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BLUESCOPE STEEL LIMITED AN
NUAL REPORT 2011/2012
BLUESCOPE STEEL LIMITED ANNUAL REPORT 2011/2012
CONTENTSChairman’s MessageAnnual Results ASX Media ReleaseInvestor PresentationDirectors’ ReportConcise Financial ReportAuditor’s ReportShareholder Information
BLUESCOPE STEEL LIMITED ABN 16 000 011 058 LEVEL 11, 120 COLLINS STREET MELBOURNE, VICTORIA 3000 AUSTRALIA WWW.BLUESCOPESTEEL.COM
XXX-XXX-XXXXX
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Dear Fellow Shareholder,
The 2012 financial year was one of transformation for BlueScope.
The Company laid the foundations for a return to profitability and growth through a number of major initiatives.
The recent establishment of our US$1.36 billion joint venture with Nippon Steel Corporation (NSC) in the building products market was a bold initiative. It delivers your Company outstanding potential to capture growth in the $54 billion per annum building and construction sector in ASEAN and North America. It will also facilitate entry into exciting new market segments such as steel for whitegoods being bought by Asia’s fast growing middle class.
The Company restructured, establishing four distinct market-focused businesses operating across the globe from our joint ventures in India and Asia, through Australia and New Zealand to our factories and steel mini-mill in the United States. The Company now comprises: BlueScope Australia and New Zealand; BlueScope Building Products (including the JV with NSC); BlueScope Global Building Solutions (our world leading custom-engineered buildings system); and North Star BlueScope Steel (our very profitable steel mini-mill JV in the United States).
In Australia, we undertook a major restructure to better align steel production with domestic demand and exit the loss-making export market. This was a very difficult decision but essential to ensure the long term future of your Company.
All the initiatives during the year had a core objective of strengthening BlueScope’s ability to compete successfully in a volatile global economy. Our competitiveness is driven by:
• ourglobalpartnerships(injointventureswiththelikesofNipponandTata,andwithFortune500 customers like Costco and Procter & Gamble);
• ourglobalnetworks–BlueScope’sportfoliocomprisesmorethan100factoriesin17countriesemploying 17,000skilledemployees;
• ourglobalbrands–marketleadingpremiumbrandslikeCOLORBOND®steel,ZINCALUME® steel, BUTLER®ANDLYSAGHT®, with a suite of next generation product updates to come.
The Company’s year of transformation occurred as it faced challenging external factors, including; a very strong Australian dollar, high raw material prices, soft steel prices, weak Australian demand and unfairly priced or “dumped” imports. The cost competitiveness of manufacturing in Australia continues to be challenged by a range of factors including energy costs, and the continued need for labour and capital productivity improvements.Combined,thesefactorscreatedadverseconditionsforyourCompany–andthiswasreflected inthe$1,044millionreportednetlossaftertax(NLAT)fortheyear.TheunderlyingNLATwas$238million. The difference between the numbers is largely due to one-off costs to restructure the Australian steelmaking business and non-cash impairment charges.
Duringtheyear,BlueScopecontinuedtomakeexcellentprogressinreducingitsdebt.AttheendoftheFY2012financialyear,theCompanyreducednetdebtfromapeakof$1.55billioninOctober2011to$384million,orapproximately$580million,adjustingforfavourabletimingofyearendcashflows.ThiswasdrivenbyasignficiantreductioninworkingcapitalandthesuccessfulsaleofMetl-Span,ourNorthAmericanbasedsteelinsulatedpanels business, for net proceeds before tax of US$140 million.
The wide ranging initiatives involved a heavy workload over an extended period for management and also for the Board, as evidenced by the 25 Board meetings held during the year.
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CHAIRMAN’S MESSAGEFROM GRAHAM KRAEHE
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TRANSFORMING OUR BUSINESSESThe new Global Building Solutions business is already one of the world’s leading suppliers of custom-engineered buildings, delivering high-tech building solutions to factories, warehouses, stores and stadiums. It is supported by the innovative Vision engineering system for building design and detailing that enables us to share our resources and skills across our sites globally, to reduce engineering costs and increase speed-to-market. Global Building Solutions has more than 5,000 employees across 21 manufacturing plants in North America, China, South East Asia, India and Australia.
Throughout the high growth Asian region and in North America, BlueScope is well known and respected for our branded steel building products, our established production network and strong customer relationships and these are an important component of the NS BlueScope Coated Products joint venture partnership with NSC. BlueScope’s netproceedsofapproximatelyUS$540millionfromNSC’sinvestmentwillprovidethefinancialflexibilitytofurthergrow our international presence and invest in businesses that can deliver strong returns.
BlueScope has had a long-standing relationship with NSC through our 40-year technology collaboration, completing morethan65projectstogethersince1970.Currently,weareworkingtogetheronthenextgenerationCOLORBOND®andZINCALUME® steel products.
The new joint venture with Nippon will assist us to enter new markets, access new technology and sell our world class products to a broader range of customers in new product areas. It will also accelerate entry into emerging economies in the fast-growing ASEAN region. Strategically, BlueScope and Nippon Steel have a complementary vision for expansion in Asia with both partners bringing significant value, skills and innovation capability. This businesshasmorethan3,000employeesin29manufacturingplantsinsevencountries–Indonesia,Thailand,Malaysia,Vietnam,Singapore,BruneiandtheUnitedStates.
SAFETYBlueScope’saimiszeroharm.TheCompany’sinjurylevelsremainedatworld’sbestinFY2012withitsLostTimeInjuryFrequencyRate(LTIFR)remainingbelowoneincidentforeverymillionhoursworked.ItsMedicallyTreatedInjuryFrequencyRate(MTIFR)improvedby10%to5.7permillionhoursworked.
REMUNERATIONBoarddecisionsinregardtotheremunerationoftheManagingDirectorandChiefExecutiveOfficerandseniorexecutives have been made in the context of the challenging circumstances faced by BlueScope operating in an industry undergoing massive structural change and at a cyclical low.
Inlastyear’sRemunerationReport,theBoardadviseditwouldundertakeacomprehensivereviewoftheCompany’sexecutiveremunerationpolicies.TheChairmanoftheRemunerationandOrganisationCommittee, DianeGrady,andanotherindependentDirector,PennyBingham-Hall,metwithover20ofBlueScope’slargershareholders, corporate governance advisory bodies and the Australian Shareholders Association for feedback and suggestions which have been incorporated into this year’s resulting remuneration structure.
Key decisions made by your Board include:
• ReducingtheManagingDirectorandChiefExecutiveOfficer’sremunerationby52%inFY2012duetono ShortTermIncentive(STI)orLongTermIncentive(LTI)awards;
• FreezingtheManagingDirectorandChiefExecutiveOfficer’sbasesalarytohis2010levelandmaintaining thisfreezeuntilFY2013;
• Withholdingatleast50%oftotalSTIawardstoKeyManagementPersonnel(KMPExecutives)asdeferredequitywithaoneyeartradinglock;
• TighteningLTIawardconditionsby:
–Eliminatingretesting; –Imposingatwoyeartradinglockonawardsthatvest;and –Reducingpaymentatthe51stpercentileofTotalShareholderReturnto40%.
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The Board has considered in detail the complex issues relating to executive remuneration in a business undergoing major structural change. The Managing Director and Chief Executive Officer supports the additional restrictions placed on his remuneration. The Board has also considered the need to retain capable leaders who have a critical contribution to return the Company to profitability. We ask shareholders to understand and respect the approach we have taken to remuneration, and look forward to a positive vote in favour of this Report.
THE FUTUREWe have formed strategic partnerships with two of the most respected companies in the world, Tata Steel in India and more recently, Nippon Steel. In North America, our 50/50 North Star BlueScope Steel joint venture with Cargill continues performing strongly and a joint venture in Saudi Arabia is opening new opportunities in an expanding market.
Our unique manufacturing footprint and our network of people, operations, builders and customers around the globe have developed and grown. Today, we have more than 100 facilities in 17 countries employing 17,000 people, and in North America, are supported by a Butler/ Varco Pruden sales network of 2,000 builders. We are the building partner of choice for many global companies such as Costco, the world’s 7th largest retail company.
Our strong partnerships and networks are founded on BlueScope’s well regarded and trusted brands including COLORBOND®, Clean COLORBOND®, and ZINCALUME® steels, LYSAGHT® building products and Butler® custom engineered buildings. We continue to build the value of our brands through investment in research and development to create the next generation of coated steel products.
The strength of our partnerships, networks and brands will increasingly reward BlueScope and you, our shareholders, into the future.
I thank you for your continued support and for the support and contribution of my fellow directors, the senior management team and all BlueScope employees.
GRAHAM KRAEHE, AOCHAIRMAN
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ANNUAL RESULTS ASX MEDIA RELEASE
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BlueScope Steel Limited
ABN 16 000 011 058
Level 11, 120 Collins St
Melbourne VIC 3000
AUSTRALIA
Telephone +61 3 9666 4000
Facsimile +61 3 9666 4111
www.bluescopesteel.com ASX Media Release Release time: Immediate Date: 20 August 2012
DEBT REDUCTION TARGETS EXCEEDED, AUSTRALIAN BUSINESS RESTRUCTURE COMPLETED
GLOBALLY WELL POSITIONED FOR GROWTH
BlueScope today reported a $1,044 million net loss after tax (NLAT) for FY2012. This compares with a $1,054 million reported NLAT in FY2011. The reported NLAT includes an impairment charge of $315 million, as foreshadowed last week. Underlying NLAT1 for FY2012 was $238 million. This compares to an underlying NLAT of $127 million in FY2011. Net debt was reduced to $384 million or approximately $580 million, adjusting for favourable timing of year end cashflows. The Board has decided there will be no final ordinary dividend. BlueScope’s Managing Director and CEO, Mr Paul O’Malley said “FY2012 was a transforming year, we delivered what we promised. Net debt is lower than forecast. Our Australian businesses are expected to be EBITDA positive in FY2013, and globally we are now well positioned for growth. “BlueScope is now structured into four main businesses: BlueScope Building Products; BlueScope Global Building Solutions; BlueScope Australia and New Zealand and in the US, North Star BlueScope Steel. “Our Building Products business, across ASEAN and the US, will be incorporated in the new US$1.36 billion NS BlueScope Coated Products joint venture with Nippon Steel Corporation. It will provide a stronger platform to capture growth in new market segments. The net proceeds of approximately US$540 million from Nippon Steel’s 50% investment will afford BlueScope further financial flexibility and balance sheet strength to grow businesses that deliver strong returns. “Our Global Building Solutions business is well placed to capture opportunities in the world’s largest and fastest growing non-residential construction markets with the potential to double current revenue of $1.45 billion within three years. “BlueScope in Australia is delivering its turnaround. New Zealand Steel continues to be profitable and its iron sands export capability is on track to double within two years. “In the US, our North Star BlueScope Steel business will concentrate on continuing its good operational performance and accelerating specific growth opportunities,” said Mr O’Malley.
BLUESCOPE’S OUTLOOK “For the 1HFY2013, we expect a continued improvement in financial performance with an underlying net after tax loss (before period-end net realisable value adjustments) approaching breakeven (subject to spread, FX and market conditions).
“In FY2013, total capital expenditure for the group is expected to be approximately $300 million with a third to be invested on growth projects,” said Mr O’Malley.
1 Underlying financial results reflect the Company’s assessment of financial performance after excluding non-current asset impairments ($315M), restructure costs ($288M), tax impairments ($268M), borrowing amendment fees ($6M), business development costs ($5M); partly offset by the Steel Transformation Plan advance $70M, profits from discontinued businesses ($4M) and asset sales ($2M). This financial information is provided to assist readers to better understand the financial performance of the underlying business.
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*** For further information about BlueScope: www.bluescopesteel.com
CONTACTS Media Michael Reay
Manager Corporate Affairs BlueScope Steel Limited Tel: +61 3 9666 4004 Mobile: +61 (0) 437 863 472 Email: [email protected]
Investor John Knowles
Vice President Investor Relations BlueScope Steel Limited Tel: +61 3 9666 4150 Mobile: +61 (0) 419 893 491 Email: [email protected]
Don Watters
Manager Investor Relations BlueScope Steel Limited Tel: +61 3 9666 4206 Mobile: +61 (0) 409 806 691 Email: [email protected]
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INVESTOR PRESENTATION
For
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FY20
12 F
inanc
ial R
esult
sPr
esen
tation
Pa
ul O’
Malle
y, Ma
nagin
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ctor a
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xecu
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fficer
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Offic
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arlie
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20 A
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2
Page
1
ASX
Code
: BSL
For
per
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Impo
rtant
notic
e
THIS
PRE
SENT
ATIO
N IS
NOT
AND
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ART
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FFER
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TATI
ON O
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IN R
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S SH
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PLAC
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FORM
ATIO
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IN
FINA
NCIA
L ADV
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REL
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PRE
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ATIO
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S PR
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Page
2
AND
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For
per
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onl
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Prog
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1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Inclu
des C
ontra
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from
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Page
3
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on B
lueSc
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MTI
defin
ition
For
per
sona
l use
onl
y
Reca
p on
US$
1.36 B
illion
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cap
on U
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ated
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noun
ced
on 13
Aug
ust 2
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Page
4
For
per
sona
l use
onl
y
US$1
.36 B
illion
Joint
Ven
ture w
ith N
ippon
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l Cor
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s in A
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US$
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)
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Scop
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proc
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be us
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n the
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Prov
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o inv
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in AS
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2012
JV an
noun
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o tou
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on F
Y201
2 una
udite
d res
ults.
Will
now
go in
to mo
re de
tail
Page
5
For
per
sona
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onl
y
FY20
12 F
inan
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FY20
12 F
inan
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FY20
12 F
inan
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FY20
12 F
inan
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Head
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Page
6
For
per
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rim fin
ancia
l repo
rt w
hich i
s bee
n re
viewe
d. De
tail c
an be
foun
d in T
able
2b of
the A
SX E
arnin
gs R
eleas
e for
twelv
e mon
ths en
ded
30 Ju
ne 2
012
(doc
umen
t und
er lis
ting
rule
4.3a)
2 –Re
flects
staff
redu
ndan
cies a
nd re
struc
turing
costs
at C
oated
& In
dustr
ial P
rodu
cts A
ustra
lia, in
relat
ion to
the m
ove t
o a on
e blas
t furn
ace
oper
ation
at P
ort K
embla
Stee
lwor
ks, C
oated
& B
uildin
g Pr
oduc
ts No
rth A
meric
a, Au
strali
a Dist
ributi
on &
Solu
tions
, New
Zea
land
and C
orpo
rate.
FY2
011 r
eflec
ts sta
ff red
unda
ncies
and
othe
r inter
nal re
struc
turing
costs
at C
oated
& In
dustr
ial P
rodu
cts
Austr
alia a
nd A
ustra
lia D
istrib
ution
& S
olutio
ns an
d plan
t rati
onali
satio
n co
sts at
Aus
tralia
Dist
ributi
on &
Solu
tions
3 –FY
2012
refle
cts no
n-cu
rrent
asse
t impa
irmen
ts in
the A
ustra
lian B
usine
ss co
mpris
ing D
istrib
ution
good
will (
$157
M), C
IPA
fixed
asse
ts ($
136M
), Ly
sagh
t goo
dwill
($10
M) a
nd B
lueSc
ope
Wate
r an
d Blue
Scop
e Bu
ilding
s goo
dwill
and f
ixed a
ssets
($11
M) d
ue to
a slo
wer r
ecov
ery i
n the
dome
stic d
eman
d tha
n pre
vious
ly ex
pecte
d an
d a hi
gher
disc
ount
rate
appli
ed to
expe
cted
futur
e cas
h flo
ws as
a re
sult o
f incre
ased
volat
ility i
n equ
ity m
arke
ts. In
addit
ion, th
ere w
ere
impa
irmen
t of a
ssets
in C
oated
& B
uildin
g Pr
oduc
ts No
rth A
meric
a ass
ociat
ed w
ith re
struc
turing
($4M
)4 –
In re
spec
t of th
e imp
airme
nt of
defer
red
tax as
sets,
the c
ompa
ny h
as de
ferre
d the
reco
gnitio
n of
a tax
asse
t total
ling $
268M
in re
spec
t to ta
x los
ses g
ener
ated
durin
g the
full y
ear,
mainl
y in r
elatio
n
Page
7
to ex
port
losse
s and
restr
uctur
ing co
sts.A
ustra
lian A
ccou
nting
Stan
dard
s imp
ose a
strin
gent
test fo
r the
reco
gnitio
n of
a defe
rred
tax as
set w
here
ther
e is a
histo
ry of
rece
nt tax
loss
es. T
he
comp
any h
as de
ferre
d the
reco
gnitio
n of
any f
urthe
r tax
asse
t for t
he A
ustra
lian
tax gr
oup
until
a retu
rn to
taxa
ble pr
ofits
hasb
een
demo
nstra
ted. U
nrec
ognis
ed A
ustra
lian
tax lo
sses
are
able
to be
carri
ed fo
rwar
d ind
efinit
ely.
5 –FY
2012
refle
cts re
ceipt
of an
adva
nce
unde
r the
Aus
tralia
n Fed
eral
Gove
rnme
nt’s S
teel T
rans
forma
tion
Plan
(STP
), re
cogn
ising
the S
TP is
prov
ided
to as
sist B
SL tr
ansit
ion to
a ca
rbon
tax
envir
onme
nt.
For
per
sona
l use
onl
y
Grou
p fina
ncial
head
lines
FY2
012 v
s. FY
2011
TWEL
VE M
ONTH
S EN
DED
FY20
12 vs
FY20
11TW
ELVE
MON
THS
ENDE
DFY
2012
vsFY
2011
A$30
JUNE
2011
30 JU
NE 20
12%
Reve
nue
9,134
M8,6
22M
(6%
)E
tl d
th77
M t
68M
t(1
2%)
Exter
nal d
espa
tches
7.7M
tonne
s6.8
M ton
nes
(12%
)EB
ITDA
−
Repo
rted
(687
M)(4
89M)
29%
−Un
derly
ing 1
240M
99M
(59%
)EB
IT−
Repo
rted
(1,04
3M)
(820
M)21
%−
Unde
rlying
1(1
07M)
(224
M)(1
09%
)NP
AT
−Re
porte
d (1
,054M
)(1
,044M
)1%
−Un
derly
ing
1(1
27M)
(238
M)(8
7%)
EPS
−Re
porte
d (4
8.6¢)
(39.1
¢)20
%−
Unde
rlyin
g 1
(5.9¢
)(8
.9¢)
(51%
)2
2EB
IT R
eturn
on In
veste
d Cap
ital
(16.2
%)/(
1.7%
)2(1
6.0%
)/(4.4
%)2
-Re
turn o
n Equ
ity(1
9.6%
)/(2.4
%)2
(25.5
%)/(
5.8%
)2-
Net O
pera
ting C
ashfl
ow−
From
oper
ating
activ
ities
142M
455M
217%
−Af
ter ca
pex /
inve
stmen
ts(2
25M)
375M
n/aDi
viden
ds (f
ully f
rank
ed)
0cps
0cps
n/a
Page
8
Gear
ing (N
D/ND
+E)
19.5%
9.2%
Below
25-3
0% ta
rget
Note
s:1 –
Plea
se re
fer to
page
57 f
or a
detai
led re
conc
iliatio
n of
repo
rted
to un
derly
ing re
sults
. Exc
ludes
Metl
-Spa
n ope
ratio
nal e
arnin
gs w
hich
have
bee
n re-
categ
orise
d to
disco
ntinu
ed o
pera
tions
. 2 –
Unde
rlying
retur
ns in
brac
kets
For
per
sona
l use
onl
y
In ad
dition
to th
e mate
rial c
ost r
educ
tion i
nitiat
ives o
f $69
6M in
Aus
tralas
ia,
Asia
and N
orth
Amer
ica si
nce 2
008,
the C
ompa
ny ha
s deli
vere
d on i
ts oth
er
FY20
12 ta
rgets
FY20
12 ta
rgets
Coat
ed &
Indu
stria
l Pro
duct
sAus
tralia
rest
ruct
ure
Succ
essfu
l equ
ipmen
t clos
ures
betw
een m
id Au
gust
and
Octob
er 20
11
Asian
gro
wth
Succ
essfu
lly co
mmiss
ioned
coati
ng &
paint
ing lin
es in
Ind
ones
ia an
d Ind
ia (Ta
ta Bl
ueSc
ope S
teel J
V)Oc
tober
2011
Cost
redu
ction
s ach
ieved
; full-y
ear b
enefi
t in F
Y201
3To
tal ca
sh re
struc
turing
costs
of $3
60-3
80M
expe
cted;
below
prev
iously
antic
ipated
$400
-500
M ra
nge
Indon
esia
and I
ndia
(Tata
Blue
Scop
e Stee
l JV)
Comm
ence
d con
struc
tion
of ne
w Xi
’an P
EB fa
cility
, Chin
a
Segm
ent r
eorg
anisa
tion
py
p$
gW
orkin
g cap
ital re
lease
of $5
94M
(adju
sting
for $
200M
fav
oura
ble tim
ing of
paym
ents)
from
Oct
2011
to Ju
n 201
2 ag
ainst
$400
-500
M ex
pecta
tion
gg
Restr
uctur
ed A
sian a
nd U
.S. b
usine
sses
to en
hanc
e foc
us
on th
e glob
al gr
owth
of the
down
strea
m Bu
ilding
s So
lution
s bus
iness
(PEB
s), as
well
as gr
owth
in the
Ex
cess
expo
rt vo
lume c
leare
d in Q
4 FY2
012
Aust
ralia
Dist
ribut
ion
& So
lutio
ns re
stru
ctur
e
(),
gmi
dstre
am B
uildin
g Pro
ducts
busin
ess w
hich i
nclud
es
coate
d/pain
ted co
il and
Lysa
ght p
rodu
cts
Cit
l t i
ititi
Distr
ibutio
n res
tructu
re w
ell ad
vanc
ed:
closu
re, s
ale or
co
nsoli
datio
n of 1
7 bra
nche
s and
perm
anen
t ove
rhea
d re
ducti
ons
Lysa
ght h
as ra
tiona
lised
its m
anufa
cturin
g foo
tprint
Capi
tal m
anag
emen
t ini
tiativ
es
Estab
lishe
d a $1
50M
rece
ivable
s pro
gram
for D
istrib
ution
tha
t red
uced
the c
ost o
f fund
s by 3
5 bas
is po
ints
Lysa
ght h
as ra
tiona
lised
its m
anufa
cturin
g foo
tprint
New
Zeala
nd g
rowt
h
Iron s
ands
expo
rts fr
om W
aikato
Nor
th He
ad
Repu
rchas
e of U
S$39
3M U
SPP
Notes
(of w
hich $
88M
in Au
g 201
2); p
ro-fo
rma
annu
al int
eres
t sav
ing of
US$
26M
Deliv
ery o
f targ
eted $
100-
150M
balan
ce sh
eet in
itiativ
es
thh
l f M
tlS f
US$
145M
Page
9
Iron s
ands
expo
rts fr
om W
aikato
Nor
th He
ad
Expa
nded
Taha
roa i
ron s
ands
expo
rt fac
ility a
nd
comm
ission
ed up
grad
ed sh
ip for
1.2M
tpa de
spatc
h rate
throu
gh sa
le of
Metl-S
pan f
or U
S$14
5MGr
oup n
et de
bt re
duce
d to
appr
oxim
ately
$580
M (a
djusti
ng fo
r fav
oura
ble tim
ing of
year
-end
cash
flows
)
For
per
sona
l use
onl
y
Segm
ent u
nder
lying
EBI
T su
mmar
y for
FY2
012;
expe
cting
earn
ings
grow
th in
all bu
sines
ses i
n FY2
013
FY10
FY11
1H
FY12
2H
FY12
FY12
FY20
12 vs
FY20
11FY
2013
Dire
ctio
n
Unde
rlyin
g EB
IT (A
$M)1
FY10
FY11
FY12
FY12
FY12
FY20
12 vs
FY20
11FY
2013
Dire
ctio
n
Coate
d & In
dustr
ial
Prod
ucts
Austr
alia
108
(258
)(1
82)
(145
)(3
27)
•Res
tructu
re in
FY1
2; do
mesti
c mar
gin
pres
sure
; wor
king c
apita
l relea
se &
mo
netis
ing e
xces
s exp
ort t
onne
s
•Ear
nings
grow
th du
e to
restr
uctur
e ben
efits
•Exp
ect E
BITD
A po
sitive
FY1
32
Austr
alia D
istrib
ution
&
Solut
ions
2(3
4)(2
9)(2
3)(5
2)•W
eake
r mar
gins &
volum
es•R
estru
cture
well
adva
nced
•Rati
onali
satio
nwe
ll adv
ance
d•T
rend
impr
oving
; targ
et EB
IT
posit
ive by
FY1
42
New
Zeala
nd S
teel &
•L
ower
mar
gin p
rodu
ct mi
x; str
onge
r NZ$
$
•Iro
n san
ds gr
owth
New
Zeala
nd S
teel &
Pa
cific
Stee
l Pro
d.73
8234
3569
vsUS
$•N
ew iro
n san
ds sh
ip on
line l
ate in
2H
g•L
ever
aged
to do
mesti
c mar
ket
impr
ovem
ent
Coate
d & B
uildin
g P
dt
Ai
116
108
4751
98•T
haila
nd a
nd In
done
sia st
rong
er in
2H•C
hina a
nd In
dia so
fter d
ue to
volum
es &
•Con
tinue
d gr
owth
•JV
comp
letion
Pr
oduc
ts As
ia11
610
847
5198
China
and
India
softe
r due
to vo
lumes
&
start-
up re
spec
tively
p•C
hina f
acilit
y com
miss
ioning
Coate
d & B
uildin
g Pr
oduc
ts Nt
h Am
3(1
7)(2
6)0
(8)
(8)
•Ben
efit o
f res
tructu
re a
t Buil
dings
•Ear
nings
grow
th fro
m be
nefit
of re
struc
ture
•Sign
ifican
t leve
rage
to vo
lume
Prod
ucts
Nth A
mg
ggr
owth
Hot R
olled
Pro
ducts
No
rth A
meric
a61
7220
4262
•Red
uced
spre
ad•S
olid e
arnin
gs w
ith gr
owth
proje
ct op
tions
Corp
orate
&
inter
-segm
ent
(88)
(52)
(27)
(39)
(66)
3
Page
10
TOTA
L GRO
UP3
253
(107
)(1
37)
(87)
(224
)No
te:
1 –Un
derly
ing E
BIT
is pr
ovide
d to a
ssist
read
ers t
o bett
er un
derst
and t
he un
derly
ing bu
sines
s seg
ment
finan
cial p
erfor
manc
e. Pl
ease
refer
to pa
ge 58
for a
detai
led re
conc
iliatio
n of
repo
rted E
BIT
to un
derly
ing E
BIT
for ea
ch se
gmen
t2 –
Subje
ct to
spre
ad, F
X, do
mesti
c mar
gin an
d dem
and
3 –Co
ated a
nd B
uildin
g Pro
ducts
Nor
th Am
erica
and G
roup
earn
ings r
eflec
t exc
lusion
of M
etl-S
pan e
arnin
gs ow
ing to
its di
vestm
ent in
June
2012
For
per
sona
l use
onl
y
Cash
flow
–sign
ifican
t wor
king c
apita
l relea
se
Sign
ifican
t impr
ovem
ent in
2H
A$M
FY
11FY
121H
FY1
22H
FY1
2
Cash
from
oper
ation
s
30
8(1
62)
(265
)10
3
Wki
it
l t
(166
)61
723
5138
2
with
Austr
alian
stee
lmak
ing
restr
uctur
e
Larg
e wor
king c
apita
l relea
se
Wor
king c
apita
l mov
emen
t (1
66)
617
2351
382
Net o
pera
ting
cash
flow
14
245
5(3
0)48
5
Capit
al &
inves
tmen
t exp
endit
ure
(404
)(2
37)
(111)
(126
)
Larg
e wor
king c
apita
l relea
se
from
Octob
er 20
11 –
more
detai
l on p
age 4
4
Asse
t sale
s and
othe
r inve
sting
cash
flow
3715
76
151
Net c
ash
flow
befo
re fi
nanc
ing
& ta
x(2
25)
375
(135
)51
0
Fii
t
(108
)(1
09)
(66)
(43)
Capit
alex
pend
iture
mini
mise
d
Comp
leted
Metl
-Spa
n sale
for
US$1
45M
in Ju
ne 20
12Fin
ancin
g cos
ts(1
08)
(109
)(6
6)(4
3)
Inter
est r
eceiv
ed7
31
2
(Pay
ment)
/ refu
nd of
inco
me ta
x2(1
2)(8
1)(5
6)(2
5)
$
Lowe
r 2H
finan
ce co
st du
e to
lower
draw
n deb
t and
re
purch
ase o
f U.S
. Priv
ate
Equit
y iss
ues
-
576
577
(1)
Divid
ends
(9
3)(5
)(1
)(4
)
N d
i / (
) f b
i
36
6(
19)
(309
)(4
10)
repu
rchas
e of U
.S. P
rivate
Pl
acem
ent N
otes
Sign
ifican
t deb
t red
uctio
n in
1H w
ith eq
uity r
aising
and i
n Ne
t dra
wing
/ (re
paym
ent)
of bo
rrowi
ngs
366
(719
)(3
09)
(410
)
Net i
ncre
ase/(
decr
ease
) in
cash
held
(6
5)40
1129
1H w
ith eq
uity r
aising
, and
in
2H w
ith po
sitive
cash
from
op
erati
ons,
worki
ng ca
pital
relea
se an
d ass
et sa
les
Page
11
Notes
:(1
)Inc
ludes
move
ments
inpr
ovisi
onsr
elatin
gtor
estru
cturin
gcos
ts(2
)Th
eBl
ueSc
ope
Stee
lAus
tralia
ntax
cons
olida
tedgr
oup
ises
timate
dto
have
carri
edfor
ward
taxlos
ses,
asat
30Ju
ne20
12,in
exce
ssof
$2.2B
n.Th
ere
willb
enoA
ustra
liani
ncom
etax
paym
ents
until
these
losse
sare
reco
vere
d.
