BlueScope Steel Limited - Amazon S3 · 2015-07-21 · BlueScope Steel Limited Directors' report 31...

BlueScope Steel Limited

ABN 16 000 011 058

Interim financial report - 31 December 2007

Contents

Page

Directors' report

1

Interim financial report

Consolidated income statement

6

Consolidated balance sheet

7

Consolidated statement of recognised income and expense

8

Consolidated cash flow statement

9

Notes to the consolidated financial statements

10

Directors' declaration

20

Independent auditor's review report to the members

21

BlueScope Steel LimitedDirectors' report

31 December 2007

Directors' report

Your directors present their report on the consolidated entity consisting of BlueScope Steel Limited and the entities it

controlled at the end of, or during, the half-year ended 31 December 2007.

Directors

The following persons were directors of BlueScope Steel Limited during the whole of the half-year and up to the date of

this report:

G J Kraehe AO

R J McNeilly

D J Grady

H K McCann AM

P J Rizzo

Y P Tan

D B Grollo

P F O'Malley was appointed a director on 6 August 2007.

K C Adams resigned as a director on 31 October 2007.

Review of operations

A summary of consolidated revenues and results by reporting segment is set out below:

Segment revenues

Segment EBIT

2007

2006

2007

2006

$M

$M

$M

$M

Hot Rolled Products Australia

2,024.8

2,000.8

353.6

438.3

Coated and Building Products Australia

2,122.0

1,537.0

5.8

49.0

New Zealand and Pacific Steel Products

343.3

365.8

43.8

42.6

Coated and Building Products Asia

753.6

678.3

(195.4)

30.8

Hot Rolled Products North America

266.0

289.0

46.6

111.6

Coated and Building Products North America

399.0

449.6

43.3

23.4

Corporate and Group

264.5

230.5

61.7

(14.2)

Intersegment eliminations

(1,440.8)

(1,405.3)

(28.3)

(33.8)

Total continuing operations

4,732.4

4,145.7

331.1

647.7

Unallocated revenue less unallocated expenses

(63.4)

(68.4)

Profit before income tax

267.7

579.3

Income tax

(145.1)

(172.1)

Profit from continuing operations

122.6

407.2

Profit (loss) from discontinued operations (net of tax)

(1.9)

(9.5)

Profit for the year

120.7

397.7

Profit (loss) attributable to minority interest

(4.8)

(9.9)

Profit attributable to members of BlueScope Steel

Limited

115.9

387.8

Earnings per share for profit from continuing operations (cents per share)

Basic earnings per share

16.0

56.0

Diluted earnings per share

15.9

55.9

Earnings per share for profit (cents per share)


15.7

54.7


15.6

54.6

-1-


31 December 2007(continued)

Review of operations (continued)

The Company’s half year revenue from continuing operations increased $586.7M compared to the previous comparative

period to a record level of $4,732.4M, primarily through additional volumes delivered by the acquisition of Smorgon Steel

Limited’s distribution business, higher global slab and hot rolled coil prices, higher scrap sales from Hot Rolled Products

Australia, higher Coated and Building Products Australia export volumes reflecting improved production performances and

sales growth in Coated and Building Products across all regions within Asia. These were partly offset by the sale of the

Vistawall business in the second half of FY 2007, a stronger average Australian dollar and a higher proportion of export

sales largely due to the closure of the tinplate business in second half FY 2007.

Net profit after tax attributable to the shareholders of the Company decreased $271.9M to $115.9M driven by one-off costs

related to the impairment of the China Metal Coating Line and Vietnam Metal Coating Line facilities, Lysaght Home

Improvements and Lysaght Fiji due to lower than expected domestic volumes and margins in these businesses. These

were partly offset by the profit on sale of the 19.9% shareholding in Smorgon Steel Limited.

Excluding these items the result was negatively impacted by a strong Australian dollar, reduced margins from North Star

BlueScope Steel, increased iron ore, scrap, steel feed and other operational costs which were partly offset by higher

international steel prices.


The earnings contribution from the Hot Rolled Products segment decreased primarily as a result of higher US dollar iron

ore, scrap and alloy purchase prices, higher freight and discretionary repairs and maintenance costs to support record

production rates and a stronger Australian dollar. These were partly offset by higher export slab and hot rolled coil prices

and higher plate and welded beam prices in the domestic market.


The earnings contribution from the Coated and Building Products Australia segment decreased significantly primarily

driven by impairment of Lysaght Home Improvements due to lower than expected domestic volumes and margins, write off

of capitalised Movex application costs resulting from the intention to migrate Lysaght Australia to BlueScope Distribution’s

ERP system, integration costs associated with the acquisition of Smorgon Steel Limited’s distribution business and

restructuring and redundancy costs associated with the announced closure of the CPL1 paint line at the CRM service

centre in Port Kembla.

