropriate. NZPac is exposed to variable macroeconomic factors and to illustrate the
sensitivity of these assumptions, if they were to differ such that the expected cash flow forecasts were to decrease by 10% across
the forecast period, without implementation of mitigation plans, the recoverable amount would be equal to the carrying amount.
- 30 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
14 Carrying value of non-financial assets (continued)
(f) Recognised impairment charges (write-backs)
Cash generating units
2018
$M
2017
$M
Discount rates
2018 (%)
2017 (%)
Australian Steel Products - PP&E impairment writeback (i)
Building Products Indonesia - PP&E impairment (iii)
Buildings China - PP&E, goodwill and intangibles (iv)
Building Products India PP&E 23(e)
Net impairment (write-back) expense of non-financial assets from
continuing operations
Discontinued operations (ii) & (v)
Net impairment (write-back) expense recognised
(216.0)
-
-
-
(216.0)
8.0
(208.0)
-
50.3
43.9
4.7
98.9
7.0
105.9
12.7
-
-
-
-
-
-
13.7
14.8
13.0
-
-
13.5
-
(i) Australian Steel Products
At 30 June 2018, ASP recognised a $216.0M write-back of PP&E that had been impaired in previous periods. The write-back
represents the full asset value available to be reversed and was due to the sustained improvement in ASP financial performance
and an increased confidence, supported by external forecasts for raw material prices, selling prices, sales volumes and the
AUD:USD, that future estimated cash flows support the uplift in asset values.
(ii) Buildings ASEAN
At 31 December 2017, $8.0M impairment of PP&E was recognised in Buildings ASEAN following management's decision to close
down the business on 12 March 2018 as a result of ongoing weak business performance and uncertain future earnings (note
23(b).
(iii) Building Products Indonesia
At 30 June 2017, Building Products Indonesia recognised an impairment as a result of uncertain regulatory environment including
tariffs, import quotas and other regulatory measures and ongoing margin compression. The impairment was based on a
recoverable amount of $190.0M.
(iv) Buildings China
At 31 December 2016, Buildings China recognised impairments in relation to engineered buildings for $28.6M of property, plant
and equipment no longer required, together with $12.0M of goodwill and $3.3M of other intangible assets as a result of uncertainty
regarding future earnings. The impairment was based on a recoverable amount of $12.9M.
(v) New Zealand Steel Mining
At 31 December 2016, further impairments were recognised in relation to Taharoa iron sand mining assets within the New Zealand
and Pacific Steel segment. The Taharoa iron sand mining business was subsequently sold on 1 May 2017.
CAPITAL STRUCTURE AND FINANCING ACTIVITIES
This section of the notes provides further information about the Group's cash, borrowings, contributed equity, reserves and
dividends, including accounting policies relevant to understanding these items.
15 Cash and cash equivalents
Cash at bank and on hand
Deposits at call
Bank overdrafts
Balance per statement of cash flows
Consolidated
2018
$M
2017
$M
941.3
3.1
944.4
(1.4)
943.0
750.1
2.9
753.0
(1.1)
751.9
- 31 -
15 Cash and cash equivalents (continued)
(a) Reconciliation of profit after income tax to net cash inflow from operating activities
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Profit for the year
Depreciation and amortisation
Net impairment charge of non-current assets
Non-cash employee benefits expense - share-based payments
Net (gain) on disposal of non-current assets
Share of net profits of associates and joint venture partnership
Associate and joint venture partnership dividends received
Change in operating assets and liabilities:
Decrease (increase) in trade receivables
Decrease (increase) in other receivables
Decrease (increase) in other operating assets
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in other payables
Increase (decrease) in borrowing costs payable
Increase (decrease) in income taxes payable
Increase (decrease) in deferred tax balances
Increase (decrease) in other provisions and liabilities
Other variations
Net cash inflow from operating activities
(b) Recognition and measurement
Consolidated
2018
$M
2017
$M
1,628.6
376.5
(208.0)
16.3
(7.0)
(32.6)
3.1
(93.8)
4.1
(30.5)
(238.3)
9.4
(13.2)
5.6
31.1
(366.9)
56.9
(0.6)
1,140.7
773.9
380.4
101.2
24.0
(51.0)
(9.1)
4.3
(105.1)
(80.6)
6.0
(322.3)
228.6
130.0
1.6
(7.5)
31.0
23.5
3.5
1,132.4
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current
liabilities in the statement of financial position.
16 Borrowings
Secured
Lease liabilities
Other loans
Total secured borrowings
Unsecured
Bank loans
Other loans
Bank overdrafts
Deferred borrowing costs
Total unsecured borrowings
Total borrowings
Consolidated
2018
2017
Current
$M
Non-
current
$M
Current
$M
Non-
current
$M
10.7
14.1
24.8
70.5
-
1.4
(0.8)
71.1
95.9
117.3
-
117.3
263.2
408.3
-
(3.9)
667.6
784.9
14.2
7.8
22.0
34.3
-
1.1
(4.2)
31.2
53.2
130.6
-
130.6
161.1
650.3
-
(10.0)
801.4
932.0
- 32 -
16 Borrowings (continued)
(a) Reconciliation of liabilties arising from financing activities
Balance at the beginning of the year
Cash flows
Non-cash changes
Additions
Borrowing costs capitalised
Foreign Exchange differences
Balance at the end of the year (excluding bank overdrafts)
(b) Secured liabilities and assets pledged as security
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Borrowings
$M
Lease
Liabilities
$M
839.3
(139.9)
-
9.4
42.6
751.4
144.8
(14.7)
0.3
-
(2.4)
128.0
Total
$M
984.1
(154.6)
0.3
9.4
40.2
879.4
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Bank loans
Trade receivables
Inventories
Lease liabilities
Property, plant and equipment
Total assets pledged as security
Consolidated
2018
$M
2017
$M
-
-
-
75.9
75.9
505.5
1,113.8
1,619.3
88.7
1,708.0
The terms and conditions of the syndicated bank facility were amended during the year and it is now an unsecured facility. Lease
liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the
event of default.
(c) Financing arrangements
Financing facilities
available
x
Australian
bank loan
x
Non-Australian
bank loans
x
Senior
Unsecured
Notes
x
Working capital
facility
Description
• $850M syndicated bank facility with a syndicate of banks. The facility is currently undrawn.
• Comprises three tranches, maturing in December 2018, November 2019 and November 2020.
• Six facilities totalling THB 4,300M ($177M), maturing December 2018, March 2019 and January 2020,
available for NS BlueScope Steel (Thailand) Ltd cash requirements.
• One facility totalling MYR 30M ($10M), maturing July 2019, to support working capital and other short-term
cash requirements for NS BlueScope Steel (Malaysia) Sdn Bhd.
• One US$11M term facility maturing March 2021 and one US$25M revolving facility maturing March 2019,
available for NS BlueScope Steel (Indonesia) cash requirements.
• Two US$100M revolving facilities maturing March 2019 and March 2020 for NS BlueScope Coated Products
joint venture.
• One US$45M term facility maturing July 2019 for NS BlueScope Coated Products joint venture.
• US$300M senior unsecured Reg-S notes offered to qualified institutional investors primarily located in Asia,
Europe and Australia, issued in May 2018, which mature May 2023. Interest of 4.625% on the Notes will be
paid semi-annually on 25 May and 25 November of each year.
• An inventory financing facility for BlueScope Steel (AIS) operates as a sale and repurchase facility whereby
the inventory is sold upon shipment and repurchased by the Company at the point of consumption. The
facility limit is US$55M (inclusive of GST) and matures November 2019. The facility is currently undrawn.
- 33 -
16 Borrowings (continued)
Maturity profile of committed facilities
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
$M
450
400
350
300
250
200
150
100
50
‐
FY19
FY20
FY21
FY22
FY23
+FY24
Australian bank loan
Non‐Australian bank loans
Senior Unsecured Notes
Working capital facility
(d) Bank overdrafts
Bank overdraft facilities are arranged with a number of banks with the general terms and conditions agreed to on a periodic basis.
(e) Lines of credit
Unrestricted access was available at balance date to the following lines of credit:
Bank overdrafts
Bank loan facilities
Total facilities
x
Bank overdrafts
Bank loan facilities
Used at balance date
x
Bank overdrafts
Bank loan facilities
Unused at balance date
Consolidated
2018
$M
2017
$M
42.9
1,525.0
1,567.9
1.4
333.7
335.1
41.5
1,191.3
1,232.8
48.9
1,374.8
1,423.7
1.1
195.4
196.5
47.8
1,179.4
1,227.2
- 34 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
16 Borrowings (continued)
(f) Contractual maturity analysis
The table below reflects all contractual repayments of principal and interest resulting from recognised financial liabilities. The
amounts disclosed represent undiscounted, contractual cash flows for the respective obligations in respect of upcoming fiscal
years and therefore do not equate to the values shown in the statement of financial position.
30 June 2018
Notes
< 1 year
$M
1 - 2 years 2 - 3 years 3 - 4 years 4 - 5 years
$M
$M
$M
$M
> 5 years
$M
Total
$M
Contractually maturing in:
Payables
9
1,797.8
3.0
6.0
6.0
6.0
46.4
1,865.2
Derivative financial
instruments
Borrowings
-Principal
-Interest
31(d)
1.9
96.9
38.6
135.5
196.7
33.8
230.5
32.1
30.2
62.3
29.6
28.5
58.1
431.8
25.4
457.2
98.4
41.4
139.8
1.9
885.5
197.9
1,083.4
< 1 year
$M
1 - 2 years 2 - 3 years 3 - 4 years 4 - 5 years
$M
$M
$M
$M
> 5 years
$M
Total
$M
Contractually maturing in:
30 June 2017
Notes
Payables
x
Derivative financial
instruments
Borrowings
-Principal
-Interest
9
1,802.9
31(d)
4.8
57.4
59.6
117.0
-
-
3.0
6.0
6.0
29.9
1,847.8
-
-
16.8
58.1
74.9
163.5
55.0
218.5
666.8
47.1
713.9
-
14.6
8.7
23.3
-
4.8
80.3
49.1
129.4
999.4
277.6
1,277.0
Maturity profile of drawn debt‐ June 2018
$M
750
700
650
600
550
500
450
400
350
300
250
200
150
100
50
0
FY19
FY20
FY21
FY22
FY23
FY24
FY25+
Finance Leases
Reg-S bond
Bank loans
- 35 -
16 Borrowings (continued)
(f) Finance costs
Interest and finance charges paid/payable
Ancillary finance charges
Provisions: unwinding of discount
Amount capitalised
Finance costs expensed
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
2018
$M
*Restated
2017
$M
86.1
24.4
2.2
(0.3)
112.4
71.2
16.9
2.1
-
90.2
*Certain amounts shown here have been restated to reflect retrospective changes made to discontinued operations (refer to note
23).