For
per
sona
l use
onl
y
Stra
tegy
Upd
ate
Stra
tegy
Upd
ate
Page
12
For
per
sona
l use
onl
y
Blue
Scop
e’s st
rateg
ic bu
sines
s foc
us …
Stru
ctur
ed as
four
main
bus
ines
ses … •
Expa
nding
pro
fitable
Chin
ese b
usine
ss –
Xi’an
plan
t to be
oper
ation
al by
end
of FY
2013
•No
rth A
meric
an b
usine
ss re
struc
tured
–ma
terial
ear
nings
ups
ide a
s eco
nomy
reco
vers
•Ac
cess
sign
ifican
t glob
al op
portu
nities
; glo
bal b
rand
s, ne
twor
ks an
d par
tnersh
ipsP
itid
f
th t
til t
dbl
t
$3 B
ithi
th
Build
ing
Solu
tions
•Po
sition
ed fo
r gro
wth
–pote
ntial
to do
uble
reve
nue
to $3
Bnw
ithin
three
year
s
•Gr
owing
our le
ading
pos
ition i
n meta
l coa
ted a
nd p
ainted
stee
l buil
ding
prod
ucts
in hig
h gr
owth
and h
igh va
lue m
arke
ts ac
ross
the A
sia-P
acific
regio
nBu
ildin
g Pr
oduc
ts•
Outst
andin
g op
portu
nity f
rom
joint
ventu
re w
ith N
SC, a
nnou
nced
13 A
ugus
t 201
2•
Pree
mine
nt foo
tprint
, well
reco
gnise
d br
ands
, bro
ad ch
anne
ls to
marke
t, ne
w pr
oduc
tsBu
ildin
g Pr
oduc
ts
•CI
PA re
struc
ture
comp
leted
: leve
rage
d to
dome
stic m
arke
t impr
ovem
ent;
conti
nued
Focus
focus
on pr
oduc
tivity
; inve
sting
in ne
xt ge
nera
tion c
oated
pro
ducts
;exp
ect E
BITD
A po
sitive
in F
Y201
3 (su
bject
to sp
read
, FX,
dom
estic
mar
gin a
nd d
eman
d)
•Ta
haro
a iro
n san
ds e
xpan
sions
–do
uble
expo
rts w
ithin
two
year
s•
Distr
ibutio
n rati
onali
satio
nwe
ll adv
ance
d. Tr
end
impr
oving
; tar
get E
BIT
posit
ive by
FY1
4
Blue
Scop
eAus
tralia
&
New
Zeala
nd
arket First F
•Pr
ofitab
le ex
pans
ion o
ppor
tunitie
s befo
re u
sHo
t Rol
ledPr
oduc
ts N
orth
Am
erica
Ma
Balan
ce S
heet
•Co
ated
Prod
ucts
JV co
mplet
ion w
ill co
nside
rably
stre
ngthe
n ba
lance
shee
t and
enh
ance
Page
13
Balan
ce S
heet
finan
cial fl
exibi
lity to
inve
st in
grow
th op
portu
nities
For
per
sona
l use
onl
y
Glob
al Bu
ilding
Solu
tions
busin
ess Co
mpr
ised
of:
•Buil
dings
Nor
th Am
erica
China
: Buil
dings
Lysa
ght a
nd C
oated
B
uildin
gs A
siaBu
ildin
g So
lutio
ns•C
hina:
Buil
dings
, Lys
aght
and C
oated
. B
uildin
gs A
sia•B
uildin
gs &
Solu
tions
Aus
tralia
•Othe
r glob
al bu
ilding
s acti
vities
Build
ing
Prod
ucts
Busin
ess s
trate
gy:
•Acc
elera
te gr
owth
in bu
ilding
solut
ions t
o ind
ustria
l and
co
mmer
cial b
uildin
g seg
ment
Build
ing
Prod
ucts
Focus
•Exp
andin
g the
sales
and i
nstal
lation
netw
ork f
or de
liver
y of
build
ings o
n a gl
obal
basis
•Exp
and t
he po
rtfoli
o of c
ost e
fficien
t man
ufactu
ring
and
engin
eerin
g fac
ilities
Blue
Scop
eAus
tralia
&
New
Zeala
nd
arket First F
engin
eerin
g fac
ilities
•Deli
ver n
ew pr
oduc
ts inc
luding
Day
-Ligh
ting t
o red
uce
build
ing op
erati
ng co
sts, a
nd Lo
ng B
ay st
ructu
ral s
olutio
ns
with
highe
r load
bear
ing ca
pacit
y and
redu
ced w
eight
for
Ma
Hot R
olled
Pro
duct
s Nor
th A
mer
icag
gp
yg
large
scale
facil
ities
Balan
ce S
heet
Page
14
Balan
ce S
heet
For
per
sona
l use
onl
y
Glob
al Bu
ilding
Solu
tions
is w
ell po
sition
to ca
pture
oppo
rtunit
ies in
the
world
’s lar
gest
and f
astes
t gro
wing
non-
resid
entia
l con
struc
tion m
arke
ts
54
gg
g
Add
bl
k 20
1 U
S$ B
14
12
Addr
essa
ble m
arke
t 201
5 US$
Bn
Sour
ce: G
lobal
Insigh
t
66
42
2
10
9Ex
isting
pres
ence
10
Addr
essa
ble
marke
tRe
st of
Wor
ldAu
strali
aMi
ddle
East
& Af
rica
South
Am
erica
Easte
rn
Euro
peAS
EAN
India
North
Am
erica
China
p
•Su
ite of
glob
al br
ands
and
effec
tive
globa
l sale
s netw
ork
•Ne
twor
k of o
ver 5
00 en
ginee
rs loc
ated i
n 10 c
ountr
iesB
dt
ft
i f
tit
E
id B
ildi
Slt
i l
ith
f
ti
bil
it i
Chi
Nth
•Br
oade
st ma
nufac
turing
footp
rint a
mong
Eng
ineer
ed B
uildin
g Solu
tions
play
ers w
ith m
anufa
cturin
g ca
pabil
ity in
Chin
a, No
rth
Amer
ica, In
dia, A
SEAN
, Midd
le Ea
st an
d Aus
tralia
•Ot
her m
arke
ts ca
n be s
ervic
ed by
a ble
nd of
Lice
nsee
s (eg
Bra
zil, K
orea
, Jap
an) a
nd Jo
int V
entur
es
Al
iifi
t t
it t
t
t th
ti
l bild
i
kt b
i
t E
id B
ildi
Slt
i
Page
15
•Al
so an
sign
ifican
t opp
ortun
ity to
pene
trate
the co
nven
tiona
l buil
ding m
arke
t by c
onve
rsion
to E
ngine
ered
Buil
ding S
olutio
ns
(eg E
ngine
ered
Buil
ding S
olutio
ns re
pres
ent o
nly 15
% of
the
total
US no
n-re
siden
tial c
onstr
uctio
n ma
rket -
sour
ce: M
BMA,
FW
Dod
ge)F
or p
erso
nal u
se o
nly
The n
ew or
ganis
ation
alstr
uctur
e also
enab
les G
lobal
Build
ing S
olutio
ns to
bette
r se
rvice
mult
i-nati
onal
corp
orati
ons w
ith th
eir gl
obal
expa
nsion
requ
ireme
nts
•Un
ique p
ropo
sition
to de
sign
manu
factur
e and
cons
truct
for gl
obal
clien
ts su
ch as
Cos
tco an
d•
Uniqu
e pro
posit
ion to
desig
n, ma
nufac
ture a
nd co
nstru
ct for
glob
al cli
ents,
such
as C
ostco
and
Proc
ter &
Gam
ble, th
at wa
nt to
stand
ardis
e con
struc
tion a
cross
their
footp
rint
•Ou
r inno
vativ
e buil
ding d
esign
s hav
e red
uced
the w
eight
per s
quar
e mete
r by 2
5% in
some
case
s, sa
ving
subs
tantia
l cos
ts for
our g
lobal
custo
mers
•Sp
eed o
f con
struc
tion a
llows
clien
ts to
redu
ce ov
erall
cons
tructi
on co
sts an
d gen
erate
reve
nue f
aster
Have
redu
ce bu
ilding
erec
tion t
imes
by 50
% w
orkin
g in p
artne
rship
with
globa
l cus
tomer
s–
Have
redu
ce bu
ilding
erec
tion t
imes
by 50
% w
orkin
g in p
artne
rship
with
globa
l cus
tomer
s
•Re
duce
s clie
nt’s r
isk an
d ena
bles t
hem
to foc
us on
area
s of c
ore c
ompe
tency
•Bl
ueSc
o pe i
s tar
getin
g som
e 200
larg
e mult
i-nati
onal
corp
orati
ons,
over
a qu
arter
of w
hich B
lueSc
ope h
as
pg
gg
p,
qp
supp
lied b
uildin
gs to
in th
e pas
t two y
ears
•Ou
r Glob
al Sa
les T
eam
have
iden
tified
lead
s rep
rese
nting
over
$800
M in
proje
ct re
venu
es
Page
16
For
per
sona
l use
onl
y
Volum
e gro
wth f
or G
lobal
Build
ing S
olutio
ns is
expe
cted t
o con
tinue
to ou
tpace
mar
ket
grow
th an
d rec
ent r
estru
cturin
g effo
rts ar
e exp
ected
to de
liver
ongo
ing pr
ofit g
rowt
h
•Re
centl
y esta
blish
ed G
lobal
Acco
unts
team
to dr
ive pe
netra
tion o
f sign
ifican
t glob
al cu
stome
r opp
ortun
ity
St
kt
th t
til
i f
Chi
•St
rong
mar
ket g
rowt
h pote
ntial
rema
ins fo
r Chin
a
•AS
EAN
build
ings b
usine
sses
have
been
integ
rated
with
the C
hina B
uildin
gs bu
sines
s to p
rovid
e stro
nger
su
ppor
t ser
vices
(sale
s ma
rketin
g en
ginee
ring)
and a
bette
r foc
us on
grow
thsu
ppor
t ser
vices
(sale
s, ma
rketin
g, en
ginee
ring)
and a
bette
r foc
us on
grow
th
•Th
e Nor
th Am
erica
n buil
dings
busin
esse
s will
bene
fit fro
m ma
rket r
ecov
ery a
nd re
cent
restr
uctur
ing ef
forts
which
have
sign
ifican
tly re
duce
d its
cost
base
which
have
sign
ifican
tly re
duce
d its
cost
base
–Do
dge M
BMA
marke
t for
ecas
t gro
wth f
or U
SA no
n-re
siden
tial c
onstr
uctio
n at
22%
for C
Y13 a
nd 34
% fo
r CY1
4
•Fu
rther
oppo
rtunit
y to i
mpro
ve Ly
sagh
t Chin
a sale
s and
mar
gins e
xpan
ding s
ales i
nto pr
ivate
secto
rFu
rther
oppo
rtunit
y to i
mpro
ve Ly
sagh
t Chin
a sale
s and
mar
gins e
xpan
ding s
ales i
nto pr
ivate
secto
r
•Im
prov
emen
t in vo
lumes
and p
rodu
ct mi
x (ba
re vs
paint
ed) w
ill dr
ive B
uildin
gs P
rodu
cts C
hina e
arnin
gs
•A
stron
g foc
us on
inno
vatio
n and
prod
uct d
evelo
pmen
t (da
yligh
t har
vesti
ng, s
olar in
tegra
tion,
small
er
build
ings e
tc)
Page
17
$1.45
Bnr
even
ue in
FY2
012.
Pote
ntial
to do
uble
in the
next
three
year
s
For
per
sona
l use
onl
y
Build
ing P
rodu
cts bu
sines
s
Build
ing
Solu
tions
Com
prise
dof
:•N
S Bl
ueSc
ope C
oated
Pro
ducts
JV (o
nce c
omple
ted):
Build
ing
Prod
ucts
•NS
Blue
Scop
e Coa
ted P
rodu
cts JV
(onc
e com
pleted
): AS
EAN
coati
ng lin
es, L
ysag
ht bu
sines
ses a
nd R
anbu
ild
busin
esse
s. S
teelsc
ape a
nd A
SC P
rofile
s (U.
S.)
•Tata
Blue
Scop
e Stee
l JV
(India
)
Build
ing
Prod
ucts
Focus
Busin
ess s
trate
gy:
•Gro
wlea
ding p
ositio
n in m
etal c
oated
and p
ainted
stee
l bu
ilding
prod
ucts
in hig
h gro
wth a
nd hi
gh va
lue m
arke
ts
Blue
Scop
eAus
tralia
&
New
Zeala
nd
arket First F
build
ing pr
oduc
ts in
high g
rowt
h and
high
value
mar
kets
acro
ss th
e Asia
-Pac
ific re
gion
•Por
tfolio
of hi
ghly
comp
etitiv
e, loc
ally m
anufa
cture
d pr
emium
susta
inable
prod
ucts
tailor
ed to
matc
h mar
ket
dd
id
til
d
idti
l bild
i
Ma
Hot R
olled
Pro
duct
s Nor
th A
mer
ica
dema
nd ac
ross
resid
entia
l and
non r
eside
ntial
build
ing
segm
ents
•Pote
ntial
new
prod
ucts,
such
as S
uper
Dyma
® co
ated
steel
supp
ly to
home
appli
ance
s man
ufactu
rers
Balan
ce S
heet
Page
18
ppy
pp•A
cces
s new
custo
mers
(esp
ecial
ly Ja
pane
se
manu
factur
ers i
n ASE
AN)
Balan
ce S
heet
For
per
sona
l use
onl
y
$1.36
Billi
on Jo
int V
entur
e with
Nipp
on S
teel C
orpo
ratio
n (NS
C)
anno
unce
d on 1
3 Aug
ust 2
012,
to for
m NS
Blue
Scop
e Coa
ted P
rodu
cts
Estab
lishm
ent o
f 50:5
0 join
t ven
ture o
ver B
lueSc
ope’s
build
ing pr
oduc
ts bu
sines
s in A
SEAN
and t
he U
.S.
(Stee
lscap
e and
ASC
Pro
files b
usine
sses
). Tr
ansa
ction
comp
letion
expe
cted M
arch
2013
quar
ter,
subje
ct to
regu
lator
y and
othe
r app
rova
lssu
bject
to re
gulat
ory a
nd ot
her a
ppro
vals
Joint
ventu
re en
terpr
ise va
lue of
US$
1,360
M (1
00%
)–
Expe
cted F
Y201
2 una
udite
d und
erlyi
ng E
BITD
A for
the b
usine
ss of
A$1
15M
(EBI
T A$
68M)
–Va
luatio
n refl
ects
the at
tracti
ve p
latfor
m an
d enh
ance
d gro
wth p
rosp
ects
of Bl
ueSc
ope’s
exist
ing bu
sines
s–
Blue
Scop
e’s ne
t pro
ceed
s US$
540M
(afte
r mino
rity in
teres
ts, ta
xes a
nd tr
ansa
ction
costs
)
Stro
nger
platf
orm
to ca
pture
grow
th in
exist
ing m
arke
ts, es
pecia
lly S
outhe
ast A
sia–
On-g
oing B
SL 50
% in
teres
t–
Quick
er ra
mp u
p to 1
00%
utilis
ation
of ex
isting
coati
ng an
d pain
ting c
apac
ity
Enha
ncem
ent o
f exis
ting p
rodu
ct mi
x to h
igher
value
prod
ucts
Poten
tial n
ew pr
oduc
ts, su
ch as
Sup
erDy
ma®
coate
d stee
l sup
ply to
home
appli
ance
s man
ufactu
rers
and a
cces
s to n
ew cu
stome
rs (e
spec
ially
Japa
nese
man
ufactu
rers
in AS
EAN)
Stre
ngthe
ns B
lueSc
ope’s
balan
ce sh
eet a
nd en
hanc
es ab
ility t
o fun
d gro
wth o
ppor
tunitie
s in o
ur
profi
table
busin
esse
s
Page
19
profi
table
busin
esse
s
For
per
sona
l use
onl
y
Grow
th of
the C
oated
Pro
ducts
busin
ess,
befor
e cre
ation
of th
e JV
•An
ticipa
ted vo
lume a
nd to
p-lin
e gro
wth d
riven
by:
–Ex
pans
ion of
down
strea
m ma
nufac
turing
facil
ities i
n dom
estic
mar
kets
–Be
st-in-
class
tech
nolog
y (inc
luding
in-lin
e pain
ting)
, qua
lity, p
rodu
ct ra
nge a
nd R
&D ca
pabil
ity–
Incre
ased
capa
city u
tilisa
tioni
n opti
mise
d netw
ork o
f facil
ities t
hrou
gh se
eding
and l
oad b
alanc
ing–
Incre
ase i
n ava
ilable
capa
city t
hrou
gh th
icker
gaug
e-mi
x and
OEE
impr
ovem
ents
–Pe
ople,
proc
esse
s and
syste
ms ge
ared
for g
rowt
h
•EB
ITDA
mar
gin im
prov
ed th
roug
h:Pr
oduc
tmix
impr
ovem
ent to
ward
s high
er va
luead
ded T
ier 1
and P
ainted
prod
ucts
–Pr
oduc
t-mix
impr
ovem
ent to
ward
s high
er va
lue-a
dded
Tier
1 an
d Pain
ted pr
oduc
ts–
Grea
ter pu
ll-thr
ough
of T
ier 1
prod
ucts
throu
gh ex
pans
ion of
Lysa
ght, R
anbu
ild an
d bolt
-on
acqu
isitio
ns of
cons
umer
facin
g dow
nstre
am bu
sines
ses
–Co
st co
mpeti
tiven
ess t
hrou
gh gr
owing
scale
, stra
tegic
sour
cing,
in-lin
e pain
ting a
nd yi
eld
impr
ovem
ents
Page
20
For
per
sona
l use
onl
y
Evalu
ating
the o
ppor
tunitie
s of N
S Bl
ueSc
ope C
oated
Pro
ducts
Initi
ally q
uant
ified
op
portu
nitie
s to
dli
td
•Ne
w pr
oduc
ts an
d solu
tions
for c
ustom
ers u
tilisin
g NSC
’s co
mpre
hens
ive
solut
ion te
chno
logies
–Ho
me ap
plian
ce se
gmen
t app
licati
ons o
f Sup
erDy
ma®
and
deliv
er an
expe
cted
US
$30-
75M
EBIT
DAto
th
e JV
by F
Y201
7 ab
ove
exist
in g b
usine
ss
Initi
allyq
uant
ified
op
portu
nitie
s
–Ho
me ap
plian
ce se
gmen
t app
licati
ons o
f Sup
erDy
ma®
and
VIEW
KOTE
® wi
ll be p
rioriti
es–
Supe
rDym
a® ap
plica
tions
in B
uildin
g & C
onstr
uctio
n•
Stab
le pr
ocur
emen
t of c
oil fe
ed su
bstra
tes a
nd en
hanc
ing co
nsist
ency
of
ggr
owth
pro
file –
see
subs
eque
nt p
ages
Stab
le pr
ocur
emen
t of c
oil fe
ed su
bstra
tes a
nd en
hanc
ing co
nsist
ency
of
quali
ty an
d com
petiti
vene
ss o
f JV
prod
ucts
by us
ing su
bstra
tes th
at ar
e ma
nufac
tured
und
er N
SC’s
integ
rated
quali
ty co
ntrol
syste
m
Edi
h
f it
i JV
bi
&
dt
t it
i J
•
Expa
nding
reac
h of e
xistin
g JV
busin
ess &
prod
ucts
to ex
isting
Japa
nese
FD
I par
ticipa
nts in
ASE
AN th
roug
h NSC
linka
ges a
nd ne
twor
k.
Oppo
rtunit
y will
grow
as Ja
pane
se m
anufa
cturin
g co
ntinu
es to
migr
ate to
AS
EAN
Furth
er
oppo
rtuni
ties f
or
revie
wan
d
S•
Pursu
ing gr
owth
in oth
er co
untrie
s in t
he A
SEAN
regio
n•
Shar
ing pr
oduc
tion s
uppo
rt re
sour
ces i
n ASE
AN w
ith N
SC’s
exist
ing
pres
ence
, and
achie
ving b
est-o
f-bre
ed p
rodu
ctivit
y and
perfo
rman
ce
Revie
w an
d qu
antifi
catio
n of
ben
efit
and
costs
onc
e JV
qu
antif
icatio
np
,g
py
p•
Acce
lerate
mar
ket e
ntry o
f nex
t gen
erati
on C
OLOR
BOND
® an
d ZI
NCAL
UME®
into
Asia
•De
velop
ment
of ne
w de
mand
for n
on-a
utomo
bile a
pplic
ation
s suc
h as
and
costs
onc
e JV
es
tabli
shed
Page
21
agric
ultur
e, en
ergy
-relat
ed a
nd el
ectric
appli
ance
appli
catio
ns (J
V ex
clude
s auto
motiv
e seg
ment)
For
per
sona
l use
onl
y
Blue
Scop
e Aus
tralia
& N
ew Z
ealan
d
Build
ing
Solu
tions
Build
ing
Prod
ucts
Focus
Build
ing
Prod
ucts
Com
prise
d of
:•C
oated
& In
dustr
ial P
rodu
cts A
ustra
liaB
ildi
Ct
& Di
tibti
At
li (B
lS
arket First F
•Buil
ding C
ompo
nents
& D
istrib
ution
Aus
tralia
(Blue
Scop
e Di
stribu
tion &
Lysa
ght)
•New
Zea
land S
teel &
Pac
ific S
teel P
rodu
cts
Blue
Scop
eAus
tralia
&
New
Zeala
nd
Ma
Busin
ess s
trate
gy:
•Imp
rove
pro
fitabil
ity in
man
ufactu
ring
and d
istrib
ution
op
erati
ons
Hot R
olled
Pro
duct
s Nor
th A
mer
ica
•Har
ness
value
of lo
w co
st iro
n san
ds op
portu
nities
in N
ew
Zeala
nd•P
ursu
e stru
ctura
l cos
t red
uctio
n opp
ortun
ities i
n raw
ma
terial
s for
Por
t Kem
blaBa
lance
She
et
Page
22
mater
ials f
or P
ort K
embla
•Com
mitm
ent to
dome
stic m
arke
t; ne
xt ge
nera
tion
prod
ucts
Balan
ce S
heet
For
per
sona
l use
onl
y
Once
Taha
roa 2
.4 Mt
pa iro
n san
ds ex
port
rate
achie
ved,
Blue
Scop
e will
be 55
% ec
onom
ically
hedg
ed fo
r iron
ore,
on a
value
-in-u
se ba
sisy
g,
Porti
on o
f iro
n or
e con
sum
ptio
n ec
onom
ically
hed
ged1
with
in B
lueS
cope
2011
Toda
yFY
2014
Exp
ecte
dBe
fore
CIP
A Re
stru
ctur
e, co
mbi
ned
with
0.8 M
tpa i
ron
sand
s exp
orts
(9.2
Mtpa
usa
ge ra
te, in
cludin
g NZ)
Post
CIP
A Re
stru
ctur
e, co
mbi
ned
with
expe
cted
2.4 M
tpa i
ron
sand
s ex
ports
from
Taha
roa
and
expo
rts
Post
CIP
A Re
stru
ctur
e, co
mbi
ned
with
expe
cted
1.2 M
tpa i
ron
sand
s ex
ports
from
Taha
roa
and
expo
rts
2011
Toda
yFY
2014
Exp
ecte
d
(p
g,
g)
expo
rts fr
om Ta
haro
a, an
d ex
ports
fro
m W
aikat
o No
rth H
ead
(5.0
Mtpa
usa
ge ra
te, in
cludin
g NZS
)
expo
rts fr
om Ta
haro
a, an
d ex
ports
fro
m W
aikat
o No
rth H
ead
(5.0
Mtpa
usa
ge ra
te, in
cludin
g NZS
)
15%
45%
55%
60%
40%
85%
Page
23
Unhe
dged
portio
n of p
urch
ases
Econ
omica
lly he
dged
Note
: 1)
Bas
ed o
n cur
rent
marke
t pric
ing ra
tio of
iron o
re fin
es to
iron s
ands
For
per
sona
l use
onl
y
Hot R
olled
Pro
ducts
Nor
th Am
erica
Build
ing
Solu
tions
Build
ing
Prod
ucts
Build
ing
Prod
ucts
Focus
Blue
Scop
eAus
tralia
&
New
Zeala
nd
arket First F
Com
prise
dof
:
Ma
•Nor
thSt
ar B
lueSc
ope S
teel J
V (O
hio)
•Cas
trip JV
• Bus
ines
s stra
tegy
:Ho
t Rol
led P
rodu
cts N
orth
Am
erica
Busin
ess s
trate
gy:
•Main
tainr
obus
t pro
fitabil
ity th
roug
h the
cycle
with
low
cost,
hig
hly fle
xible
oper
ation
s and
a str
ong
focus
on c
ustom
er
relat
ionsh
ipsBa
lance
She
et
Page
24
•Pro
fitable
grow
th op
tions
–inc
reas
e pro
ducti
on ca
pacit
y; low
er fe
ed su
pply
cost
struc
ture
Balan
ce S
heet
For
per
sona
l use
onl
y
Hot R
olled
Pro
ducts
Nor
th Am
erica
–gr
owth
oppo
rtunit
ies
DRI p
rojec
tS
d lb
t
j
t
•Po
tentia
l upg
rade
in pr
oduc
tion c
apac
ity fr
om ~
2.2
millio
n to ~
2.6 m
illion
tons
per a
nnum
DRI p
rojec
tSe
cond
slab
cast
er p
rojec
t
•Bu
ild a
1 milli
on to
n per
annu
m Di
rect
Redu
ced I
ron
(DRI
) Plan
t. DRI
wou
ld re
place
some
of th
e cur
rent
hih
i
d
d i
i
l l
i th
•
Involv
es in
stallin
g a se
cond
stee
l slab
caste
r, en
hanc
ing th
e exis
ting e
lectric
arc f
urna
ce, in
stallin
g a n
ew sh
uttle
furna
ce an
d und
ertak
ing ge
nera
l re
confi
gura
tion o
f ass
ociat
ed in
frastr
uctur
e
highe
r pric
ed sc
rap
and p
ig iro
n sup
ply, lo
werin
g the
ov
erall
cost
struc
ture
of the
JV•
Involv
es bu
ilding
a pla
nt to
feed D
RI to
the e
lectric
ar
c fur
nace
redu
cing P
ig Iro
n (Im
porte
d fro
m Ru
ssia
reco
nfigu
ratio
n of a
ssoc
iated
infra
struc
ture
•To
tal ca
pital
cost
estim
ated t
o be U
S$20
0-25
0M
(BSL
shar
e 50%
of th
is)•
Feas
ibility
stud
ies an
d deta
iled e
ngine
ering
comp
lete
arc f
urna
ce re
ducin
g Pig
Iron
(Impo
rted
from
Russ
ia an
d Bra
zil) a
nd P
rime S
crap p
urch
ases
•Ca
pital
cost
–to b
e dete
rmine
d•
Feas
ibility
Stud
y und
erwa
y and
plan
ned t
o be
yg
gp
•Pr
oject
is cu
rrentl
y on h
old du
e to D
RI fe
asibi
lity
analy
sis. D
epen
ding o
n outc
ome,
JV m
ay pr
opos
e giv
ing th
e DRI
proje
ct a h
igher
prior
ity
yy
yp
revie
wed b
y end
of C
Y201
2•
Proje
ct su
bject
to JV
partn
ers a
ppro
val
Page
25
For
per
sona
l use
onl
y
Balan
ce S
heet
Build
ing
Solu
tions
Build
ing
Prod
ucts
Build
ing
Prod
ucts
Focus
Blue
Scop
eAus
tralia
&
New
Zeala
nd
arket First F Ma
Hot R
olled
Pro
duct
s Nor
th A
mer
ica
•Main
tain a
stro
ng b
alanc
e she
et •R
educ
e cos
t & m
anag
eliqu
idity
throu
gh th
e cyc
le Ba
lance
She
et
Page
26
•Red
uce c
ost &
man
agel
iquidi
ty thr
ough
the c
ycle
•Sup
port
grow
th ini
tiativ
esBa
lance
She
et
For
per
sona
l use
onl
y
Perfo
rman
ce o
f Rep
ortin
g Pe
rform
ance
of R
epor
ting
Segm
ents
in F
Y201
2Se
gmen
ts in
FY2
012
Page
27
For
per
sona
l use
onl
y
Coate
d & In
dustr
ial P
rodu
cts A
ustra
lia –
segm
ent s
umma
ry
Hlf
l d
li E
BIT
i (A
$M)
CHa
lf ye
arly
unde
rlyin
g EB
IT co
mpa
rison
(A$M
) Co
mm
ents
on
resu
lts an
d bu
sines
s dire
ctio
n 18
8 •
2H F
Y201
2 und
erlyi
ng E
BIT
loss o
f $14
5M dr
iven b
y (vs
. 1H
FY2
012)
:L
‘lki
’ t
l
(145)
(97)
(80)
Lowe
r ‘los
s-mak
ing’ e
xpor
t volu
mes
Impr
oved
spre
ad:
–Lo
wer r
aw m
ateria
l cos
ts pa
rtly of
fset b
y low
er
dome
stic a
nd in
terna
tiona
l sell
ing pr
ices a
nd
highe
r al
e of o
penin
g in
entor
carri
ed fo
rar
d (14
5)(16
1)(18
2)
2H F
Y12
1H F
Y12
2H F
Y11
1H F
Y11
2H F
Y10
1H F
Y10
highe
r valu
e of o
penin
g inv
entor
y car
ried f
orwa
rd
into 2
H FY
2012
than
1H F
Y201
2Lo
wer N
RV pr
ovisi
on at
30 Ju
ne 20
12 vs
31 D
ec 20
11Pa
rtly of
fset b
y:Hi
h
it t
d t
fid
i
t
120
7 1,
427
Unde
rlyin
g EB
ITDA
pro
gres
sion
(A$M
)–
High
er un
it cos
ts du
e to
fixed
conv
ersio
n cos
ts sp
read
over
lowe
r pro
ducti
on vo
lumes
–Ad
verse
dome
stic p
rodu
ct mi
x to l
ower
mar
gin
prod
ucts
and m
arke
tsC
d i
I S
d i
i
k E
tit
337
1,20
7 98
9 76
5 89
1 72
7
•Co
mmen
ced u
sing I
ron S
ands
in iro
n mak
e. Es
timate
us
age a
t aro
und 3
% of
iron o
re in
put b
lend
•Ex
cess
expo
rt vo
lume d
espa
tched
in Q
4 FY2
012
(follo
wing
restr
uctur
e and
due t
o slig
htly l
ower
dome
stic
(150)
(56)
305
337
(g
gy
dema
nd)
•W
ester
n Por
t EBA
comp
lete.
Illaw
arra
(PKS
W &
Sp
ringh
ill) re
mains
unde
r neg
otiati
on•
Full r
estru
cture
bene
fit in
FY20
13: e
xpec
t EBI
TDA
Page
28
(150)
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
•Fu
ll res
tructu
re be
nefit
in FY
2013
: exp
ect E
BITD
A po
sitive
(sub
ject to
spre
ad, F
X, do
mesti
c mar
gins a
nd
dema
nd)
For
per
sona
l use
onl
y
2H F
Y201
2 Aus
tralia
n dem
and b
road
ly in
line w
ith pr
eced
ing tw
o halv
es, b
ut so
me m
ix de
terior
ation
away
from
high
er B
uildin
g & C
onstr
uctio
n seg
ment
2H F
Y200
81H
FY2
009
2H F
Y200
91H
FY2
010
2H F
Y201
01H
FY2
011
2H F
Y201
11H
FY2
012
2H F
Y201
2TO
TAL
BSL A
USTR
ALIA
N EX
TERN
AL D
ESPA
TCH
VOLU
MES
(1)
1,600
1,800
2H F
Y200
81H
FY2
009
2H F
Y200
91H
FY2
010
2H F
Y201
01H
FY2
011
2H F
Y201
11H
FY2
012
2H F
Y201
2(N
o. 5 B
last
Furn
ace R
eline
)63
%Co
nstru
ctio
n64
%
1,200
1,400
65%
66%
27%
(436
kt)
27%
(389
kt)
28%
(349
kt)
28%
(391
kt)
67%
67%
65%
64%
800
1,000
Dwell
ing
Non-
dwell
ing
0 tonnes
29%
(236
kt)
70%
21%
(344
kt)
15%
(243
kt)
23%
(341
kt)
28%
(349
kt)
25%
(312
kt)
23%
(320
kt)
29%
(340
kt)
27%
(313
kt)
29%
(344
kt)
26%
(308
kt)
29%
(346
kt)
26%
(301
kt)
27%
(321
kt)
23%
(274
kt)
400
600
Manu
factur
ingEn
ginee
ring
Dwell
ing
‘000
13%
(208
kt)
15%
(239
kt)
14%
(212
kt)
13%
(192
kt)
()
28%
(235
kt)
13%
(109
kt)
13%
(161
kt)
13%
(160
kt)
14%
(187
kt)
11%
(152
kt)
()
(3)
11%
(133
kt)
11%
(123
kt)
27%
(313
kt)
13%
(154
kt)
10%
(124
kt)
26%
(308
kt)
10%
(119
kt)
11%
(128
kt)
26%
(301
kt)
12%
(138
kt)
11%
(131
kt)
23%
(274
kt)
0
200
Auto
& tra
nspo
rtAg
ri & m
ining
15%
(239
kt)
9% (1
44kt
)
14%
(202
kt)
9% (1
30kt
)
13%
(109
kt)
11%
(90k
t)11
% (9
2kt)
8% (6
2kt)
13%
(156
kt)
8% (1
05kt
)
14%
(198
kt)
10%
(134
kt)
13%
(157
kt)
9% (1
02kt
)
14%
(164
kt)
9% (1
06kt
)
15%
(174
kt)
9% (1
06kt
)
14%
(170
kt)
9% (1
03kt
)
1614
kt(9
%)
1466
kt(4
4%)
824k
t51
%12
43kt
11%
1381
kt(1
5%)
1168
kt3%
1198
kt(2
%)
1174
kt(3
%)
1138
ktGr
oss
1,614
kt(9
%)
1,466
kt(4
4%)
824k
t51
%1,2
43kt
11%
1,381
kt(1
5%)
1,168
kt3%
1,198
kt(2
%)
1,174
kt(3
%)
1,138
kt(2
64kt
)(1
92kt
)(1
40kt
)(1
64kt
)(1
66kt
)(1
61kt
)(1
60kt
)(1
60kt
)(1
48kt
)
1,368
kt(7
%)
1,274
kt(4
6%)
684k
t58
%1,0
79kt
13%
1,215
kt(4
) (17%
)1,0
07kt
3%1,0
38kt
(2%
)1,0
13kt
(2%)
990k
tFY
2009
FY20
11FY
2010
17%
(11%
)--
----
FY20
12(2
%)
----
Gros
sDe
spat
ches
less(2
)
Norm
alise
dDe
spat
ches
Page
29
Note
s :
(1)
Perce
ntage
s hav
e bee
n rou
nded
. (2
)No
rmali
sed d
espa
tches
exclu
de th
ird pa
rty so
urce
d pro
ducts
, incl
long p
rodu
cts.