Excluding these items the result was positively impacted by the recently acquired BlueScope Distribution business, higher

export sales prices, higher steel feed and metal coating costs, partly offset by a stronger Australian dollar and higher unit

costs associated with the ramp up of the Western Sydney COLORBOND® Steel Centre and the ramp up of cold rolled

export sales to replace domestic tinplate.


The earnings contribution from the New Zealand and Pacific Steel Products segment increased slightly primarily as a

result of redemption of B class preference shares in Manukau International Limited an investment vehicle of the New

Zealand Steel Pension Fund, which had previously been impaired, improved scrap prices combined with a higher

contribution from vanadium due to strengthening world prices and an improved product mix to higher margin products.

These were partly offset by higher coal prices, a strengthening New Zealand dollar relative to the US dollar and

impairment of Lysaght Fiji.


The earnings contribution from the Coated and Building Products Asia segment was significantly lower primarily due to

impairment of China Metal Coating Line and Vietnam Metal Coating Line facilities, driven by lower than expected domestic

volumes and margins in these businesses, together with reduced margins driven by increases in steel feed costs more

than offsetting sales price increases. These were partly offset by lower unit costs following an increase in production

volumes at the China Metal Coating Line and lower metal coating costs.


The earnings contribution from the Hot Rolled Products North America segment was considerably lower primarily due to

reduced spread at North Star BlueScope Steel with lower hot rolled coil prices combined with increases in the cost of

scrap in North America, increased conversion costs driven by higher electricity cost and an unfavourable movement in the

Australian dollar relative to the US dollar.

-2-



Review of operations (continued)


The earnings contribution from the Coated and Building Products North America segment improved significantly primarily

due to improved margins as sales price increases exceeded raw material cost increases, improved plant efficiencies,

increased output at lower unit cost facilities and write back of over-provided liabilities in relation to a UK pension fund.

These were partly offset by an unfavourable movement in the Australian dollar relative to the US dollar.

Corporate and Group

The earnings contribution from the Corporate and Group segment was significantly improved compared to the previous

year’s loss primarily as a result of the profit on sale of the 19.9% shareholding in Smorgon Steel Limited. This was partly

offset by employee share ownership plan costs during the current period (similar costs were incurred during the second

half FY 2007) and internal restructuring costs.

Significant changes in the state of affairs

The following significant events occured during the half-year:

On 3 August 2007, BlueScope Steel Limited acquired the distribution business of Smorgon Steel Limited for $750M,

including acquisition costs. As part of the consideration for this acquisition the 179,124,278 Smorgon Steel Limited shares,

previously acquired by the Company for $319.3M, were bought back at $2.50 per share based on 0.4091 OneSteel Limited

shares for each Smorgon Steel Limited share valued using the volume weighted price of OneSteel Limited shares for the

10-day period to 17 August 2007. The pre-tax gain on the disposal of the Smorgon Steel Limited shares was $128M.

Paul O'Malley, previously Chief Financial Officer, succeeded Kirby Adams as Managing Director and CEO effective from 1

November 2007. As part of the transition to his new role, Mr O'Malley joined the Board of BlueScope Steel Limited.

Charlie Elias was appointed as Chief Financial Officer and will take up his new role from late February 2008.

Kathryn Fagg (currently President, Asia) will leave the company in April 2008 to pursue other career interests.

The senior leadership team is as follows:

• Noel Cornish - Chief Executive, Australian and New Zealand Steel Manufacturing Businesses

• Paul O'Keefe - Chief Executive, Australian Coated and Industrial Markets

• Mark Vassella - Chief Executive, Australian Distribution and Solutions

• Kathryn Fagg - President, Asia (until April 2008)

• Brian Kruger - President, North America and Corporate Strategy and Innovation

Matters subsequent to the end of the financial half-year

BlueScope Steel North America Corporation has acquired the outstanding shares of IMSA Steel Corporation for US$730M

from Ternium S.A., a NYSE listed public company effective 1 February 2008. IMSA Steel Corporation has four distinct

businesses with manufacturing facilities throughout the United States and sales throughout North America:

• Varco Pruden Buildings - a leading North American manufacturer of pre-engineered building systems (PEBs) for

the non-residential market with five manufacturing facilities. It has a total processing capacity of approximately

210,000 tons per annum.

• Steelscape - a leading west coast producer of metal coated and painted steel coils with three production facilities.

Steelscape has a total capacity of approximately 500,000 tons per annum of metal coated steel products and

350,000 tons per annum of painting capacity.