(g) Non-cash financing activities
Consolidated
2018
$M
2017
$M
Acquisition of plant and equipment by means of finance leases
0.3
6.8
Prior period represents a US$4.3M finance lease addition in Buildings North America segment for a warehouse lease.
(h) Recognition and measurement
Borrowings are initially recognised at fair value, net of transaction costs incurred, and are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over
the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are consequently
recognised in profit or loss over the term.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 months after the end of the reporting period.
17 Contributed equity
(a) Share capital
Issued fully paid ordinary shares
(b) Movements
Parent Entity
Parent Entity
2018
Shares
546,875,343
2017
Shares
561,111,434
2018
$M
4,311.2
2017
$M
4,554.4
Date
Details
Number of shares
Issue Price ($)
$M
1 July 2017
30 June 2018
Opening balance
CEO & KMP STI share awards
Retention share awards
CEO & ELT LTIP awards
LTIP share awards
Share buybacks (c)
Share rights - Tax deduction (d)
Other
Balance
561,111,434
3,612,593
765,682
1,706,734
857,639
(21,178,739)
-
-
546,875,343
3.79/8.49
4.90
3.30/3.51/3.53
3.41
($14.18)
-
-
4,554.4
14.9
3.8
6.0
2.9
(300.3)
22.3
7.2
4,311.2
- 36 -
17 Contributed equity (continued)
Date
Details
Number of shares
Issue Price($)
$M
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
1 July 2016
30 June 2017
Opening balance
FY15 KMP STI share awards
FY13 LTIP share award
FY13 CEO LTIP share award
FY13 Retention share award
FY15 KMP STI share buy-back
Share buybacks (c)
Share rights - Tax deduction (d)
Balance
(c) Share buybacks
571,346,300
129,621
393,362
323,547
1,700,497
-
(12,781,893)
-
561,111,434
4.12
3.30
3.51
4.57
-
(11.74)
-
4,688.1
0.5
1.3
1.1
7.8
(0.3)
(150.1)
6.0
4,554.4
On 21 August 2017 the Company announced an on-market share buyback program of up to $150M which was extended by a
further $150M on 26 February 2018. At 30 June 2018, a total of 21,178,739 shares had been bought back at an average cost of
$14.18 (transaction costs of $309,000).
(d) Share rights- tax deduction
The tax deduction recorded in share capital represents the estimated tax deduction in excess of accounting expense recognised
for share right awards issued to employees.
(e) Capital risk management
Management monitors its capital structure through various key financial ratios with emphasis on the gearing ratio (net debt/total
capital). The Group's gearing ratio is managed through the economic price cycle to ensure access to finance at reasonable cost
regardless of the point in the cycle. On occasions, the Group will take advantage of certain investment opportunities where an
increased level of gearing will be tolerated, provided there is sufficient future cash flow strength and flexibility to be confident of
credit strengthening rather than uncertainty and risk of credit weakening.
In managing equity, all methods of returning funds to shareholders outside of dividend payments or raising funds are considered
within the context of its balance sheet objectives. In managing debt, the Group seeks a diversified range of funding sources and
maturity profiles. Sufficient flexibility is maintained within committed facilities in order to provide the business with the desired
liquidity support for operations and to pursue its strategic objectives.
Total borrowings
Less: Cash and cash equivalents
Net (cash) debt
Total equity
Total capital
Gearing ratio
(f) Recognition and measurement
Notes
16
15
Consolidated
2018
$M
2017
$M
880.8
(944.4)
(63.6)
6,887.6
6,824.0
985.2
(753.0)
232.2
5,538.7
5,770.9
0.0%
4.0%
Ordinary shares
Ordinary shares are classified as equity and have no par value. Ordinary shares carry one vote per share, the right to participate in
dividends and entitle the holder to the proceeds on winding up of the Group in proportion to the number of shares held.
The proceeds of share buybacks are deducted from equity, including directly attributable incremental costs (net of income taxes).
No gain or loss is recognised in profit and loss.
- 37 -
18 Reserves
Hedging (b) (i)
Share-based payments (b) (ii)
Foreign currency translation (b) (iii)
Non-distributable profits (b) (iv)
Asset realisation (b) (v)
Controlled entity acquisition (b) (vi)
(a) Movements in reserves
Consolidated - Jun 2018 ($M)
Hedging
Opening balance
Net gain (loss) on cash flow hedges
Net gain (loss) on net investments in
foreign subsidiaries
Share-based payments expense
Vesting of share awards
Deferred tax
Transfer to inventory
Transfer to profit and loss
Transfer to PP&E
Transfers from retained profits
Asset acquisitions
Exchange fluctuations
Closing balance
(1.0)
0.2
-
-
-
(0.1)
1.4
-
0.5
-
-
-
1.0
Consolidated - Jun 2017 ($M)
Hedging
Opening balance
Net gain (loss) on cash flow hedges
Net gain (loss) on net investments in
foreign subsidiaries
Share-based payments expense
Vesting of share awards
Deferred tax
Transfer to inventory
Transfer to profit and loss
Transfer to PP&E
Transfers from retained profits
Exchange fluctuations
Closing balance
1.6
1.9
-
-
-
0.7
(5.2)
-
-
-
-
(1.0)
Share
based
payments
73.3
-
-
16.3
(27.6)
-
-
-
-
-
-
-
62.0
Share
based
payments
59.5
-
-
24.0
(10.2)
-
-
-
-
-
-
73.3
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
2018
$M
2017
$M
1.0
62.0
4.0
38.8
188.9
(21.9)
272.8
(1.0)
73.3
(81.8)
17.3
188.8
(21.9)
174.7
Asset
realisation
Controlled
entity
acquisition
Total
Non-
Foreign
currency Distributable
translation
profits
(81.8)
-
32.9
-
-
(25.1)
-
0.2
-
-
-
77.8
4.0
17.3
-
-
-
-
-
-
-
-
21.5
-
-
38.8
188.8
-
-
-
-
-
-
-
-
-
0.1
-
188.9
(21.9)
-
-
-
-
-
-
-
-
-
-
-
(21.9)
174.7
0.2
-
32.9
16.3
(27.6)
(25.2)
1.4
0.2
0.5
21.5
0.1
77.8
272.8
Non-
Foreign
currency Distributable
translation
profits
Asset
realisation
Controlled
entity
acquisition
Total
(19.4)
-
(15.8)
-
-
-
-
1.7
-
-
(48.3)
(81.8)
16.3
-
-
-
-
-
-
-
-
1.0
-
17.3
188.8
-
-
-
-
-
-
-
-
-
-
188.8
(21.9)
-
-
-
-
-
-
-
-
-
-
(21.9)
224.9
1.9
(15.8)
24.0
(10.2)
0.7
(5.2)
1.7
-
1.0
(48.3)
174.7
- 38 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
18 Reserves (continued)
(b) Nature and purpose of reserves
(i) Hedging reserve
Records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge
relationship.
(ii) Share-based payments reserve
Recognises the value of equity-settled share-based payments provided to employees, including Key Management Personnel, as
part of their remuneration.
(iii) Foreign currency translation reserve
Records exchange fluctuations arising from the translation of the financial statements of foreign subsidiaries. It is also used to
record the effect of the translation of the net investments in foreign operations. The cumulative amount is reclassified to profit and
loss when the net investment is disposed of.
(iv) Non-distributable profit reserve
In certain overseas operations local regulations require a set amount of retained profit to be set aside and not be distributed as a
dividend.
(v) Asset realisation reserve
Arises from the disposal of 50% interest in BlueScope's ASEAN and North American building product businesses to Nippon Steel
and Sumitomo Metal Corporation in March 2013.
(vi) Controlled entity acquisition reserve
Arises from the Group's acquisition of the remaining 40% non-controlling interest in BlueScope Steel (Malaysia) Sdn Bhd and 5%
of Lysaght Thailand Ltd and BlueScope Steel Thailand Ltd, adjusted for the subsequent 50% disposal of their additional interests
into BlueScope and Nippon Steel and Sumitomo Metal Corporation joint venture establised in March 2013. This item represents
the difference between the amount paid and the balance of the non-controlling interest acquired.
19 Dividends
(a) Ordinary shares
Final dividend for 30 June 2017 of 5 cents per fully paid ordinary share paid on 16 October 2017
(2017: 3 cents).
Fully franked based on tax paid at 30%
Interim dividend of 6 cents per fully paid ordinary share was paid on 3 April 2018
in relation to the year ended 30 June 2018 (2017: 4 cents).
Fully franked based on tax paid at 30%
Total dividends paid
(b) Dividends not recognised at year-end
Parent entity
2018
$M
2017
$M
28.3
17.2
33.4
61.7
23.0
40.2
For the year ended 30 June 2018, the Directors have approved the payment of a final unfranked dividend of 8 cents per fully paid
ordinary share.
- 39 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
19 Dividends (continued)
(c) Franked dividends
Actual franking account balance as at the reporting date
Franking credits available for subsequent financial years based on a tax rate of 30%
Parent entity
2018
$M
2017
$M
-
-
14.1
14.1
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) Recognition and measurement
A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on
or before the balance sheet date.
This section of the notes provides information which will help users understand how the group structure affects the financial
position and performance of the Group.