(3)
Engin
eerin
g inc
ludes
infra
struc
ture s
uch a
s roa
ds, p
ower
, rail
, wate
r, pip
es, c
ommu
nicati
ons a
nd so
me m
ining
-linke
d use
1,958
kt2,0
45kt
2,294
kt17
%(1
1%)
----
2,003
kt(2
%)
----
For
per
sona
l use
onl
y
Exter
nal fo
reca
ster e
xpec
tation
s of r
eside
ntial
cons
tructi
on se
ctor
impr
ovem
ent in
FY2
013 a
nd no
n-re
siden
tial im
prov
emen
t in F
Y201
4
Resid
entia
l An
nual
% C
hang
e(F
in Yr
s)
Engi
neer
ing
Cons
truct
ion
Annu
al %
Cha
nge
(Fi
Y)
Mini
ng
Annu
al %
Cha
nge
(Fin
Yrs)
(Fin
Yrs)
(Fin
Yrs)
25.8
26.8
253035BI
S Sh
rapn
el F’c
asts
(Jul 1
2)
()
60.5
6075BI
S Sh
rapn
el F’c
asts
(Mar
12)
3.2
3.0
2.5
30
4.5
6.0
7 Yr A
vera
geHI
A F’c
asts
(Aug
12)
19.1
9.8
82
14.6
70
10152025
72
11.5
22.6
35.3
28.8
3045
19.1
18.0
164
1.2
-1.5
1.3
1.2
0.3
30
-1.50.0
1.5
3.0
2.9
8.2
7.0
0510
2014
20137.2
2012
2011
2010
2009
2008
2007
2006
2005
4.7
12.1
9.8
015
2014
2013
2012
2011
2010
2009
16.4
2008
2007
2006
2005
-3.4
-6.0
-4.5
- 3.0
2008
2009
-5.0
2010
2011
2012
2013
2007
2006
2005
2014
Non
Resid
entia
l An
nual
% C
hang
e(F
in Yr
s)
Manu
fact
urin
g*
Annu
al %
Cha
nge
(Fin
Yrs)
25De
loitte
Acc
ess E
cono
mics
F’ca
sts (J
ul 12
)
Agric
ultu
re*
Annu
al %
Cha
nge
(Fin
Yrs)
25De
loitte
Acc
ess E
cono
mics
F’ca
sts (J
ul 12
)BI
S Sh
rapn
el F’c
asts
(May
12)
7.6
35
9.1
8.4
12.8
3.6
51015
4.82
7
12.8
15.6
510152025
13.1
12.8
18.8
10152025
3.5
-50
-7.6
-2.1
-5.1
-12
3
-6.6
2.7
0.2
-0.8
-5.1
-15
-10-505
63
-0.7
-0.6
4.2
-5051.4
Page
30So
urce
: ABS
, BIS
Shr
apne
l, HIA
, *De
loitte
Acc
ess E
cono
mics
(bas
ed on
Gro
ss O
utput
grow
th ra
tes)
-10
2014
2013
2012
-9.8
2011
2010
2009
2008
2007
2006
2005
12.3
-14.
1-2
015
2014
2013
2006
2010
2012
2011
2008
2005
2009
2007
-6.3
-8.6
-6.9
-10
2011
2010
2009
2014
2013
2012
2007
2006
2005
2008
For
per
sona
l use
onl
y
Rece
nt we
akne
ss in
raw
mater
ial in
put c
osts
enco
urag
ing
Iron
Ore a
nd H
ard
Cokin
g Co
al Pr
ices (
FOB)
180
Iron o
re fin
es pr
ice U
S$/t
Hard
cokin
g pric
e US$
/t
$
140
160
320
US$1
10/t
(1-1
0 Aug
2012
)
100
120
240
608016
0Ha
rd co
king
coal
US$1
76/t
(1-1
3 Aug
201
2)
204080
Iron
ore f
ines
00
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Page
31
Sour
ce: C
RU, P
latts,
TSI
, Blue
Scop
e Stee
l calc
ulatio
nsNo
te:
•Ind
icativ
e iro
n ore
prici
ng: 6
2% F
e iro
n ore
fines
price
assu
med.
Indu
stry a
nnua
l ben
chma
rk pr
ices u
p to M
arch
2010
. Qua
rterly
inde
x ave
rage
price
s lag
ged b
y one
quar
ter fr
om A
pril 2
010 t
o Mar
ch 20
11; m
onthl
y ind
ex av
erag
e the
reaft
er. F
OB es
timate
dedu
cts ba
lticca
pe in
dex f
reigh
t cos
t from
CFR
Chin
a pric
e.•
Indica
tive h
ard c
oking
coal
prici
ng: l
ow-vo
l; FOB
. Ind
ustry
annu
al be
nchm
ark p
rices
prior
to, a
nd in
cludin
g, Ma
rch 20
10; q
uarte
rly pr
ices f
rom
April
2010
to M
arch
2011
; mon
thly a
vera
ge sp
ot pr
ice th
erea
fter.
For
per
sona
l use
onl
y
Spre
ad (s
teel p
rices
less
raw
mater
ial pr
ices)
conti
nues
to be
a ma
jor
deter
mina
nt of
C&IP
A pr
ofitab
ility
East
Asia
HRC
Pric
e (US
$/t) a
nd In
dica
tive S
teelm
aker
HRC
Spr
ead
(A$/t
)Sp
read
: SB
B Ea
st As
ia HR
C pr
ice le
ss co
st of
15t ir
on or
e fine
s and
071
t har
d cok
ing co
al
py
$700
$800
Spre
ad:
SBB
East
Asia
HRC
price
less
cost
of 1.5
t iron
ore f
ines a
nd 0
.71t h
ard
cokin
g coa
l
SBB
East
Asia
HRC
(US$
/t)
$400
$500
$600
$200
$300
$400
Sd
(A$/t
)
$0
$100
$200
Spre
ad (A
$/t)
$Ja
n-09
Jan-
08Ja
n-07
Jan-
06Ja
n-05
Jan-
04Ja
n-03
Jan-
02Ja
n-01
Jan-
12Ja
n-11
Jan-
10So
urce
: SB
B, C
RU, P
latts,
TSI
, Res
erve
Ban
k of A
ustra
lia, B
lueSc
ope
Stee
l calc
ulatio
ns
FY20
10FY
2011
1H F
Y11
2H F
Y11
1H F
Y12
2H F
Y12
Idi
ti t
lk
HRC
d (
US$/t
)36
527
125
229
126
029
1Ind
icativ
e stee
lmak
er H
RC sp
read
(US$
/t)36
527
125
229
126
029
1
Indica
tive s
teelm
aker
HRC
spre
ad (A
$/t)
414
275
266
283
253
282
A$ / U
S$ F
X0.8
80.9
90.9
51.0
31.0
31.0
3
Page
32
Note
s on
calcu
latio
n:•
‘Indic
ative
stee
lmak
er H
RC sp
read
’ rep
rese
ntatio
n ba
sed
on si
mple
input
blend
of 1
.5t ir
on or
e fine
s and
0.71
t har
d co
king
coal
per o
utput
tonne
of s
teel. C
hart
is no
t a sp
ecific
repr
esen
tation
of B
SL re
alise
d exp
ort H
RC sp
read
(eg
does
not
acco
unt f
or iro
n or
e blen
ds, r
ealis
ed st
eel p
rices
etc),
but
rathe
r is sh
own
prim
arily
to d
emon
strate
mov
emen
ts fro
m pe
riod
to pe
riod
arisi
ng fr
om th
e pr
ices /
curre
ncy i
nvolv
ed.
•Ind
icativ
e iro
n ore
pric
ing:
62%
Fe i
ron o
re fin
es p
rice a
ssum
ed.
Indus
try a
nnua
l ben
chma
rk pr
ices u
p to
March
2010
. Qu
arter
ly ind
ex a
vera
ge p
rices
lagg
ed b
y one
qua
rter f
rom
April
2010
to M
arch
2011
; 50/5
0 mo
nthly/
quar
terly
index
aver
age
there
after
. FO
B es
timate
ded
ucts
baltic
cape
inde
x fre
ight c
ost fr
om C
FR C
hina p
rice.
•Ind
icativ
e ha
rd co
king
coal
prici
ng:
low-vo
l; FOB
. Ind
ustry
ann
ual b
ench
mark
price
s up
to Ma
rch 20
10;
quar
terly
price
s fro
m Ap
ril 20
10 to
Mar
ch 20
11;
50/50
mon
thly/q
uarte
rly p
ricing
ther
eafte
r.
For
per
sona
l use
onl
y
Coate
d & In
dustr
ial P
rodu
cts A
ustra
lia ou
tlook
•Ex
pect
CIPA
to de
liver
posit
ive un
derly
ing E
BITD
A in
FY20
13, w
ith a
posit
ive co
ntribu
tion i
n 2H
FY20
13,
and n
eutra
l to ne
gativ
e con
tributi
on in
1H F
Y201
3 (su
bject
to sp
read
, FX
and d
omes
tic m
argin
and
dema
nd)
Impr
ovem
ents
drive
n by:
dema
nd).
Impr
ovem
ents
drive
n by:
–Fu
ll-per
iod de
liver
y of r
estru
cture
ben
efits:
raw
mate
rial m
ix, re
ducti
on in
expo
rts to
sing
le bla
st fur
nace
pro-
forma
leve
lP
tti
l f l
iht d
ti
i i
t (
i
tid
i
ti)
–Po
tentia
l for s
light
dome
stic m
argin
impr
ovem
ent (
pre
any s
ucce
ss in
anti-d
umpin
g acti
ons)
•Im
pacts
of ca
rbon
prici
ng m
echa
nism
includ
ed in
CIP
A ou
tlook
:–
Estim
ated S
cope
1 &
2 liab
ility o
f 1mt
CO
-e in
FY2
013 (
c$23
M at
$23/t
) C
ost in
clude
d in u
nder
lying
earn
ings
–Es
timate
d Sco
pe 1
& 2 l
iabilit
y of 1
mt C
O 2-e
in F
Y201
3 (c.$
23M
at $2
3/t).
Cos
t inclu
ded i
n und
erlyi
ng ea
rning
s–
Expe
cted t
hat b
alanc
e of $
83M
Stee
l Tra
nsfor
matio
n Pl
an pa
ymen
ts wi
ll be r
eceiv
ed in
the l
atter
year
s of fo
ur
year
perio
d of th
e Plan
(FY2
012 t
o FY2
015)
, ther
efore
ther
e may
not b
e an o
ffsett
ing p
ayme
nt ag
ainst
Scop
e 1
& 2 l
iabilit
ies in
FY2
013
& 2 l
iabilit
ies in
FY2
013
•FY
2013
CIP
A ca
pex o
f app
roxim
ately
$140
M (1
H: $5
4M, 2
H: $8
6M).
Aro
und a
third
to be
inve
sted i
n ma
nufac
turing
facil
ities t
o deli
ver t
he ne
xt ge
nera
tion o
f Colo
rbon
d® an
d Zinc
alume
® pr
oduc
ts. In
vesti
ng
i f
t
in ou
r futu
re
•Ex
pecte
d tota
l cas
h pay
ments
due t
o res
tructu
ring n
ow es
timate
d at $
360-
380M
(belo
w ini
tial $
400-
500M
es
timate
); of
this,
resid
ual c
ash p
ayme
nts (n
on P
&L) o
f $60
M in
FY20
13 an
d agg
rega
te $3
0M F
Y201
4
Page
33
);,
py
()
$gg
g$
and b
eyon
dFor
per
sona
l use
onl
y
Austr
alia D
istrib
ution
and S
olutio
ns (A
D&S)
–se
gmen
t sum
mary
Hlf
l d
li E
BIT
i (A
$M)
C
(1)
3 •
2H F
Y201
2 und
erlyi
ng E
BIT
loss o
f $23
M dr
iven b
y (vs
1H
FY20
12):
Half
year
ly un
derly
ing
EBIT
com
paris
on (A
$M)
Com
men
ts o
n re
sults
and
busin
ess d
irect
ion
(15)
(1)(vs
. 1H
FY20
12):
Impr
oved
spre
ad dr
iven b
y low
er st
eel fe
ed co
sts
Impr
oved
conv
ersio
n cos
ts ma
inly d
elive
red t
hrou
gh
(23)
(29)
(19)
cost
impr
ovem
ent in
itiativ
es
Partly
offse
t by l
ower
volum
es
•Re
struc
ture
of Di
stribu
tion b
usine
ss w
ell ad
vanc
ed:
121
2H F
Y11
1H F
Y11
2H F
Y10
1H F
Y10
1H F
Y12
2H F
Y12
•Re
struc
ture
of Di
stribu
tion b
usine
ss w
ell ad
vanc
ed:
closu
re, s
ale or
cons
olida
tion o
f 17 b
ranc
hes a
nd
perm
anen
t ove
rhea
d re
ducti
ons.
Lysa
ght h
as ra
tiona
lised
its m
anufa
cturin
g foo
tprint
Unde
rlyin
g EB
ITDA
pro
gres
sion
(A$M
) 40
121
3
•Ly
sagh
t has
ratio
nalis
ed its
man
ufactu
ring
footpr
int
•An
ticipa
te Di
stribu
tion b
usine
ss to
be E
BIT
posit
ive
by F
Y201
4
(3)
32
40
22
37
18
14
11
Page
34
(29)
()
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
For
per
sona
l use
onl
y
New
Zeala
nd an
d Pac
ific S
teel P
rodu
cts –
segm
ent s
umma
ry
Hlf
l d
li E
BIT
i (A
$M)
C
49
52
•2H
FY2
012 u
nder
lying
EBI
T of
$35M
drive
n by
(vs 1
H FY
2012
):
Half
year
ly un
derly
ing
EBIT
com
paris
on (A
$M)
Com
men
ts o
n re
sults
and
busin
ess d
irect
ion
35
34
33
21
(vs. 1
H FY
2012
):Sm
all im
prov
emen
t in do
mesti
c des
patch
volum
es
Lowe
r pro
ducti
on (m
elter
issu
e & ga
s pipe
line o
utage
No
rth Is
land )
in 1H
FY2
012
1H F
Y12
2H F
Y11
1H F
Y11
2H F
Y10
1H F
Y10
2H F
Y12
)Pa
rtly of
fset b
y unfa
vour
able
FX (A
UD/N
ZD)
trans
lation
impa
ct
•Ex
pans
ion of
Taha
roa i
ron s
ands
expo
rt ca
pacit
y
216
1H F
Y12
2H F
Y11
1H F
Y11
2H F
Y10
1H F
Y10
2H F
Y12
by 40
0Ktpa
to 1.
2Mtpa
La
rger
char
ter ve
ssel
comm
ence
d op
erati
ons i
n May
20
12, r
eplac
ing th
e ex
isting
vess
elS
td b
tt
ith
iti
t
Unde
rlyin
g EB
ITDA
pro
gres
sion
(A$M
)
113
122
107
117
115
119
132
216
98
Supp
orted
by n
ew co
ntrac
ts wi
th ex
isting
custo
mers
Expo
rt ca
pacit
y exp
ande
d for
$17M
capit
al co
st
•Co
ntrac
t sign
ed fo
r sale
of a
furthe
r 1.2M
tpa iro
n sa
nds f
rom
Taha
roa
comm
ence
ment
of wh
ich is
10
7 98
87
sa
nds f
rom
Taha
roa,
comm
ence
ment
of wh
ich is
co
nditio
nal o
n cus
tomer
deli
verin
g a sh
ipping
so
lution
over
next
two y
ears
Low
cost
to BS
L to i
nitiat
e: $
10-1
5M
Page
35
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
Low
cost
to BS
L to i
nitiat
e: $
1015
M
For
per
sona
l use
onl
y
Coate
d & B
uildin
g Pro
ducts
Asia
–se
gmen
t sum
mary
Hlf
l d
li E
BIT
i (A
$M)
C
13
14
15
19
5 Id
iTh
ailan
d51
4762
46
6650
•2H
FY2
012 u
nder
lying
EBI
T of
$51M
drive
n by
(vs. 1
H FY
2012
):
Half
year
ly un
derly
ing
EBIT
com
paris
on (A
$M)
Com
men
ts o
n re
sults
and
busin
ess d
irect
ion
13
11
4 4
6
1 5
China
Vietn
amMa
laysia
Indon
esia
1761510
2413
1851812
211210
1451720
17119Im
prov
ed m
argin
s with
lowe
r stee
l feed
costs
(main
ly Ch
ina an
d Ind
ones
ia) p
artly
offse
t by w
eake
r dom
estic
an
d exp
ort s
ales p
rices
(main
ly Th
ailan
d an
d Ind
ones
ia)I
d d
t i
i Th
ild
(4)(16
)Ot
her
China
2H F
Y12
17
1H F
Y12
(6)
2H F
Y11
(6)18
1H F
Y11
(6)
2H F
Y10
14
1H F
Y10
(6)17
Impr
oved
pro
duct
mix i
n Tha
iland
Lowe
r 2H
FY20
12 de
spatc
hvo
lumes
in C
hina
Impa
cted
by co
sts as
socia
ted w
ith st
artin
g sec
ond
Indon
esian
coati
ng lin
e an
d Tha
iland
flood
s of $
13M
150
157
Indon
esian
coati
ng lin
e, an
d Tha
iland
flood
s of $
13M
•Ch
ina: c
onstr
uctio
n of
Butle
r PEB
/ Lys
aght
rollfo
rming
plan
t in X
i’an t
o cap
italis
e on s
trong
ma
rket d
eman
d in c
entra
l Chin
a and
leve
rage
Unde
rlyin
g EB
ITDA
pro
gres
sion
(A$M
)
144
150
157
125
98
78
117
115
103
marke
t dem
and i
n cen
tral C
hina a
nd le
vera
ge
Blue
Scop
e’s gl
obal
PEB
capa
bility
. Exp
ected
to be
op
erati
onal
at en
d of 2
H FY
2013
.
•Fu
rther
incre
menta
l inve
stmen
ts in
capa
city a
nd
28
78
•Fu
rther
incre
menta
l inve
stmen
ts in
capa
city a
nd
effici
ency
acro
ss A
SEAN
to su
ppor
t our
grow
th str
ategy
Page
36
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
For
per
sona
l use
onl
y
Coate
d & B
uildin
g Pro
ducts
Asia
–Co
nstan
t cur
renc
y ana
lysis
bette
r de
mons
trates
the r
eal e
arnin
gs gr
owth
in ou
r Asia
n ope
ratio
nsg
gp
Coat
ed &
Bui
ldin
g Pr
oduc
ts A
sia
Unde
rlyin
g EB
IT o
n FY
2003
cons
tant
curre
ncy (
A$M)
160
180
135
157
155
Coat
ed &
Bui
ldin
g Pr
oduc
ts A
sia –
Unde
rlyin
g EB
IT o
n FY
2003
cons
tant
curre
ncy (
A$M)
109
120
140
107
116
111
92
123
109
108
80100
7951
51
ASEA
N &
Chin
a:
A$16
3M
70
9592
6185
118
406051
5556
A$16
3M
61
28-1
9020
161
80
-5-6
-6-2
-926 -2
5556 -8
39 -62
-28
60-40
-20
-9-2
9-2
5Ch
inaInd
iaAS
EAN
Page
37
-60
FY03
FY08
FY07
FY06
FY05
FY04
FY12
FY11
FY10
FY09
For
per
sona
l use
onl
y
Coate
d & B
uildin
g Pro
ducts
Nor
th Am
erica
–se
gmen
t sum
mary
Hlf
l d
li E
BIT
ldi
Mtl
S (A
$M)
C
0
9 •
2H F
Y201
2 und
erlyi
ng E
BIT
loss o
f $8M
drive
n by
(vs. 1
H FY
2012
):
Half
year
ly un
derly
ing
EBIT,
exclu
ding
Met
l-Spa
n (A
$M)
Com
men
ts o
n re
sults
and
busin
ess d
irect
ion
(8)
0
(7)
Seas
onall
y low
er vo
lumes
(main
ly Bl
ueSc
ope
Build
ings a
nd A
SC P
rofile
s)Hi
gher
per u
nit fix
ed co
nver
sion c
osts
drive
n by
seas
onall
y low
er pr
oduc
tion
volum
es at
Blue
Scop
e
(20)
(26)
2H F
Y12
1H F
Y12
2H F
Y11
1H F
Y11
2H F
Y10
1H F
Y10
Build
ings
High
er 2H
FY2
012
NRV
prov
ision
at S
teelsc
ape
Partly
offse
t by i
mpro
ved
spre
ad (m
ainly
Stee
lscap
e)
as st
eel fe
ed co
st re
ducti
ons e
xcee
ded
sell p
rice
123
2H F
Y12
1H F
Y12
2H F
Y11
1H F
Y11
2H F
Y10
1H F
Y10
pre
ducti
ons
•Re
struc
turing
comp
leted
Impr
ovem
ent in
engin
eerin
g an
d ma
nufac
turing
IM
SA ac
quire
d1 F
ebru
ary 2
008
Unde
rlyin
g EB
ITDA
pro
gres
sion,
exclu
ding
Met
l-Spa
n (A
$M)
123
51
pg
gg
effici
ency
resu
lting i
n a m
ore
accu
rate
sche
dulin
g of
work
loads
in lin
e with
dema
ndCo
nsoli
datio
n of
prod
uctio
n fac
ilities
and
over
head
co
st re
ducti
ons i
nclud
in g th
e con
solid
ation
of r
egion
al Bu
tler a
cquir
ed27
Apr
il 200
4(2
mon
th co
ntrib
ution
1 Feb
ruar
y 200
8(5
mon
th co
ntrib
ution
in
2008
finan
cial y
ear)
21
5 19
35
51
27
0
gg
supp
ort fu
nctio
nsNe
w pr
oduc
t dev
elopm
ent a
nd a
stro
ng fo
cus o
n inn
ovati
on d
riving
volum
es g
reate
r tha
n ind
ustry
av
era g
es
(2 m
onth
cont
ribut
ion
in 20
04 fin
ancia
l yea
r)
Page
38
(8)(8)
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
g
•Le
vera
ge to
volum
e gro
wth w
ill dr
ive si
gnific
ant
earn
ings i
mpro
veme
nt
For
per
sona
l use
onl
y
Restr
uctur
ing of
Buil
dings
(PEB
) bus
iness
in N
orth
Amer
ica bu
sines
s to
impr
ove c
urre
nt an
d futu
re ea
rning
s pote
ntial
pg
p
Build
ings
Nor
th A
mer
ica –
Unde
rlyin
g EB
ITDA
vsMB
MA D
espa
tche
s1
100
1,400
90
Build
ings
Nor
th A
mer
ica –
Unde
rlyin
g EB
ITDA
vsMB
MA D
espa
tche
s
7080901,2
00
90
Unde
rlying
EBI
TDA
(A$M
) (LH
S)An
nuali
sed i
ndus
try sh
ipmen
ts (m
etric
kt) (R
HS)1
48506070
800
1,000
Unde
rlying
EBI
TDA
(A$M
) (LH
S)
14203040
400
600
10010
200
400
-15
-13
-20
- 10
0
FY20
09FY
2008
FY20
12FY
2011
FY20
10
Note
: five
mon
th p
eriod
from
acqu
isitio
n 1
Feb
2008
Page
39No
tes:
(1
)Me
tal B
uildin
g Man
ufactu
rers
Asso
ciatio
n dom
estic
build
ing sh
ipmen
ts
For
per
sona
l use
onl
y
Hot R
olled
Pro
ducts
Nor
th Am
erica
–se
gmen
t sum
mary
Hlf
l d
li E
BIT
i (A
$M)
C
64
47
•2H
FY2
012 u
nder
lying
EBI
T of
$42M
drive
n by (
vs.
1H F
Y201
2) in
creas
ed sp
read
(lowe
r cos
t of s
crap)
Half
year
ly un
derly
ing
EBIT
com
paris
on (A
$M)
Com
men
ts o
n re
sults
and
busin
ess d
irect
ion
42
20
47
14
1H F
Y201
2) in
creas
ed sp
read
(lowe
r cos
t of s
crap)
•Co
nver
sion c
ost im
prov
emen
ts an
d cos
t red
uctio
n ini
tiativ
es m
ore
than o
ffsett
ing e
scala
tion
8 14
1H F
Y10
1H F
Y12
2H F
Y11
1H F
Y11
2H F
Y10
2H F
Y12
•Ex
pecte
d fav
oura
ble co
ntribu
tors t
o EBI
T in
FY20
13
–Si
gnific
ant r
educ
tion i
n dep
recia
tion t
o occ
ur in
FY
2013
(BSL
shar
e US$
10M
)
193
FY20
13 (B
SL sh
are U
S$10
M )
–Inc
reas
ed sl
ab th
ickne
ss to
deliv
er gr
eater
ton
nage
at m
inima
l incre
menta
l cos
tUn
derly
ing
EBIT
DA p
rogr
essio
n (A
$M)
62
72
61
105
155
167
193
70
74
62
61
70
Page
40
(58)
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
For
per
sona
l use
onl
y
Fina
ncial
Res
ults
Fi
nanc
ial R
esul
ts
Page
41
For
per
sona
l use
onl
y
Unde
rlying
EBI
T va
rianc
e FY2
012 t
o FY2
011 b
y majo
r item
Net S
prea
d Re
duct
ion
($11
6m)
Conv
ersio
n & O
ther
Cos
ts:
Cost
Impr
ovem
ent In
itiativ
es45
Esca
lation
(116
)On
e-off
/ disc
retio
nary
(132
)Ot
her
(2
0)
-10
-27
Othe
r
(20)
-108
+191
139
+35
-12
-223
- 139
Raw
Mate
rial C
osts
:Co
al
(63)
Iron o
re
2
Scra
p
1Al
loys
2
-224
+29
Exter
nal S
teel F
eed
(4
6)Ne
t rea
lisab
le va
lue pr
ovisi
on42
Open
ing S
tock A
djustm
ent
(74)
Coati
ng M
etals
1
Othe
r(4
)
FY20
12Ot
her
Exch
ange
Ra
tes+40
Conv
ersio
n Co
stsNo
rth S
tarMi
xVo
lume
Raw
Mater
ial
Dome
stic
Price
sEx
port
Price
sFY
2011
(1)
(1)
Page
42
Rates
Costs
Mater
ial
Costs
Price
sPr
ices
Note
: 1)
Volu
me / m
ix ba
sed
on F
Y201
1 mar
gins
For
per
sona
l use
onl
y
Unde
rlying
EBI
T va
rianc
e 2H
FY20
12 to
1H F
Y201
2 by m
ajor it
em
+22
Net S
prea
d Im
prov
emen
t $25
m
8
-58
+22
-7
+ 82
-87
-5-8
8
-138
-43
Raw
Mate
rial C
osts
:Co
al
62Iro
n ore
57Sc
rap
3 Ex
terna
l Stee
l Fee
d
42
Conv
ersio
n & O
ther
Cos
ts:
Cost
Impr
ovem
ent In
itiativ
es
29
Esca
lation
(4
0)On
e-off
/ disc
retio
nary
(4
0)Ot
her
(8
) +1
36
-68
Exter
nal S
teel F
eed
42Ne
t rea
lisab
le va
lue pr
ovisi
on
32
Open
ing S
tock A
djustm
ents
(6
0)Co
ating
Meta
ls
1Ot
her
(1)
Othe
r
(8)
2H F
Y201
2Ot
her
Exch
ange
R
tCo
nver
sion
Ct
North
Star
Mix
Volum
eRa
w M
til
Do
mesti
c P
iEx
port
Pi
1H F
Y201
2(1
)(1
)
Page
43
Rates
Costs
Mater
ial
Costs
Price
sPr
ices
Note
: 1)
Volu
me / m
ix ba
sed
on 1H
FY2
012 m
argin
s
For
per
sona
l use
onl
y
Impr
ovem
ent in
oper
ating
wor
king c
apita
l
•$4
37M
decre
ase i
n wor
king c
apita
l from
Dec
embe
r 201
1 t
J 20
12W
orkin
g Ca
pita
l (A$
M)(1
)
to Ju
ne 20
12$3
82M
decre
ase i
n inv
entor
y driv
en by
:–
$274
M in
CIPA
as a
resu
lt of P
K re
struc
ture
-357
+242
1,391
–$1
03M
in C&
BP A
sia an
d Nor
th Am
erica
with
build
of
steel
feed i
nven
tories
in an
ticipa
tion o
f exte
rnal
sour
cing u
nwind
ing in
2H F
Y201
279
2
-437
1,034
1,149
(2)
–$5
M oth
er$5
5M in
creas
e in c
redit
ors a
nd ot
her
•$7
94M
decre
ase i
n wor
king c
apita
l from
Octo
ber 2
011 t
o
684
486
CIPA
597(3
,4)
$794
M de
creas
e in w
orkin
g cap
ital fr
om O
ctobe
r 201
1 to
June
2012
(sur
pass
ing $4
00-5
00M
targe
t)Eq
uivale
nt wo
rking
capit
al, af
ter a
djusti
ng fo
r fav
oura
bletim
ing of
year
-end
cash
flows
wou
ld be
arou
nd $2
00M
465
599
548
380
217
Othe
rbu
sines
ses
timing
of ye
aren
d ca
sh flo
ws, w
ould
be ar
ound
$200
M hig
her t
han J
une 2
012 l
evels
(imply
ing $5
94M
effec
tive
relea
se si
nce O
ctobe
r 201
1)
380
busin
esse
s
Jun-
12De
c 201
1Oc
t-11
Jun-
11
Note:
(1)I
nclud
es re
ceiva
bles,
inven
tory,
oper
ating
intan
gible
asse
ts, pa
yable
s, pr
ovisi
ons,
defer
red i
ncom
e, re
tireme
nt be
nefit
oblig
ation
s and
othe
r ass
ets an
d liab
ilities
.(2
)$10
0M re
ceiva
ble (r
eceiv
ed 13
Janu
ary 2
012)
and $
34M
defer
red i
ncom
e at 3
1 Dec
embe
r 201
1 in r
espe
ct of
Stee
l Tra
nsfor
matio
nPlan
paym
ent a
nd ne
t res
tructu
re pr
ovisi
ons
of $1
82M
exclu
ded f
rom
CIPA
wor
king c
apita
l. W
orkin
g cap
ital b
alanc
es ex
clude
defin
ed be
nefit
supe
rann
uatio
n actu
arial
adjus
tmen
t of $
250M
(Aus
tralia
$67M
, othe
r bu
sines
ses $
183M
).(3
)Net
restr
uctur
e pro
vision
s of $
85M
exclu
ded f
rom
CIPA
wor
king c
apita
l W
orkin
g cap
ital b
alanc
es ex
clude
defin
ed be
nefit
supe
rann
uatio
n full
year
actua
rial a
djustm
ent o
f
Page
44
(3)N
et re
struc
ture p
rovis
ions o
f $85
M ex
clude
d fro
m CI
PA w
orkin
g cap
ital.