• Metl-Span - a leading North American manufacturer of insulated steel panels for commerical, industrial and cold

storage buildings. Metl-Span has five production facilities across the United States.

• ASC Profiles - a leading North American manufacturer of building components including architectural roof and

wall systems and structural roof and floor decking. ASC has ten production facilities located primarily in western

US.

-3-



Auditor's independence declaration

The auditors' independence declaration for the half-year ended 31 December 2007 has been received from Ernst &

Young. This can be referred to on page 5 of the directors' report.

Rounding of amounts

The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments

Commission, relating to the 'rounding off' of amounts in the directors' report and half-year financial report. Amounts in the

directors' and financial report have been rounded off in accordance with that Class Order to the nearest hundred thousand

dollar.

This report is made in accordance with a resolution of directors.

Graham Kraehe AO

Chairman

Paul O'Malley

Managing Director & CEO

Melbourne

22 February 2008

-4-



Auditor's Independence Declaration to the Directors of BlueScope Steel Limited

In relation to our review of the financial report of BlueScope Steel Limited for the half-year ended 31 December 2007, to

the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the

Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

Bruce Meehan

Partner

Melbourne

22 February 2008

-5-

BlueScope Steel LimitedConsolidated income statement

For the half-year ended 31 December 2007

Half-year

2007

2006

$M

$M

Revenue from continuing operations

4,732.4

4,145.7

Other income

146.1

8.3

Changes in inventories of finished goods and work in progress

(48.6)

98.3

Raw materials and consumables used

(2,274.3)

(1,941.8)

Employee benefits expense

(730.5)

(651.9)

Depreciation and amortisation expense

(173.6)

(156.1)

Impairment of non-current assets

(250.9)

(0.6)

Freight on external despatches

(316.5)

(280.5)

External services

(566.1)

(468.5)

Finance costs

(66.0)

(71.4)

Other expenses

(225.7)

(205.0)

Share of net profits of associates and joint venture partnership accounted for using the

equity method

41.4

102.8


267.7

579.3

Income tax expense

(145.1)

(172.1)

Profit from continuing operations

122.6

407.2

Profit (loss) from discontinued operations

(1.9)

(9.5)

Profit for the half-year

120.7

397.7

Profit is attributable to:

Equity holders of BlueScope Steel Limited

115.9

387.8

Minority interest

4.8

9.9

120.7

397.7

Cents

Cents

Earnings per share for profit from continuing operations attributable to the

ordinary equity holders of the company:


16.0

56.0


15.9

55.9

Cents

Cents

Earnings per share for profit attributable to the ordinary equity holders of the

company:


15.7

54.7


15.6

54.6

The above consolidated income statement should be read in conjunction with the accompanying notes.

-6-

BlueScope Steel LimitedConsolidated balance sheet

As at 31 December 2007

31 December

30 June

2007

2007

$M

$M

ASSETS

Current assets

Cash and cash equivalents

40.6

36.4

Receivables

1,235.1

1,219.4

Inventories

1,461.6

1,212.3

Derivative financial instruments

-

7.7

Available-for-sale financial assets

-

476.5

Other

63.2

56.0

Total current assets

2,800.5

3,008.3

Non-current assets

Receivables

39.3

49.5

Retirement benefit assets

24.2

59.9

Inventories

57.2

58.8

Investments accounted for using the equity method

313.0

301.3

Property, plant and equipment

3,447.8

3,670.7

Deferred tax assets

106.4

136.1

Intangible assets

628.5

220.9

Other

1.7

0.7

Total non-current assets

4,618.1

4,497.9

Total assets

7,418.6

7,506.2

LIABILITIES

Current liabilities

Payables

900.9

878.8

Interest bearing liabilities

1,196.1

633.0

Current tax liabilities

40.6

56.7

Provisions

428.2

477.5

Deferred income

74.3

70.9


7.0

2.5

Total current liabilities

2,647.1

2,119.4

Non-current liabilities

Payables

0.5

2.0


549.0

905.1

Deferred tax liabilities

243.4

317.0

Provisions

173.4

168.3

Retirement benefit obligations

150.0

127.3


0.7

2.1

Total non-current liabilities

1,117.0

1,521.8

Total liabilities

3,764.1

3,641.2

Net assets

3,654.5

3,865.0

EQUITY

Contributed equity

1,978.5

1,896.0

Reserves

(142.4)

7.0

Retained profits

1,748.1

1,894.7

Parent entity interest

3,584.2

3,797.7

Minority interest

70.3

67.3

Total equity

3,654.5

3,865.0

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

-7-

BlueScope Steel LimitedConsolidated statement of recognised income and expense


2007

2006

$M

$M

Gain (loss) on cash flow hedges taken to equity

(4.3)

(2.7)