GROUP STRUCTURE
20 Subsidiaries and non-controlling interests
(a) Investments in subsidiaries
Name of entity
Note
Principal place
of business
Amari Wolff Steel Pty Ltd
Australian Iron & Steel Pty Ltd
BlueScope Distribution Pty Ltd
BlueScope Steel Asia Holdings Pty Ltd
BlueScope Steel (AIS) Pty Ltd
BlueScope Steel Employee Share Plan Pty Ltd
BlueScope Steel (Finance) Ltd
BlueScope Pacific Steel (Fiji) Pty Limited
BlueScope Steel Americas Holdings Pty Ltd
BlueScope Pty Ltd
BlueScope Solutions Holdings Pty Ltd
BlueScope Water Australia Pty Ltd
BlueScope Building and Construction Ltd
Permalite Aluminium Building Solutions Pty Ltd
Glenbrook Holdings Pty Ltd
Fielders Manufacturing Pty Ltd
John Lysaght (Australia) Pty Ltd
Laser Dynamics Australia Pty Ltd
Lysaght Building Solutions Pty Ltd
Orrcon Distribution Pty Ltd
Orrcon Manufacturing Pty Ltd
Metalcorp Steel Pty Ltd
New Zealand Steel (Aust) Pty Ltd
The Roofing Centre (Tasmania) Pty Ltd
Butler do Brazil Limitada
NS BlueScope Lysaght (Brunei) Sdn Bhd
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(f)
(b)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Brazil
Brunei
- 40 -
Equity
holding
2018
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
30
Equity
holding
2017
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
30
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
20 Subsidiaries and non-controlling interests (continued)
Name of entity
Note
Principal place
of business
BlueScope Buildings (Guangzhou) Ltd
BlueScope Lysaght (Shanghai) Ltd
BlueScope Steel (Shanghai) Co Ltd
BlueScope Steel Investment Management (Shanghai) Co Ltd
BlueScope Lysaght (Langfang) Ltd
BlueScope Lysaght (Chengdu) Ltd
BlueScope Building Systems (Xi'an) Co Ltd
BlueScope Steel (Suzhou) Co. Ltd
Butler (Shanghai) Inc
Butler (Tianjin) Inc
Shanghai BlueScope Butler Construction Engineering Co. Ltd
BlueScope Lysaght Fiji Ltd
BlueScope Steel North Asia Ltd
BlueScope Steel India (Private) Ltd
PT NS BlueScope Indonesia
PT NS BlueScope Lysaght Indonesia
PT BlueScope Distribution Indonesia
PT NS BlueScope Service Center Indonesia
PT BlueScope Buildings Indonesia
BlueScope Buildings (Malaysia) Sdn Bhd
BlueScope Steel Transport (Malaysia) Sdn Bhd
NS BlueScope Engineering Systems Sdn Bhd (Malaysia)
NS BlueScope (Malaysia) Sdn Bhd
NS BlueScope Lysaght (Malaysia) Sdn Bhd
NS BlueScope Lysaght (Sabah) Sdn Bhd
NS BlueScope Asia Sdn Bhd
NS BlueScope Lysaght Myanmar Limited
Global BMC (Mauritius) Holdings Ltd
Butler Manufacturas S de R.L. de C.V.
Butler de Mexico S. de R.L. de C.V.
BlueScope Acier Nouvelle Caledonie SA
BlueScope Steel Finance NZ Ltd
Tasman Steel Holdings Ltd
New Zealand Steel Holdings Ltd
New Zealand Steel Ltd
Pacific Steel (NZ) Limited
New Zealand Steel Development Ltd
Toward Industries Ltd
Steltech Structural Ltd
BlueScope Steel Trading NZ Ltd
Waikato North Head Mining Limited
BlueScope Steel International Holdings SA
BlueScope Steel Philippines Inc
BlueScope Buildings (Singapore) Pte Ltd
Steelcap Insurance Pte Ltd
NS BlueScope Lysaght Singapore Pte Ltd
NS BlueScope Pte Ltd
NS BlueScope Holdings Thailand Pte Ltd
BlueScope Steel Southern Africa (Pty) Ltd
BlueScope Lysaght Taiwan Ltd
NS BlueScope (Thailand) Ltd
Steel Holdings Co Ltd
NS BlueScope Lysaght (Thailand) Ltd
BlueScope Buildings (Thailand) Ltd
BlueScope Steel International Ltd
China
China
China
China
China
China
China
China
China
China
China
Fiji
Hong Kong
India
Indonesia
Indonesia
Indonesia
Indonesia
Indonesia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Myanmar
Mauritius
Mexico
Mexico
New Caledonia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Panama
Philippines
Singapore
Singapore
Singapore
Singapore
Singapore
South Africa
Taiwan
Thailand
Thailand
Thailand
Thailand
UK
(h)
(g)
(b)
(b)
(b)
(g)
(b)
(b)
(b)
(b)
(b)
(c)
(b)
(b)
(b)
(b)
(b)
(b)
Equity
holding
2018
%
100
100
100
100
100
-
100
100
100
100
-
64
100
100
50
50
100
50
100
60
-
50
50
30
25
50
100
100
100
100
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
50
100
80
40
50
40
80
100
Equity
holding
2017
%
100
100
100
100
100
100
100
100
100
100
100
64
100
100
50
50
100
50
100
100
100
50
50
30
25
50
100
100
100
100
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
50
100
80
40
50
40
80
100
- 41 -
20 Subsidiaries and non-controlling interests (continued)
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Name of entity
ASC Profiles LLC
BlueScope Steel Finance (USA) LLC
BlueScope Steel Holdings (USA) Partnership
BlueScope Steel North America Corporation
BlueScope Steel Technology Inc
BlueScope Steel Americas LLC
BlueScope Finance (Americas) LLC
BlueScope Steel Investments Inc
BlueScope Steel Investments 2 LLC
BlueScope Steel Investments 3 LLC
North Star BlueScope Steel LLC
VSMA Inc
BIEC International Inc
BMC Real Estate Inc
Butler Holdings Inc
BlueScope Construction Inc
Butler Pacific Inc
Steelscape LLC
Steelscape Washington LLC
BlueScope Buildings North America Inc
NS BlueScope Holdings USA LLC
BlueScope Properties Development LLC
BlueScope Properties Group LLC
BlueScope Properties Holdings LLC
BPG Laredo 1 LLC
BlueScope Construction Engineering (Michigan) LLC
BPG Ocoee 1 LLC
BPG Apopka Properties 1 LLC
BPG Laredo 2 LLC
BPG North Canton 1 LLC
BlueScope Lysaght (Vanuatu) Ltd
BlueScope Buildings Vietnam Ltd
NS BlueScope Lysaght (Vietnam) Ltd
NS BlueScope Vietnam Ltd
Principal place
of business
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Vanuatu
Vietnam
Vietnam
Vietnam
Equity
holding
2018
%
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
100
50
100
100
100
100
100
100
100
100
100
39
100
50
50
Note
(b)
(b)
(b)
(b)
(e)
(e)
(e)
(c) (d)
(b)
(b)
Equity
holding
2017
%
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
100
50
100
100
100
100
100
100
-
-
-
39
100
50
50
All subsidiaries incorporated in Australia are members of the BlueScope Steel Limited tax consolidated group. Refer to note
29(d)(ii).
(a) These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with ASIC
Corporations (wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments
Commission. For further information refer to note 30.
(b) These entities are part of the joint venture established between BlueScope and Nippon Steel & Sumitomo
Metal Corporation in March 2013 and have been classified as controlled entities because of the Group's unilateral right to
appoint the CEO (and other Key Management Personnel), approval of the operating budget and retaining significant
decision making authority.
(c) These controlled entities are audited by firms other than Ernst & Young and affiliates.
(d) The Group's ownership of the ordinary share capital in this entity represents a beneficial interest of 39% represented by its
65% ownership in BlueScope Acier Nouvelle Caledonie SA, which in turn has 60% ownership of the entity.
(e) New entities incorporated during the year.
(f) This entity is in the process of being liquidated and deregistered.
(g) This entity was liquidated and deregistered during the year.
(h) This entity was was sold during the year.
- 42 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
20 Subsidiaries and non-controlling interests (continued)
(b) Principles of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are consolidated from the date on which control is transferred to
the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(c) Non-controlling interests (NCI)
Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive income,
statement of changes in equity and statement of financial position respectively.
Financial information of subsidiaries that have material non-controlling interests, as determined by reference to the net assets of
the Group, are provided below:
Name of entity
Place of
business/
country of
incorporation
Proportion of equity interest held by non-controlling interests:
NS BlueScope (Steel) Thailand Ltd
Steelscape LLC
Thailand
USA
Accumulated balances of material non-controlling interest:
NS BlueScope (Steel) Thailand Ltd
Steelscape LLC
Profit (loss) allocated to material non-controlling interest:
NS BlueScope (Steel) Thailand Ltd
Steelscape LLC
2018
%
60
50
2018
$M
2017
%
60
50
2017
$M
164.1
159.6
10.6
27.8
155.8
155.3
19.2
39.3
The summarised financial information of these subsidiaries is provided below. This information is based on amounts before inter-
company eliminations.
x
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current net assets
Current liabilities
Non-current liabilities
Total liabilities
x
Net assets
Attributable to:
Owners of BlueScope Steel Limited
Non-controlling interests
NS BlueScope (Steel)
Thailand Ltd
Steelscape LLC
2018
$M
2017
$M
2018
$M
2017
$M
189.9
290.1
480.0
-
93.0
113.4
206.4
273.6
109.4
164.2
-
173.9
191.9
365.8
102.3
3.8
106.1
259.7
103.9
155.8
-
289.4
134.3
423.7
80.8
23.7
104.5
319.2
159.6
159.6
-
295.0
131.9
426.9
94.0
22.3
116.3
310.6
155.3
155.3
- 43 -
20 Subsidiaries and non-controlling interests (continued)
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Summarised statement of comprehensive income
Revenue
Expenses
Profit before tax
Income tax (expense)
Profit after tax
Attributable to non-controlling interests
Dividends paid to NCI
s
Summarised statement of cash flows
NS BlueScope (Steel)
Thailand Ltd
Steelscape LLC
2018
$M
2017
$M
2018
$M
2017
$M
492.1
(471.2)
20.9
(3.3)
17.6
10.6
15.1
433.5
(395.0)
38.5
(6.5)
32.0
19.2
23.1
723.5
(667.9)
55.6
-
55.6
27.8
29.8
663.5
(584.9)
78.6
-
78.6
39.3
25.6
NS BlueScope (Steel)
Thailand Ltd
Steelscape LLC
2018
$M
2017
$M
2018
$M
2017
$M
Cash inflow from operating activities
Cash (outflow) inflow from investing activities
Cash inflow (outflow) from financing activities
Net increases (decrease) in cash and cash equivalents
8.9
(96.6)
79.7
(8.0)
26.1
(30.5)
(31.6)
(36.0)
44.5
(9.5)
(38.8)
(3.8)
61.3
(8.3)
(48.9)
4.1
21 Investment in associates
Investment in associates
Name of entity
Saudi Building Systems Manufacturing Company Ltd
Saudi Building Systems Ltd
NS BlueScope Lysaght (Sarawak) Sdn Bhd
SteelServ Limited
(a) Movements in carrying amounts
Consolidated
2018
$M
2017
$M
7.5
7.5
Principal place
of business
Saudi Arabia
Saudi Arabia
Malaysia
New Zealand
Equity
holding
2018
%
30
30
25
50
Equity
holding
2017
%
30
30
25
50
Consolidated
2018
$M
2017
$M
7.5
3.0
(3.1)
0.1
7.5
8.6
3.4
(4.3)
(0.2)
7.5
Carrying amount at the beginning of year
Share of profits after income tax
Dividends received/receivable
Currency fluctuation
Carrying amount at the end of the year
(b) Contingent assets and liabilities relating to associates
There were no contingent assets and liabilities relating to investments in associates.