Wor
king c
apita
l bala
nces
exclu
de de
fined
bene
fit su
pera
nnua
tion f
ull ye
ar ac
tuaria
l adju
stmen
t of
$279
M (A
ustra
lia $9
2M, o
ther b
usine
sses
$187
M).
(4)$
437M
oper
ating
wor
king c
apita
l mov
emen
t from
Dec
embe
r 201
1 to J
une 2
012 r
econ
ciles
to st
atutor
y wor
king c
apita
l mov
emen
t $38
2M sh
own i
n cas
h flow
state
ment
on pa
ge
11 af
ter al
lowing
for -
$97M
redu
ction
in re
struc
ture c
ost p
rovis
ions,
+$66
M ne
t mov
emen
t for S
teel T
rans
forma
tion P
lan pa
ymen
t, -$1
5M M
etl-S
pan d
ispos
al an
d -$9
M FX
re
statem
ent a
nd ot
herFor
per
sona
l use
onl
y
Stre
ngthe
ned t
he ba
lance
shee
t –ne
t deb
t red
uced
to $3
84M
(or a
ppro
x $5
80M
when
adjus
ting f
or fa
vour
able
timing
of ye
ar-e
nd ca
sh flo
ws)
jg
gy
)
Key M
etric
s:30
June
2011
31 O
ct 20
1131
Dec
2011
30 Ju
ne 20
12,
actu
al30
June
2012
, ad
just
ed (1
)
Net d
ebt
$1,06
8M$1
,555M
$796
M$3
84M
~$58
0M
Gear
ing (n
et de
bt)19
.5%27
.7%15
.7%9.2
%13
.4%
Liquid
ity (u
ndra
wn fa
cilitie
s & ca
sh)
$1,13
7M$7
01M
$1,50
1M$1
,571M
~$1,3
75M
Net D
ebt (
A$M)
+1,55
5Ot
her:
Cash
wor
king p
rofits
(57)
Finan
ce co
sts23
Othe
r:Ca
sh w
orkin
g pro
fits(7
4)Fin
ance
costs
41
+1,06
8
-357
+121
-577
+796
Finan
ce co
sts23
Cape
x 26
Tax
17FX
/ lea
ses /
othe
r45
Finan
ce co
sts41
Cape
x 11
5Ta
x25
FX / l
ease
s / ot
her
(10) +3
84+9
7+6
8-4
37
+54
-140
Net D
ebt
Jun 2
012
Othe
rRe
struc
turing
co
stsW
orkin
g ca
pital
Metl-S
pan
proc
eeds
Wor
king
capit
alRe
struc
turing
co
stsEq
uity
raisi
ng (n
et)Ne
t Deb
t Oc
t 201
1Ne
t Deb
t Ju
n 201
1Ne
t Deb
t De
c 201
1Ot
her
(2)
(3)
Page
45
Note:
(1)
Adjus
ting f
or tim
ing o
f cas
h flow
s aro
und y
ear e
nd eq
uivale
nt wo
rking
capit
al ba
lance
s wou
ld be
arou
nd $2
00M
highe
r; ad
justed
net d
ebt s
hown
adds
this
amou
nt ba
ck(2
)$1
27M
worki
ng ca
pital
bene
fit fro
m Ju
n to D
ec 20
11 ($
357M
less
$230
M) re
conc
iles t
o $23
5M be
nefit
show
n in c
ash f
low st
ateme
nt on
page
11 af
ter al
lowing
for +
$182
M of
restr
uctur
e cos
t pro
vision
s, -$
66M
net S
teel
Tran
sform
ation
Plan
and +
$8M
of oth
er ite
ms(3
)$4
37M
worki
ng ca
pital
bene
fit fro
m De
c 201
1 to J
un 20
12 re
conc
iles t
o $41
1M be
nefit
show
n in c
ash f
low st
ateme
nt on
page
11aft
er al
lowing
for -
$97M
of re
struc
ture c
ost p
rovis
ion m
ovem
ents,
+$6
6M ne
t Stee
l Tr
ansfo
rmati
on P
lan, -
$15M
Metl
-Spa
n disp
osal
and -
$9M
FX re
statem
ents
and o
ther
For
per
sona
l use
onl
y
Debt
facilit
ies m
aturity
profi
le at
30 Ju
ne 20
12, p
ro-fo
rma a
djuste
d for
7 Aug
ust 2
012 r
epur
chas
e of U
S$88
M of
U.S.
Priv
ate P
lacem
ent N
otes
gp
753
Rece
ivabl
es se
curit
isatio
n pr
ogra
m:
675
Sdi
d L N
Fili
Rece
ivabl
es se
curit
isatio
n pr
ogra
m:
In ad
dition
to de
bt fac
ilities
, BSL
has
a rec
eivab
les se
curiti
satio
n pro
gram
Curre
nt es
timat
ed co
st o
f net
deb
t: 67
5Ot
her
US P
rivate
Plac
emen
t Note
sSy
ndica
ted Lo
an N
ote F
acilit
y$1
50M
matur
ing A
ugus
t 201
3
Appr
oxim
ately
6% in
teres
t cos
t on
draw
n deb
t; plus
Comm
itmen
t fee o
n und
rawn
part
of LN
F of
1.1%
; plus
Othe
r cos
ts of
$6m
pa;
978
1146
1174
Nt
AUD
/USD
t 1
0032
Othe
r cos
ts of
$6m
pa;
Less
: int
eres
t on c
ash
978
2H
FY16
+1H
FY
162H
FY
151H
FY
152H
FY
141H
FY
142H
FY
131H
FY
13No
te:as
sume
s AUD
/USD
at 1.
0032
In re
sizing
our f
inanc
e fac
ilities
and t
o red
uce c
osts,
agre
emen
t has
been
reac
hed w
ith th
e Sy
ndica
ted Lo
an N
ote F
acilit
y ban
ks th
at up
on co
mplet
ion of
the C
oated
Pro
ducts
Joint
Ven
ture
Page
46
Synd
icated
Loan
Note
Fac
ility b
anks
that,
upon
comp
letion
of th
e Coa
ted P
rodu
cts Jo
int V
entur
e (e
xpec
ted in
Mar
ch 20
13 qu
arter
), the
Dec
embe
r 201
3 A$6
75M
LNF
tranc
he co
mmitm
ent w
ill be
re
duce
d by A
$450
M to
A$22
5M
For
per
sona
l use
onl
y
Move
ments
in to
tal eq
uity (
A$M)
+4,39
6
Actua
rial lo
ss on
defin
ed b
enefi
t plan
s (lar
gely
NZ) c
ompo
sed
of:•
actua
rial a
sset
loss d
ue to
turb
ulent
inter
natio
nal a
nd do
mesti
c equ
ity m
arke
ts•
actua
rial li
abilit
y los
s due
to si
gnific
ant d
ecre
ase
in lon
g ter
m bo
nd ra
tes in
all c
ountr
ies in
a sh
ort
perio
d of ti
me fo
llowi
ng co
ncer
ns ov
er th
e Eur
ozon
ede
bt cri
sis
+3,77
9-1
95-9
811H 2H
+577
+3,77
9+7
-25
2H
Comp
rised
of:
$(10
44)M
t
ft t
l•
$(10
44)M
net
after
tax l
oss
•$5
1M e
xcha
nge
fluctu
ation
re
serve
mov
emen
t•
$12M
mino
rity in
teres
t
Total
equit
y Jun
2012
Othe
rSu
per a
nd
Equit
y rais
ed
Repo
rted
profi
ts
Total
equit
y Jun
2011
Page
47
Total
equit
y Jun
2012
Othe
rSu
per a
nd
pens
ion pl
ans
Equit
y rais
ed
(net
of co
sts)
Repo
rted
profi
ts,
net o
f exc
hang
e flu
ct. an
d mi
noriti
es
Total
equit
y Jun
2011
Note:
(1) $
220M
mov
emen
t com
prise
d of $
279M
actua
rial a
djustm
ent, n
et of
$59M
tax e
ffect.
$27
9M ac
tuaria
l adju
stmen
t rec
oncil
es to
$261
M ne
t incre
ase i
n reti
reme
nt be
nefit
oblig
ation
prov
ision
incre
ase i
n acc
ounts
thro
ugh $
18M
of oth
er m
ovem
ents
such
as pa
ymen
ts, ch
arge
s to P
&L an
d for
eign e
xcha
nge f
luctua
tion
(1)
For
per
sona
l use
onl
y
Indica
tive E
BIT
sens
itivitie
s for
1H F
Y201
3
Estim
ated i
mpac
t on
1H F
Y201
3 EBI
T A$M
(1)
$
Assu
mptio
n
+/–
US$2
5 / to
nne m
ovem
ent in
Blue
Scop
e’s av
erag
e rea
lised
expo
rt HR
C pr
ice(2
)
1¢ m
ovem
ent in
Aus
tralia
n doll
ar / U
S do
llar e
xcha
nge r
ate(3
)+/
–23 1
US$1
0 / to
nne m
ovem
ent in
coal
costs
+/–
US$1
0 / to
nne m
ovem
ent in
iron o
re co
sts
+/–
10 20
(1)
1H F
Y13 b
ase e
xcha
nge r
ate is
US$
103
(1)
1H F
Y13 b
ase e
xcha
nge r
ate is
US$
1.03.
(2)
The c
hang
e in e
xpor
t HRC
price
assu
mes p
ropo
rtiona
l effe
ct on
expo
rt sla
b, an
d flow
on to
dome
stic p
ipe an
d tub
e mar
ket a
nd to
othe
r exp
ort p
rodu
cts. T
his do
es no
t inc
lude t
he po
tentia
l impa
ct on
Aus
tralia
n dom
estic
coate
d pro
duct
price
s, as
the f
low on
effec
t in th
e sho
rt ter
m is
less c
erta
in.
(3)
The m
ovem
ent in
the A
ustra
lian d
ollar
/US
dolla
r exc
hang
e rat
e inc
ludes
the i
mpac
t on U
S do
llar d
enom
inated
expo
rt pr
ices a
nd co
sts, r
estat
emen
t of U
S do
llar
deno
mina
ted re
ceiva
bles a
nd pa
yable
s and
the i
mpac
t of tr
ansla
ting t
he ea
rning
s of o
ffsho
re op
erati
ons t
o A$
Doe
s not
refle
ct im
pact
on A
ustra
lian d
omes
tic pr
icing
Page
48
deno
mina
ted re
ceiva
bles a
nd pa
yable
s and
the i
mpac
t of tr
ansla
ting t
he ea
rning
s of o
ffsho
re op
erati
ons t
o A$.
Doe
s not
refle
ct im
pact
on A
ustra
lian d
omes
tic pr
icing
.
For
per
sona
l use
onl
y
Outlo
ok &
Sum
mar
yOu
tlook
& S
umm
ary
Page
49
For
per
sona
l use
onl
y
1H F
Y201
3 outl
ook
•Fo
r the
1H F
Y201
3 we
expe
ct a c
ontin
ued i
mpro
veme
nt in
finan
cial p
erfor
manc
e with
unde
rlying
net
•Fo
r the
1H F
Y201
3, we
expe
ct a c
ontin
ued i
mpro
veme
nt in
finan
cial p
erfor
manc
e with
unde
rlying
net
after
tax l
oss (
befor
e per
iod-e
nd ne
t rea
lisab
le va
lue ad
justm
ents)
appr
oach
ing br
eak-e
ven (
subje
ct to
spre
ad, F
X an
d mar
ket c
ondit
ions)
•In
FY20
13 $3
00M
grou
p cap
ex ex
pecte
d, wi
th a t
hird s
pent
throu
gh in
creas
ed fo
cus o
n gro
wth p
rojec
ts
Page
50
For
per
sona
l use
onl
y
Summ
ary –
grow
ing ou
r fou
r bus
iness
es an
d main
tainin
g a
cons
erva
tive b
alanc
e she
et
•Glob
al br
ands
, glob
al pa
rtner
ships
, glob
al ne
twor
ks•P
ositio
ned f
or gr
owth
and t
o acc
ess g
lobal
oppo
rtunit
ies –
poten
tial to
doub
le re
venu
e to $
3 Bni
n thr
ee ye
ars
Build
ing
Solu
tions
reve
nue t
o $3 B
nin t
hree
year
s
•Outs
tandin
g opp
ortun
ity fr
om jo
int ve
nture
with
NSC
, ann
ounc
ed 13
Aug
ust 2
012
•Pre
emine
nt foo
tprint
stro
ng br
ands
broa
d cha
nnels
and m
arke
tsBu
ildin
g Pr
oduc
ts•P
reem
inent
footpr
int, s
trong
bran
ds, b
road
chan
nels
and m
arke
ts•N
ew cu
stome
rs an
d pro
duct
oppo
rtunit
iesBu
ildin
g Pr
oduc
ts
•CIP
A re
struc
tured
and l
ever
aged
to do
mesti
c mar
ket im
prov
emen
t; exp
ect
Focus
gp
;p
EBIT
DA po
sitive
in F
Y201
3•T
rend
impr
oving
in D
istrib
ution
•Iro
n san
ds ex
pans
ions –
doub
le ex
ports
with
in tw
o yea
rs
Blue
Scop
eAus
tralia
&
New
Zeala
nd
arket First F
•Pro
fitable
expa
nsion
oppo
rtunit
ies
Hot R
olled
Prod
ucts
Nor
th A
mer
ica
Ma
Balan
ce S
heet
•Stra
tegic
initia
tives
stre
ngthe
ned b
alanc
e she
et; en
hanc
ed fin
ancia
l flex
ibility
to Pa
ge 51
Balan
ce S
heet
gg
yinv
est in
grow
th op
portu
nities
For
per
sona
l use
onl
y
Ques
tions
& A
nswe
rsQu
estio
ns &
Ans
wers
Page
52
For
per
sona
l use
onl
y
Furth
er D
etail
on
Furth
er D
etail
on
Fina
ncial
Res
ults
Fina
ncial
Res
ults
Fina
ncial
Res
ults
Fina
ncial
Res
ults
Page
53
For
per
sona
l use
onl
y
Histo
rical
earn
ings p
erfor
manc
e
A$ M
illion
sFY
2008
(3)
FY20
09FY
2010
FY20
11FY
2012
1H F
Y12
2H F
Y12
Reve
nue(1
)10
,495
10,32
98,6
249,1
348,6
224,5
494,0
85
EBIT
DA(2
)–R
epor
ted1,4
2038
059
0(6
87)
(489
)(2
70)
(219
)
–Und
erlyi
ng(4
)1,6
1850
659
424
099
2376
EBIT
(2)
–Rep
orted
1,063
1524
0(1
,043)
(820
)(4
35)
(385
)
–Und
erlyi
ng(4
)1,2
6715
225
3(1
07)
(224
)(1
37)
(87)
NPAT
–R
epor
ted59
6(6
6)12
6(1
,054)
(1,04
4)(5
30)
(514
)
–Und
erlyi
ng(4
)80
935
110
(127
)(2
38)
(136
)(1
02)
Note
s:(1
)Do
esno
tinclu
deNo
rthSt
arBl
ueSc
opeS
teelre
venu
e,wh
ichwa
sA$6
97M
(FY2
011)
vs.A
$626
M(F
Y201
0).
Page
54
(2)
Includ
es50
%sh
areo
fNor
thSt
arBl
ueSc
opeS
teeln
etpr
ofitb
efore
tax.
(3)
Includ
esele
venm
onths
ofBl
ueSc
opeD
istrib
ution
finan
cialre
sults
andf
ivemo
nthsI
MSA
steel
busin
esse
sfina
ncial
resu
lts.
(4)
Unde
rlying
numb
ers
repr
esen
tRep
orted
numb
ers
adjus
tedfor
unus
ualit
ems
toas
sisti
nun
derst
andin
gthe
unde
rlying
finan
cialp
erfor
manc
eof
thebu
sines
s.Ex
clude
sMe
tl-Spa
nope
ratio
nale
arnin
gswh
ichha
vebe
enre
-categ
orise
dtod
iscon
tinue
d
For
per
sona
l use
onl
y
Balan
ce S
heet
A$M
30 Ju
n 20
1131
Dec
2011
30 Ju
n 20
12As
sets
Cash
172
186
214
Rece
ivable
s 1,0
501,0
5999
5
Inven
tory
2,029
1,791
1,409
Othe
r Ass
ets
1041
1099
816
Othe
r Ass
ets
1,041
1,099
816
Net F
ixed A
ssets
3,5
013,4
663,2
96
Tota
l Ass
ets
7,793
7,601
6,730
,,
,
Liab
ilities
Cred
itors
1,163
988
1,057
Inter
est B
earin
g Liab
ilities
1,2
4098
259
8
Prov
ision
s & O
ther L
iabilit
ies99
41,3
541,2
96
Tota
l Liab
ilities
3,3
973,3
242,9
51
Net A
sset
s 43
9642
7737
79
Page
55
Net A
sset
s 4,3
964,2
773,7
79
Net D
ebt /
(Net
Deb
t + E
quity
)19
.5%15
.7%9.2
%
For
per
sona
l use
onl
y
Balan
ce S
heet
… $3
82M
redu
ction
in in
vento
ry sin
ce Ju
ne 20
11 m
ainly
due t
o red
uctio
n in v
olume
s held
+281
5RM
S$3
88M
RMS
$344
M+2
,815
RMS
$338
MW
IP56
9FG
S49
8
RMS
$397
MW
IP63
9FG
S61
8Ot
her
175
RMS
$421
MW
IP69
0FG
S67
9Ot
her
172
RMS
$388
MW
IP75
0FG
S71
4Ot
her
177
RMS
$258
M
RMS
$344
MW
IP77
0FG
S50
9Ot
her
168
+1,79
1
+2,02
9+1
,962
+1,82
9
+1,58
7+1
,702
+1,66
0-2
9
FGS
498
Othe
r 18
2$
WIP
532
FGS
466
Othe
r 15
3
+1,40
9+3
2+8
-393
Jun 2
012
NRV
FXVo
lume
Rate
/ De
c 201
1Ju
ne 20
11De
c 201
0Ju
n 201
0De
c 200
9Ju
n 200
9De
c 200
8Ju
n 200
8
Volu
me
chan
ge fr
om
J 20
08
+25%
vsJu
n-20
08-1
2%vs
Jun-
2008
+14%
vsJu
n-20
08-9
%vs
Jun-
2008
adjus
tmen
t mo
veme
ntfee
d cos
ts
-1%
vsJu
n-20
08+1
1%vs
Jun-
2008
-26%
v sJu
n-20
08-1
0%vs
Jun-
2008
Page
56
June
2008
vsJu
n20
08vs
Jun
2008
vsJu
n20
08vs
Jun
2008
vsJu
n20
08
Note
:“R
MS” –
Raw
Mater
ials (
includ
ing ex
terna
lly so
urce
d stee
l feed
to B
SL bu
sines
ses)
“WIP
” –W
ork i
n Pro
gres
s“F
GS” –
Finish
ed G
oods
vsJu
n20
08vs
Jun
2008
For
per
sona
l use
onl
y
Histo
rical
Earn
ings P
erfor
manc
e –Re
conc
iliatio
n of R
epor
ted to
Un
derly
ing (A
$M)
Ude
yg(
$)
FY 20
10FY
2011
FY20
121H
FY20
112H
FY20
111H
FY20
122H
FY2
012
Reco
ncilia
tion o
f EBI
TDA
and
EBIT
EBIT
DA 2
Repo
rted
590
(687
)(4
89)
127
(814
)(2
70)
(219
)EB
IT 2
Repo
rted
240
(1,04
3)(8
20)
(48)
(995
)(4
35)
(386
)Di
scon
tinue
d Bus
iness
(gain
s)/los
ses
(7)
(2)
(47)
5/ (
39)6
(2)
0 1
(39)
5/ (
34)6
Busin
ess D
evelo
pmen
t 4
7 7
-7
-7
Restr
uctur
e / re
dund
ancie
s31
14
41
2-
14
364
48As
set s
ales
--
319
--
-31
4As
set Im
pairm
ents
-92
2 (3
)9
913
5 (3
)Pr
ofit o
n sale
& le
aseb
ack o
f pro
pertie
s(1
3)-
--
--
-St
eel T
rans
forma
tion P
lan A
dvan
ce-
-(1
00)
--
(66)
(34)
EBIT
DA 3
Unde
rlyin
g 160
5 25
4 99
134
120
32
76y
gEB
IT 3
Unde
rlyin
g 125
5 (1
01)
(224
)(4
1)(6
1)(1
32)
(86)
Reco
ncilia
tion o
f NPA
T / (
NLAT
)NP
AT / (
NLAT
)Re
porte
d12
6 (1
,054)
(1,04
4)(5
5)(9
99)
(530
)(5
14)
Disc
ontin
ued B
usine
ss (g
ains)/
losse
s(6
)(1
)(4
)(1
)-
(6)
(2)
(g)
()
()
()
()
()
()
Busin
ess D
evelo
pmen
t 3
5 5
-5
-5
Restr
uctur
e / re
dund
ancie
s21
10
28
8-
10
254
34As
sets
ales
--
315
--
-31
2As
set Im
pairm
ents
-92
2 (2
)9
913
3 (2
)Pr
ofit o
n sale
& le
aseb
ack o
f pro
pertie
s(9
)-
--
--
-p
p(
)St
eel T
rans
forma
tion P
lan-
-(7
0)-
-(4
6)(2
4)NZ
Tax
Adju
stmen
t(2
2)-
--
--
-Bo
rrowi
ng A
mend
ment
Fees
--
6-
-6
-De
ferre
d Tax
Ass
et Im
pairm
ents
--
268
--
184
84NP
AT / (
NLAT
)Un
derly
ing 1
113
(118
)(2
38)
(47)
(71)
(136
)(1
02)
()
yg
()
()
()
()
()
()
EPS
(¢)4
Repo
rted
6.9
(57.4
)(3
9.1)
(2.5)
(26.6
)EP
S (¢
)4Un
derly
ing 1
6.2
(6.4)
(8.9)
(2.2)
(7.5)
Note
s1.
Mana
geme
nt ha
ve pr
ovide
d an a
nalys
is of
unus
ual it
ems i
nclud
ed in
the r
epor
ted IF
RS fin
ancia
l infor
matio
n. Th
ese i
tems h
ave b
eenc
onsid
ered
in re
lation
to th
eir si
ze an
d
Page
57
natur
e, an
d hav
e bee
n adju
sted f
rom
the re
porte
d info
rmati
on to
assis
t rea
ders
to be
tter u
nder
stand
the f
inanc
ial pe
rform
ance
ofthe
unde
rlying
busin
ess i
n eac
h rep
ortin
g per
iod.
Thes
e adju
stmen
ts ar
e ass
esse
d on a
cons
isten
t bas
is fro
m pe
riod t
o per
iod an
d inc
lude b
oth fa
vour
able
and u
nfavo
urab
le ite
ms. N
on-IF
RS fin
ancia
l infor
matio
n whil
st no
t su
bject
to au
dit or
revie
w ha
s bee
n extr
acted
from
the i
nterim
finan
cial re
port
which
has b
een s
ubjec
t to re
view
by ou
r exte
rnal
audit
ors.
2.EB
IT =
EBI
TDA
-Dep
recia
tion &
Amo
rtisati
on
3.Un
derly
ing ad
justm
ents
are t
he sa
me fo
r both
EBI
TDA
& EB
IT
4.Ea
rning
s per
shar
e (EP
S) re
flects
repo
rted a
nd un
derly
ing N
PAT
/ (NL
AT) d
ivide
d by a
vera
ge sh
ares
on is
sue f
or th
e per
iod
5.EB
ITDA
adjus
tmen
t6.
EBIT
adjus
tmen
t
For
per
sona
l use
onl
y
EBIT
Seg
ment
Summ
ary –
Reco
ncilia
tion o
f Rep
orted
to U
nder
lying
(A
$M)
FY20
10FY
2011
FY20
121H
FY20
112H
FY20
111H
FY20
122H
FY2
012
Coat
ed &
Indu
stria
l Pro
duct
s Aus
tralia
($
)
Repo
rted
EBIT
84
(1,06
3)(7
26)
(97)
(966
)(4
63)
(263
)Re
struc
ture
/ red
unda
ncies
24
8 36
3-
8 34
716
Asse
t Imp
airme
nts-
797
136
-79
7 -
136
Stee
l Tra
nsfor
matio
n Pl
an-
0 (1
00)
--
(66)
(34)
Unde
rlyin
g EB
IT 1
108
(258
)(3
27)
(97)
(161
)(1
82)
(145
)
Aust
ralia
n Di
strib
utio
n &
Solu
tions
Repo
rted
EBIT
12
(218
)(2
60)
(92)
(126
)(3
3)(2
27)
Restr
uctur
e / r
edun
danc
ies3
7 30
-7
4 26
Asse
t Imp
airme
nts-
177
178
77
100
-17
8Pr
ofit o
n sa
le &
lease
back
of p
rope
rties
(13)
--
--
--
Unde
rlyin
g EB
IT 1
2 (3
4)(5
2)(1
5)(1
9)(2
9)(2
3)
New
Zeala
nd S
teel
& Pa
cific
Stee
l Pro
duct
sRe
porte
d EB
IT73
8265
4933
3431
Restr
uctur
e / r
edun
danc
ies-
-4
--
-4
Unde
rlyin
g EB
IT 1
7382
6949
3334
35
Coat
ed &
Bui
ldin
g Pr
oduc
ts A
siaRe
porte
d EB
IT11
6 17
6 10
211
4 62
47
55
Asse
t sale
--
(4)
--
-(4
)As
setim
pairm
ent w
rite ba
ck-
(68)
-(6
8)-
--
Unde
rlyin
g EB
IT 1
116
108
9846
62
47
51
Coat
ed &
Bui
ldin
g Pr
oduc
ts N
orth
Am
erica
Repo
rted
EBIT
(21)
(36)
(24)
(16)
(20)
(16)
(8)
Restr
uctur
e / r
edun
danc
ies5
-11
--
11
-As
set I
mpair
ments
-16
5
-16
5
-1
Unde
rlyin
g EB
IT 1
(16)
(20)
(8)
(16)
(4)
-(8
)
Hot R
olled
Pro
duct
s Nor
th A
mer
icaRe
porte
d &
Unde
rlyin
g EB
IT 1
61
72
628
64
20
42
Corp
orat
e & in
ters
egm
ent
Repo
rted
EBIT
(93)
(58)
(78)
(16)
(42)
(29)
(49)
Restr
uctur
e / r
edun
danc
ies-
-5
--
1 4
Restr
uctur
e / r
edun
danc
ies-
-5
--
1 4
Busin
ess D
evelo
pmen
t Cos
ts4
7 7
-7
-7
Unde
rlyin
g EB
IT 1
(89)
(51)
(66)
(16)
(35)
(28)
(38)
Tota
l Gro
upRe
porte
d EB
IT23
2 (1
,045)
(859
)(5
0)(9
95)
(440
)(4
19)
Unde
rlyin
g EB
IT 1
255
(101
)(2
24)
(41)
(60)
(138
)(8
6)
Page
58
Note
:1.
Mana
geme
nt ha
ve p
rovid
ed a
n an
alysis
of u
nusu
al ite
ms in
clude
d in
the re
porte
d IF
RS fin
ancia
l infor
matio
n. Th
ese i
tems h
ave
been
cons
idere
d in
relat
ion to
their
size
and
natur
e, an
d ha
ve b
een
adjus
ted
from
the re
porte
d inf
orma
tion
to as
sist r
eade
rs to
bette
r und
ersta
nd th
e fin
ancia
l per
forma
nce
of the
und
erlyi
ng b
usine
ss in
each
repo
rting
perio
d. Th
ese a
djustm
ents
are
asse
ssed
on
a con
sisten
t bas
is fro
m pe
riod
to pe
riod
and
includ
e bo
th fav
oura
ble a
nd u
nfavo
urab
le ite
ms. N
on-IF
RS fin
ancia
l infor
matio
n wh
ilst n
ot su
bject
to au
dit o
r rev
iew ha
s bee
n ex
tracte
d fro
m the
inter
im fin
ancia
l rep
ort w
hich h
as
been
subje
ct to
revie
w by
our e
xtern
al au
ditor
s.
For
per
sona
l use
onl
y
Glob
al de
spatc
hmix
Expo
rt To
nnes
(kt)
1H2H
Tota
l Blu
eSco
pe G
roup
Ext
erna
l Des
patc
hes
Expo
rt To
nnes
(kt)
1H2H
Aust
ralia
74
738
4NZ
156
159
Asia
3427
NA (in
clMe
tl-Sp
an)
2 1
939
572
Expo
rts27
%
FY20
10FY
2011
Expo
rts33
%
FY20
12Ex
ports
22%
939
572
23%
10%
7%19
%11
%6%
21%
17%
6%4%
27%
(1,91
4kt)
33%
(2,53
5kt)
22%
(1,51
1kt) 5%
16%
17%
34%
4%
17%
31%
14%
38%
4%
14%
3%
7,137
kt7,7
46kt
6,811
kt 9%
incr
ease
12%
dec
reas
eTo
tal E
xtern
al Sa
les,
Expo
rts –
Amer
icas
Key
Dome
stic s
ales (
prod
uced
and
sold
withi
n cou
ntry)
,Sa
les
Page
59
Expo
rts –
Asia
Expo
rts –
Euro
pe/M
ed/M
iddle
East/
India
Austr
alia
NA (H
RPNA
+ C
&BPN
A)Ne
w Ze
aland
/Pac
ific
Asia
Note
:Pe
rcenta
ges h
ave b
een r
ound
ed.