Gain (loss) on revaluation of available-for-sale financial assets

(29.2)

13.9

Transfer to profit of gain on disposal of available-for-sale financial assets

(128.0)

-

Net gain (loss) on hedges of net investments

29.2

(73.3)

Exchange differences on translation of foreign operations

(53.0)

62.2

Actuarial gain (loss) on defined benefit superannuation plans

(88.2)

(24.8)

Income tax on items taken directly to or transferred from equity

56.5

26.0

Net income recognised directly in equity

(217.0)

1.3

Profit for the half-year

120.7

397.7

Total recognised income and expense for the half-year

(96.3)

399.0

Total recognised income and expense for the half-year is attributable to:

Member of BlueScope Steel Limited

(100.8)

389.4

Minority interest

4.5

9.6

(96.3)

399.0

The above consolidated statement of recognised income and expense should be read in conjunction with the

accompanying notes.

-8-

BlueScope Steel LimitedConsolidated cash flow statement


Half-year

2007

2006

$M

$M

Cash flows from operating activities

Receipts from customers

5,189.1

4,864.4

Payments to suppliers and employees

(4,645.1)

(4,252.7)

544.0

611.7

Dividends received

14.8

10.7

Joint venture partnership distributions received

27.9

65.1

Interest received

3.3

3.6

Other revenue

13.8

9.8

Finance costs paid

(69.9)

(80.0)

Income taxes (paid) received

(139.3)

(125.7)

Net cash (outflow) inflow from operating activities

394.6

495.2

Cash flows from investing activities

Purchases of controlled entities net of cash acquired

(791.0)

-

Payments for property, plant and equipment

(135.8)

(216.9)

Payments for intangibles

(5.4)

(3.6)

Payments for investment in joint venture partnerships

(12.3)

(27.0)

Payments for investment in business assets

(1.0)

(5.3)

Payments for available-for-sale financial assets

-

(319.3)

Proceeds from sale or redemption of investments

458.7

-

Loans to related parties

-

(29.4)

Proceeds from sale of property, plant and equipment

0.7

33.8

Repayment of loans by related parties

1.9

3.8

Net cash (outflow) inflow from investing activities

(484.2)

(563.9)

Cash flows from financing activities

Proceeds from issues of shares

5.0

119.3

Proceeds from shares issued to minority interests

-

2.2

Proceeds from borrowings

4,918.1

5,927.0

Repayment of borrowings

(4,708.2)

(5,873.7)

Dividends paid to company's shareholders

(131.0)

(119.3)

Dividends paid to minority interests in subsidiaries

(1.5)

(1.3)

Net cash inflow (outflow) from financing activities

82.4

54.2

Net increase (decrease) in cash and cash equivalents

(7.2)

(14.5)

Cash and cash equivalents at the beginning of the half-year

26.9

59.0

Effects of exchange rate changes on cash and cash equivalents

-

(0.8)

Cash and cash equivalents at end of the half-year

19.7

43.7

The above consolidated cash flow statement should be read in conjunction with the accompanying notes.

-9-

BlueScope Steel LimitedNotes to the consolidated financial statements

31 December 2007

Contents of the notes to the financial statements

Page

1

Basis of preparation of half-year report

11

2

Critical accounting estimates

11

3

Segment information

12

4

Equity securities issued

14

5

Discontinued operations

15

6

Dividends

16

7

Contingencies

16

8

Business combination

17

9

Events occurring after the balance sheet date

19

-10-



1

Basis of preparation of half-year report

This general purpose financial report for the interim half-year reporting period ended 31 December 2007 has been

prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001

and other mandatory reporting requirements.

This interim financial report does not include all the notes of the type normally included in an annual financial report.

Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2007 and any public

announcements made by BlueScope Steel Limited during the interim reporting period in accordance with the continuous

disclosure requirements of the Corporations Act 2001.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim

reporting period.

2

Critical accounting estimates

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including

expectations of future events that are believed to be reasonable under the circumstances.

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,

seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Income taxes

The group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is

required in determining the worldwide provision for income taxes. There are many jurisdictions and calculations for which

the ultimate tax determination is uncertain during the ordinary course of business. 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 actually reported, such differences will impact the current and

deferred tax provisions in the period in which such determination is made.

(ii) Defined benefit superannuation plans and workers compensation

Calculations for the group's defined benefit superannuation plans and self-insured workers compensation are determined

by external actuaries. These calculations require assumptions in relation to the expectation of future events.

(iii) Product claims

Provisions for claims is based on sales volume and past experience of the level of repairs and replacement. The provision

requires the use of assumptions in relation to the level of future claims made.