- 44 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
21 Investment in associates (continued)
(c) Recognition and measurement
Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the consolidated
financial statements using the equity method of accounting, after initially being recognised at cost.
The Group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-
acquisition movements in reserves is recognised in other comprehensive income. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. Dividends receivable from associates in the consolidated financial
statements reduce the carrying amount of the investment.
When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf
of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the
associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
22 Investment in joint ventures
Interest in joint venture partnerships
Consolidated
2018
$M
2017
$M
65.2
36.7
The Group also has a 50% interest in Tata BlueScope Steel Ltd (TBSL), an Indian resident, the principal activity of which is to
manufacture metallic coated and painted steel products.
(a) Movements in carrying amounts
Carrying amount at beginning of year
Share of profit after income tax
Reserve movements
Exchange fluctuations
Carrying amount at the end of the year
Tata BlueScope Steel
2017
2018
$M
$M
36.7
29.6
-
(1.1)
65.2
30.7
5.7
(0.3)
0.6
36.7
- 45 -
22 Investment in joint ventures (continued)
(b) Summarised financial information
Summarised statement of financial position
Current assets
Cash and cash equivalents
Receivables
Inventories
Prepayment and other assets
Financial assets held at fair value
Non-current assets
Property plant and equipment
Deferred tax asset
Other
Total assets
Current liabilities
Payables
Provisions
Deferred income
Current tax liabilities
Non-current liabilities
Borrowings
Provisions
Total liabilities
Net assets
Proportion of the Group's ownership (%)
Carrying amount of the investment
Summarised statement of comprehensive income:
Revenues
Expenses
Depreciation and amortisation expense
Finance costs
Profit before income tax
Income tax (expense) benefit
x
Profit after income tax
Group's share of profit for the year
Group's share of capital commitments
(c) Contingent liabilities relating to joint ventures
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Tata BlueScope Steel
2017
2018
$M
$M
12.1
20.5
62.1
8.5
29.4
158.3
16.3
2.9
310.1
68.3
2.2
5.6
2.2
98.4
2.9
179.6
130.5
50.0
65.2
10.4
21.7
55.4
11.3
24.4
170.2
-
3.6
297.0
38.2
1.5
5.3
-
175.8
2.8
223.6
73.4
50.0
36.7
Tata BlueScope Steel
2017
2018
$M
$M
389.6
(319.4)
(10.4)
(13.4)
46.4
12.8
59.2
29.6
0.1
344.0
(300.7)
(11.9)
(20.0)
11.4
-
11.4
5.7
-
Export Promotion Capital Goods Scheme (EPCG)
TBSL has imported goods under the Government of India's EPCG scheme at the concessional rates of duty with an obligation to
fulfill the specified exports. Failure to meet this export obligation within the stipulated time would result in payment of the aggregate
differential duty saved along with interest. TBSL is confident of meeting the obligation. BlueScopeʼs 50% share of this contingent
liability is $2.7M (2017: $2.8M).
- 46 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
22 Investment in joint ventures (continued)
Disputed rent
The Jharkhand Government has been in a land rental dispute with Tata Steel for several years and this matter impacts the rental
costs of TBSL as a sub-tenant of Tata Steel. BlueScope's 50% share of this contingent liability is $5.5M (2017: $5.2M).
Taxation
TBSL has direct and indirect tax computations which have been submitted but not agreed by the relevant authorities. TBSL has
provided for the amount of tax it expects to pay taking into account professional advice it has received. The matters currently in
dispute could result in amendments to the original computations. BlueScopeʼs 50% share of the potential amendments is $5.8M
(2017: $5.6M).
(d) Secured liabilities and assets pledged as security
The Tata BlueScope Steel borrowings are secured against property, plant and equipment.
(e) Impairment losses
Prior period includes fixed asset write-downs of $4.7M within Building Products Asia & North America segment for the India joint
venture in relation to engineered building solutions assets no longer required.
(f) Recognition and measurement
Joint arrangements are classified as joint operations or joint ventures based on the rights and obligations of the parties to the joint
arrangements. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement ("joint
operators") have rights to the assets, and obligations for the liabilities relating to the arrangement. A joint venture is a joint
arrangement whereby the parties that have joint control of the arrangement ("joint venturers") have rights to the net assets of the
arrangement.
The interests in joint ventures are accounted for in the financial statements using the equity method. Under the equity method, the
share of the profits or losses of the partnerships is recognised in profit or loss, and the share of post-acquisition movements in
reserves is recognised in other comprehensive income.
Profits or losses on transactions establishing a joint venture and transactions with a joint venture are eliminated to the extent of the
Group's ownership interest until such time as they are realised by the joint venture partnership on consumption or sale. However, a
loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current
assets, or an impairment loss.
23 Discontinued operations
(a) Description
(i) New Zealand Steel Mining Ltd
The Taharoa New Zealand Steel Mining business was sold on 1 May 2017.
(ii) BlueScope Buildings ASEAN
BlueScope Buildings ASEAN has been included as part of discontinued operations following management's decision to close the
business on 12 March 2018. Comparatives for June 2017 have been restated.
- 47 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
23 Discontinued operations (continued)
(b) Financial performance of discontinued operations
Consolidated
2018
Taharoa
Mining
$M
Buildings
ASEAN
$M
Other
$M
Total
$M
2017
Taharoa
Mining
$M
Buildings
ASEAN
$M
Other
$M
Revenue
Other income
Impairment of non-current assets (note 14(e))
Restructuring expense
Finance costs
Other expenses
Profit (loss) before income tax
Income tax expense
Profit (loss) after income tax from
discontinued operations
Outside equity interest in discontinued net profit/(loss)
Profit (loss) after income tax from discontinued operations
attributable to owners of BlueScope Steel Limited
-
4.5
-
-
-
(0.9)
3.6
-
3.6
-
3.6
51.9
-
(8.0)
(8.2)
(0.1)
(64.4)
(28.8)
(0.5)
(29.3)
(3.8)
-
-
-
-
-
(0.6)
(0.6)
-
(0.6)
-
51.9
4.5
(8.0)
(8.2)
(0.1)
(65.9)
(25.8)
(0.5)
(26.3)
(3.8)
(25.5)
(0.6)
(22.5)
108.8
0.5
(7.0)
-
(4.8)
(83.0)
14.5
-
14.5
-
14.5
96.9
-
-
-
-
(99.7)
(2.8)
-
(2.8)
-
(2.8)
-
0.6
-
-
-
(0.1)
0.5
(0.1)
0.4
-
0.4
Total
$M
205.7
1.1
(7.0)
-
(4.8)
(182.8)
12.2
(0.1)
12.1
-
(12.1)
The results from discontinued operations are required to be presented on a consolidated basis. Therefore, the impact of
intercompany sales, profit in stock eliminations, intercompany interest income and expense and intercompany funding have been
excluded. The profit attributable to the discontinued segment is not affected by these adjustments. As a result of these
adjustments the discontinued operations result does not represent the operations as stand-alone entities.
(c) Cash flow information - discontinued operations
The net cash flows of discontinued operations held are as follows:
Consolidated
2018
Taharoa
Mining
$M
Buildings
ASEAN
$M
Other
$M
Total
$M
2017
Taharoa
Mining
$M
Buildings
ASEAN
$M
Other
$M
Total
$M
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
(4.4)
-
-
(4.4)
(13.2)
(0.2)
1.8
(11.6)
(4.4)
-
-
(4.4)
(22.0)
(0.2)
1.8
(20.4)
13.0
(10.5)
(10.3)
(7.8)
(13.8)
(0.6)
(0.1)
(14.5)
0.1
-
-
0.1
(0.7)
(11.1)
(10.4)
(22.2)
UNRECOGNISED ITEMS
24 Contingencies
(a) Contingent liabilities
The Group had contingent liabilities at 30 June 2018 in respect of:
(i) Outstanding legal matters
As announced to the market on 30 August 2017, proceedings have been issued in New Zealand against BlueScope's
subsidiary, Toward Industries Limited (Toward), by a special purpose vehicle (NZ Iron Sands Holdings Limited (NZIS)),
representing a consortium of small private investors. The proceedings relate to NZISʼ failed attempt to buy Towardʼs Taharoa Iron
Sands mining business (NZSM).
- 48 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
24 Contingencies (continued)
After an extended sale process, a sale to NZIS failed because the required consents and conditions were not achieved. NZIS is
now claiming $506M on the basis of a claimed loss of opportunity to acquire the shares of NZSM for the period 2017 to 2029.
NZISʼ calculations are based on unsubstantiated assumptions.
BlueScope and Toward consider the NZIS claims to be completely unfounded. Toward will vigorously defend these preceedings.
In addition, there was a range of outstanding legal matters that were contingent on court decisions, arbitration rulings and private
negotiations to determine amounts required for settlement. The Group does not believe that any adverse outcomes would have a
material effect on the financial statements.
(ii) Guarantees
In Australia, BlueScope Steel Limited has provided $87.6M (2017: $87.6M) in guarantees to various state workers compensation
authorities as a prerequisite for self-insurance. An amount, net of recoveries, of $49.8M (2017: $51.5M) has been recognised as
recommended by independent actuarial advice.
Bank guarantees have been provided to customers and suppliers in respect of the performance of goods and services provided
and purchases of goods and services which are immediately callable by default. Bank guarantees outstanding at 30 June 2018
totalled $116.8M (2017: $93.0M).
(iii) Taxation
The 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, although such adjustments may be significant to any individual year's income statement.