For
per
sona
l use
onl
y
Blue
Scop
e’s gl
obal
manu
factur
ing fo
otprin
t at J
une 2
012 (
show
n by
FY20
13 re
portin
g seg
ments
)
Kalam
a•
Cold
Rollin
g 455
kt•
Metal
Coa
ting 2
35kt
Kalam
aNo
rth S
tar (2
)
•Ra
w St
eel 2
.3mt
•Ho
t Roll
ing 2
1mt
North
Sta
r (2)
Metal
Coa
ting 2
35kt
•Pa
inting
110k
tIn
dia(1
)
•Me
tal C
oatin
g +25
0kt
•Pa
inting
+15
0kt
•Ly
sagh
t site
s 3
Hot R
olling
2.1m
t
Indi
a(1)
•Me
tal C
oatin
g 250
kt
•Bu
ilding
s site
s 8Un
ited
Stat
es
•AS
C Pr
ofiles
sites
9 (3
)Ch
ina
Bild
i i
t 1
Fairf
ield
•Pa
inting
110k
t
•Me
tal C
oatin
g 220
ktP
iti
100k
t
Ranc
ho C
ucam
onga
Fairf
ield
•Me
tal C
oatin
g 130
ktVi
etna
m
Metal
Coa
ting 2
50kt
•Pa
inting
150k
t•
Lysa
ght s
ites 4
•Bu
ilding
s site
s 3•
Build
ings s
ites 1
Midd
le Ea
st JV
•Bu
ilding
s site
s 1
•Pa
inting
100k
t
New
Segm
ent L
egen
d
g•
Paint
ing 50
kt•
Lysa
ght s
ites 2
•Ra
nbuil
d ou
tlets
•Bu
ilding
s site
s 1
•Co
ld Ro
lling 3
60kt
•Me
tal C
oatin
g 324
kt•
Paint
ing 75
kt•
Lysa
ght s
ites 3
•Ra
nbuil
d ou
tlets
Thail
and
Fairf
ield
•Bu
ilding
s site
s 1Me
xico
•Glob
al Bu
ilding
Solu
tions
•Buil
ding P
rodu
cts A
SEAN
, Nor
th Am
erica
and I
ndia
•Coa
ted &
Indu
strial
Pro
ducts
Aus
t•
Metal
Coa
ting 1
68kt
•Pa
inting
75kt
Lht
it 6
(4)
Malay
sia / S
inga
pore
/ Bru
nei
•Me
tal C
oatin
g 273
ktIn
done
sia•
Distr
ibutio
n site
s 61
•Ly
sagh
t site
s 33
•Pa
inting
95kt
Sydn
ey
•Bu
ilding
s site
s 1Br
isban
e
Aust
ralia
•Buil
ding C
ompo
nents
& D
ist A
ust
•New
Zea
land &
Pac
ific S
teel P
rodu
cts•H
ot Ro
lled P
rodu
cts N
orth
Amer
ica
•Ly
sagh
t site
s 6(4
)
•Ra
nbuil
d ou
tlet
•Pa
inting
160k
t •
Lysa
ght s
ites 4
•Ra
nbuil
d ou
tlets W
este
rn P
ort
•Ly
sagh
t site
s 33
•Pa
inting
(1 lin
e) 12
0kt
Sydn
ey•
Servi
ce C
entre
s 6•
Solut
ions (
Build
ings,
Wate
r, Hi
ghlin
e, Ra
nbuil
d) 9(5
)
•Co
ld Ro
lling 1
.0mt
•Me
tal C
oatin
g (3 l
ines)
830k
t (6)
•Pa
inting
(2 lin
es) 3
30kt
Note
s:
(1)
Tata
Blue
Scop
e Stee
l is a
50:50
JV be
twee
n Blue
Scop
e Stee
l and
Tata
Stee
l –me
tallic
coati
ng lin
e com
menc
ed tr
ials a
nd
Wes
tern
Por
t
•Ra
w St
eel 2
.6mt
•H o
t Roll
ing 2.
9mt
Port
Kem
bla
•Iro
n San
ds M
ining
sites
2•
Raw
Stee
l 615
kt•
Hot R
olling
610k
tCo
ld Ro
lling 2
80kt
New
Zeala
nd/P
acifi
c Isla
nds
Page
60
paint
line c
omme
nced
oper
ation
s at e
nd of
CY2
011.
Will
not b
e inc
luded
in N
S Bl
ueSc
ope C
oated
Pro
ducts
JV w
ith N
SC(2
)No
rth S
tar is
a 50
:50 JV
betw
een B
lueSc
ope S
teel a
nd N
orth
Star
Stee
l (sub
sidiar
y of C
argil
l Inc.)
; BS
L equ
ity sh
are 1
.0mt
(3)
Wate
r site
s in t
he U
.S. h
ave b
een c
onso
lidate
d into
ASC
sites
(4)
Four
sites
in M
alays
ia, on
e in S
ingap
ore,
one i
n Bru
nei
(5)
Two m
anufa
cturin
g site
s, se
ven s
ales
(6)
One l
ine ha
s bee
n idle
d, re
ducin
g ava
ilable
capa
city b
y app
rox 2
30ktp
a
oto
g9
t•
Plate
450k
t•
Cold
Rollin
g 990
kt•
Metal
Coa
ting (
3 line
s) 82
5kt
•Pa
inting
(1 lin
e) 20
0kt
•Co
ld Ro
lling 2
80kt
•Me
tal C
oatin
g 220
kt •
Paint
ing 60
kt•
Hollo
w Se
ction
s 45k
t•
Lysa
ght s
ites 4
For
per
sona
l use
onl
y
Segm
ent u
nder
lying
EBI
T su
mmar
y –ne
w se
gmen
ts
Unde
rlyin
g EB
IT (A
$M)(1
)
FY20
10FY
2011
1H F
Y201
22H
FY2
012
FY20
12
Coate
d & In
dustr
ial P
rodu
cts
108
(258
)(1
82)
(145
)(3
27)
Unde
rlyin
g EB
IT (A
$M)
Austr
alia
108
(258
)(1
82)
(145
)(3
27)
Build
ing C
ompo
nents
&
Distr
ibutio
n Aus
tralia
9(2
2)(2
7)(1
9)(4
6)
New
Zeala
nd S
teel &
Pac
ific
Stee
l Pro
ducts
7382
3435
69
Glob
al Bu
ilding
Solu
tions
(15)
(14)
249
33
Build
ing P
rodu
cts A
SEAN
Nor
th Bu
ilding
Pro
ducts
ASE
AN, N
orth
Amer
ica an
d Ind
ia10
782
2130
51
Hot R
olled
Pro
ducts
Nor
th A
i61
7220
4262
Amer
ica
Corp
orate
&
inter
-segm
ent
(90)
(49)
(27)
(39)
(66)
Page
61
TOTA
L GRO
UP25
3(1
07)
(137
)(8
7)(2
24)
Note
: Exc
ludes
Metl
-Spa
n ear
nings
due
to di
vestm
ent in
June
201
2
For
per
sona
l use
onl
y
DIRECTORS’ REPORT
For
per
sona
l use
onl
y
BlueScope Steel Limited Directors’ Report
Page 1 of 47
BlueScope Steel Limited
ABN 16 000 011 058
Directors’ Report for the year ended 30 June 2012
Contents
Page
Corporate Directory 2
Directors’ Report 3
Directors’ Biographies 7
Remuneration Report 11
Corporate Governance Statement 45
For
per
sona
l use
onl
y
BlueScope Steel Limited Directors’ Report
Page 2 of 47
CORPORATE DIRECTORY Directors G J Kraehe AO
Chairman
R J McNeilly Deputy Chairman
P F O’Malley Managing Director and Chief Executive Officer
D J Grady AM
H K McCann AM
Y P Tan
D B Grollo
K A Dean
P Bingham-Hall
Secretary M G Barron
Executive Leadership Team P F O’Malley Managing Director and Chief Executive Officer
M G Barron Chief Legal Officer and Company Secretary
I R Cummin Executive General Manager, People and Organisation Performance
S Dayal Chief Executive, Building Products
S R Elias Chief Financial Officer
P Finan Executive General Manager, Global Building and Construction Markets
K Mitchelhill Executive General Manager
R Moore Chief Executive, Global Building Solutions
M R Vassella Chief Executive, BlueScope Australia and New Zealand
Notice of Annual General Meeting The Annual General Meeting of BlueScope Steel Limited will be held at the Melbourne Convention and Exhibition Centre, 2 Clarendon Street, South Wharf, Victoria at 2.00 pm on Thursday 15 November 2012
Registered Office Level 11, 120 Collins Street, Melbourne, Victoria 3000 Telephone: +61 3 9666 4000 Fax: +61 3 9666 4111 Email: [email protected] Postal Address: PO Box 18207, Collins Street East, Melbourne, Victoria 8003
Share Registrar 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 2 8280 7760 Fax: +61 2 9287 0303 Email: [email protected]
Auditor Ernst & Young 8 Exhibition Street, Melbourne, Victoria 3000
Stock Exchange BlueScope Steel Limited shares are quoted on the Australian Securities Exchange (ASX code: BSL)
Website Address www.bluescopesteel.com For
per
sona
l use
onl
y
BlueScope Steel Limited Directors’ Report
Page 3 of 47
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 June 2012
The Directors of BlueScope Steel Limited (‘BlueScope Steel’) present their report on the consolidated entity (‘BlueScope Steel Group’ or ‘the Company’) consisting of BlueScope Steel Limited and its controlled entities for the year ended 30 June 2012.
PRINCIPAL ACTIVITIES
During the year the principal continuing activities of the BlueScope Steel Group, based principally in Australia, New Zealand, North America, China and elsewhere in Asia, were:
(a) Manufacture and distribution of flat steel products;
(b) Manufacture and distribution of metallic coated and painted steel products;
(c) Manufacture and distribution of steel building products; and
(d) Design and manufacture of pre-engineered steel buildings and building solutions.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS In August 2011, the Company announced a major restructure of the Australian manufacturing business to reduce its exposure to loss-making export markets for steel products. At the Port Kembla Steelworks, the changes were broadly to reduce production of steel by half through the closure of No. 6 Blast Furnace and other equipment to reflect the reduced ironmaking capacity. Steelmaking production capacity at Port Kembla has been reduced from approximately 5.3Mtpa to approximately 2.6Mtpa. At the Western Port facility the changes were broadly to reduce production of rolled and coated products through the closure of the Hot Strip Mill and moth balling of Metal Coating Line 5.
The Company commenced operations in its metallic coating and painting facility in India, which forms part of a 50/50 joint venture with Tata Steel, during March 2012.
The Company sold Metl-Span, its North American insulated metal panels business, during June 2012.
MATTERS SUBSEQUENT TO THE YEAR ENDED 30 JUNE 2012 The following matters occurred subsequent to the year ended 30 June 2012:
(a) BlueScope Steel Limited has announced a reorganisation to establish two businesses to focus on growth in the global pre-engineered building market and building products market to take effect on 1 July 2012. As a result of these changes on 26 July 2012 the Company announced changes to its external reporting segments.
BlueScope Global Building Solutions comprises the Company's North American pre-engineered buildings (PEB) businesses, the entire China business and all PEB businesses in ASEAN. BlueScope Building Products comprises the Company's metal coating, painting and roll-forming businesses in ASEAN and North America.
Mr Bob Moore, BlueScope's President, China and a member of the Executive Leadership Team (ELT), will become Chief Executive Global Building Solutions leading more than 5000 employees across 21 manufacturing plants in eight countries. Mr Sanjay Dayal, Chief Executive BlueScope Asia and a member of the ELT will take on a new role as Chief Executive Building Products with additional responsibility for the North American Steelscape and ASC Profiles businesses, leading 3300 employees at 29 manufacturing plants in seven countries.
These reporting segment changes will be applied in respect of the half year ending 31 December 2012 and thereafter.
(b) As announced to the market on 13 August 2012, BlueScope and Nippon Steel Corporation (NSC) agreed to form a new joint venture encompassing BlueScope’s ASEAN and North American building products businesses.
The new 50:50 joint venture, called NS BlueScope Coated Products, provides a strong platform to capture expected growth in the $40 billion per annum building and construction sector in ASEAN and North America. The JV will facilitate entry into new markets not currently accessible to BlueScope. For example, the JV will supply whitegoods manufacturers offering products to Asia’s fast growing middle class. The JV will also speed up entry into emerging markets in the ASEAN region. NSC’s investment recognises an agreed enterprise valuation for the JV of US$1.36 billion. BlueScope will receive approximately US$540 million in net proceeds through NSC’s 50% acquisition of BlueScope’s interest in the businesses after allowing for taxes, minority interests and transaction costs. BlueScope will continue to control and consolidate the business for financial reporting purposes. The cash consideration received from NSC will be recognised within equity, therefore no gain or loss on this transaction will be recorded in the income statement. The joint venture will comprise BlueScope’s current building products businesses in ASEAN (Indonesia, Malaysia, Thailand, Vietnam, Singapore and Brunei) and North America (Steelscape and ASC Profiles). The footprint of this business also covers Myanmar, Cambodia, Laos and the Philippines. NSC and BlueScope will each hold 50 per cent of a new joint venture company, headquartered in Singapore. BlueScope will appoint the Chief Executive of NS BlueScope Coated Products. NSC will appoint the Chairman and a number of key executives to assist with business development and the introduction of new technology and products. The transaction is expected to complete in the March 2013 quarter, once regulatory approvals have been obtained. The JV does not include BlueScope’s building products businesses in Australia, China and India, or its Global Building Solutions business that operates across the world (including in ASEAN countries).
For
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BlueScope Steel Limited Directors’ Report
Page 4 of 47
(c) On 7 August 2012 the Company repurchased a further US$88.2 million of its U.S. Private Placement Notes (subsequent to the repurchase of US$305.4 million in May 2012) at par, plus accrued interest. The repurchase will be funded in US dollars using existing undrawn lines under the Company’s syndicated bank facility. No early redemption or make-whole costs were incurred by BlueScope in effecting the repurchase, and based on the Company’s drawn debt balance at 30 June 2012, the US$88.2 million repurchase is expected to realise a pro-forma reduction in the Company’s annual interest expense of approximately A$6 million per annum.
(d) On 16 August 2012 the Company acquired the 40% interest of the BlueScope Steel Malaysia that it did not own.
DIVIDENDS In view of the financial performance of the Company the Directors determined not to pay an interim for the half year ended 31 December 2011 or final dividend for the year ended 30 June 2012.
REVIEW AND RESULTS OF OPERATIONS The BlueScope Steel Group comprises six reportable operating segments: Coated & Industrial Products Australia, Australia Distribution & Solutions, New Zealand & Pacific Steel Products, Coated & Building Products Asia, Hot Rolled Products North America and Coated & Building Products North America.
(1) The use of the terms ‘reported’ refers to IFRS financial information and ‘underlying’ to non-IFRS financial information. Underlying earnings are categorised as non-IFRS financial information prepared in accordance with ASIC Regulatory Guide 230 – Disclosing non-IFRS financial information, issued in December 2011. Underlying adjustments 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 business in each reporting period. These adjustments are assessed on a consistent basis from period to period and include both favourable and unfavourable items. The non-IFRS financial information, whilst not subject to an audit or review, has been extracted from the financial report which has been subject to audit by our external auditors. (2) Performance of operating segments is based on EBIT which excludes the effects of interest and taxes. The Company considers this a useful and appropriate segment performance measure because interest income and expense are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group.
REPORTED(1) UNDERLYING(2) REVENUES
2012 $M
REVENUES 2011
$M
EARNINGS 2012
$M
EARNINGS 2011
$M
EARNINGS 2012
$M
EARNINGS 2011
$M
Sales revenue/EBIT(2)
Coated & Industrial Products Australia
4,279.6 5,193.0 (725.8) (1,062.5) (327.3) (257.8)
Australia Distribution & Solutions 1,612.4 1,675.4 (259.7) (217.9) (51.8) (34.2)
New Zealand & Pacific Steel Products
755.0 672.1 64.7 82.5 68.6 82.5
Coated & Building Products Asia 1,625.8 1,486.8 101.9 175.6 98.5 107.8
Hot Rolled Products North America - - 62.2 72.3 62.2 72.3
Coated & Building Products North America
1,257.5 1,197.1 (24.4) (42.1) (8.6) (26.5)
Discontinued operations 164.1 159.4 38.5 8.0 - -
Segment revenue/EBIT(2)
9,694.4 10,383.8 (742.6) (984.1) (158.4) (55.9)
Inter-segment eliminations (1,091.7) (1,271.4) 3.5 16.0 3.5 16.0
Segment external revenue/EBIT 8,602.7 9,112.4 (739.1) (968.1) (154.9) (39.9)
Other revenue/(net unallocated expenses)
18.9 22.1 (80.8) (74.6) (69.4) (67.6)
Total revenue/EBIT(2)
8,621.6 9,134.5 (819.9) (1,042.7) (224.3) (107.5)
Net borrowing costs (117.3) (98.9) (109.0) (98.9)
Profit/(loss) from ordinary activities before income tax
(937.2) (1,141.6) (333.3) (206.4)
Income tax (expense)/benefit (90.7) 101.2 111.4 93.1
Profit/(loss) from ordinary activities after income tax expense
(1,027.9) (1,040.4) (221.9) (113.3)
Net (profit)/loss attributable to outside equity interest
(15.6) (13.8) (15.6) (13.8)
Net profit/(loss) attributable to equity holders of BlueScope Steel (1,043.5) (1,054.2) (237.5) (127.1)
Basic Earnings per share (cents) (39.1) (48.6) (8.9) (5.9)
For
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BlueScope Steel Limited Directors’ Report
Page 5 of 47
Underlying earnings The reported earnings include the following unusual items:
Factors EBIT NLAT EPS
2012 2011 2012 2011 2012 2011 Reported Earnings (819.9) (1,042.7) (1,043.5) (1,054.2) (0.39) (0.49) Net (gains) / losses from discontinued businesses (1) (38.5) (8.0) (3.8) (9.9) (0.00) (0.00)
Reported earnings (from continuing operations) (858.5) (1,050.7) (1,047.3) (1,064.0) (0.39) (0.49)
Unusual or non-recurring events:
Restructure and redundancy costs (2) 412.3 14.0 288.4 9.8 0.11 0.00
Borrowing amendment fees (3) 0.0 0.0 5.8 0.0 0.00 0.00
Steel Transformation Plan advance (4) (100.0) 0.0 (70.0) 0.0 (0.03) 0.00
Asset impairments (5) 318.6 922.3 315.0 922.3 0.12 0.43
Business development and pre-operating costs (6) 6.7 6.9 4.7 4.8 0.00 0.00
Asset sales (7) (3.4) 0.0 (2.4) 0.0 (0.00) 0.00
Tax asset impairment (8) 0.0 0.0 268.3 0.0 0.10 0.00
Underlying Operational Earnings (224.3) (107.5) (237.5) (127.1) (0.09) (0.06)
(1) 2012 reflects a pre-tax profit/post tax loss on sale of the Metl-Span business during June 2012, Metl-Span operational
earnings during 2012 and a foreign exchange translation gain within the Lysaght Taiwan business. 2011 reflects Metl-Span operational earnings during that period, profit on sale of Packaging Products assets and a foreign exchange translation gain within the Lysaght Taiwan business.
(2) 2012 reflects staff redundancies and restructuring costs at Coated & Industrial Products Australia in relation to the move to a one blast furnace operations, Coated & Building Products North America, Australia Distribution & Solutions, New Zealand and Corporate. 2011 reflects staff redundancies and other internal restructuring costs at Coated & Industrial Products Australia and Australia Distribution & Solutions and plant rationalisation costs at Australia Distribution & Solutions.
(3) 2012 reflects the costs associated with restructuring existing financing facilities following the decision to move to a one blast furnace operation at Port Kembla Steelworks.
(4) 2012 reflects recognition of the $100M advance under the Australian Federal Government Steel Transformation Plan (STP).The STP is provided to assist BSL transition to a carbon tax environment.
(5) 2012 reflects non-current asset impairments in the Australian Business comprising Distribution goodwill ($157M), CIPA fixed assets ($136M), Lysaght goodwill ($10M) and BlueScope Water and BlueScope Buildings goodwill and fixed assets ($11M) due to a slower recovery in the domestic demand than previously expected and a higher discount rate applied to expected future cash flows as a result of increased volatility in equity markets. In addition, there were impairment of assets in Coated & Building Products North America ($4M) associated with restructuring. 2011 reflects asset impairment write downs Coated & Industrial Products Australia ($797M); Australia Distribution & Solutions ($177M); and Coated & Building Products North America ($16M); partly offset by a write back at China Coated ($68M).
(6) 2012 and 2011 reflect Corporate business development costs.
(7) 2012 reflects profit on the sale of surplus land in Coated and Building Products Asia.
(8) 2012 reflects impairment of Australian deferred tax asset generated during the period mainly in relation to export losses and restructure costs incurred during the period. Australian Accounting Standards impose a stringent test for the recognition of a deferred tax asset arising from unused tax losses where there is a history of recent tax losses. The Company has deferred the recognition of any further tax asset for the Australian tax group until a return to taxable profits has been demonstrated. Australian tax losses are able to be carried forward indefinitely.
Group Review The Company reported a $1,043.5 million net loss after tax (NLAT) for 2012. This compares with a $1,054.2 million reported NLAT in 2011. The reported NLAT included non-current asset impairments ($315M), tax impairments ($268M) and restructure costs ($288M), partly offset by the receipt of the Steel Transformation Plan advance ($70M). Underlying NLAT was $237.5 million, an increase of $110.4 million mainly due to lower spread (HRC selling price less raw material costs) and higher per unit conversion costs as a result of lower volumes. Net debt was reduced to $384 million or approximately $580 million adjusting for favourable timing of year end cash flows. The Board has decided there will be no final ordinary dividend. 2012 was a transforming year, we delivered what we promised. Net debt is lower than forecast. Our Australian businesses are expected to be EBITDA positive in 2013, and globally we are now well positioned for growth. BlueScope is now structured into four main businesses: BlueScope Building Products; BlueScope Global Building Solutions; BlueScope Australia and New Zealand and in the U.S., North Star BlueScope Steel.
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Our Building Products business, across ASEAN and the US, will be incorporated in the new US$1.36 billion NS BlueScope Coated Products joint venture with Nippon Steel Corporation. It will provide a stronger platform to capture growth in new market segments. The net proceeds of approximately US$540 million from Nippon Steel’s 50% investment will afford BlueScope further financial flexibility and balance sheet strength to grow businesses that deliver strong returns. Our Global Building Solutions business is well placed to capture opportunities in the world’s largest and fastest growing non-residential construction markets with the potential to double current revenue of $1.45 billion within three years. BlueScope in Australia is delivering its turnaround. New Zealand Steel continues to be profitable and its iron sands export capability is on track to double within two years. In the US, our North Star BlueScope Steel business will concentrate on continuing its good operational performance and accelerating specific growth opportunities.
Segment Review Coated and Industrial Products Australia Coated and Industrial Products Australia delivered a $327.3 million underlying EBIT loss, an increase of $69.5 million mainly due to a lower spread (HRC selling price less raw material cost), lower domestic prices, higher per unit conversion costs on lower volumes and an adverse domestic product mix. These were partly offset by lower loss-making export sales and favourable foreign exchange movements. The Company delivered the Australian restructure that was announced in August 2011, including:
• positive outcomes for major contract renegotiations, no significant supply or customer issues and significantly reduced exposure to loss-making export sales;
• targeted fixed cost reductions of $385m;
• restructure costs of $380 million, below the expected range of $400-$500m; and
• working capital release of $583 million, after adjusting for the timing of certain year end cash flows, better than the expected range of $400-500m.
We expect this business to deliver positive underlying EBITDA in 2013 (subject to spread, the strength of the Australian dollar relative to the US dollar, domestic margins and demand). Capital expenditure of $140 million is expected with a third of this being invested in manufacturing facilities to deliver the next generation of COLORBOND® and ZINCALUME® steel products, an investment in our future and commitment to the Australian market. Australian Distribution and Solutions Australian Distribution and Solutions delivered a $51.8 million underlying EBIT loss, an increase of $17.6 million mainly due to lower margins and volumes. An improvement program is now well advanced and the benefits of this restructure are starting to flow through its financial results. New Zealand and Pacific Products New Zealand and Pacific Products delivered a $68.6 million underlying EBIT, a decrease of $13.9 million mainly due to higher utility costs and a stronger NZ dollar relative to the US dollar. This business benefits from access to low cost captive iron units and the export of iron sands from Taharoa and Waikato North Head. The expansion of Taharoa iron sands exports increased to 1.2Mtpa late in the second half of 2012, enabled by the commissioning of a larger ore carrier, the Taharoa Destiny. A contract is in place for sale of a further 1.2Mtpa iron sands from Taharoa, which will commence within two years, once the customer has concluded the necessary shipping arrangements. Coated and Building Products Asia Coated and Building Products Asia delivered a $98.5 million underlying EBIT, a decrease of $9.3 million. This segment continues to grow but was affected during the year by start-up costs at our second coating facility in Indonesia and new coating facility in India, floods in Thailand and unfavourable foreign exchange translation as a result of the higher Australian dollar. Our China business continued its strong contribution, as did our Thailand and Indonesia businesses in the second half of 2012. An expansion in Xi’an will capitalise on strong demand for our Butler PEB and Lysaght roll forming products in Central and Western China. This new $60 million facility is expected to be operational by the end the 2013 financial year. Hot Rolled Products North America Hot Rolled Products North America delivered a $62.2 million underlying EBIT, a decrease of $10.1 million mainly due to higher scrap costs relative to higher selling prices, with the spread between scrap and selling price improving in the second half. We are actively assessing growth opportunities for this business. Coated and Building Products North America Coated and Building Products North America delivered a $8.6 million underlying EBIT loss, an improvement of $17.9 million mainly due to further restructuring steps in the Buildings (PEB) business lowering costs in engineering and manufacturing. The business has rationalised its US building footprint, achieving break-even run rate at volumes almost half pre-GFC levels. It is also leveraged for earnings growth as building and construction activity improves.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS For the first half of the 2013 financial year, we expect a continued improvement in financial performance with an underlying net after tax loss (before period-end net realisable value adjustments) approaching breakeven (subject to spread, FX and market conditions). In 2013, total capital expenditure for the group is expected to be approximately $300 million with a third to be invested in growth projects.
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BOARD COMPOSITION The following were Directors for the full year ended 30 June 2012: Graham John Kraehe AO (Chairman), Ronald John McNeilly (Deputy Chairman), Diane Jennifer Grady AM, Daniel Bruno Grollo, Harry Kevin (Kevin) McCann AM, Kenneth Alfred Dean, Paul Francis O’Malley (Managing Director and Chief Executive Officer) Tan Yam Pin and Penelope Bingham-Hall. Particulars of the skills, experience, expertise and special responsibilities of the Directors are set out below. DIRECTORS’ BIOGRAPHIES Graham Kraehe AO, Chairman (Independent) Age 69, BEc Director since: May 2002 Extensive background in manufacturing and was Managing Director and Chief Executive Officer of Southcorp Limited from 1994 to February 2001. Chairman of Brambles Industries Limited since February 2008 and a Non-Executive Director since December 2000, Member of the Board of the Reserve Bank of Australia from February 2007 to February 2012, Member of the Board of Djerriwarrh Investments Limited since July 2002, Member of the Board of Governors of CEDA and a Director of European Australian Business Council. Mr Kraehe was a Non-Executive Director of National Australia Bank Limited from August 1997 to September 2005 and Chairman from February 2004 to September 2005, and was a Non-Executive Director of News Corporation Limited from January 2001 until April 2004. He brings skills and experience in manufacturing management and in companies with substantial, geographically diverse, industrial operations. Mr Kraehe’s experience with a wide range of organisations is relevant for his role as Chairman of the Board. Ron McNeilly Deputy Chairman (Independent) Age 69, BCom, MBA, FCPA Director since: May 2002 Deputy Chairman of the Board with over 30 years experience in the steel industry. He joined BHP in 1962, and until December 2001 held various positions with the BHP Group (now BHP Billiton), including Executive Director and President BHP Minerals, Chief Operating Officer and Executive General Manager, and was Chief Executive Officer BHP Steel until 1997. The latter role developed his knowledge of many of the businesses comprising BlueScope Steel today. Chairman of Worley Parsons Limited and a Director since October 2002. Director of Alumina Ltd from December 2002 to March 2011, Vice President of the Australia Japan Business Cooperation Committee until November 2010. He also served as a Member of the Council on Australia Latin America Relations and as Chairman of Melbourne Business School. Mr McNeilly was Chair of the Health, Safety and Environment Committee until 21 March 2012. Diane Grady AM, Non-Executive Director (Independent) Age 64, BA (Hons), MA (Chinese Studies), MBA Director since: May 2002 Director of Macquarie Group Limited and Macquarie Bank Limited since May 2011 and Member of the Advisory Board of McKinsey & Co. Director of Woolworths Ltd from July 1996 until November 2010 and Goodman Group from September 2007 to October 2010. Has served on the boards of a number of other public and not-for-profit organisations including Lend Lease Corporation, Wattyl Limited, Greengrocer.com (Chair), Sydney Opera House Trust, Ascham School (current Chair), The Hunger Project Australia (current Chair) and as President of Chief Executive Women. Formerly a partner of McKinsey & Co. serving clients in a wide range of industries on strategic growth and change initiatives. Ms Grady is an experienced director who brings valuable strategic and business expertise to the Board and to her role as Chair of the Remuneration and Organisation Committee. Kevin McCann AM, Non-Executive Director (Independent) Age 71, BA LLB (Hons), LLM Director since: May 2002 Mr McCann is Chairman of Macquarie Group Ltd and Macquarie Bank Ltd and has been on the Board of those companies since August 2007 and December 1996 respectively. He is also Chairman of Origin Energy Ltd (since February 2000). Mr McCann is a director of the Australian Institute of Company Directors (AICD) and is a member of the AICD Corporate Governance Committee and President of the NSW Advisory Council. He is a Fellow of the Senate of the University of Sydney and a director of the University of Sydney United States Studies Centre. Community activities include Chairman of the National Library of Australia Foundation. Former Chairman of the Sydney Harbour Federation Trust, Chairman of ING Management Limited from September 2010 to June 2011 and Director of the Sydney Harbour Conservancy from January 2010 to September 2010. He also served as Chairman of Healthscope Ltd from May 1994 to October 2008 and as a Member of the Takeovers Panel and the Defence Procurement Advisory Board. He has served on the Boards of Pioneer International Limited, Ampol Limited and the State Rail Authority of New South Wales and as a member of the Council of the National Library of Australia. Former Chairman of Partners of Allens Arthur Robinson, a national and international Australian law firm, and a partner of the firm from 1970 until June 2004. He brings extensive commercial experience as a Chairman and director and former Chairman and director of major listed companies and deep corporate governance and legal expertise to the Board.
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Tan Yam Pin, Non-Executive Director (Independent) Age 71, BEc (Hons), MBA, CA Director since: May 2003 A chartered accountant by profession, formerly Managing Director of Fraser and Neave Group, one of South-East Asia’s leading public companies, and Chief Executive Officer of its subsidiary company, Asia Pacific Breweries Ltd. A member of the Public Service Commission of Singapore since 1990 and a Director of the Board of Keppel Land Limited (Singapore) since June 2003, Singapore Post Limited since February 2005, Great Eastern Holdings Limited since January 2005, Leighton Asia Limited since January 2009 and The Lee Kuan Yew Scholarship Fund since January 2010. Mr Tan previously served as Chairman of PowerSeraya Limited (Singapore) from January 2004 to June 2009, as a Director of Certis CISCO Security Pte. Ltd from July 2005 to January 2009, The East Asiatic Company Limited A/S (Denmark) from 2003 to 2006, International Enterprise Singapore from January 2004 to June 2008 and Singapore Food Industries Ltd from December 2005 to December 2009. Mr Tan resides in Singapore. He brings extensive knowledge of Asian markets, an area of strategic importance to BlueScope Steel. His financial and leadership skills complement the skills on the Board. Daniel Grollo, Non-Executive Director (Independent) Age 42 Director since: September 2006 Chief Executive Officer of Grocon Pty Ltd, Australia’s largest privately owned development and construction company. He was appointed a Director of CP1 Limited in June 2007 and is a Director of the Green Building Council of Australia. He has previously been a Director and National President of the Property Council of Australia. He brings extensive knowledge of the building and construction industry to the Board. In March 2012, Mr Grollo was appointed as Chair of the Health, Safety and Environment Committee. Paul O’Malley, Managing Director and Chief Executive Officer Age 48, BCom, M. App Finance, ACA Director since: August 2007
Appointed Managing Director and Chief Executive Officer of BlueScope Steel on 1 November 2007.