(iv) Share based payment transactions

The group measures cost of equity settled transactions with employees by reference to the fair value of equity instruments

at grant date. The fair value is determined by an external valuer using a binomial model. These calculations require

assumptions to be made.

(v) Restructuring and redundancy provisions

Provisions for restructuring and redundancy are based on the group's best estimate of the outflow of resources required to

settle commitments made by the group. Where the outcome of these matters is different from the amounts that were

intially recorded, such differences will impact the income statement in the period in which such determination is made.

(vi) Estimated impairment of cash-generating units, including goodwill

The Group tests annually whether goodwill has suffered any impairment, or more frequently if events or changes in

circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. The Group

assesses impairment of cash-generating units at each reporting date by evaluating conditions specific to the Group and to

the particular cash-generating unit that may lead to impairment. If an impairment trigger exists the recoverable amount of

the cash-generating unit is determined. The recoverable amounts of cash-generating units have been determined based

on value-in-use calculations which require the use of assumptions surrounding future cash flows and discount factors.

-11-



3

Segment information

(a)

Description of segments

Business segments

The consolidated entity has six business reporting segments: Hot Rolled Products Australia, Coated and Building Products

Australia, New Zealand and Pacific Steel Products, Coated and Building Products Asia, Hot Rolled Products North

America and Coated and Building Products North America.


Hot Rolled Products includes the Port Kembla Steelworks, a steel making operation with an annual production capacity of

approximately 5.1 million tonnes of crude steel. The Port Kembla Steelworks manufactures slab, hot rolled coil and plate.

Slab and hot rolled coil is supplied to Coated and Building Products Australia for further processing, as well as to other

domestic and export customers.


Coated and Building Products Australia markets a range of products and material solutions to the Australian building and

construction industry and is also a key supplier to the Australian automotive sector, major white goods manufacturers and

general manufacturers. Coated and Building Products Australia is a leader in metallic coating and painting technologies

supplying a wide range of branded products such as COLORBOND® pre painted steel, ZINCALUME® zinc/aluminium

alloy coated steel and the LYSAGHT® range of building products. The Coated and Building Products business comprises

two main metallic coating production facilities at Springhill in New South Wales and Western Port in Victoria together with

a network of manufacturing and distribution facilities throughout Australia, including BlueScope Distribution (formerly

Smorgon Distribution).


The New Zealand Steel operation at Glenbrook, New Zealand, produces a full range of flat steel products for both

domestic and export markets. It has an annual production capacity of 0.6 million tonnes. The segment also includes

facilities in New Caledonia, Fiji and Vanuatu which manufacture and distribute the LYSAGHT® range of products.


Coated and Building Products Asia manufactures and distributes a range of metallic coated, painted steel products and

pre-engineered steel building systems primarily to the building and construction industry and to some sections of the

manufacturing industry across Asia.


Hot Rolled Products North America includes a 50% interest in the North Star BlueScope Steel joint venture, a steel mini

mill in the United States, a 47.5% shareholding in Castrip LLC, and North American export trading activities.


Coated and Building Products North America includes the North American Buildings Group, which designs, manufactures

and markets pre-engineered steel buildings and component systems.

Corporate and Group

Corporate and Group relates primarily to logistics and corporate activities.

-12-



3

Segment information (continued)

(b)

Primary reporting format - business segments

Half-year

2007

Hot Rolled

Products

Australia

Coated and

Building

Products

Australia

New

Zealand and

Pacific Steel

Products

Coated and

Building

Products

Asia

Hot Rolled

Products

North

America

Coated and

Building

Products

North

America Corporate

and Group

Inter-

segment

eliminations/

unallocated

Total

Continuing

Operations Discontinued

Operations

Consolidated

$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

Segment revenue

2,024.8 2,122.0

343.3

753.6

266.0 399.0

264.5

(1,440.8)

4,732.4 2.1

4,734.5

Segment result

353.6 5.7

29.8

(195.0)

8.9 41.9

(66.3)

(28.3)

150.3 (2.9)

147.4

Share of net profits of associates and joint venture

partnership

- 0.1

2.6

(0.4)

37.7 1.4

-

-

41.4 -

41.4

Share of gains(loss) on sale of investments

- -

11.4

-

- -

128.0

-

139.4 -

139.4

Segment EBIT

353.6 5.8

43.8

(195.4)

46.6 43.3

61.7

(28.3)

331.1 (2.9)

328.2


(63.4)


264.8

Half-year

2006

Hot Rolled

Products

Australia

Coated and

Building

Products

Australia

New

Zealand and

Pacific Steel

Products

Coated and

Building

Products

Asia

Hot Rolled

Products

North

America

Coated and

Building

Products

North

America Corporate

and Group

Inter-

segment

eliminations/

unallocated

Total

Continuing

Operations Discontinued

Operations

Consolidated

$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

Segment revenue

2,000.8 1,537.0

365.8

678.3

289.0 449.6

230.5

(1,405.3)