(iv) Regulatory
The Group is subject to extensive government laws and regulation, including environmental, greenhouse gas emissions, tax,
occupational health and safety, competition law and trade restrictions in each of the countries in which it operates. The Group is
also subject to risks posed by the conduct of our employees and other participants in the supply chain and to the risk of regulatory
investigations into compliance with government laws and regulations which could be lengthy and costly.
The Australian Competition and Consumer Commission (ACCC) is investigating potential cartel conduct by BlueScope relating to
the supply of steel products in Australia, that allegedly involved a small number of BlueScope employees in the period from late
2013 to mid-2014. It is not known when the ACCCʼs investigation will be completed, or what the outcome might be. Possible
outcomes include the commencement of either civil or criminal proceedings or no action being taken. BlueScope has co-operated
and continues to co-operate with the ACCC's investigation.
(b) Prior year contingent liability settled
The legal proceedings initiated by BlueScope against South32 alleging certain coal supply contract non-compliances, and
subsequent proceedings by South32 against BlueScope alleging certain other coal supply contract non-compliances, have been
settled with a $32.1M one-off benefit to BlueScope related to prior period supply arrangements recognised during the period. The
benefit includes cash settlement and reversal of prior year provisions.
(c) Contingent assets
There are no material contingent assets required for disclosure as at 30 June 2018.
- 49 -
25 Commitments
(a) Capital commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Property, plant and equipment
Payable:
Within one year
Later than one year but not later than five years
Total capital commitments
(b) Lease commitments: Group as lessee
Consolidated
2018
$M
2017
$M
65.1
-
65.1
67.9
-
67.9
(i) Non-cancellable operating leases
The Group leases various property, plant and equipment under non-cancellable operating leases. The rental expense relating to
operating leases for year ended 30 June 2018 was $94.5M (2017: $88.8M). The leases have varying terms escalation clauses and
renewal rights. On renewal the terms of the leases are renegotiated. There are no restrictions placed upon the lessee by entering
into these leases.
Commitments for minimum lease payments in relation to non-cancellable operating leases
are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Total operating lease commitments
Operating lease commitments by geographic region
Asia , 7%
New Zealand , 2%
Consolidated
2018
$M
2017
$M
99.8
233.6
178.5
511.9
89.7
223.4
153.6
466.7
North
America, 18%
Australia, 73%
- 50 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
25 Commitments (continued)
(ii) Finance leases
The Group leases various property, plant and equipment with a carrying amount of $75.9M (2017: $88.7M).
The terms and conditions of other leases include varying terms, purchase options and escalation clauses. On renewal, the terms
of these are renegotiated. There are no restrictions of use placed upon the lessee by entering into any of these leases.
Commitments in relation to finance leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Minimum lease payments
Future finance charges
Recognised as a liability
Representing lease liabilities:
Current
Non-current
Total finance lease liabilities
Notes
Consolidated
2018
$M
2017
$M
23.0
83.5
109.2
215.7
(87.7)
128.0
10.7
117.3
128.0
27.9
92.7
127.3
247.9
(103.1)
144.8
14.2
130.6
144.8
16
16
(c) Recognition and measurement - Lease liabilities
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception
date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a
right to control the use of the asset, even if that right is not explicitly specified in an arrangement.
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease's inception at the fair value of the leased property or, if
lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are
included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The
finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit
or loss on a straight-line basis over the period of the lease.
26 Events occurring after balance date
The board has approved an on-market share buy-back of $250 million.
- 51 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
OTHER INFORMATION
This section of the notes includes information on items which require disclosure to comply with Australian Accounting Standards
and other regulatory pronouncements but are not considered critical in understanding the financial performance or position of the
Group.
27 Share-based payments
(a) Share award schemes
(i) STI share award - CEO
The Board approved the annual FY18 STI plan for the CEO, being a one year equity STI program. No amount will be paid in cash.
Performance was assessed against a range of financial and other measures aligned with the returns delivered to shareholders
from the implementation of initiatives under the Group's strategic plan. The shares will be issued in late August 2018.
(ii) The Long Term Incentive Plan
The Long Term Incentive Plan (LTIP) is a program determined annually by the Board, which awards share rights to eligible senior
management of BlueScope Steel Limited. LTIPs are designed to reward senior management for long-term value creation, and are
part of the Group's overall recognition and retention strategy. The share rights give the right to receive an ordinary share at a later
date subject to the satisfaction of certain performance criteria and continued employment with the Group.
The share rights available for exercise are contingent on the Group's Total Shareholder Return (TSR) percentile ranking relative to
the TSR of companies in the S&P/ASX 100 index at the reward grant date or a compound annual growth rate of Earnings per
Share (EPS) condition. Share rights that fail to meet performance vesting conditions will lapse upon the LTIP's expiry date, or
sooner upon employee resignation or termination. Plans have been granted to senior management, all at $Nil exercise price.
(iii) Deferred Equity Award
The Board awarded deferred equity awards to senior management throughout the Group, with no performance hurdles required to
be met. The equity award gives the right to receive an ordinary share at a later date subject to continued employment with the
Group.
(iv) Alignment Rights (AR) Plan
The Alignment Rights plan is a program determined annually by the Board, which awards share rights to eligible senior
management of BlueScope Steel Limited. Alignment Rights are designed to build share ownership and reward senior management
for long-term value creation, and are part of the Group's overall recognition and retention strategy. The share rights give the right
to receive an ordinary share at a later date subject to the satisfaction of certain performance criteria and continued employment
with the Group.
The share rights available for exercise are contingent on the Group's achievement of a three-year rolling average level of Return
on Invested Capital (ROIC) and debt leverage, as well as individual adherence to the BluesScope Bond. Share rights that fail to
meet performance vesting conditions will lapse upon the Alignment Rights expiry date, or sooner upon employee resignation or
termination. Plans have been granted to senior management, all at $Nil exercise price.
(b) Fair value of share rights granted
The fair value of the share rights granted during the year ended 30 June 2018 are as follows:
Fair Value inputs
Grant date
Latest expiry date
Share rights granted
Fair value estimate at grant date ($)
Cash rights (i)
Valuation date share price ($)
Expected dividend yield (%)
Expected risk-free interest rate (%)
Expected share price volatility (%)
CEO FY18
STI award
FY18 AR plan
KMP
FY18 AR plan
(Senior
management)
1-Jul-17
30-Jun-18
72,711
11.64
-
11.74
1.25
1.79
45.00
1-Jul-17
30-Jun-20
385,125
11.35
-
11.74
1.25
2.11
45.00
1-Jul-17
30-Jun-20
791,800
11.35
38,900
11.74
1.25
2.11
45.00
(i) The cash rights have been issued to eligible employees in Asia who are entitled to receive cash bonuses three years from grant
date, in place of shares. The fair value of the cash rights is calculated as the sum of the market value of shares and dividends that
would have otherwise been received.
- 52 -
27 Share-based payments (continued)
(c) Cash and equity settled awards outstanding
x
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
LTIP
(CEO, KMP &
STI
share awards
Senior
(CEO & KMP) management) management)
Deferred
Equity
(Senior
3,612,593
72,711
(3,612,593)
-
72,711
-
10,649,413
1,177,825
(3,279,870)
(368,994)
8,178,374
-
3,420,434
-
(813,856)
(286,240)
2,320,338
-
(i) The average share price for the year ended 30 June 2018 was $14.55 (2017: $9.93).The weighted average remaining
contractual life of share rights outstanding at the end of the period was 1 year (2017: 1 year).
(d) Expense arising from share-based payment transactions
Employee share rights expense
Employee share awards expense
Total net expense arising from share-based payments
Consolidated
2018
$M
2017
$M
16.3
1.2
17.5
24.0
3.5
27.5
The carrying amount of the liability relating to share-based payment plans at 30 June 2018 is $2.4M (30 June 2017: $4.3M). This
liability represents the deferred cash amounts payable under LTIPs and Deferred equity awards.
(e) Recognition and measurement
Equity settled transactions
The fair value of equity settled awards is recognised as an employee benefit expense with a corresponding increase to the share
based payments reserve within equity. The amount to be expensed is determined by reference to the fair value of the share
awards or share rights granted, which includes any market performance conditions but excludes the impact of non-market
performance vesting conditions.
The fair value of equity settled awards at grant date is independently determined by an external valuer using Black-Scholes option
pricing model that includes a Monte Carlo simulation analysis, which takes into account the exercise price, the term of the share
right, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the share right.
Non-market vesting conditions are included in assumptions about the number of share awards or share rights that are expected to
vest. The expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are
expected to be satisfied. At the end of each period, the entity revises its estimates of the number of share awards and share rights
that are expected to vest based on non-market vesting conditions. It recognises the impact of the revision to original estimates, if
any, in profit or loss, with a corresponding adjustment to equity.
The cumulative expense recognised for equity settled transactions at each reporting date until vesting date reflects the extent to
which the expected vesting period has expired and the number of rights that are expected to ultimately vest. This number is based
on the best available information at the reporting date. No expense is recognised for awards that do not ultimately vest due to a
performance condition not being met, except for share rights where vesting is only conditional upon a market condition. No
adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in
the determination of fair value at grant date.
Upon the exercise of equity settled share awards, the balance of the share-based payments reserve relating to those rights and
awards is transferred to share capital. The dilutive effect, if any, of outstanding rights is reflected as additional share dilution in the
computation of diluted earnings per share.
Cash settled transactions
The ultimate expense recognised in relation to cash-settled transactions will be equal to the actual cash paid to the employees,
which will be the fair value at settlement date. The expected cash payment is estimated at each reporting date and a liability is
recognised to the extent that the vesting period has expired and in proportion to the amount of the awards that are expected to
ultimately vest.
- 53 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
28 Related party transactions
(a) Parent entities
The ultimate parent entity within the Group is BlueScope Steel Limited, which is incorporated in Australia.