Joined BlueScope Steel as its Chief Financial Officer in December 2005. Formerly the CEO of TXU Energy, a subsidiary of TXU Corp based in Dallas, Texas, and held other senior management roles within TXU including Senior Vice President and Principal Financial Officer and, based in Melbourne, Chief Financial Officer of TXU Australia. Before joining TXU, he worked in investment banking and consulting.
Ken Dean, Non-Executive Director (Independent) Age 59, BCom (Hons), FCPA, FAICD Director since: April 2009
Mr Dean has been a Director of Santos Limited since February 2005 and has held past directorships with Alcoa of Australia Limited, Woodside Petroleum Limited and Shell Australia Limited. In July 2012 he was appointed as a non-executive director of to TRUenergy Holdings Pty Ltd.
Mr Dean spent more than 30 years in a variety of senior management roles with Shell in Australia and the United Kingdom. His last position with Shell, which he held for five years, was as Chief Executive Officer of Shell Finance Services based in London. Upon his return to Australia in 2005, he was Chief Financial Officer of Alumina Limited, a position from which he resigned in 2009 to focus on non-executive directorship roles.
He brings extensive international financial and commercial experience to the Board and to his role as Chair of the Audit and Risk Committee.
Penny Bingham-Hall, Non-Executive Director (Independent) Age 52, BA (Ind.Des) FAICD, SA(Fin)
Ms Bingham-Hall was appointed a Director of BlueScope Steel in March 2011. She spent more than 20 years in a variety of roles with Leighton Holdings prior to retiring from that company at the end of 2009. Senior positions held by her 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. Ms Bingham-Hall is a Director of Australia Post (since May 2011), the Sydney Ports Corporation (since April 2012) and SCEGGS Darlinghurst School (since February 2011). She was the inaugural Chairman of Advocacy Services Australia (the fiduciary company for the Tourism & Transport Forum and Infrastructure Partnerships Australia) from May 2008 to December 2011 and is a former Director of The Global Foundation and the Australian Council for Infrastructure Development and former Member of the Vis Asia Council, Art Gallery of NSW.
She brings extensive knowledge of the building and construction industry in both Australia and Asian markets.
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COMPANY SECRETARIES
Michael Barron Chief Legal Officer and Company Secretary, BEc, LLB, ACIS Responsible for the legal affairs of BlueScope Steel and for company secretarial matters. Joined the Company as Chief Legal Officer and Company Secretary in January 2002. Prior to that occupied position of Group General Counsel for Orica.
Clayton McCormack, BCom, LLB Corporate Counsel, Governance and Secretariat with BlueScope Steel. A lawyer with over 15 years experience in private practice and corporate roles.
Darren Mackenzie, BA, LLB (Hons) General Counsel, Corporate with BlueScope Steel. A lawyer with over 15 years experience in private practice and corporate roles.
PARTICULARS OF DIRECTORS' INTERESTS IN SHARES AND OPTIONS OF BLUESCOPE STEEL LIMITED As at the date of this report the interests of the Directors in shares and options of BlueScope Steel are:
Director Ordinary shares Share rights
Director - Current
G J Kraehe 641,297 -
R J McNeilly 2,378,704 -
P F O’Malley 499,704 2,607,631
D J Grady 377,007 -
H K McCann 162,368 -
Y P Tan 282,809 -
D B Grollo 230,681 -
K A Dean 146,924 -
P Bingham-Hall 122,000 -
MEETINGS OF DIRECTORS
Attendance of the current Directors at Board and Board Committee meetings from 1 July 2011 to 30 June 2012 is as follows:
Board meetings
Audit and Risk
Committee
Remuneration and
Organisation Committee
Health, Safety and
Environment Committee
Nomination Committee
Other Sub-Committees
Annual General Meeting
A B A B A B A B A B A B A B
G J Kraehe 25 25 - 61 7 7 4 4 2 2 5 5 1 1
R J McNeilly 25 234 6 6 7 7 4 4 2 2 - - 1 1
P F O’Malley 25 25 - 62 - 72 4 4 - - 5 5 1 1
D J Grady 25 224 - - 7 7 4 4 2 2 - - 1 1
H K McCann 25 214 6 6 - - 4 3 2 2 1 1 1 1
Y P Tan 25 203, 4 - - 7 63 4 33 2 2 - - 1 1
D B Grollo 25 224 6 6 - - 4 4 2 2 - - 1 1
K A Dean 25 25 6 6 - - 4 4 2 2 2 2 1 1
P Bingham-Hall 25 234 - - 3 3 4 4 2 2 - - 1 1
All Directors have held office for the entire year ended 30 June 2012.
Ms Bingham-Hall became a member of the ROC on 17 February 2012.
A = number of meetings held during the period 1 July 2011 to 30 June 2012 during the time the Director was a member of the
Board or the Committee, as the case may be.
B = number of meetings attended by the Director from 1 July 2011 to 30 June 2012.
1 The Chairman of the Board is not a Committee member and attends as part of his duties as Chairman.
2 The Chief Executive Officer is not a Committee member and attends by invitation as required.
3 A scheduled meeting was missed due to illness.
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4 An unscheduled meeting was missed through unavailability due to travel or other commitments. Unscheduled meetings are generally called at very short notice and any directors unable to attend are provided with separate briefings on the matters considered.
There were a number of unscheduled meetings held during the year. They are as follows:
Board meetings: 17
Audit & Risk Committee meetings: 2
Remuneration Committee meetings: 1
The Non-Executive Directors have met twice during the year ended 30 June 2012 (without the presence of management). Non-
Executive Directors meetings are chaired by the Chairman of the Board.
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REMUNERATION SUMMARY (UNAUDITED) 1. Over the last two years, BlueScope’s remuneration system has been under severe pressure from two competing interests; shareholders who want executive remuneration reduced, reflecting their experience of no dividends and a significant decline in share price and talented executives who are tempted by opportunities in less structurally challenged industries where remuneration prospects are greater.
Introduction
The BlueScope Board understands and acknowledges the issues raised by shareholders in relation to executive remuneration. The Board also believes it is in both shareholder and Company interests that our executive remuneration policy assists to retain the Managing Director & Chief Executive Officer (MD&CEO) and the Key Management Personnel (KMP) Executives because they are best placed to lead the Company through the major structural challenges facing the industry.
In the Remuneration Report last year, the Board informed shareholders of the intention to conduct a comprehensive review of the Company’s executive remuneration policies. As part of this review, the Chairman of the Remuneration and Organisation Committee, Ms Diane Grady, and another Independent Committee member, Ms Penny Bingham-Hall, met with over twenty of the Company’s larger shareholders, corporate governance advisory bodies and the Australian Shareholders’ Association to obtain feedback in relation to proposals developed by the Board. Those discussions were very valuable and suggestions have been incorporated in the remuneration structure described below.
Some of the more notable decisions include: • Reducing the MD & CEO’s remuneration by 52% in FY 2012 due to no Short Term Incentive (STI) or Long Term
Incentive (LTI) awards; • Again freezing the MD & CEO’s base salary to his 2010 level, and maintaining this freeze during FY2013; • Withholding at least 50% of total STI awards by KMP Executives as deferred equity with a one year trading lock; • Paying significantly lower cash STI in aggregate for the MD & CEO and all KMP Executives ($994,476 compared to
$3,051,813 for FY 2011). • Tightening LTI award conditions by:
- Eliminating retesting; - Imposing a two year trading lock on awards that vest; and - Reducing payment at the 51st percentile of TSR to 40%;
• Using the capital raising price of 40 cents as a minimum to determine the quantum of share rights offered to KMP Executives for the FY 2013 LTI award and the addition of a hurdle that the FY 2013 LTI award will not vest unless the share price at the end of the vesting period is at least 40 cents; and
• Restructuring the organisation from 6 into 4 divisions thereby reducing the number of KMP Executives and the total cost of their fixed remuneration.
2. Board decisions in regard to the remuneration of the MD & CEO and senior executives have been made in the context of the challenging circumstances faced by BlueScope operating in an industry undergoing massive structural change and at a cyclical low. These circumstances which have particularly affected our Australian businesses include:
Context
1. Historically high iron ore and coking coal prices;
2. Surplus global steelmaking capacity resulting in depressed prices for steel exports;
3. Increased penetration of imports attracted by the high A$; and
4. Reduced domestic sales due to sluggish demand from the construction and manufacturing sectors. While our Australian
businesses are under severe pressure, BlueScope’s businesses in Asia are profitable and continue to be well positioned in
this fast growing region of the world. These differences in business environments require an appropriate remuneration
response.
Management and employees across BlueScope have responded to these pressures by restructuring the business and undertaking a significant change program across all of the Company’s operations. As a result of this restructure the number of KMP Executives has been reduced from 10 to 8.Major achievements in FY 2012 included:
• Outstanding cash flow management to outperform challenging debt reduction targets.
• The injury free shutdown of 2.6 million tonnes of export steel-making capacity with the closure of a blast furnace, a coke oven, one hot-strip mill, and the moth-balling of a metal coating line — achieved within 7 weeks and below budgeted cost.
• The sale of the Company’s insulated panels business in North America, MetlSpan, at an attractive price.
• The negotiation of the Steel Transformation Plan resulting in an advance of $100m from the Australian Government to BlueScope. (The STP income has been specifically excluded from all calculations relating to STI awards.)
• Capturing more value from the Company’s own reserves of NZ iron sands by incorporating this lower cost raw material into the Port Kembla feed-stock blend and by significantly increasing our iron sands export capacity.
• Consolidating businesses which formerly comprised six divisions into four: - A Global Building Products business which operates the largest integrated network of sales and manufacturing
operations around the Pacific Basin.
- A Global Building Solutions business to deliver growth in the pre-engineered steel building market through low cost
design and manufacturing coupled with dedicated account management serving multi-national customers.
- A single Australian and New Zealand business called BlueScope ANZ, that better aligns our manufacturing, sales and
distribution operations to our customers and will be more responsive to tough markets, with a significant lowering of
our total cost base.
- A profitable joint venture with Cargill - North Star BlueScope Steel – which is the 5th largest producer by volume of hot
rolled coil in North America.
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A key issue for the Board has been selecting the appropriate peer group for remuneration benchmarking. In the Board’s view using market capitalisation as the sole comparison is not appropriate for establishing BlueScope’s remuneration benchmarks because it would lead to unmanageable fluctuations in executive remuneration and does not reflect our belief in BlueScope's future. A recent Ernst & Young paper, ‘Rethinking market practice’, May 2012 advocates the need for companies to establish the ‘right’ market to support remuneration governance. We believe the peer group shown below is reflective of the size and complexity of BlueScope. In choosing this peer group we have taken into account revenue, number of employees, number of geographies, industry similarities and market capitalisation.
BlueScope Steel Benchmarking Peer Group
Company Revenue Employees Market Cap 23-Mar-2012
Market Cap Average past 3
years to 23-Mar-2012
Market Cap Average past 5
years to 23-Mar-2012
Multiple Geographies
Y/N
Adelaide Brighton 1,100 1,600 1,845 1,800 1,774 N
Amcor 12,000 33,000 8,640 7,525 6,728 Y
Asciano 3,056 7,172 4,662 4,382 n.a. N
Boral 4,700 15,200 3,061 3,132 3,356 Y
Brambles 4,672 17,000 10,245 9,640 11,412 Y
Coca Cola Amatil 4,500 15,000 9,031 8,340 7,654 Y
Caltex 22,105 4,000 3,707 3,215 3,682 N
CSR 1,914 4,000 903 2,042 2,294 Y
Downer 6,975 21,000 1,673 1,854 1,879 Y
Fletcher 7,416 20,000 3,619 3,766 3,807 Y
Incitec Pivot 3,906 5,000 5,065 5,442 5,489 Y
James Hardie 1,200 2,500 3,349 2,759 2,757 Y
Leighton 19,400 51,000 7,793 8,894 10,004 Y
Lend Lease 5,099 17,000 4,191 4,367 4,789 Y
Orica 6,182 14,000 9,647 8,851 8,592 Y
Arrium (formerly OneSteel) 7,133 11,000 1,678 3,233 3,741 Y
Sims 8,900 6,500 3,022 3,729 3,887 Y
Toll 8,225 45,000 4,116 4,388 5,397 Y
Transfield 4,000 27,000 1,336 1,491 1,657 Y
Worley Parsons 5,904 37,800 7,225 6,228 6,665 Y
Median 5,502 15,100 3,912 4,067 3,887
BSL 9,112 18,344 1,323 3,500 4,763 Y
BSL Ranking (Total 21) 4 8 20 13 10
Source:
1. Revenue, employees and geographies sourced from 2011 annual reports.
2. Peer Group market cap data as at 23 March 2012 source Factset.
The Board believes management has performed well in extremely difficult business conditions. While some businesses have delivered good financial results and there has been significant progress in restructuring the total organisation, the Company overall has not made a profit and has not resumed paying dividends. Both of these factors have been considered in determining executive remuneration. The Board considers it particularly important in the transformation program underway in BlueScope to pay STI to KMP Executives for delivering outstanding quantified results even if the Company as a whole is not yet profitable. At the same time we have significantly reduced the cash component of executive remuneration and increased the deferred equity component of incentives. This will allow us to both retain and recognise executives for their achievements as well as reinforce the alignment between future shareholder value and executive reward. The Board and management believe that at this stage in a major transition process these measures are an appropriate balance of the need for incentive, retention, shareholder alignment and executive accountability. It is expected that once the Company has returned to profitability, there will be further adjustments to the remuneration system. Key remuneration decisions during the year are outlined below.
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3. The Board, with the full support of the MD & CEO, has significantly reduced the MD & CEO’s total remuneration package for FY 2012. No salary increase, no LTI and no STI awards have resulted in a 52% year on year reduction in his remuneration. As a result, the MD & CEO’s total remuneration will be down from $4,156,129 in 2011 to $1,995,000 for 2012.
MD & CEO Remuneration
The following table summarises the reduction in Mr O’Malley’s remuneration from FY 2011 to FY 2012.
FY 2012 Actual
$
FY 2011
$
Base pay including superannuation
1,995,000 1,995,000
STI paid Nil 720,865
Total take home pay 1,995,000 2,715,865
LTI potential Nil 1,440,264*
Total remuneration 1,995,000 4,156,129
Reduction in total remuneration from FY 2011
52%
Actual remuneration received as a % of target remuneration
41%
*Note: while the MD & CEO is unlikely to receive any value from the FY 2011 LTI which was awarded at $2.26, shareholders have incurred the cost as accounting standards require this fair value expense to be taken through the P&L. A summary of the decisions made for FY 2012 and FY 2013 are as follows:
i) Base Pay The Board has determined that base pay is appropriately positioned at about the 60th percentile relative to the selected peer group as of April 2012. Consequently, the MD & CEO has not had a salary increase in FY2012. Furthermore, the MD & CEO’s base pay will be frozen during FY2013.
ii) Short Term Incentive Although the MD & CEO has led the Company to achieve the targets set by the Board in relation to reduction in debt, cash management and Company restructuring, the MD & CEO’s STI for FY2012 will be zero in view of EBIT performance. STI objectives for FY2013 at target are based on the achievement of a major strategic transformational initiative; delivery of a positive underlying profit; and top quartile TSR performance relative to the ASX 100. Details of the targets and results will be disclosed to shareholders in the FY 2013 Remuneration Report. If any STI is awarded it will be delivered equally in cash and equity. The equity will be subject to a 12 month trading lock and will lapse on termination due to resignation or for cause. The quantum of the MD & CEO’s potential STI at target is 80% of base pay and 120% at stretch.
iii) Long Term Incentive (LTI) The MD & CEO did not receive any LTI share rights in FY2012 in view of the Company’s financial performance. The MD & CEO will receive share rights for FY2013 under the existing terms of his LTI plan, as approved by shareholders at the AGM in 2010. However, notwithstanding the relative performance of share rights awarded in FY2013 under the approved performance hurdles, the MD & CEO has agreed that in addition to the relative total shareholder return hurdle, no share rights will vest unless the share price is at least 40 cents, the price offered to shareholders at the time of the capital raising in November 2011. Shareholders will be asked to approve a new LTI plan for the MD & CEO to apply in FY 2014 and FY 2015 which will have a five year period from the date of the award of share rights before vested shares can be accessed. The new LTI plan will be more restrictive than the current plan with the removal of re-testing, a reduction in the number of shares that will vest at the 51st percentile of relative ASX100 TSR performance from 52% to 40%, and a requirement to hold any shares that do vest after 3 years for a further period of 2 years. Share rights are not eligible for dividends until they vest. Share rights would be awarded using the current formula of 155% of base pay per annum. This percentage was agreed when the MD & CEO’s initial contract was signed and at that time reflected an increased weighting to LTI and a reduced weighting of his STI. In considering remuneration for the MD & CEO, the Board focuses on total remuneration relative to the peer group recognizing the mix at BlueScope is more skewed toward the long term.
With this remuneration structure, 56% of the MD & CEO’s potential remuneration for FY 2013 would be at risk in deferred equity.
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4. The Board, with the support of the MD & CEO and KMP Executives implemented the following measures in relation to KMP Executive remuneration for FY 2012 and FY 2013.
KMP Executive Remuneration
i) Base Pay There have been some significant base pay increases during FY 2012 reflecting the restructure of the business and our need to retain remaining KMP Executives to lead major strategic initiatives. There will be no “across-the-board” base pay increase for all KMP Executives for FY 2013. Examples of increased responsibilities are outlined below. • Mr Mark Vassella was promoted to the new role of Chief Executive – BlueScope Australia & New Zealand which
comprises responsibility for businesses previously led by Mr Noel Cornish, Mr Paul O’Keefe and Mr Keith Mitchelhill. His base pay increased to $1,000,000.
• Mr Sanjay Dayal had his salary increased to $880,000 in recognition of the additional responsibilities arising from the establishment of the Building Products business unit comprising a combination of the ASEAN and Indian businesses and the Steelscape and ASC Profiles businesses on the US West Coast.
• Mr Bob Moore, Chief Executive, China had his salary increased to $700,000 with effect from 1 July 2012 reflecting the increased responsibilities in leading the Company’s pre-engineered steel building businesses stretching from North America across China, Asia, India, the Middle East and Australia.
ii) Short Term Incentive (STI) STI objectives are set and approved by the Board at the beginning of each financial year and include measurable objectives for results achieved in financial, safety, operational excellence and strategic projects. At the end of each year achievements are assessed by the Remuneration and Organisation Committee. Payments have only been made for quantified results. Potential STI payments for KMP Executives at target are 60% of base salary and at stretch are 90% of base salary. All executives have at least 50% weighting to financials, including at least 25% for company-wide results. Safety and operational excellence targets are set using quantifiable measures. As BlueScope’s overall financial performance did not reach the required threshold established by the Board of an underlying profit for the 2nd half of the financial year, no STI is payable for Company Financials which make up 25% of total STI opportunity at target. The Company’s safety LTIFR performance for the year did not meet the required hurdle. Accordingly, no STI is payable for safety performance which makes up 5% of STI opportunity at target. For KMP Executives who achieved quantified results which otherwise would have warranted higher STI, awards have been capped at 60% of target (36% of base pay) if they did not achieve underlying EBIT targets. STI awards were made for achievement of positive EBIT financial objectives, achieving outstanding cashflow results and implementation of fundamental restructuring initiatives to underpin a turnaround in company financial performance. In addition, KMP Executives will have half of their STI cash awards withheld, and delivered as restricted shares. These will lapse if the KMP Executive resigns or is terminated for cause within 12 months. No dividends will be payable during the period of the holding lock. Also, the Chief Executive BANZ will have 100% of his STI award withheld and delivered in deferred equity. Half may be released early if certain H1 FY2013 objectives are achieved. Details of awards to individual KMP are summarised below.
• Mark Vassella, and the corporate team of Charlie Elias, Ian Cummin and Michael Barron delivered the Australian restructure including: o Achieving targeted fixed cost reductions of $315m; o Containing restructure costs to $380 million, below the budgeted range of $400-$500m; o Releasing working capital of $583 million between October 2011 to June 2012, after adjusting for the timing of certain
year end cashflows, better than the expected range of $400-500m; o Negotiating positive outcomes for major contract renegotiations; and o Significantly reducing exposure to loss-making export sales.
In addition, the corporate team managed the sale of MetlSpan at an attractive multiple, a significant initiative contributing to the reduction in net debt.
• Sanjay Dayal – Delivered business unit threshold EBIT and stretch cashflow objectives for the ASEAN business, including restructuring the cost base of the Asian building products businesses.
• Bob Moore – Delivered business unit EBIT and cashflow objectives, including improving the profitability of the coated business in China by both expanding sales channels and sourcing lower cost feed. In addition, established the Global Buildings Solutions business by merging the US, China, ASEAN and Australian buildings solutions businesses into a single group with a lower cost structure.
• Keith Mitchelhill - Rationalised the US buildings footprint achieving break-even run rate at volumes almost half Pre-GFC levels delivering a significant underlying EBIT improvement versus FY2011.
• Pat Finan - Established the global sales and marketing function for the Global Buildings Solutions business, delivering stretch sales revenue with new global accounts and enabling significant engineering cost reductions through the introduction of BlueScope’s proprietary Vision Engineering system in Vietnam and Thailand. In addition, restructured the Australian solutions business to achieve positive underlying run rate and divested the Australian urban water business.
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Due to outstanding achievements in cash delivery and debt reduction, overall STI awards are higher than FY 2011. However, because half of the total STI awards has been withheld and delivered in shares which will lapse in the event the executive resigns or is dismissed for cause within 12 months, and the MD and CEO did not receive an STI, the payment of cash STI awards is significantly less than FY 2011 for all KMP. The total cash STI awards in aggregate for the CEO & MD and all KMP Executives for FY 2012 was $994,476 compared to $3,051,813 for FY 2011. iii) Long Term Incentive (LTI) For FY2012, as the usual timing of the LTI award for all executives including KMP Executives coincided with the capital raising initiative, the Board deferred this award until 1 February 2012. Share rights were issued at 41.4 cents. At the same time, the Board tightened LTI award conditions as follows:
• Eliminated retesting by making share rights awarded in FY 2012 subject to a single performance hurdle test on 1 February
2015;
• Reduced the number of share rights that will vest at the 51st percentile of relative ASX 100 TSR from 52% to 40%; and
• Established a one year trading lock for any share rights that do vest.
In relation to FY2013, the Board will halve the value of LTI that would normally be awarded, and the quantum of share rights will be set to reflect, as a minimum, the 40 cent capital raising price. In addition, we have increased the trading lock over vested share rights from one to two years. The same tighter TSR hurdle introduced for FY2012 will also be applied, together with a minimum 40 cent share price for vesting and with no re-testing. iv) Retention Equity In times of specific need the Board has awarded retention shares to a limited number of executives throughout the Company, where their retention is particularly critical to the successful delivery of business strategy. As the Board stated in last year’s Remuneration Report, in light of the major re-structure of the business 8 KMP Executives (not including the MD & CEO) were awarded retention shares. These will lapse if resignation occurs before 30 June 2014. As a condition of the award of retention shares, the KMP Executives agreed to vary their employment contracts to reduce any future severance payment. The award of retention shares has been successful in retaining the participating executives. As the Company is part way through a significant restructure, in FY 2013 the Board has reduced the LTI award to KMP Executives by half the fair value and diverted this value to KMP Executives in the form of retention rights. Retention rights will have a retention hurdle of three years from the time of the award. These will lapse in circumstances of resignation or termination for cause. This change sees no increase in cost to shareholders. It is not envisioned that this retention rights structure will continue after FY2013. The Board recognises that the agreed remuneration for KMP Executives in FY2012 will be examined closely by shareholders; however, we knew such intervention was urgent and necessary to safeguard the successful restructure of the businesses in Australia and overseas. As a result of the changes described above, executives will have approximately 43% of their total remuneration paid in deferred equity. These proposed changes, particularly reducing the cash opportunity will be challenging for executives. However, we believe this approach represents a balance between the concerns of shareholders and the need to retain the KMP Executives by offering fair reward for achievement. 5. The Board has considered in detail the complex issues relating to executive remuneration in a business undergoing major structural change. The MD & CEO supports the additional restrictions placed on his remuneration this year to reflect the performance of the Company. However, the Board has balanced this against the need to retain key capable leaders who have a critical contribution to make to return the Company to profitability. We ask shareholders to understand and respect the approach we have taken to remuneration, and look forward to a positive vote in favour of this Report.
Summary
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REMUNERATION REPORT (AUDITED).
The Directors of the Company present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 for the Company and the consolidated entity for the year ended 30 June 2012. 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.
INTRODUCTION
Through its remuneration strategy, BlueScope aims to support the achievement of superior business performance over the long term by motivating talented executives to deliver results that reward shareholders.
The Board of Directors oversees BlueScope’s remuneration arrangements, including executive remuneration and the remuneration of Non-Executive Directors. This year the Board, led by the Remuneration and Organisation Committee, conducted a comprehensive review of the Company’s remuneration strategy to find a way to address the concerns of shareholders expressed in FY 2011 when only 61% voted in favour of our Report. This review included extensive consultation with shareholders and proxy advisors. Our goal has been to develop a remuneration strategy that both keeps our executive team focused on delivering the major restructuring initiatives required to return to profitability and wins widespread support from our shareholders.
Following this year’s review, the Board resolved that while our basic remuneration principles (described later in this Report) remain sound, it is appropriate for BlueScope to adopt some transitional remuneration modifications until the Company returns to profit and is paying dividends. These changes have been developed by the Board and are being introduced on a transitional basis with the full support of management who appreciate the need to further align executive rewards with the delivery of superior returns to shareholders. It is intended once the business is stabilised, the Board will again review the Company’s approach to remuneration and make further changes, if necessary.
Key elements of this transitional strategy are:
1) Shifting a significant percentage of executive remuneration from cash to deferred equity to more tightly link executive experience with shareholders;
2) Tightening Long Term Incentive (LTI) award conditions by eliminating retesting, imposing a two year trading lock, and reducing vesting at the 51st percentile of Total Shareholder Return (TSR) to 40%;
3) Using the capital raising price of 40 cents as a minimum to determine the quantum of share rights offered to Key
Management Personnel (KMP) Executives for the FY 2013 LTI award and the addition of a hurdle that the FY 2013 LTI
award will not vest unless the share price at the end of the vesting period is at least 40 cents; 4) Setting special FY 2013 Short Term Incentive (STI) objectives for the Managing Director and Chief Executive Officer (MD
& CEO) as disclosed in this Report, after paying no STI or LTI in FY 2012;
5) Paying significantly lower cash STI for all KMP Executives with at least 50% of total STI awarded held as deferred equity
with a one year trading lock;
6) For KMP Executives, who achieved quantified results which otherwise would have warranted higher STI, awards have
been capped at 60% of target (36% of base pay) if they did not achieve underlying EBIT targets; and
7) Splitting LTI for KMP Executives other than the MD & CEO into a combination of retention rights with a 3 year time-based hurdle, and share rights which vest after 3 years if they meet TSR hurdles but have a further 2 year trading lock.
The table below outlines the issues raised by shareholders and BlueScope’s response. Details of BlueScope’s remuneration policies and the changes we have made this year are shown in the Report.
ISSUES RAISED
Shareholder Concerns with the 2011 Remuneration Report
BLUESCOPE’S RESPONSE
• MD & CEO’s pay is high compared to ASX 75 to 100 companies.
Fixed
• No disclosure of peer group.
• No MD & CEO base pay increase since September 2010.
• BSL peer group is disclosed and takes into account complexity not just market capitalisation.
• Cash STI paid despite large loss, share price decline and no dividends.
STI
• No specific disclosure of hurdles and targets.
• No requirement for minimum level of financial performance before payment of STI.
• No STI for the MD & CEO in FY 2012.
• 50% of KMP Executive STI payments will be awarded in deferred equity other than for the Chief Executive BlueScope ANZ who will have 100% delivered in deferred equity.
• STI only paid to KMP Executives for demonstrated results with specific measures to be disclosed in FY 2012 Remuneration Report.
• No STI will be paid for Companywide financials in FY 2012.
• Executives in a structurally challenged industry need to believe they will be fairly rewarded for achievements, especially where businesses operate in very different markets eg BSL China versus BSL Australia. The Board believes it is in shareholders’ interests to retain the BSL KMP Executives to drive the transformation program.
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ISSUES RAISED BLUESCOPE’S RESPONSE
• Retention shares may not be effective.
LTI
• Deficient linking of remuneration to Company performance.
• To date, retention shares have helped keep the BSL leadership team together and focused on the business turnaround.
• MD & CEO’s pay has dropped 52% between FY 2011 and FY 2012 and FY 2012 remuneration is only 41% of target remuneration.
• Under the proposed remuneration structure, the MD & CEO will have 56% and KMP Executives will have approximately 43% of their total potential remuneration in deferred equity.
• Directors should consider reduction in Directors’ Fees as there have been no returns delivered to shareholders.
Directors’ Fees
• Directors’ Fees are fixed and reviewed periodically. Directors do not participate in any performance based incentive plans.
• The last increase in fees was 5% which occurred on 1 January 2011. The previous increase in base fees occurred on 1 January 2006 and in committee fees on 1 January 2008.
1. CONTEXT: REMUNERATION DECISIONS REFLECT EXECUTIVE ACHIEVEMENTS IN OVERCOMING MAJOR STRUCTURAL CHALLENGES CONFRONTING THE COMPANY
The challenging circumstances faced by BlueScope provide the context for Board decisions in regard to the remuneration of the MD & CEO and KMP Executives. These circumstances include:
• Historically high iron ore and coking coal prices.
• Record high level of the A$ exchange rate, which has placed downward pressure on domestic steel pricing as the Company competes with imports that benefit from the high dollar, as well as unfair trade (dumping).
• A downturn in the building and manufacturing sectors of the Australian economy, while the strong resources sector imports a significant supply of fabricated products.
• The competitive demand for highly trained and capable management, technical and other professionals with skills relevant in other sectors, such as resources.
• The prolonged down-turn and slow pace of recovery in the US economy.
Against this background management and employees across BlueScope have responded to the need to restructure the business to succeed in the toughest business environment the Company has ever experienced. Major achievements included:
• Outstanding cash flow management to achieve a debt reduction outcome at the highest level of the Board’s expectations.
• The injury free and operationally secure closure of 2.6 million tonnes of export steelmaking capacity with the closure of a blast furnace, a coke oven, one hot-strip mill, and the moth-balling of a metal coating line – achieved within 7 weeks and below budgeted cost.
• The successful transition to lower priced grades of iron ore, including the introduction of the Company’s own reserves of NZ iron sands into the Port Kembla feed-stock blend.
• The sale of the Company’s insulated panels business in North America – MetlSpan – at an attractive price.
• The negotiation of the Steel Transformation Plan (STP) resulting in an advance of $100m from the Australian Government to BlueScope. (The STP income has been specifically excluded from all calculations relating to STI awards).
• The restructure of debt and covenant facilities to enable the Company to embark on its operational and business transformation.