4,145.7 382.8

4,528.5

Segment result

438.3 49.0

41.3

32.9

9.9 21.4

(14.2)

(33.8)

544.8 (12.9)

531.9

Share of net profits of associates and joint venture

partnership

- -

1.3

(2.1)

101.7 2.0

-

-

102.9 0.2

103.1

Share of gains(loss) on sale of investments

- -

-

-

- -

-

-

- -

-

Segment EBIT

438.3 49.0

42.6

30.8

111.6 23.4

(14.2)

(33.8)

647.7 (12.7)

635.0


(68.4)


566.6

-13-


31 December 2007

4

Equity securities issued

2007

2006

2007

2006

Shares

Shares

$M

$M

Issues of ordinary shares during the Interim

Opening balance

733,828,317

698,856,440

1,896.0

1,653.9

Dividend reinvestment plan - shareholders

5,552,248

7,494,951

60.1

48.9

Dividend reinvestment plan - underwritten

-

17,856,029

-

119.3

Exercise of share rights under the Long Term Incentive

Plan

1,488,252

2,101,057

6.5

6.8

Exercise of share rights under the Special Share Rights

Plan

-

40,000

-

0.3

General Employee Share Plan issues

1,564,557

204,400

15.7

1.0

Forfeited shares from employee share plans

-

-

0.3

-

742,433,374

726,552,877

1,978.6

1,830.2

Dividend Reinvestment Plan

The dividend reinvestment plan enables shareholders to receive some or all of their future dividends as ordinary

BlueScope Steel Limited shares instead of cash. The dividend reinvestment plan was fully underwritten in respect of the

financial year 2006 final ordinary dividend.

Long Term Incentive Plan

The Long Term Incentive Plan is an award of share rights to eligible senior managers. The September 2004 award was

48% vested in the current period with the September 2005 and November 2006 awards partially vesting at 1% and 2%

respectively due to Vistawall executives leaving the Plans as a result of the sale of Vistawall on 29 June 2007. The

September 2003 award fully vested in the previous period. The full details of the operation of the plan are detailed in the

June 2007 Remuneration Report.

Special Share Rights Plan

Special share rights are awarded from time to time to meet specific or exceptional demands. Special share rights which

were awarded in 2004 to Mr Lance Hockridge, to facilitate the effective integration and turn around of the North American

Coated and Building Products business, vested and were exercised in the comparative period.

General Employee Share Plan

In Thailand and New Zealand, shares were granted under the September 2004 General Employee Share Plan which

vested during the period. In addition, employees from Australia and USA were issued shares under the November 2007

General Employee Share Plan.

The aim of this plan is, in recognition of company performance, to assist employees to build a stake in the company by

enabling each eligible employee to acquire a parcel of shares. Employees who become shareholders have the potential to

benefit from dividends paid on the shares, growth in the market value of their shares and any bonus shares or rights

issues the Board of Directors may approve from time to time.

-14-


31 December 2007

5

Discontinued operations

(a)

Description

In June 2007, Coated and Building Products North America sold its Vistawall division, which manufactured and sold

extruded aluminium and glass products for the building and construction sector. The current year result is due to working

capital completion adjustments.

In April 2007, the Company closed its loss making tinplate manufacturing facility which was the major component of the

Packaging Products cash generating unit. Divestment of remaining components of the Packaging Products cash

generating unit have continued in the six months to 31 December 2007.

Following a series of construction contract losses in the financial year 2006, the Company closed down and sold the

assets of its Lysaght Taiwan business. The company continues to progressively complete pre-existing construction

projects.

(b)

Financial performance of discontinued operations

The results of the discontinued operations for the half-year 31 December 2007 until disposal are presented below:

Consolidated

2007

2006

Vistawall

Packaging

Lysaght

Taiwan

TOTAL

Vistawall

Packaging Lysaght

Taiwan

TOTAL

$M

$M

$M

$M

$M

$M

$M

$M

Revenue

-

2.0

0.1

2.1

210.9

162.8

9.1

382.8

Expenses

(3.4)

(1.4)

(0.2)

(5.0)

(198.1)

(191.4)

(6.3)

(395.8)

Share of net profit (loss) of equity

accounted associate

-

-

-

-

0.2

-

-

0.2

Gross profit (loss)

(3.4)

0.6

(0.1)

(2.9)

13.0

(28.6)

2.8

(12.8)

Finance costs

-

-

(0.1)

(0.1)

-

-

(0.1)

(0.1)