(b) Key Management Personnel compensation
Short-term employee benefits
Post-employment and other long-term benefits
Share-based payments
(c) Transactions with other related parties
Consolidated
2018
$'000
2017
$'000
10,319.2
807.5
4,431.2
15,557.9
7,847.3
303.5
12,622.0
20,772.8
The following transactions occurred with related parties other than Key Management Personnel or entities related to them:
Sales of goods and services
Sales of goods to associates
Sales of goods to joint ventures
Interest revenue
Interest revenue
Superannuation contributions
Contribution to superannuation funds on behalf of employees
(d) Outstanding balances
Consolidated
2018
$M
2017
$M
4.8
4.0
0.1
3.3
-
0.1
132.0
104.4
The following balances are outstanding at the reporting date in relation to transactions with related parties other than key
management personnel:
Current receivables (sales of goods and services)
Associates
Joint ventures
Current receivables (loans)
Associates
Current payable (purchase of goods and services)
Associates
(e) Terms and conditions
Note
6
Consolidated
2018
$M
2017
$M
0.9
-
1.2
3.0
0.5
1.6
1.3
3.3
Sales of finished goods and purchases of raw materials from related parties are made in arm's length transactions both at normal
market prices and on normal commercial terms. There are no fixed terms for the repayment of loans between the parties.
The terms and conditions of the tax funding agreement are set out in note 29(d)(ii)).
Outstanding balances are unsecured and are repayable in cash.
Other director transactions with Group entities
Transactions with related parties of directors of wholly owned subsidiaries within the BlueScope Steel Group total $1.2M (2017:
$1.2M). These transactions have been made on commercial arm's length terms and conditions.
- 54 -
29 Parent entity financial information
(a) Summary financial information
Summarised Statement of comprehensive income
Revenue
Other Income
Net impairment write-back of non-current assets
Finance costs
Other expenses
Profit before income tax
Income tax benefit
Net profit for the year
Other comprehensive income (loss) for the year
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2018
$M
2017
$M
3,126.1
2,894.2
3.1
13.8
441.0
(92.2)
(3,080.3)
397.7
646.1
1,043.8
-
14.6
(100.5)
(2,750.3)
71.8
102.0
173.8
-
Total comprehensive income for the year
1,043.8
173.8
Summary of movements in retained losses
Retained losses at the beginning of the year
Net profit for the year
Transfer to profits reserve
Other
Retained losses at the end of the year
x
Summarised Statement of financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Share-based payments reserve
Profits reserve
Retained losses
Total equity
(1,523.5)
1,043.8
(1,043.8)
-
(1,523.5)
(1,523.4)
173.8
(173.8)
(0.1)
(1,523.5)
2018
$M
2017
$M
4,581.8
2,469.9
7,051.7
2,297.0
56.2
2,353.2
4,615.5
1,542.9
6,158.4
2,122.3
62.6
2,184.9
4,698.5
3,973.5
4,311.2
53.4
1,857.4
(1,523.5)
4,698.5
4,554.4
67.4
875.2
(1,523.5)
3,973.5
Profits reserve
Profits reserve represents profits available for distribution to BlueScope Steel Limited shareholders as dividends.
- 55 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
29 Parent entity financial information (continued)
(b) Guarantees entered into by the parent entity
In Australia, the parent entity has given $87.6M (2017: $87.6M) in guarantees to various state workers compensation authorities as
a prerequisite for self-insurance and has entered into a deed of cross-guarantee with certain Australian wholly-owned subsidiaries
note (30). Additionally, the parent entity has provided financial guarantees in respect to subsidiaries amounting to:
Bank overdrafts and loans of subsidiaries
Other loans (unsecured)
Trade finance facilities
(c) Capital commitments
Parent entity
2018
$M
2017
$M
918.1
408.3
204.2
1,530.6
915.0
650.3
195.1
1,760.4
As at 30 June 2018, the parent entity had capital commitments of $14.7M (2017: $6.6M). These commitments are not recognised
as liabilities as the relevant assets have not yet been received.
(d) Recognition and measurement
The financial information for the parent entity BlueScope Steel Limited has been prepared on the same basis as the consolidated
financial statements, except as set out below.
(i) Investment in subsidiaries
Investments in subsidiaries are accounted for at cost less accumulated impairment losses in the financial statements of BlueScope
Steel Limited.
(ii) Tax consolidation legislation
BlueScope Steel Limited and its wholly-owned Australian controlled entities have entered into a tax sharing and funding agreement
in relation to their participation in the tax consolidation regime. Under the terms of this agreement, the wholly-owned entities
reimburse BlueScope Steel Limited for any current tax payable assumed and are compensated by BlueScope Steel Limited for any
current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to BlueScope
Steel Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised
in the wholly-owned entities' financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from BlueScope
Steel Limited, which is issued as soon as practicable after the end of each financial year. BlueScope Steel Limited may require
payment of interim funding amounts to assist with its obligations to pay tax instalments.
The tax sharing agreement limits the joint and several liability of the wholly-owned entities in the case of a default by BlueScope
Steel Limited. At balance date, the possibility of default is considered remote.
The tax consolidated group has applied the group allocation approach in determining the appropriate amount of current taxes to
allocate to members of the tax consolidated group. Intercompany receivables of $162.8M (2017: $108.0M) and intercompany
payables of $Nil (2017: $6.1M) of BlueScope Steel Limited have been recognised as a tax consolidated adjustment.
- 56 -
30 Deed of cross - guarantee
BlueScope Steel Limited and certain Australian wholly owned subsidiaries are parties to a deed of cross-guarantee (Deed) under
which each company guarantees the debts of the others. The companies in the Deed are as follows:
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Amari Wolff Steel Pty Ltd
BlueScope Building and Construction Ltd
BlueScope Distribution Pty Ltd
BlueScope Pacific Steel (Fiji) Pty Limited
BlueScope Steel Limited
BlueScope Solutions Holdings Pty Ltd
BlueScope Water Australia Pty Ltd
Fielders Manufacturing Pty Ltd
Lysaght Building Solutions Pty Ltd
Laser Dynamics Australia Pty Ltd
Metalcorp Steel Pty Ltd
New Zealand Steel (Aust) Pty Ltd
Orrcon Distribution Pty Ltd
Orrcon Manufacturing Pty Ltd (added by way of assumption Deed in June 2018)
Permalite Aluminium Building Solutions Pty Ltd
The Roofing Centre (Tasmania) Pty Ltd
By entering into the deed, the wholly owned subsidiaries have been relieved from the requirement to prepare a financial report and
Directorsʼ report under ASIC (wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments
Commission.
(a) Consolidated income statement and a summary of movements in consolidated retained losses
The above companies represent a 'closed group' for the purposes of the Class Order, and as there are no other parties to the deed
of cross-guarantee that are controlled by BlueScope Steel Limited, they also represent the 'extended closed group'.
2018
$M
2017
$M
3,997.4
3,681.1
3.1
14.2
101.3
(2,851.8)
(541.8)
(67.6)
435.9
(223.4)
(256.9)
(93.0)
(92.5)
410.7
658.6
1,069.3
-
1,069.3
26.5
(2,409.8)
(523.6)
(63.9)
18.7
(215.0)
(264.5)
(102.0)
(77.2)
84.5
102.7
187.2
-
187.2
Statement of comprehensive income
Revenue
Other income
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Net impairment write-back of non-current assets
Freight on external despatches
External services
Finance costs
Other expenses from ordinary activities
Profit before income tax
Income tax benefit
Net profit for the year
Other comprehensive income for the year
Total comprehensive income (loss) for the year
- 57 -
30 Deed of cross - guarantee (continued)
Summary of movements in consolidated retained losses
Retained losses at the beginning of the year
Net profit for the year
Acquisition/disposal
Transfer to profits reserve
Other
Retained losses at the end of the year
(b) Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Deferred charges and prepayments
Total current assets
Non-current assets
Receivables - external
Inventories
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Payables
Borrowings
Provisions
Deferred income
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Share-based payments reserve
Hedge reserve
Profits reserve
Retained losses
Total equity
- 58 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
2018
$M
2017
$M
(1,295.0)
1,069.3
(207.8)
(1,043.8)
(0.1)
(1,477.4)
(1,308.3)
187.2
-
(173.8)
(0.1)
(1,295.0)
2018
$M
2017
$M
41.6
4,370.7
605.9
19.6
5,037.8
8.4
15.4
1,020.3
614.8
608.6
27.6
-
2,295.1
69.7
4,475.5
478.2
18.5
5,041.9
8.4
15.7
1,012.2
584.1
84.6
32.6
0.3
1,737.9
7,332.9
6,779.8
589.3
1,737.6
172.7
13.6
2,513.2
0.4
18.9
53.3
2.3
74.9
778.0
1,547.7
166.5
7.5
2,499.7
0.7
19.5
55.4
2.6
78.2
2,588.1
2,577.9
4,744.8
4,201.9
4,311.2
53.5
0.1
1,857.4
(1,477.4)
4,744.8
4,554.4
67.4
(0.1)
875.2
(1,295.0)
4,201.9
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Loans and
receivables
$M
Derivative
instruments
$M
Financial
liabilities at
amortised cost
$M
Total carrying
amount
$M
1,485.6
-
1,485.6
-
-
-
1,485.6
-
11.7
11.7
-
-
(1.9)
9.8
-
-
-
(1,865.2)
(880.8)
-
(2,746.0)
1,485.6
11.7
1,497.3
(1,865.2)
(880.8)
(1.9)
(1,250.6)
Loans and
receivables
$M
Derivative
instruments
$M
Financial
liabilities at
amortised cost
$M
Total carrying
amount
$M
1,363.9
-
1,363.9
-
-
-
1,363.9
-
7.3
7.3
-
-
(4.8)
2.5
-
-
-
(1,847.8)
(985.2)
-
(2,833.0)
1,363.9
7.3
1,371.2
(1,847.8)
(985.2)
(4.8)
(1,466.6)
Notes
6
31(d)
9
16
31(d)
Notes
6
31(d)
9
16
31(d)
31 Financial instruments and risk
(a) Financial assets and liabilities
30 June 2018
Financial assets
Receivables
Derivative financial instruments
Financial liabilities
Payables
Borrowings
Derivative financial instruments
30 June 2017
Financial assets
Receivables
Derivative financial instruments
Financial liabilities
Payables
Borrowings
Derivative financial instruments
(b) Risk management
The Board of Directors has overall responsibility for overseeing the management of financial risks, and approves policies for
financial risk management with the objective of supporting the delivery of financial targets while protecting future financial security.
The Group's Audit Committee regularly reviews the financial risk management framework to ensure it is appropriate when
considering any changes in market conditions. It reviews financial risk management controls and procedures and oversees how
management monitors compliance with these, and monitors the levels of exposure to fluctuations in commodity prices, interest
rates, and foreign exchange rates.