• Restructuring the organisation from 6 into 4 divisions effective from 1 July 2012. As a consequence the total cost of fixed remuneration for KMP Executives has reduced. These groups are:
i) BlueScope ANZ, comprises the integrated steelmaking, coating, painting, roll-forming and distribution operations across Australia, New Zealand and the Pacific Islands. This business has sales of $5,464m and employees 8,078.
ii) Global Building Solutions, a supplier of complete steel buildings worldwide; this business is led from Shanghai and Kansas City, and has manufacturing and sales offices across North America, China, ASEAN, Australia and elsewhere. It is the world’s largest design, fabrication and supply business of complete steel buildings. In China, this business includes metal coating and painting operations, and Lysaght China. Sales are $1,442m and employees number 5,000.
iii) Building Products, headquartered in Singapore, this business comprises metal coating, painting and roll-forming across ASEAN and North America, along with the Tata BlueScope joint venture in India. 780,000 tonnes are coated and 620,000 tonnes painted per annum, giving this business the largest integrated network of sales and manufacturing operations around the Pacific Basin. Sales are $1,547m and employees number 3,300.
iv) Hot Rolled Products North America, comprising North Star BlueScope Steel located in Delta, Ohio a 50 – 50 joint venture between BlueScope and North Star Steel a subsidiary of Cargill and a 47% shareholding in Castrip LLC with Nucor. North Star BlueScope Steel produces around 2 million tonnes of hot rolled coil annually and is ranked fifth by volume in the production of hot rolled coil in North America. Sales are $1,366m and employees number 370.
The Board acknowledges the extremely difficult business conditions and significant achievements by management and employees. The Board identifies with investor concerns regarding the decline in share price and the urgent need to return the business to profit. All of these factors have been considered by the Board in reaching decisions regarding executive remuneration.
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2. REMUNERATION AND ORGANISATION COMMITTEE IS COMPRISED OF INDEPENDENT DIRECTORS AND ASSISTS THE BOARD IN OVERSEEING PEOPLE STRATEGIES AS WELL AS REMUNERATION
The Board oversees the BlueScope Human Resources Strategy, both directly and through the Remuneration and Organisation Committee of the Board (the Committee). The Committee consisted entirely of independent non-executive directors.
The members of the Committee during the year were:
Ms Diane Grady - Independent Director and Chairman of the Committee
Mr Graham Kraehe - Chairman of the Board and Committee Member
Mr Ron McNeilly - Deputy Chairman and Committee Member
Mr Tan Yam Pin - Independent Director and Committee Member
Ms Penny Bingham-Hall – Independent Director and Committee Member (effective 17 February 2012)
The purpose of the Committee is to assist the Board in overseeing that the Company:
• Has a human resources strategy aligned to the overall business strategy, which supports ‘Our Bond’;
• Has coherent remuneration policies that are observed and that enable it to attract and retain executives and directors who will create value for shareholders;
• Fairly and responsibly rewards executives having regard to the performance of the Company, the creation of value for shareholders, the performance of the executives and the external remuneration environment; and
• Plans and implements the development and succession of executive management.
The Committee has responsibility for overseeing and recommending to the Board remuneration strategy, policies and practices applicable to Non-Executive Directors, the Managing Director and Chief Executive Officer, senior managers and employees generally. The Committee focuses on the following activities in its decision making on the Company’s remuneration arrangements:
• Approving the terms of employment of the Key Management Personnel (KMP), including determining the levels of remuneration;
• Ensuring a robust approach to performance management through approval of the STI objectives and awards and reviewing performance of members of the KMP Executives;
• Considering all matters relating to the remuneration and performance of the Managing Director and Chief Executive Officer prior to Board approval;
• Approving awards of equity to employees; and
• Ensuring the Company’s remuneration policies and practices operate in accordance with good corporate governance standards, including approval of the Remuneration Report and communications to shareholders on remuneration matters.
The Committee seeks input from the Managing Director and Chief Executive Officer and the Executive General Manager People and Organisation Performance, who attend Committee meetings, except where matters relating to their own remuneration are considered.
The Committee engages and considers advice from independent remuneration consultants where appropriate. 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, BSL’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.
During FY2012, the Remuneration and Organisation Committee employed the services of PwC to review and provide recommendations on remuneration strategy and structure which covers KMP. Under the terms of the engagement, PwC provided a remuneration recommendation as defined in section 9B of the Corporations Act 2001 and was paid $24,000 for these services. PwC has confirmed that the remuneration recommendations were made free from undue influence by members of BlueScope Steel Limited’s KMP.
The following arrangements were made to ensure that the remuneration recommendation was free from undue influence:
• PwC was engaged by, and reported directly to, the independent Chair of the Remuneration and Organisation Committee. The agreement for the provision of remuneration consulting services was executed by the Chair of the Remuneration and Organisation Committee under delegated authority on behalf of the Board.
• The report containing the remuneration recommendation was provided by PwC directly to the Chair of the Remuneration and Organisation Committee.
• Management provided factual information to PwC throughout the engagement about Company processes, practices and other business issues. However, PwC did not provide any member of management with a copy of the draft or final report that contained the remuneration recommendation.
As a consequence, the Board is satisfied that the recommendations were made free from undue influence from any members of the KMP.
In addition to providing remuneration recommendations, PwC also provided advice on various other services. PwC was paid a total of $1,306,586 for financial, tax and other remuneration services.
In FY 2012 there was no increase in fees for Non-Executive Directors and all Directors participated in the Capital Raising. The last increase in fees was 5% which occurred on 1 January 2011. The previous increase in base fees occurred on 1 January 2006 and in committee fees on 1 January 2008.
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3. EXECUTIVE REMUNERATION POLICY & PRINCIPLES HAVE BEEN MODIFIED THIS YEAR TO REFLECT INVESTOR FEEDBACK
At BlueScope, executive remuneration packages typically comprise three elements – fixed pay (base pay and superannuation), short-term incentive and long-term incentive. In exceptional circumstances, a further element relating to targeted retention may be applied. Although these elements are described separately, they must nevertheless be viewed as part of an integrated package. Whilst each element has a particular design purpose, taken together the intent of the package is to:
• Align executives with the interests of shareholders;
• Competitively reward executives in response to the external market conditions;
• Encourage the retention of highly capable leaders;
• Provide incentive to take well managed risks; and
• Reward executives relative to their performance and accountability.
The mix of elements differs depending on the level in the organisation with a higher skew towards fixed at lower levels. Overall the aim is to provide executives the opportunity to earn top quartile remuneration for stretch performance. For KMP the mix of elements as a proportion of total remuneration at target is shown below.
Fixed Pay % STI % LTI* % Total %
MD & CEO 40% 29% 31% 100%
KMP Executives 52% 28% 20% 100%
*LTI value based on an estimate of the fair value of target awards. The face value equivalent award levels as a % of base pay are 155% for the MD &CEO and 80% for the KMP Executives. Careful remuneration benchmarking is critical to achieving these objectives. The Board has taken advice and invested considerable thought in determining the appropriate peer group for BlueScope shown below.
These companies have been selected because they reflect 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. In the Board’s view it is not appropriate to benchmark against global steel companies, as these are not prime candidates for attracting our executives. Nor is using a simple market capitalisation measure helpful, as the volatile market would result in unmanageable fluctuations in executive remuneration.
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i) Fixed Pay Fixed pay recognises the market value of an individual’s skills, experience, accountability and their expected sustained contribution in delivering the fundamental requirements of their role. In order to attract and retain skilled leaders, BlueScope aims to maintain a competitive position for base pay – around the 60th percentile of the most relevant market. ii) Short Term Incentive (STI) Whereas base pay recognises the attributes an individual executive brings to their role, short term incentive focuses all executives on priority team based outcomes. The targets are re-set each year in the context of the specific business strategy and new priorities. Short term incentive awards are assessed at the end of each year and covers financial, safety, operational and strategic and new project measures. Failure to achieve a team based target does not necessarily reflect inadequate performance on the part of a particular individual. The threshold, target and maximum STI award settings reflect general market practice for large Australian based industrial companies. Executives are not assured of an STI reward, as the Board retains the discretion to limit, defer or cancel STI awards and specifically considers and approves the objectives and awards for all KMP Executives and the MD&CEO each year. The Board considers it particularly important in a transformation program to pay STI to KMP Executives for delivering outstanding quantified results even if the Company as a whole is not yet profitable. At the same time we have significantly reduced cash STI by withholding 50% of any STI grant in restricted shares that have a 12 month trading lock and will lapse on resignation or termination for cause.
Target STI levels are set having regard to appropriate levels in the market and range from 10% of base pay through to 60% for the KMP other than the MD & CEO whose STI is 80% of base pay. These levels are reviewed annually. For outstanding results, participants may receive up to a further 50% of their target award amount:
The goals for each participant are drawn from the following categories:
• Companywide Financial Measures - performance measures may include Net Profit After Tax, Cash Flow and Return on Invested Capital;
• Own Business Controllables – performance measures against a range of controllable business unit financial and operational excellence measures based on approved business plans;
• Zero Harm - safety performance measures, including Lost Time Injury Frequency Rates, and Medical Treatment Injury Frequency Rates; and
• Projects & New Initiatives – performance measures based on measurable execution and implementation of business priorities included in the strategic plan.
STI plans are developed using a balanced approach to financial measures and key performance indicator (‘KPI’) metrics. At the senior executive level, there is a minimum weighting of 25% allocated to Companywide financials and a weighting of 5% to Zero Harm, with the balance of the STI allocated between Own Business Controllables comprising Business Unit financials, and Operational Excellence measures and Projects and New Initiatives. The minimum weighting to financials for KMP Executives is usually 55% comprising a 25% weighting to Companywide financials and 30% to business unit financials.
The weightings that applied for FY 2012 were as follows:
Company Financials
%
Zero Harm
%
Own Business Controllables (with
a minimum weighting of 30% for business unit
financial measures)
%
Projects and New Initiatives
%
Total
%
MD & CEO 60% 5% 0% 35% 100%
KMP Executives 25% 5% 30 –70% 0 – 40% 100%
The allocated weightings will vary from year to year reflecting business priorities and the individual’s role.
Performance conditions, including threshold, target and stretch hurdles, are set for each plan and approved by the Board for KMP Executives. If the threshold level is not reached, no payment is made in respect of that goal. The Board retains the discretion to adjust any STI payments in exceptional circumstances, including determining that a reduced award or even no award is paid. In FY 2009 the Board decided that no STI would be paid even though some performance objectives had been met because the overall Company profit performance was poor. Below target STI awards were paid in 2010 and 2011.
Although the MD & CEO has led the Company to achieve the targets set by the Board in relation to reduction in debt, cash management and Company restructuring in view of EBIT performance the MD & CEO’s STI for FY2012 will be zero. For KMP Executives, where businesses did not achieve their underlying EBIT hurdles, the Board has exercised discretion to cap STI at 60% of target notwithstanding higher levels of achievement on measurable results. All KMP received less than their target STI outcome.
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iii) Long Term Incentive (LTI) Long term incentive is one of the means of aligning executives with the experience of shareholders. BlueScope uses a three year time period to test total shareholder return (TSR) relative to the ASX 100, to determine whether or not an executive receives a reward from this element in their remuneration package. The Board considered shifting to a combination of TSR and earnings measures this year, but determined that in light of ongoing volatility in both the cost of raw materials and steel pricing it would be not be appropriate to use an earnings measure at this time. The quantum of LTI awards is normally calculated based on an agreed percentage of base salary divided by the face value of shares at the time of issue rather than fair value. Fair value however is used for reporting purposes as required by accounting standards, and is also used in benchmarking executive remuneration against the selected peer group which reports fair value. For FY 2013, the Board has taken into account shareholder feedback and tightened conditions related to long term incentive awards even further. Specifically, we have agreed that the quantum of rights for KMP Executives will be calculated using a minimum share price of 40 cents reflecting the capital raising price even if the share price at the time of the grant is lower. We also extended the trading lock from one to two years which takes the effective period of awards to 5 years, and retained the tighter vesting hurdles introduced in FY 2012. Executives at BlueScope are not permitted to hedge (such as “cap and collar” arrangements) LTI awards, or vested shares held under trading lock restrictions. The last LTI that vested for BlueScope executives was the 2005 award, which vested in 2008. iv) Retention Equity In unprecedented circumstances, the Board has awarded retention shares to a limited number of executives throughout the Company, where their retention is critical to the successful delivery of business strategy. As the Board stated in last year’s Remuneration Report, in light of the major re-structure of the business 8 KMP Executives (not including the MD & CEO) were awarded retention shares, which will lapse if resignation occurs before 30 June 2014. As a condition of the award of retention shares KMP Executives agreed to vary their employment contracts to limit any future severance payment to 12 months of final average fixed pay over the previous three years. The award of retention shares has been successful in retaining participating executives. This year the Board has determined to split executive LTI (except for the MD & CEO) into two parts. Half will be offered under normal LTI conditions described above. The other half will be offered as retention rights which have a 3 year vesting hurdle and will lapse if the executive leaves the Company. The Board does not expect to continue this retention rights offer after FY2013. v) Deferred Equity Offered A goal of the Board in developing the remuneration structure for this transition period has been to increase the percentage of remuneration paid in deferred equity to further reinforce the alignment of executive experience with shareholders. At the same time the Board is cognisant of investor concerns regarding further equity dilution. The following table shows the number of shares and percentage of equity potentially available to the MD & CEO, KMP Executives and other participants in long term equity plans in FY 2012 and FY 2013 pending performance against hurdles and satisfying retention conditions. The Share Rights will only vest in the event that the Company achieves its relative TSR hurdles against the ASX 100 and the participant is employed by BlueScope at the end of the 3 year performance period. Retention Rights will only vest if the share price is at least 40 cents and the participant is employed by BlueScope at the end of 3 years. If an executive retires or is made redundant, rights will be retained on a prorata basis but will only be accessible after the normal vesting and holding requirements` are met. The Board, however, has discretion to release sufficient rights to pay any associated tax liability. LTIP Awards, Retention & STI Shares
Share Rights (1) Retention Shares (1) Total
Total as a % of Issued Shares
Share Rights (2) Retention Rights (2)
STI Shares for FY 2012 (3) Total
Total as a % of issued Shares(4)
MD& CEO 0 0 0 0 6,781,250 0 0 6,781,250 0.20%
KMPExecutives
11,339,940 3,685,900 15,025,840 0.45% 5,052,679 3,789,510 3,259,575 12,101,764 0.36%
Other Executives & participants
34,973,500 5,056,500 40,030,000 1.20% 11,515,335 20,104,228 0 31,619,563 0.94%
Total 46,313,440 8,742,400 55,055,840 1.65% 23,349,264 23,893,738 3,259,575 50,502,577 1.50%
Notes:(1) Includes cash rights, vesting subject to satisfying relative TSR hurdles and a minimum 40 cent share price
(3) Assume share price of 40 cents (closing share price on 17 August 2012)(4) BSL Issued Capital at 3.3b shares(5) Target parcels calculated on base salary as at 30 June 2012
FY2012 FY2013
(2) Allocation based on share price of 40 cents and estimated participation levels. Vesting subject to a minimum 40 cent share price and 3-year service period with prorata vesting on retirement and redundancy.
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Page 22 of 47
HOW THESE TRANSITION POLICIES & PRINCIPLES APPLY TO THE MD & CEO
This section of the Remuneration Report provides shareholders with an explanation of how the policies referred to above have been applied to the MD & CEO. The Board, with his full support, has significantly reduced the MD & CEO’s total remuneration package for FY 2012. No salary increase, no Long Term Incentive (LTI) and no Short Term Incentive (STI) awards have been paid, resulting in a 52% year on year reduction in his remuneration or 41% of his target remuneration as shown in this table.
FY 2012 Actual Remuneration
$
FY 2011 Actual Remuneration
$
Base pay including superannuation 1,995,000 1,995,000
STI paid Nil 720,865
Total take home pay 1,995,000 2,715,865
LTI awarded Nil 1,440,264
Total remuneration 1,995,000 4,156,129
Reduction in total remuneration from FY 2011
52%
Actual remuneration received as a % of target remuneration
41%
A summary of the decisions made for FY 2012 and FY 2013 follows: i) Base Pay The Board has determined that the MD&CEO’s base pay is appropriately positioned around the 60th percentile relative to the selected peer group as at 3 April 2012. Consequently, the MD & CEO has not had a salary increase in FY 2012. Furthermore, the MD & CEO’s salary will be frozen again in FY 2013.
The following table sets out the MD & CEO’s actual remuneration for FY 2012 relative to his potential target remuneration and to the 60th percentile of the selected peer group.
Fixed pay
$
Short term incentive
$
Long term incentive
$
Total remuneration
$
BSL CEO actual remuneration FY 2012
1,995,000 Nil Nil 1,995,000
BSL CEO Target remuneration 1,995,000 1,400,000 1,491,875 4,886,875
Peer Group remuneration at the 60th%*
1,998,150 1,718,000 1,397,000 5,144,000
(Source PWC remuneration benchmarking report dated 3 April 2012)
*Note the individual remuneration components (including the total) are benchmarked to market separately. ii) Short Term Incentive (STI) Although the MD & CEO has achieved the targets set by the Board in relation to reduction in debt, cash management and Company restructuring in view of EBIT performance, the MD & CEO’s STI for FY 2012 will be zero. The payment of a target STI for FY 2013 will depend upon the achievement of the following target objectives: delivery of a major strategic transformational initiative; returning to a positive underlying profit and top quartile TSR performance relative to the ASX 100. Details of the targets and results will be disclosed to shareholders in the FY 2013 Remuneration Report. Importantly, if any STI is awarded, it will be delivered equally in cash and equity. The equity will be subject to a 12 month trading lock and will lapse on termination due to resignation or for cause. iii) Long Term Incentive (LTI) The MD & CEO did not receive any LTI share rights in FY 2012 in view of the Company’s financial performance and no share rights have vested since the 2005 award vested in September 2008. The MD & CEO will receive share rights for FY 2013 under the existing terms of his LTI plan, as approved by shareholders at the AGM in 2010. However, the MD & CEO agreed that in addition to the relative total shareholder return hurdle previously approved, no share rights will vest unless the share price is at least 40 cents, the price offered to shareholders at the time of the capital raising in November 2011. Shareholders will be asked to approve a new LTI plan for the MD & CEO to apply in FY 2014 and FY 2015 which will have a five year period from the date of the award of share rights before vested shares can be accessed. The new LTI plan will be
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BlueScope Steel Limited Directors’ Report
Page 23 of 47
more restrictive than the current plan with the removal of re-testing, a reduction in the number of shares that will vest at the 51st percentile of relative ASX100 TSR performance from 52% to 40%, and a requirement to hold any shares that do vest after 3 years for a further period of two years. Share rights are not eligible for dividends until they vest. Share rights would be awarded using the current formula of 155% of base salary per annum. This percentage was agreed when the MD & CEO’s initial contract was signed and at that time reflected an increased weighting to LTI and a reduced weighting of his STI. The following table shows what the MD & CEO will earn in cash and shares if he achieves target or stretch objectives in FY 2013 including his potential LTI award assuming full vesting in three years.
$ % $ % $ % $ %
Base Pay 1,750,000 1,750,000 1,750,000 1,750,000
Super 245,000 245,000 245,000 245,000
Fixed Pay 1,995,000 1,995,000 1,995,000 1,995,000
Cash STI 1,400,000 2,100,000 700,000 1,050,000
Total Cash 3,395,000 69% 4,095,000 73% 2,695,000 55% 3,045,000 55%STI Shares - - 700,000 1,050,000
Retention Shares - - - -
LTIP Share Rights
(based on Fair Value) 1,491,875 1,491,875 1,491,875 1,491,875
Total Equity 1,491,875 31% 1,491,875 27% 2,191,875 45% 2,541,875 45%TOTAL REM 4,886,875 100% 5,586,875 100% 4,886,875 100% 5,586,875 100%
Previous Remuneration Structure New Remuneration StructureTarget Stretch Target Stretch
5. HOW THESE TRANSITION POLICIES & PRINCIPLES APPLY TO KMP EXECUTIVES
This section explains how the executive remuneration policies adopted as part of our transition process have been applied to KMP Executives during FY 2012 and FY2013. i) Base Pay The KMP Executive Team was reduced by two in FY 2012 resulting in the total cost of KMP Executive fixed remuneration declining by 10%. However, increased accountabilities from the restructure of the business in FY 2012 and the need to retain remaining KMP Executives to lead major strategic initiatives resulted in increases to base pay reflecting peer group benchmarking. There will be no “across-the-board” base pay increase for all KMP Executives for FY 2013. Mr Mark Vassella was promoted to the new role of Chief Executive – BlueScope Australia & New Zealand which comprises responsibility for businesses previously led by Mr Noel Cornish, Mr Paul O’Keefe and Mr Keith Mitchelhill. His base pay increased to $1,000,000. Mr Sanjay Dayal had his base pay increased to $880,000 in recognition of the additional responsibilities arising from the establishment of the Building Products business unit comprising a combination of the ASEAN, Indian, Steelscape and ASC Profiles businesses on the US West Coast. Mr Bob Moore, Chief Executive, China had his base pay increased to $700,000 with effect from 1 July 2012 reflecting the increased responsibilities in leading the Company’s pre-engineered steel building businesses stretching from North America across China, Asia, India, the Middle East and Australia. Mr Keith Mitchelhill replaced Mr Vassella as Chief Executive, North America. He was seconded to Kansas City and his base pay increased to $852,000. The Corporate KMP group, Mr Charlie Elias – CFO, Mr Ian Cummin – EGM People & Organisation Performance and Mr Michael Barron – CLO and Mr Pat Finan EGM Global Building and Construction Markets received increases ranging from 8% to 10%. These increases re-aligned their base remuneration to the market, after the salary freeze in FY 2010 and nominal increases in FY 2011. Over the past three years salary increases for corporate KMP Executives have averaged between 4% and 6%. Mr Noel Cornish, formerly Chief Executive ANZ Manufacturing Businesses, retired on 31 July 2011 and did not receive a base pay increase for FY 2012. Mr Paul O’Keefe, formerly Chief Executive Australian Coated & International Markets left the Company on 27 January 2012 as a result of the restructure of the Australian business. He did not receive a base pay increase during FY 2012. ii) Short Term Incentive As BlueScope’s overall financial performance did not reach the required EBIT threshold established by the Board, no STI is payable for Company Financials. This applies notwithstanding that the cash flow performance has been excellent. In addition, the Company’s safety LTIFR performance for the year did not meet the required hurdle. Accordingly, no STI is payable for safety performance. STI awards were made for achievement of positive business unit EBIT objectives, achieving outstanding cashflow results and implementation of fundamental restructuring initiatives to underpin a turnaround in company financial performance.
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Page 24 of 47
In addition, KMP Executives will have half of their total STI awards withheld, and delivered as restricted shares. These will lapse if the KMP executive resigns or is terminated for cause within 12 months. No dividends will be payable during the period of the holding lock. Also, the Chief Executive BANZ will have 100% of his STI award withheld and delivered in equity. Half may be released early if certain H1 FY2013 objectives are achieved.
The basis of awards to individual KMP Executives are outlined below:
• Mark Vassella, and the corporate team of Charlie Elias, Ian Cummin and Michael Barron delivered the Australian restructure including: - Achieving targeted fixed cost reductions of $315m; - Containing restructure costs to $380m, below the targeted range of $400-$500m; - Releasing working capital of $583m between October 2011 and June 2012, after adjusting for the timing of certain
year end cashflows, better than the expected range of $400-500m; - Negotiating positive outcomes for major contract renegotiations; and - Significantly reducing exposure to loss-making export sales.
In addition, the corporate team managed the sale of Metl Span at an attractive price, a significant initiative contributing to the reduction in net debt.
• Sanjay Dayal – Delivered business unit threshold EBIT and stretch cashflow objectives for the ASEAN business, including restructuring the cost base of the ASEAN Building Products.
• Bob Moore – Delivered business unit EBIT and cashflow objectives, including improving the profitability of the coated business in China by expanding sales channels and sourcing lower cost feed. In addition, he established the Global Buildings Solutions business by merging the US, China, ASEAN and Australian businesses into a single group with a lower cost structure.
• Keith Mitchelhill - Rationalised the US buildings footprint achieving break-even run rate at volumes almost half Pre-GFC levels delivering a significant underlying EBIT improvement versus FY2011.
• Pat Finan - Established the global sales and marketing function for the Building Solutions business, delivering stretch sales revenue with new global accounts and enabling significant engineering cost reductions through the introduction of BlueScope’s proprietary Vision Engineering system in Vietnam and Thailand. In addition, he restructured the Australian Solutions business to achieve positive underlying run rate and divested the Australian Urban Water business.
Further details of the STI awards are included in this Remuneration Report at paragraph 7.2 and details of the STI forfeited are included at paragraph 7.3. Due to outstanding achievements in cash delivery and debt reduction, overall STI awards are higher than FY 2011. However, because half of the STI awards have been withheld in “at risk” shares, and the MD and CEO did not receive an STI, the payment of cash STI awards is significantly less than FY 2011 for all KMP. The total cash STI awards in aggregate for the CEO & MD and all KMP Executives for FY 2012 was $994,476 compared to $3,051,813 for FY 2011. iii) Long Term Incentive As the usual timing of the award of LTI for KMP Executives generally coincided with the capital raising initiative, the Board deferred this award until 1 February 2012 at 41.1 cents. LTI conditions were significantly tightened reflecting investor feedback including: 1) eliminating the previous two year retesting period in favour of a single performance hurdle test on 1 February 2015; 2) reducing the number of share rights that will vest at the 51st percentile of relative ASX 100 TSR (from 52% of share rights to 40%) through to the 75th percentile where vesting is unchanged at 100% of share rights; and 3) imposing a further one year trading lock on any share rights that do vest. In relation to FY 2013, and as part of this transition process the Board will halve the value of LTI that would normally be awarded, and the quantum of share rights will be set to reflect, as a minimum, the 40 cent capital raising price. In addition, we have increased the trading lock over vested share rights from one to two years. The same tighter TSR hurdle introduced for FY 2012 will also be applied, together with a minimum 40 cent share price for vesting, only 40% vesting at the 51st percentile and with no re-testing. iv) Retention Equity As foreshadowed in the 2011 Remuneration Report, retention shares were awarded to continuing KMP Executives in FY2012. Those retention shares will lapse if the executive resigns or is terminated for cause before 1 July 2014. The Board retains discretion in other circumstances, such as redundancy and agreed retirement. As a condition for participation, KMP Executives agreed to reduce the maximum termination payment previously included in their employment contracts. This intervention was taken to address the unique circumstances facing the Company and the critical contribution required by KMP Executives in leading the restructure of the Company. The Board intends to introduce a new retention rights scheme in FY 2013. This has been funded by halving the value of the executive LTI program and there is no change in cost to shareholders. Retention rights will have a retention hurdle of three years from the time of the award, and a minimum share price of 40 cents for vesting to occur. These retention rights will lapse in circumstances of resignation or termination for cause. The Board retains discretion in other circumstances. It is not envisaged that this retention rights structure will continue after FY 2013.
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BlueScope Steel Limited Directors’ Report
Page 25 of 47
A key objective in determining the remuneration structure during this transition period has been to increase the percentage of remuneration paid in deferred equity and reduce the percentage paid in cash. The following table illustrates what the total remuneration would look like for a sample KMP Executive other than the MD &CEO if the executive were to achieve target or stretch STI outcomes in FY2012 and FY2013 and were also eligible for all LTI and retention rights offered. This example shows the target and maximum outcomes and provides the breakdown of cash and deferred equity with comparisons to the previous structure.
$ % $ % $ % $ %
Base Pay 800,000 800,000 800,000 800,000
Super 112,000 112,000 112,000 112,000
Fixed Pay 912,000 912,000 912,000 912,000
Cash STI 480,000 720,000 240,000 360,000
Total Cash 1,392,000 80% 1,632,000 82% 1,152,000 66% 1,272,000 64%STI Shares - - 240,000 360,000
Retention Shares - - 176,000 176,000
LTIP Share Rights
(based on Fair Value) 352,000 352,000 176,000 176,000
Total Equity 352,000 20% 352,000 18% 592,000 34% 712,000 36%TOTAL REM 1,744,000 100% 1,984,000 100% 1,744,000 100% 1,984,000 100%
Previous Remuneration Structure New Remuneration StructureTarget Stretch Target Stretch
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47
V) L
ong
Term
Ince
ntiv
e Pl
an
The f
ollo
win
g t
able
sum
mari
ses t
he k
ey f
eatu
res o
f th
e c
urr
ent
unveste
d long t
erm
incentive p
lan a
ward
s.
SUM
MA
RY T
ABL
E O
F LO
NG T
ERM
INC
ENTI
VE
PLA
N A
WA
RDS
FY
2007
FY
2008
FY
2009
FY
2010
1FY
2011
1FY
2012
1
Gra
nt D
ate
18 N
ovem
ber
2006
5 N
ovem
ber
2007
(all
executiv
es
exclu
din
g M
D &
CEO
)
28 N
ovem
ber
2008
30 N
ovem
ber
2009
30 N
ovem
ber
2010
16 A
pril 2
012
(The
gran
t to th
e MD
& CE
O wa
s sub
ject to
shar
ehold
er
appr
oval
at th
e 200
6 AGM
)14
Nov
embe
r 200
7 (M
D &
CEO)
(The
gran
t to th
e MD
& CE
O wa
s sub
ject to
shar
ehold
er
appr
oval
at th
e 200
8 AGM
)
(The
gran
t to th
e MD
& CE
O wa
s sub
ject to
shar
ehold
er
appr
oval
at th
e 200
8 AGM
)
(The
gran
t to th
e MD
& CE
O wa
s sub
ject to
shar
ehold
er
appr
oval
at th
e 200
9 AGM
)(In
view
of C
ompa
ny fin
ancia
l per
form
ance
, the M
D &
CEO
did no
t rece
ive a
gran
t of s
hare
right
s this
year
)
Exerc
ise D
ate
Fro
m 1
Septe
mber
2009
Fro
m 1
Septe
mber
2010
Fro
m 1
Septe
mber
2011
Fro
m 1
Septe
mber
2012
Fro
m 1
Septe
mber
2013
Fro
m 1
Febru
ary
2015
Expiry D
ate
31 O
cto
ber
2011
31 O
cto
ber
2012
31 O
cto
ber
2013
31 O
cto
ber
2014
31 O
cto
ber
2015
31 J
anuary
2015
Tota
l Num
ber
of
Share
Rig
hts
Gra
nte
d2,3
10,9
50
1,9
34,8
45
2,2
48,2
46
8,0
90,4
80
10,5
36,5
50
43,1
90,9
60
Tota
l Num
ber
of
Cash R
ights
Gra
nte
d2
158,0
00
166,0
00
3,1
22,4
80
Num
ber
of
Part
icip
ants
at G
rant D
ate
206
217
255
313
285
266
Num
ber
of
Curr
ent Part
icip
ants
0113
162
282
265
266
Exerc
ise P
rice
Nil
Nil
Nil
Nil
Nil
Nil
Fair V
alu
e E
stim
ate
at G
rant D
ate
$12,0
12,7
80
$11,4
68,2
63
$2,7
65,3
43
$10,5
16,8
12
$9,7
23,1
80
$7,2
34,2
94
Fair V
alu
e p
er
Share
Rig
ht at G
rant D
ate
$5.5
3
$6.3
7 (
5 N
ov 2
007)
$6.4
2 (
14 N
ov 2
007)
$1.6
4$1.7
0$1.2
0$0.2
1
Share
Rig
hts
Lapsed s
ince G
rant D
ate
2,3
10,9
50
860,0
73
734,8
50
1,1
54,0
49
1,6
20,3
69
0
Cash R
ights
Lapsed s
ince G
rant D
ate
--
-13,0
00
26,0
00
0
Vestin
g S
chedule
TS
R H
urd
le -
75th
-100th
perc
entil
e100%
100%
100%
100%
100%
100%
TS
R H
urd
le -
51st-
<75th
perc
entil
e
No v
estin
g u
ntil
51st perc
entil
e, at w
hic
h
poin
t 40%
vests
incre
asin
g o
n a
linear
basis
to 1
00%
vestin
g a
t th
e 7
5th
perc
entil
e. A
ny
unveste
d S
hare
Rig
hts
will la
pse.