Loss before tax from discontinued

operations

(3.4)

0.6

(0.2)

(3.0)

13.0

(28.6)

2.7

(12.9)

Income tax (expense) credit

1.3

(0.2)

-

1.1

(5.0)

8.6

(0.2)

3.4

Profit (loss) for the half-year from

discontinued operations

(2.1)

0.4

(0.2)

(1.9)

8.0

(20.0)

2.5

(9.5)

(c)

Cash flow information - discontinued operations

The net cash flows of discontinued operations held are as follows:

Consolidated

2007

2006

Vistawall

Packaging

Lysaght

Taiwan

TOTAL

Vistawall

Packaging Lysaght

Taiwan

TOTAL

$M

$M

$M

$M

$M

$M

$M

$M

Net cash inflow (outflow) from

operating activities

(1.7)

30.0

(1.2)

27.1

7.0

(25.0)

(0.4)

(18.4)


investing activities

-

1.8

-

1.8

(0.5)

(0.9)

5.0

3.6


financing activities

1.7

(31.8)

0.9

(29.2)

(5.1)

25.9

(4.8)

16.0

Net increase in cash generated

by the operation

-

-

(0.3)

(0.3)

1.4

-

(0.2)

1.2

-15-



6

Dividends

Half-year ended

2007

2006

$M

$M

(a)

Ordinary shares

Dividends provided for or paid during the half-year

191.2

168.3

A dividend reinvestment plan is established to enable shareholders to receive some or all

of their future dividends as ordinary BlueScope Steel Limited shares instead of cash.

Dividends provided for or paid during the half-year

Paid in cash

131.0

119.3

Satisfied by issue of shares

60.1

48.9

Movement in DRP residual owing

0.1

0.1

191.2

168.3

(b)

Dividends not recognised at the end of the half-year

In addition to the above dividends, since the end of the half-year the directors have

authorised the payment of an interim dividend of 22 cents per fully paid ordinary share

(2006 - 21 cents), fully franked based on tax paid at 30%. The aggregate amount of the

dividend to be paid on 1 April 2008 out of retained profits at 31 December 2007, but not

recognised as a liability at the end of the half-year, is

163.4

152.6

7

Contingencies

(a)

Contingent liabilities

Since the last annual reporting date, there have been no material changes of any contingent liabilities or contingent

assets.

-16-



8

Business combination

(i) Smorgon Distribution

(a)

Summary of acquisition

On 3 August 2007, BlueScope Steel Limited acquired the distribution business of Smorgon Steel Limited. The legal

entities forming the distribution business of Smorgon Steel Limited includes Smorgon Steel Distribution Pty Ltd, Metalcorp

Steel Pty Ltd; and Metalcorp Manufacturing Pty Ltd. The 179,124,278 of Smorgon Steel Limited shares previously held by

BlueScope Steel Limited were bought back for $2.50 per share ($447.3M) realising a pre-tax gain on disposal of $128M.

The proceeds were utilised to acquire Smorgon Distribution.

From the date of acquisition, Smorgon Distribution has contributed $10.5M to the earnings before interest and tax of the

Group.

Details of net assets acquired and goodwill are as follows:

$M

Purchase consideration

Cash paid

730.2

Direct costs relating to the acquisition

19.8

Total purchase consideration

750.0

Fair value of net identifiable assets acquired (refer (c) below)

384.3

Goodwill

365.7

(b)


Outflow of cash to acquire business, net of cash acquired

Cash consideration

750.0

Less: Balances acquired

Cash

0.1

Outflow of cash

749.9

(c)

Assets and liabilities acquired

The assets and liabilities arising from the acquisition are as follows:

Acquiree’s

carrying

amount

Fair value

$M

$M

Cash and cash equivalents

0.1

0.1

Receivables

261.9

261.9

Inventories

257.0

254.9


67.8

73.3

Intangible assets

10.7

26.8

Deferred tax asset

1.4

10.6

Other assets

3.4

3.4

Payables

(219.3)

(218.9)

Provisions

(18.8)

(27.8)

Net identifiable assets acquired

364.2

384.3

The fair value of assets and liabilities acquired may be subject to future adjustments upon finalisation of the initial

accounting. In accordance with AASB 3 "Business Combinations" fair value adjustments more than twelve months from

the acquisition date, excluding unrecognised deferred tax assets, are to be accounted for in accordance with AASB 108

"Accounting Policies, Changes in Accounting Estimates and Errors".

-17-



8

Business combination (continued)

(ii) HCI Steel Building Systems

(a)

Summary of acquisition

On 1 November 2007, Butler Manufacturing Company acquired HCI Steel Building Systems Incorporated (HCI). HCI

designs and manufactures steel building solutions for the heavy industrial, commercial and community end-use segments.