- 59 -
31 Financial instruments and risk (continued)
Risk
Exposure arising from
Measurement
Management
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
x
Foreign
exchange
Risk
Foreign currency payables and receivables
(primarily USD) and net investments in
foreign currency.
Interest
rate risk
Floating interest rate bearing liabilities
(2018: $349.2M, 2017: $203.4M) and
investments in cash and cash equivalents
(2018: $944.4M, 2017: $753.0M).
Commodity
price risk
International steel prices (primarily hot
rolled coil and slab), and commodity
prices including iron ore, coal, scrap,
zinc, aluminium and electricity.
Sensitivity
analysis and
cash flow
forecasting
Sensitivity
analysis
Sensitivity
analysis
Liquidity
risk
Difficulty in meeting obligations associated with
financial liabilities.
Rolling cash
flow forecasts
Credit risk
(Counter-
parties/Geo-
graphical)
Ageing
analysis and
fair value
exposure
management
•Possibility that counterparties to the
Group's financial assets, including cash,
receivables and derivative financial
instruments, will fail to settle their
obligations under their contracts.
•Large number of customers internationally
dispersed with trades in several major
geographical regions.
•Regions in which the Group has a significant
credit exposure are Australia, USA, China,
South-East Asia and New Zealand.
•Significant transactions with major customers,
being Liberty OneSteel and Fletcher Building
Group within the Australian operations.
Hedged with forward foreign exchange
contracts or internal (net investment) of foreign
operations as disclosed in note (c).
Given the level of exposure, any impact from
reasonably possible movements in interest
rates (+/- 50 basis points) will be immaterial.
Forward commodity contracts as disclosed in
note (c). Any impact from reasonably possible
movements based on an historical basis and
market expectations (+/- 20%) in electricity will
be immaterial.
The Group's net exposure to liquidity risk is not
significant based on available funding facilities
and cash flow forecasts. Refer to note 16(b) for
a summary of the Group's material financing
facilities. When undertaking financing facilities,
the Group takes into account a liquidity buffer
which is reviewed at least annually.
•Establish credit approvals and limits, including
the assessment of counterparty
creditworthiness.
•Undertake monitoring procedures such as
periodic assessments of the financial viability of
its counterparties and reviewing terms of trade.
•Obtain letters of credit from financial
institutions to guarantee the underlying
payment from trade customers.
•Undertake debtor insurance to cover selective
receivables for both commercial and sovereign
risks.
- 60 -
31 Financial instruments and risk (continued)
(c) Foreign currency risk exposure and sensitivity analysis (AUD/USD)
Cash and cash equivalents
Trade and other receivables
Forward foreign exchange contracts
Commodity option
Financial assets
Trade and other payables
Borrowings
Forward foreign exchange contracts
Financial liabilities
Net exposure
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
2018
$M
2017
$M
161.9
38.4
4.4
7.0
211.7
144.7
89.8
0.5
235.0
103.9
35.2
1.0
5.3
145.4
165.5
72.8
2.4
240.7
(23.3)
(95.3)
This exposure for the Group does not reflect the natural hedge of USD assets against USD liabilities of AUD 218.1M (2017: AUD
183.4M).
Judgement of reasonably possible movements:
Post-tax profit
higher (lower)
2018
$M
2017
$M
Equity
higher (lower)
2018
$M
2017
$M
AUD/USD + 10% (2017: +10%)
AUD/USD - 10% (2017: -10%)
2.9
(3.9)
4.9
(6.0)
2.9
(3.9)
4.9
(6.0)
(d) Commodity price and foreign exchange risk management
The Group uses derivative instruments to manage commodity price risk and foreign exchange risk by entering into forward
contracts. Derivatives are used only for the purposes of managing these risks and not for speculative purposes.
Forward foreign exchange contracts - cash flow hedges (i)
Forward foreign exchange contracts - fair value hedges (i)
Forward commodity contracts - cash flow hedges (ii)
Commodity option - non-current asset (iii)
Financial assets
Forward foreign exchange contracts - cash flow hedges (i)
Forward commodity contracts - cash flow hedges (ii)
Forward foreign exchange contracts - fair value hedges (i)
Financial liabilities
Net exposure
Consolidated
2018
$M
2017
$M
1.5
3.2
-
7.0
11.7
-
1.6
0.3
1.9
9.8
-
1.0
1.0
5.3
7.3
2.4
-
2.4
4.8
2.5
(i) Forward foreign exchange contract
The Group has entered into forward foreign exchange contracts designated as cash flow hedges and fair value hedges relating to
foreign currency sales and purchases, plant and equipment purchases and hedging of net working capital exposures. For the cash
flow hedges, the effective portion of gains and losses are recognised directly in equity. The fair value hedges are being marked to
market through the profit and loss in line with the Group's risk management strategy.
- 61 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
31 Financial instruments and risk (continued)
(ii) Forward commodity contracts
The Group has entered into forward contracts for the purchase of electricity for its New Zealand Steel business. This forward
contract has been designated as a cash flow hedge with the effective portion of gains and losses recognised directly in equity.
(iii) Commodity option
As part of the sale agreement of New Zealand Steel Mining Limited to Taharoa Mining Investments Limited (TMIL), BlueScope is
eligible to receive future royalties of US$1.66 per dry metric tonne (DMT) when the Platts Index Quotation is equal or greater than
US$65 per DMT. The royalty period is for iron sand shipments made between years 2 and 11 from 1 May 2017. The royalty
agreement ends on 10 May 2028.
The key model variable inputs impacting the value of the derivative are the Platts index iron ore price, the historical volatility of iron
ore prices, the credit worthiness of TMIL and production risk. The June 2017 royalty value was assessed at US$4M and revised to
US$5.2M as at 30 June 2018 . The royalty value will need to be reassessed at each reporting date with any movement in the fair
value of the derivative to be fair valued through the profit and loss and included in discontinued operations.
(e) Fair values
The carrying amounts and estimated fair values of the Groupʼs financial instruments recognised in the financial statements are
materially the same, with the exception of the following:
Non-traded financial liabilities
Other loans
Net assets (liabilities)
2018
2017
Carrying
amount
$M
Fair value
$M
Carrying
amount
$M
Fair value
$M
408.3
(408.3)
439.8
(439.8)
650.3
(650.3)
682.6
(682.6)
The fair value of interest bearing financial liabilities where no market exists is based upon discounting the expected future cash
flows by the current market interest rates on liabilities with similar risk profiles that are available to the Group (level 3).
Valuation of financial instruments
(i) Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
(ii) Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (i.e. derived from prices); and
(iii) Level 3 - inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
Derivatives valued using valuation techniques with market observable inputs are primarily foreign exchange forward contracts and
commodity forward contracts. These valuations reference forward pricing using present value calculations. The forward price
incorporates various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, and forward rate
curves of the underlying commodity. The fair value of forward commodity exchange contracts and forward foreign exchange
contracts are considered level 2 valuations (note 32(d)) and the commodity royalty option is considered level 3.
(f) Recognition and measurement of derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured
to their fair value at the end of each reporting period.
The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument,
and if so, the nature of the item being hedged.
The Group designates certain derivatives as either:
• Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges);
• Hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast
transactions (cash flow hedges); or
• Hedges of a net investment in a foreign operation (net investment hedges).
- 62 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
31 Financial instruments and risk (continued)
The relationship between hedging instruments and hedged items, the risk management objective and the strategy for undertaking
hedge transactions, is documented at the inception of the hedge transaction. The effectiveness of the derivatives in offsetting
changes in fair values or cash flows of hedged items is assessed and documented on an ongoing basis.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together
with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
(ii) Cash flow hedges
Changes in the fair value of derivatives that are designated as cash flow hedges are recognised in other comprehensive income
and accumulated in the hedging reserve in equity. The gain or loss relating to the effective portion is recognised in other
comprehensive income and accumulated in the hedging reserve, whilst ineffective portions are recognised immediately in profit or
loss within other income or other expenses.
Amounts accumulated in the hedging reserve are reclassified to profit or loss in the periods when the hedged item affects profit or
loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example,
inventory or fixed assets) the gains and losses previously deferred in the hedging reserve are reclassified from equity and included
in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in profit or loss as cost of
goods sold in the case of inventory, or as depreciation in the case of fixed assets.
(iii) Net investment hedges
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging
instrument relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in the
foreign currency translation reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit
or loss within other income or other expenses. Gains and losses accumulated in the foreign currency translation reserve are
reclassified to profit or loss when the foreign operation is partially disposed of or sold.
(iv) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does
not qualify for hedge accounting are recognised immediately in profit or loss and are included in other income or other expenses.
(v) Discontinuation of hedge accounting
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in the hedging reserve at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in the hedging reserve is immediately reclassified to profit or loss.
32 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the Group, and its related practices:
(a) Audit services
Audit and review of financial statements and other audit work under
the Corporations Act 2001:
Ernst & Young (including overseas Ernst & Young firms)
Consolidated
2018
$
2017
$
3,929,000
3,950,000
- 63 -
32 Remuneration of auditors (continued)
(b) Other services
Other non-audit services
Ernst & Young Australian firm
Tax compliance services
Advisory services
Assurance related
Related practices of Ernst & Young Australian firm
(including overseas Ernst & Young firms)
Tax compliance services
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
Consolidated
2018
$
2017
$
165,000
267,000
383,000
38,000
694,000
61,000
208,000
1,023,000
80,000
873,000
33 Other accounting policies
(a) New Accounting Standards and Interpretations adopted by the Group
(i) AASB 2016-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 107
(effective 1 July 2017)
This standard amends AASB 107 Statement of Cash Flows to require entities preparing financial statements in accordance with
Tier 1 reporting requirements to provide disclosures that enable users of financial statements to evaluate changes in liabilities
arising from financing activities, including both changes arising from cash flows and non-cash changes. The Group has applied
this amendment from 1 July 2017 (note 16(a)).
(b) New Accounting Standards and Interpretations not yet adopted by the Group
Certain new Accounting Standards and interpretations have been published that are not mandatory for the 30 June 2018 reporting
period. The Group's assessment of the impact of these new standards and interpretations is set out below.
(i) AASB 9 Financial Instruments (effective from 1 July 2018)
This standard addresses the classification, measurement and derecognition of financial assets in addition to new hedge
accounting requirements, including changes to hedge effectiveness testing, treatment of hedging costs, risk components that can
be hedged and disclosures and includes a new impairment model for financial assets.