It has a manufacturing plant in Arlington, Washington. HCI complements Butler's current operations in North America and

services customers in the north western region of the US and western Canada through a network of authorised builders.

From the date of acquisition, HCI has contributed $0.4M to the earnings before interest and tax of the Group.

Details of net assets acquired and goodwill are as follows:

$M


Cash paid

40.4

Direct costs relating to the acquisition

0.6

Total purchase consideration

41.0

Fair value of net identifiable assets acquired (refer (c) below)

8.0

Goodwill

33.0

(b)


$M

Outflow of cash to acquire business, net of cash acquired

Cash consideration

41.0

Less: Balances acquired

Cash

3.4

Outflow of cash

37.6

(c)

Assets and liabilities acquired

Acquiree’s

carrying

amount

Fair value

$M

$M

Cash & cash equivalents

3.4

3.4

Receivables

4.5

4.5

Inventories

4.6

5.9


2.2

2.2

Intangible assets

-

1.0

Other assets

0.1

0.1

Payables

(4.5)

(4.5)

Provisions

(0.4)

(1.2)

Other liabilities

(2.1)

(3.3)


(0.1)

(0.1)

Net identifiable assets acquired

7.7

8.0

The fair value of assets and liabilities acquired may be subject to future adjustments upon finalisation of the initial

accounting. In accordance with AASB 3 "Business Combinations" fair value adjustments more than twelve months from

the acquisition date, excluding unrecognised deferred tax assets, are to be accounted for in accordance with AASB 108

"Accounting Policies, Changes in Accounting Estimates and Errors".

-18-



9

Events occurring after the balance sheet date

Acquisition of IMSA Steel Corporation

BlueScope Steel North America Corporation has acquired the outstanding shares of IMSA Steel Corp for US$730M from

Ternium S.A., a NYSE listed public company effective 1 February 2008. IMSA Steel Corporation has four distinct

businesses with manufacturing facilities throughout the United States and sales throughout North America:

• Varco Pruden Buildings - a leading North American manufacturer of pre-engineered building systems (PEBs) for

the non-residential market with five manufacturing facilities. It has a total processing capacity of approximately

210,000 tons per annum.

• Steelscape - a leading west coast producer of metal coated and painted steel coils with three production facilities.

Steelscape has a total capacity of approximately 500,000 tons per annum of metal coated steel products and

350,000 tons per annum of painting capacity.

• Metl-Span - a leading North American manufacturer of insulated steel panels for commerical, industrial and cold

storage buildings. Metl-Span has five production facilities across the United States.

• ASC Profiles - a leading North American manufacturer of building components including architectural roof and

wall systems and structural roof and floor decking. ASC has ten production facilities located primarily in western

US.

-19-

BlueScope Steel LimitedDirectors' declaration

31 December 2007

Directors' declaration

In the directors’ opinion:

(a)

the financial statements and notes set out on pages 5 to 19 are in accordance with the Corporations Act 2001,

including:

(i)

complying with AASB 134 Interim Financial Reporting, 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 31 December 2007 and of

their performance, as represented by the results of their operations and their cash flows, for the half-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.

This declaration is made in accordance with a resolution of the directors.

Graham Kraehe AO

Chairman

Paul O'Malley

Managing Director & CEO

Melbourne

22 February 2008

-20-

BlueScope Steel LimitedIndependent Review report

31 December 2007

Independent Review Report

To the members of BlueScope Steel Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of BlueScope Steel Limited, which comprises the balance sheet as at 31

December 2007, and the income statement, statement of recognised income and expense and cash flow statement for the half-year

ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration of the

consolidated entity comprising of the company and the entities it controlled at 31 December 2007 or from time to time during the half-year

then ended.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with

Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility

includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that

is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on the half-year ended 31 December 2007 financial report based on our review. We conducted

our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed

by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of

any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including; giving a true and

fair view of the consolidated entity’s financial position as at 31 December 2007 and its performance for the half-year ended on that date;

and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of

BlueScope Steel Limited and the entities it controlled during the half-year, ASRE 2410 requires that we comply with the ethical

requirements relevant to the audit of the annual report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters,

and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with

Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant

matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review we have met the independence requirements of the Corporations Act 2001. We have given to the directors of the

company a written Auditor's Independence Declaration, a copy of which is included in the directors' report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial

report of BlueScope Steel Limited is not in accordance with the Corporations Act 2001, including:

(i)

giving a true and fair view of the consolidated entity’s financial position as at 31 December 2007 and of its performance for the

half-year ended that date; and

(ii)

complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Ernst & Young

Bruce Meehan

Partner

Melbourne

22 February 2008

-21-

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