The new standard has no impact on the Groupʼs current classification, measurement and derecognition of financial assets and
liabilities.
The new hedge accounting rules will, as a general rule, more closely align the accounting for hedging instruments with the groupʼs
risk management practices. The current hedge relationships outlined in note 31(d) qualify as continuing hedges under AASB 9.
Accordingly, there is no significant impact on the accounting treatment for the Groupʼs hedging relationships.
The new impairment requirements result in an earlier recognition of impairment provisions through the use of an expected credit
loss (ECL) model compared to the incurred credit loss model under AASB 139. In the case of the Group it applies to financial
assets classified at amortised cost. Based on the Groupʼs assessment of historical provision rates and forward-looking analysis the
impact on adoption is an increase in the impairment provision of $5.5M recognised through opening retained earnings.
- 64 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
33 Other accounting policies (continued)
(ii) AASB 15 Revenue from Contracts with Customers (effective 1 July 2018)
AASB 15 replaces AASB 118 Revenue which covers contracts for goods and services, and AASB 111 Construction Contracts,
which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of good
or service transfers to a customer, so the notion of control replaces the existing notion of risk and rewards. This standard has the
potential to change the timing and in some cases the quantum of revenue recognised.
In order to assess if the new standard would have a material impact on the Groupʼs financial statements, management selected
representative samples of customer contracts to review from all material locations. The findings resulted in no material impact on
the Groupʼs financial statements arising from adoption of AASB 15. However, a different accounting treatment is required for some
identified service warranties.
The majority of the Groupʼs product warranties are assurance type warranties and therefore do no not require a different
accounting treatment. However, based on the completed assessment, management identified service warranties, ranging from 5 to
30 years, in our North America Buildings and Building Product businesses. Instead of currently recognising revenue upon receipt
of the warranty premium and raising a claims provision based on known claims and a past history of claims experience, the new
standard requires the service warranty premium to be deferred and revenue recognised across the warranty period with any claims
costs to be expensed as incurred. As the Group has elected to apply the modified retrospective approach upon transition, the
impact is as follows:-
Deferred warranty income
Product claims provision
Deferred tax assets
Opening retained earnings
$'M Dr
-
1.8
1.1
5.6
8.5
$'M Cr
8.5
-
-
-
8.5
(iii) AASB 16 Leases (effective 1 July 2019)
AASB 16, the new lease accounting standard was released in January 2016. The standard eliminates the classification of leases
as either operating leases or finance leases as required by the current lease accounting standard and, instead, introduces a single
lessee accounting model. A lessee is required to recognise assets and liabilities for all leases with a term of more than 12 months,
unless the underlying asset is of low value, and depreciate lease assets separately from interest on lease liabilities in the income
statement.
Management has carried out an assessment of the impact of the new standard and has determined that it will have a material
impact on the Group's financial statements and disclosures. This will involve an increase in assets and liabilities, a change in the
timing in which lease expenses are recognised, a switch in earnings categories from operating expense to depreciation and
interest expense and an increase in gearing levels. The changes will have no cash effect to the Group. Further assessment of the
impact will be carried out as part of the adoption of the new standard.
The current lease commitments note as disclosed in Note 25(b)(i) is indicative of the lease commitments to be discounted to
present value and recognised on the balance sheet upon adoption. However, this undiscounted number will be subject to change
due to a number of factors including:
• New lease contracts entered into by the Group;
• Changes to existing lease contracts;
• Management finalising their review of embedded leases within existing supply contracts;
• Changes in managementʼs judgement to exercise rights of renewal under lease arrangements;
• Exclusion from balance sheet recognition for low value assets (less than $10K when brand new) and leases with terms less
than 12 months; and
• Foreign exchange translation movements.
A key judgement area is the discount rates to be used to discount lease assets and liabilities. Management is currently reviewing
the process for determining the appropriate discount rates upon transition and beyond.
The Group intends to adopt the modified retrospective approach with the cumulative effect of initially applying the Standard
recognised at the date of initial application within retained earnings. Comparative amounts will not be restated for the period prior
to adoption.
(iii) AASB Interpretation 23 – Uncertainty over income tax treatments (effective 1 July 2019)
AASB 23 clarifies the application of recognition and measurement requirements in AASB 112 Income Taxes when there is
uncertainty over income tax treatments and removes most of the choice about how to reflect uncertain tax positions in the financial
statements.
A full assessment of the amendments to the standard is yet to be carried out.
- 65 -
BlueScope Steel Limited
Notes to the consolidated financial statements
30 June 2018
(continued)
33 Other accounting policies (continued)
(b) Foreign currency translation
(i) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss,
except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to
part of the net investment in a foreign operation.
(ii) Foreign operations
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that
statement of financial position;
• Income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions); and
• All resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and
other currency instruments designated as hedges of such investments, are recognised in other comprehensive income. When a
foreign operation is sold, a proportionate share of such exchange differences is reclassified to profit or loss as part of the gain or
loss on sale where applicable.
Goodwill and fair value adjustments arising on the acquisition of foreign entities are treated as assets and liabilities of the foreign
entities and translated at the closing rate.
(c) Other taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing and financing activities
which are recoverable from, or payable to, the taxation authority are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
- 66 -
Directors' Declaration
BLUESCOPE STEEL LIMITED
FOR THE YEAR ENDED 30 JUNE 2018
In the Directors' opinion:
(a) the financial statements and notes set out on pages 1 to 66 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
(ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2018 and of its performance for
the year ended on that date, and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable, and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group
identified in note 30 will be able to meet any liabilities to which they are, or may become, subject by virtue of
the deed of cross-guarantee described in note 30.
(d) the financial statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
J Bevan
Chairman
M Vassella
Managing Director & CEO
Melbourne
13 August 2018
- 67 -
BLUESCOPE STEEL
ANNUAL REPORT 2017/2018
Extended
FINANCIAL
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-
BLUESCOPE STEEL
ANNUAL REPORT 2017/2018
shareholder
INFORMATION
and
corporate
DIRECTORY
SHAREHOLDER INFORMATION
As at 24 August 2018
Distribution Schedule
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Total
No of Holders
61,458
11,340
1,096
542
57
74,493
Securities
17,996,990
23,073,098
7,674,616
12,586,528
483,194,111
544,525,343
%
3.30
4.24
1.41
2.31
88.74
100.00
Based on a closing share price of $17.830 on 24 August 2018, the number of shareholders holding less than a
marketable parcel of 29 shares is 5,453 and together they hold 78,589 shares.
Twenty Largest Registered Shareholders
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
AMP LIFE LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
ECAPITAL NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
BRISPOT NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
UBS NOMINEES PTY LTD
TOTAL
Balance of Register
Grand TOTAL
Securities
%IC
199,648,998
113,786,579
67,763,961
39,121,178
14,610,587
11,463,762
7,484,249
4,532,537
3,365,048
2,401,535
1,953,928
1,568,145
1,081,070
1,025,160
958,973
858,419
818,747
629,581
572,000
570,000
36.66%
20.90%
12.44%
7.18%
2.68%
2.11%
1.37%
0.83%
0.62%
0.44%
0.36%
0.29%
0.20%
0.19%
0.18%
0.16%
0.15%
0.12%
0.11%
0.10%
474,214,457
70,310,886
544,525,343
87.09%
12.91%
100.00%
Substantial Shareholders
As at 24 August 2018, BlueScope has been notified of the following substantial shareholdings:
The Vanguard Group Inc
BlackRock Group
27,559,047
34,947,589
Name
Number of securities held
On-Market Share Buy-Back
On 13 August 2018, BlueScope announced its intention to undertake an on-market share buy-back of up to $250
million.
Voting Rights for Ordinary Shares
The Constitution provides for votes to be cast:
(a) on a show of hands, one vote for each shareholder; and
(b) on a poll, one vote for each fully paid share.
Stock exchanges on which our debt securities are listed
Debt securities (Unsecured Guaranteed Euro Medium Term Notes) are listed on the Singapore Stock Exchange
(SGX).
CORPORATE DIRECTORY
Directors
J A Bevan
Chairman
Secretaries
Executive Leadership Team
M R Vassella
Managing Director and Chief Executive Officer
D B Grollo
K A Dean
P Bingham-Hall
E G W Crouch AM
L H Jones
R P Dee-Bradbury
J M Lambert
D J Counsell
P. Grau
M R Vassella
Managing Director and Chief Executive Officer
T J Archibald
Chief Financial Officer
D J Counsell
Chief Legal Officer and Company Secretary
S R Elias
Chief Executive NS BlueScope [and executive responsibility for BlueScope China]
P Finan
Chief Executive, BlueScope Buildings
A Highnam
Executive General Manager, People and Performance
J Nowlan
Chief Executive, Australian Steel Products
G Stephens
Chief Executive, New Zealand Steel & Pacific Islands
Andrew Garey
Chief Executive, Strategy & Optimisation
Notice of Annual General Meeting
The Annual General Meeting of BlueScope Steel Limited will be held at the Intercontinental
Sydney, 117 Macquarie Street, Sydney at 10.00am on Friday, 23 November 2018
Corporate Governance Statement
An overview of BlueScope Steel Limited’s corporate governance structures is presented in the
2018 Corporate Governance Statement which is available online at:
http://www.bluescope.com/about-us/governance
Registered Office
Share Registrar
Auditor
Securities Exchange
Level 11, 120 Collins Street, Melbourne, Victoria 3000
Telephone: +61 3 9666 4000
Fax: +61 3 9666 4111
Email: bluescopesteel@linkmarketservices.com.au
Postal Address: PO Box 18207, Collins Street East, Melbourne, Victoria 8003
Link Market Services Limited
Level 12, 680 George Street, Sydney, NSW 2000
Postal address: Locked Bag A14, Sydney South, NSW 1235
Telephone (within Australia): 1300 855 998
Telephone (outside Australia): +61 1300 855 998
Fax: +61 2 9287 0303
Email: bluescopesteel@linkmarketservices.com.au
Ernst & Young
8 Exhibition Street, Melbourne, Victoria 3000
BlueScope Steel Limited shares are quoted on the Australian Securities Exchange
(ASX).
Website Address
www.bluescope.com
BLUESCOPE STEEL LIMITED
LEVEL 11, 120 COLLINS STREET
MELBOURNE, VICTORIA 3000
AUSTRALIA
ABN 16 000 011 058
WWW.BLUESCOPE.COM