TS
R H
urd
le -
< 5
1st perc
entil
eA
ll S
hare
Rig
hts
will la
pse.
Vestin
g O
utc
om
e 1
st Perf
orm
ance P
eriod
0.0
0%
0.0
0%
0.0
0%
--
-
Vestin
g O
utc
om
e 2
nd P
erf
orm
ance P
eriod
0.0
0%
0.0
0%
0.0
0%
--
No r
ete
stin
g
Vestin
g O
utc
om
e 3
rd P
erf
orm
ance P
eriod
0.0
0%
0.0
0%
--
-N
o r
ete
stin
g
Vestin
g O
utc
om
e 4
th P
erf
orm
ance P
eriod
0.0
0%
0.0
0%
--
-N
o r
ete
stin
g
Vestin
g O
utc
om
e 5
th P
erf
orm
ance P
eriod
0.0
0%
--
--
No r
ete
stin
g
1 T
hese g
rants
are
with
in the f
irst perf
orm
ance p
eriod a
nd a
re y
et to
be teste
d.
2 F
or
som
e c
ountr
ies, w
here
there
are
additi
onal r
estr
ictio
ns r
ela
ting to a
ward
s o
f equity
, a 'C
ash R
ights
' aw
ard
is m
ade w
hic
h d
eliv
ers
a c
ash p
aym
ent on v
estin
g.
There
is n
o v
estin
g u
ntil
the 5
1st perc
entil
e, at w
hic
h p
oin
t 52%
vests
incre
asin
g o
n a
linear
basis
to 1
00%
vestin
g a
t th
e 7
5th
perc
entil
e. A
ny u
nveste
d S
hare
Rig
hts
will b
e c
arr
ied o
ver
for
assessm
ent at subsequent perf
orm
ance p
eriods.
All
Share
Rig
hts
will b
e c
arr
ied o
ver
for
assessm
ent at subsequent perf
orm
ance p
eriods.
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WHAT IS THE RELATIONSHIP BETWEEN COMPANY PERFORMANCE AND REMUNERATION?
The short-term and long-term incentive components of the remuneration structure reward achievement against Company and individual performance measures over one year and multi-year timeframes. Company profit and TSR performance over the last year have been unsatisfactory notwithstanding significant management achievements in restructuring BlueScope to adapt to major challenges affecting the industry. Executive remuneration has been substantially reduced as a consequence. Nevertheless, the Board believes it is important to retain our leadership team to deliver the turnaround initiatives underway and to recognise that some BlueScope businesses are performing well.
The table below summarises the Company’s performance for FY 2012 and the previous 4 years.
Measure30 June
200830 June
200930 June
201030 June
201130 June
2012
Share Price $11.34 $2.53 $2.10 $1.21 $0.30
Dividend per Share:
Ordinary (cents) 49 5 5 2 0
Earnings per Share (cents) 1 56.0 -6.0 5.8 -48.6 -39.1
REPORTED 2
NPAT $ million $596 -$66 $126 -$1,054 -$1,044
EBIT $ million $1,063 $15 $240 -$1,043 -$820
EBITDA $ million $1,420 $380 $590 -$687 -$489
UNDERLYING 2
NPAT $ million $809 $35 $110 -$127 -$238
EBIT $ million $1,267 $152 $253 -$107 -$224
EBITDA $ million $1,618 $506 $594 $240 $99
1 Prior period earnings per share has been restated for the bonus element of the four-for-five share rights issue undertaken in December 2011 using a factor of 1.1823.
2 The use of the terms ‘reported’ refers to IFRS financial information and ‘underlying’ to non-IFRS financial information. Underlying earnings are categorised as non-IFRS financial information prepared in accordance with ASIC Regulatory Guide 230 – Disclosing non-IFRS financial information, issued in December 2011. Underlying adjustments 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 business in each reporting period. These adjustments are assessed on a consistent basis from period to period and include both favourable and unfavourable items. The non-IFRS financial information, whilst not subject to an audit or review, has been extracted from the financial report which has been subject to audit by our external auditors. A detailed reconciliation of adjustments to the reported financial information is provided on page 5 of the Director’s Report.
As BlueScope’s overall financial performance did not reach the required threshold established by the Board of an underlying profit for the 2nd half of the financial year, no STI is payable for Company Financials which make up 25% of total STI at target. The Company’s safety LTIFR performance for the year did not meet the required hurdle. Accordingly, no STI is payable for safety performance which makes up 5% of STI at target. For KMP Executives, who achieved quantified results which otherwise would have warranted higher STI, awards have been capped at 60% of target (36% of base pay) if they did not achieve underlying EBIT objectives. STI awards were made for achievement of positive EBIT financial objectives, achieving outstanding cashflow results and implementation of fundamental restructuring initiatives to underpin a turnaround in Company financial performance.
For
per
sona
l use
onl
y
Blu
eSco
pe S
teel
Lim
ited
Dire
ctor
s’ R
epor
t
Page 2
8 of
47
SPEC
IFIC
REM
UN
ERAT
ION
DET
AILS
7.1
Key
Man
agem
ent P
erso
nnel
– D
irect
ors’
Rem
uner
atio
n
Deta
ils o
f th
e a
udited r
em
unera
tion f
or
the y
ear
ended 3
0 J
une 2
012 f
or
each N
on-E
xecutive D
irecto
r of
Blu
eS
cope a
re s
et
out
in t
he f
ollo
win
g t
able
KM
P R
emun
erat
ion
– N
on E
xecu
tive
Dire
ctor
s
Nam
eYe
arFe
esNo
n-m
onet
ary
Sub-
Tota
lPo
st-e
mpl
oym
ent
bene
fits
1To
tal 2
$$
$$
$
Dire
ctor
- Cu
rren
tG
J K
raehe
2012
472,5
00
10,6
72
483,1
72
15,7
75
498,9
48
2011
460,3
85
10,4
98
470,8
83
15,1
99
486,0
82
R J
McN
eill
y2012
273,0
00
-
273,0
00
15,7
75
288,7
75
2011
266,0
00
-
266,0
00
15,1
99
281,1
99
D J
Gra
dy
2012
197,4
00
-
197,4
00
15,7
75
213,1
75
2011
192,3
39
-
192,3
39
15,1
99
207,5
38
H K
McC
ann
2012
190,0
50
-
190,0
50
15,7
75
205,8
25
2011
185,1
77
-
185,1
77
15,1
99
200,3
76
Y P
Tan
2012
205,8
00
-
205,8
00
15,9
91
221,7
91
2011
200,5
23
-
200,5
23
15,1
99
215,7
22
D B
Gro
llo2012
193,1
03
-
193,1
03
15,7
75
208,8
78
2011
185,1
77
-
185,1
77
15,1
99
200,3
76
K A
Dean
2012
207,9
00
-
207,9
00
15,7
75
223,6
75
2011
202,5
69
-
202,5
69
15,1
99
217,7
68
P B
ingham
-Hall
2012
175,6
65
-
175,6
65
15,7
75
191,4
40
2011
38,8
38
-
38,8
38
3,4
49
42,2
87
Tota
l 201
21,9
15,4
18
10,6
72
1,9
26,0
90
126,4
16
2,0
52,5
06
Tota
l 201
11,7
31,0
07
10,4
98
1,7
41,5
05
109,8
42
1,8
51,3
47
Shor
t-ter
m e
mpl
oyee
ben
efits
1
Post
em
plo
ym
ent
benefits
rela
te t
o g
overn
ment
com
puls
ory
supera
nnuation c
ontr
ibutions.
2
There
was n
o i
ncre
ase i
n d
irecto
rs'
fees d
uring t
he y
ear.
The F
Y2011 f
igure
s i
nclu
de 6
month
s o
f th
e 5
% i
ncre
ase f
rom
1 J
anuary
2011 a
nd t
he F
Y2012 f
igure
re
flects
the i
ncre
ase f
or
the f
ull
12 m
onth
s t
o 3
0 J
une 2
012.
The p
revio
us i
ncre
ase i
n b
ase f
ees o
ccurr
ed o
n 1
January
2006 a
nd i
n C
om
mitte
e f
ees o
n 1
January
2008.
For
per
sona
l use
onl
y
BlueScope Steel Limited Directors’ Report
Page 29 of 47
Key Management Personnel – Executives (including Managing Director and Chief Executive Officer’s) remuneration
The Key Management Personnel of BlueScope Steel Limited includes those members of the KMP Executive Team who have the authority and responsibility for planning, directing and controlling the activities of the Company. These executives also represent the five most highly remunerated executives within the organisation.
The following table shows the composition of the KMP Executive Team during the year.
Key Management Personnel - Executives
Current KMP - Executives
Position Dates position held during year ended 30 June 2012
P F O’Malley Managing Director and Chief Executive Officer
1 July 2011 – 30 June 2012
I R Cummin Executive General Manager, People and Organisation Performance
1 July 2011 – 30 June 2012
M R Vassella Chief Executive BlueScope Australia and New Zealand
1 July 2011 – 30 June 2012
S R Elias Chief Financial Officer 1 July 2011 – 30 June 2012
M G Barron Chief Legal Officer and Company Secretary
1 July 2011 – 30 June 2012
K A Mitchelhill President North America 1 July 2011 – 30 June 2012
S Dayal Chief Executive, Asia 1 July 2011 – 30 June 2012
R Moore President, China 1 July 2011 – 30 June 2012
P Finan Executive General Manager, Global Building & Construction Markets
1 July 2011 – 30 June 2012
P E O’Keefe2 Former Chief Executive, Australian Coated & Industrial Markets
1 July 2011 – 27 January 2012
N H Cornish1 Former Chief Executive, Australian & New Zealand Steel Manufacturing Businesses
1 July 2011 – 31 July 2011
1 Noel Cornish retired from the Company on 31 July 2011.
2 Following the restructure of the Australian Business involving the consolidation of three ELT roles in Australia to one role, Paul O’Keefe’s role became redundant and he left the Company 27 January 2012.
The audited information contained in the following tables represents the annual remuneration for the year ended 30 June 2012 for the KMP. The aggregate remuneration of the KMP of the Company is set out below:
2012 2011$
Short-term employee benefits1 11,324,526 12,009,503
Post-employment benefits 346,715 432,438
Other long-term benefits 335,994 231,934
Termination benefits - 578,810
Share-based payments2,3 4,385,420 2,452,180
Total 16,392,655 15,704,867 1 This includes base salary, annual leave accruals, non-monetary benefits, superannuation received as cash allowance
and STI payments.
2 This relates to awards of share rights that can only vest when performance hurdles are achieved.
3 For some countries, where there are additional restrictions relating to awards of equity, a 'Cash Rights' award is made which delivers a cash payment on vesting.
The remuneration of each member of the KMP of the Company is set out in the following tables.
For
per
sona
l use
onl
y
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eSco
pe S
teel
Lim
ited
Dire
ctor
s’ R
epor
t
Page 3
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47
KM
P - R
emun
erat
ion
–201
2
Shor
t-te
rm e
mpl
oyee
ben
efits
Shar
e-ba
sed
paym
ent
Nam
e
Year
Salary and feesMovement in annual leave provision1
Bonus
Non-monetary
Other2
Sub-total
Post-employment benefits3
Other long-term employee benefits4
Termination benefits
Shares and units
Options and rights9
Total13
% of performance related pay10
$$
$$
$$
$$
$$
$$
%
Exec
utiv
e Di
rect
orP F
O'M
alle
y 5
,92012
1,7
50,0
00
-20,0
08
0995
220,0
00
1,9
50,9
87
25,0
00
43,8
11
042,7
25
741,4
98
2,8
04,0
21
26.4
2011
1,7
02,3
46
-11,9
03
720,8
65
980
213,4
04
2,6
25,6
92
25,0
00
51,0
79
088,7
54
997,8
04
3,7
88,3
29
45.4
KMP
exec
utiv
esN
H C
orn
ish
11
2012
89,4
32
00
28,3
94
0117,8
26
12,5
20
00
0-3
60,0
31
-229,6
85
0.0
2011
770,5
60
-16,2
84
254,8
45
1,8
69
01,0
10,9
90
109,5
26
34,3
86
00
213,2
79
1,3
68,1
81
34.2
M R
Vassella
6,9
2012
961,5
38
29,9
17
0538,3
12
110,5
77
1,6
40,3
44
24,0
38
123,1
88
0267,9
21
603,2
38
2,6
58,7
29
22.7
2011
762,6
00
-39,6
19
269,3
61
261,1
05
81,1
90
1,3
34,6
37
25,0
00
27,8
49
07,8
89
188,7
45
1,5
84,1
20
28.9
P E
O'K
eefe
12
2012
356,1
91
050,6
46
5,1
67
34,4
82
446,4
86
15,3
84
00
0-1
06,1
45
355,7
25
0.0
2011
573,2
98
19,5
87
182,3
25
055,2
91
830,5
01
25,0
00
16,8
40
578,8
10
0145,3
55
1,5
96,5
06
20.5
I R C
um
min
52012
618,3
76
8,2
31
111,6
00
995
30,7
96
769,9
98
55,7
69
24,7
01
0166,1
00
289,0
08
1,3
05,5
76
30.7
2011
569,7
52
4,6
39
196,3
41
980
53,6
59
825,3
71
26,1
06
17,1
76
00
158,4
11
1,0
27,0
64
34.5
M G
Barr
on
2012
618,3
76
16,5
06
111,6
00
035,5
37
782,0
19
50,0
00
26,4
48
0166,1
00
289,0
08
1,3
13,5
75
30.5
2011
569,7
52
13,5
99
196,3
41
029,7
65
809,4
57
50,0
00
17,7
98
00
145,2
61
1,0
22,5
16
33.4
S R
Elia
s
2012
760,5
90
42,0
00
137,3
40
1,4
93
81,4
83
1,0
22,9
06
25,0
00
24,8
88
0204,4
27
347,8
32
1,6
25,0
53
29.9
2011
683,7
08
38,1
48
237,5
54
070,7
71
1,0
30,1
81
25,0
00
20,1
49
00
169,7
06
1,2
45,0
36
32.7
S D
ayal 6
2012
835,7
10
22,5
43
217,8
00
-25,4
10
67,7
70
1,1
18,4
13
47,9
17
35,5
31
056,3
63
423,8
52
1,6
82,0
76
38.1
2011
680,9
73
23,7
13
300,6
23
-90,0
07
45,5
50
960,8
52
50,0
00
18,9
17
016,0
67
115,2
10
1,1
61,0
46
35.8
K A
Mitc
helh
ill 5
,82012
852,0
00
44,5
60
127,8
00
316,1
37
94,2
80
1,4
34,7
77
25,0
00
27,2
99
0239,9
53
329,0
71
2,0
56,1
00
22.2
2011
747,5
20
9,6
86
236,8
49
50,4
52
54,6
53
1,0
99,1
60
50,0
00
19,5
63
019,8
33
131,6
94
1,3
20,2
50
27.9
P J
Fin
an
6,7
,82012
445,5
06
5,6
07
82,7
64
357,3
92
0891,2
69
18,1
70
00
126,4
11
154,8
43
1,1
90,6
93
20.0
2011
302,8
23
-5,7
06
155,8
69
198,9
02
0651,8
88
17,6
39
00
026,4
66
695,9
93
26.2
R J
Moore
6,7
2012
604,0
00
-17,8
53
154,9
26
372,4
61
35,9
67
1,1
49,5
01
47,9
17
30,1
28
0161,8
50
241,3
96
1,6
30,7
92
24.3
2011
334,2
83
16,3
17
300,8
40
161,5
43
17,7
92
830,7
75
29,1
67
8,1
79
00
27,7
06
895,8
27
36.7
Tota
l 201
27,8
91,7
19
131,5
03
994,4
76
1,5
95,9
36
710,8
92
11,3
24,5
26
346,7
15
335,9
94
01,4
31,8
50
2,9
53,5
70
16,3
92,6
55
Tota
l 201
17,6
97,6
15
52,1
77
3,0
51,8
13
585,8
24
622,0
76
12,0
09,5
03
432,4
38
231,9
34
578,8
10
132,5
43
2,3
19,6
37
15,7
04,8
67
For
per
sona
l use
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y
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eSco
pe S
teel
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ited
Dire
ctor
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epor
t
Page 3
1 of
47
1 N
egative m
ovem
ent
in a
nnual le
ave p
rovis
ion indic
ate
s leave t
aken d
uring t
he y
ear
exceeded leave a
ccru
ed d
uring t
he c
urr
ent
year.
2 D
ue t
o c
hanges in t
he s
upera
nnuation legis
lation r
esultin
g in m
axim
um
contr
ibution levels
, m
em
bers
of
the D
efined C
ontr
ibution D
ivis
ion c
an e
lect
to r
eceiv
e a
pro
port
ion o
f th
eir s
upera
nnuation a
s
a c
ash a
llow
ance.
3 P
ost-
em
plo
ym
ent
benefits
rela
te t
o s
upera
nnuation a
rrangem
ents
. T
here
are
no o
ther
post-
em
plo
ym
ent
benefits
. 4 T
his
show
s m
ovem
ent
in long s
erv
ice leave b
enefits
during t
he y
ear.
5 N
on-m
oneta
ry inclu
des e
xecutive h
ealth c
heck.
6 N
on-m
oneta
ry inclu
des b
enefits
pro
vid
ed u
nder
the C
om
pany's
inte
rnational assig
nm
ent
polic
y e
.g.
accom
modation,
tax e
qualis
ation,
and m
edic
al covera
ge.
The C
om
pany c
ontinued t
o incur
costs
re
late
d t
o M
r V
assella
's N
ort
h A
merica a
ssig
nm
ent
as a
consequence o
f his
early r
etu
rn t
o A
ustr
alia
on a
ppoin
tment
as C
hie
f E
xecutive B
lueS
cope A
ustr
alia
an
d N
ew
Zeala
nd.
7 K
MP
appoin
ted t
o E
LT
during y
ear
ended 3
0 J
une 2
011.
Am
ounts
dis
clo
sed f
or
year
ended 3
0 J
une 2
011 a
re f
or
part
year
only
. 8 N
on-m
oneta
ry inclu
des r
elo
cation e
xpenses.
9 F
or
the M
D&
CE
O L
TI
repre
sents
the a
ccounting a
mort
isation o
f prior
year
aw
ard
s a
s n
o L
TI
aw
ard
was m
ade in F
Y2012.
10 T
he %
of
rem
unera
tion t
hat
is p
erf
orm
ance r
ela
ted r
ecognis
es S
TI
payouts
at
belo
w t
arg
et.
LT
I is
based o
n a
ccounting v
alu
es r
ath
er
than t
he a
mounts
actu
ally
receiv
ed.
The last
LT
I aw
ard
to v
est
was t
he 2
005 A
ward
that
veste
d in S
epte
mber
2008.
11
Mr
Corn
ish r
etire
d f
rom
the C
om
pany o
n 3
1 J
uly
2011.
No p
aym
ents
oth
er
than s
tatu
tory
entitlem
ents
were
paid
. T
he C
om
pany e
nte
red into
an a
gre
em
ent
with M
r C
orn
ish f
or
the p
rovis
ion o
f consultancy s
erv
ices f
or
a p
eriod o
f up t
o 2
years
. A
s p
art
of
this
arr
angem
ent
Mr
Corn
ish is a
mem
ber
of
the B
oard
s o
f N
ort
h S
tar
Blu
eS
cope S
teel and T
ata
Blu
eS
cope S
teel.
He a
lso r
epre
sents
B
lueS
cope o
n t
he E
xecutive o
f A
I G
roup a
nd p
rovid
es s
afe
ty leaders
hip
acro
ss o
ur
opera
tions,
part
icula
rly in A
sia
. I
n a
dditio
n,
he p
rovid
ed p
roje
ct
managem
ent
leaders
hip
during t
he c
om
mis
sio
nin
g
of
MC
L2 in I
ndonesia
.
12
Mr
O'K
eefe
left
the c
om
pany o
n 2
7 J
anuary
2012 d
ue t
o t
he r
estr
uctu
re o
f th
e A
ustr
alia
n b
usin
esses,
at
whic
h t
ime h
e w
as e
ntitled t
o a
term
ination p
aym
ent
of
12 m
onth
s b
ase p
ay,
under
the
term
s o
f his
em
plo
ym
ent
contr
act.
This
was d
isclo
sed in t
he F
Y2011 R
em
unera
tion R
eport
.
13
Notw
ithsta
ndin
g t
he r
eduction o
f th
e t
wo K
MP
Executives,
due t
o d
isclo
sure
s r
equired u
nder
Austr
alia
n A
ccounting S
tandard
s,
tota
l re
port
ed K
MP
rem
unera
tion f
or
FY
2012 is h
igher
than t
hat
report
ed
for
FY
2011 d
ue t
o incre
ases in b
ase p
ay a
s r
efe
rred t
o in p
ara
gra
ph 5
(i),
the inclu
sio
n o
f re
munera
tion f
or
Mr
Fin
an a
nd M
r M
oore
on a
full
year
basis
in F
Y2012 c
om
pare
d t
o a
part
year
basis
for
FY
2011,
an incre
ase in t
he n
um
ber
of
KM
P E
xecutives c
overe
d b
y t
he C
om
pany's
inte
rnational assig
nm
ent
polic
y a
nd t
he a
mort
isation o
f th
e s
pecia
l re
tention s
hare
aw
ard
s issued d
uring
the y
ear.
For
per
sona
l use
onl
y
BlueScope Steel Limited Directors’ Report
Page 32 of 47
7.3 Short term incentive awards
For the year ended 30 June 2012 no KMP executive received target STI. In addition half of any STI earned has been withheld and delivered as restricted shares. These will lapse if the executive resigns or is dismissed within 12 months of the award. Also, the Chief Executive BANZ will have 100% of his STI award withheld and delivered in equity. Half may be released early if certain H1 FY2013 objectives are achieved. Eligibility to receive an STI award is subject to the terms and conditions of the plan, including a minimum of six months performance during the plan year and employment during the period is not terminated for resignation or performance-related reasons.
Under the Company’s Short Term Incentive Plan each executive can earn between 0% and 150% (maximum) of the STI target award. The table below shows the, actual percentage outcome achieved and percentage forfeited for the year ended 30 June 2012.
SHORT TERM INCENTIVES
Name
Actual STI as a % of maximum STI for
year ended 30 June 2012
% of maximum STI forfeited for year
ended 30 June 2012
% %
Executive DirectorP F O'Malley 0 100
KMP executives N H Cornish 1 0 0
M R Vassella 40 60
P E O'Keefe 17 83
I R Cummin 40 60
M G Barron 40 60
S R Elias 40 60
S Dayal 55 45
K A Mitchelhill 33 67
P J Finan 38 62
R J Moore 57 431Mr Cornish retired on 31 July 2011 and w as not entitled to participate in the STI plan for the year
ending 30 June 2012.
For
per
sona
l use
onl
y
BlueScope Steel Limited Directors’ Report
Page 33 of 47
7.4 Share Rights Holdings
Share Rights granted, exercised and forfeited by the KMP during the year ended 30 June 2012 were as follows:
Name
Remuneration consisting of share rights1
Value of share rights granted during the year at grant date2
Value of share rights
exercised during the
year
Value of share rights at lapse date, that lapsed during the
year
Total value of share rights
granted, exercised and lapsed during
the year
% $ $ $ $
Executive DirectorP F O'Malley 0 0 387,653 387,653
KMP executivesN H Cornish3 - - - 376,554 376,554
M R Vassella 26 405,798 - - 405,798
P E O'Keefe4 - - - 200,840 200,840
I R Cummin 24 251,595 - 298,067 549,662
M G Barron 25 251,595 - 274,288 525,883
S R Elias 25 309,624 - - 309,624
S Dayal 31 357,101 - - 357,101
K A Mitchelhill 26 345,740 - - 345,740
P J Finan 31 214,834 - 154,840 369,674
R J Moore 27 245,102 - 132,720 377,822
1 This figure is calculated on the value of share rights awarded in the year ended 30 June 2012 as a percentage of the total value of
all remuneration received in that same year. 2 External valuation advice from PricewaterhouseCoopers Securities Limited has been used to determine the value of share rights
awarded in the year ended 30 June 2012. The valuation has been made using the Black-Scholes Option Pricing Model (BSM) that includes a Monte Carlo simulation analysis. 3
Mr Cornish retired on 31 July 2011.
4 Mr O'Keefe left the Company on 27 January 2012 following restructure of the Australian businesses.
The Share Rights awarded to executives under the September 2006 Award were tested after the last (31 August 2011) performance period and no vesting occurred. As this was the final performance period for the 2006 Award and as the Award has not vested, all Share Rights granted under the Award have been lapsed under the terms of the Award. The September 2007 Award was tested after the third (31 August 2011) and fourth (28 February 2012) performance periods and no vesting occurred. The September 2008 Award was tested after the first (31 August 2011) and the second (28 February 2012) performance periods and no vesting occurred. Both the September 2007 and 2008 Awards will be tested after the conclusion of the fifth and third performance period respectively on 31 August 2012.
Details of the audited Share Rights holdings for year ended 30 June 2012 for the KMP - Executives are set out in the following table. Refer to the Summary Table of Long Term Incentive Plan Awards (paragraph 5.V) for details with respect to fair values, exercise price and key dates.
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l use
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ited
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47
Sha
re R
ight
s ho
ldin
gs fo
r th
e fin
anci
al y
ear
ende
d 30
Jun
e 20
12
2012
Bala
nce
at
30 J
une
2011
Gra
nted
in
year
en
ded
30
June
201
2
Exer
cise
d in
yea
r en
ded
30
June
201
21
Laps
ed in
ye
ar
ende
d 30
Ju
ne 2
012
Bala
nce
at
30 J
une
2012
Ves
ted
and
not
yet
exer
cise
d in
yea
r en
ded
30
June
201
2
Unve
sted
at
30
June
20
12
Tota
l Sha
re
Righ
ts
vest
ed in
ye
ar e
nded
30
Jun
e 20
12
Exec
utiv
e Di
rect
orP F
O'M
alle
y2,6
77,7
31
0
-
70,1
00
2,6
07,6
31
-
2,6
07,6
31
-
KMP
exec
utiv
es-
N H
Corn
ish 2
668,1
70
-
-
446,9
77
221,1
93
-
221,1
93
-
M R
Vassella
584,5
68
1,9
32,3
70
-
-
2,5
16,9
38
-
2,5
16,9
38
-
P E
O'K
eefe
2454,4
29
-
-
149,2
92
305,1
37
-
305,1
37
-
I R
Cum
min
496,2
89
1,1
98,0
70
-
53,9
00
1,6
40,4
59
-
1,6
40,4
59
-
M G
Barr
on
491,9
89
1,1
98,0
70
-
49,6
00
1,6
40,4
59
-
1,6
40,4
59
-
S R
Elia
s522,9
19
1,4
74,4
00
-
-
1,9
97,3
19
-
1,9
97,3
19
-
S D
ayal
470,7
10
1,7
00,4
80
-
-
2,1
71,1
90
-
2,1
71,1
90
-
K A
Mitchelh
ill529,9
80
1,6
46,3
80
-
-
2,1
76,3
60
-
2,1
76,3
60
-
P J
Fin
an 3
347,2
10
1,0
23,0
20
-
28,0
00
1,3
42,2
30
-
1,3
42,2
30
-
R J
Moore
3365,1
83
1,1
67,1
50
-
24,0
00
1,5
08,3
33
-
1,5
08,3
33
-
1
The n
um
ber
of
share
s issued is e
qual to
the n
um
ber
of
rights
exerc
ised a
nd n
o a
mount
was p
aid
or
rem
ain
s u
npaid
for
each s
hare
issued.
2 M
r C
orn
ish a
nd M
r O
'Keefe
reta
in p
ro r
ata
Share
Rig
hts
with v
esting s
ubje
ct
to a
chie
vin
g p
erf
orm
ance h
urd
les.
3 M
r F
inan a
nd M
r M
oore
's S
hare
Rig
hts
hold
ings f
or
30 J
une 2
011 inclu
des s
hare
rig
ht
aw
ard
s f
rom
2006,
2007,
2008,
2009 &
2010
befo
re
becom
ing a
KM
P.
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sona
l use
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y
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SHAR
E R
IGH
TS h
oldi
ngs
for t
he fi
nanc
ial y
ear e
nded
30
June
201
1
2011
Bala
nce
at
30 J
une
2010
Gra
nted
in
year
en
ded
30
June
201
1
Exer
cise
d in
yea
r en
ded
30
June
201
11
Laps
ed in
ye
ar
ende
d 30
Ju
ne 2
011
Bala
nce
at
30 J
une
2011
Ves
ted
and
not
yet
exer
cise
d in
yea
r en
ded
30
June
201
1
Unve
sted
at
30
June
20
11
Tota
l Sha
re
Righ
ts
vest
ed in
ye
ar e
nded
30
Jun
e 20
11
Exec
utiv
e Di
rect
orP F
O'M
alle
y1,4
77,5
11
1,2
00,2
20
-
-
2,6
77,7
31
-
2,6
77,7
31
-
KMP
exec
utiv
es-
N H
Corn
ish
393,8
10
2
74,3
60
-
-
668,1
70
-
668,1
70
-
M R
Vassella
314,7
58
2
69,8
10
-
-
584,5
68
-
584,5
68
-
P E
O'K
eefe
249,5
39
2
04,8
90
-
-
454,4
29
-
454,4
29
-
I R C
um
min
293,4
29
2
02,8
60
-
-
496,2
89
-
496,2
89
-
M G
Barr
on
289,1
29
2
02,8
60
-
-
491,9
89
-
491,9
89
-
S R
Elia
s277,4
69
2
45,4
50
-
-
522,9
19
-
522,9
19
-
S D
ayal
225,4
00
2
45,3
10
-
-
470,7
10
-
470,7
10
-
K A
Mitc
helh
ill263,8
20
2
66,1
60
-
-
529,9
80
-
529,9
80
-
P J
Fin
an
2172,0
00
1
75,2
10
-
-
347,2
10
-
347,2
10
-
R J
Moore
3181,7
63
1
83,4
20
-
-
365,1
83
-
365,1
83
-
1 T
he n
um
ber
of
share
s issued is e
qual to
the n
um
ber
of
rights
exerc
ised a
nd n
o a
mount
was p
aid
or
rem
ain
s u
npaid
for
each s
hare
issued.
2 A
ppoin
ted t
o K
MP
on 1
Novem
ber
2010.
3 A
ppoin
ted t
o K
MP
on 1
Decem
ber
2010.
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The t
able
belo
w s
ets
out
the d
eta
ils o
f each s
pecific
share
rig
ht
tranche a
nd a
ward
s g
rante
d a
nd v
este
d d
uri
ng t
he y
ear
ended 3
0 J
une 2
012 f
or
each K
MP
.
Shar
e Ri
ghts
Aw
ard
Sum
mar
y
$ M
in$
Max
Exec
utiv
e Di
rect
orP F
O'M
alle
y70,1
00
18-N
ov-0
6-
100%
-
2011
-
-
231,0
53
14-N
ov-0
7-
-
231,0
53
2011
-
1,4
83,3
60
246,3
58
28-N
ov-0
8-
-
246,3
58
2012
-
404,0
27
930,0
00
30-N
ov-0
9-
-
930,0
00
2013
-
1,5
81,0
00
1,2
00,2
20
30-N
ov-1
0-
-
1,2
00,2
20
2014
-
1,4
40,2
64
016-A
pr-
12
-
-
02015
-
-
KMP
exec
utiv
esN
H C
orn
ish
70,1
00
18-N
ov-0
6-
100%
-
2011
-
51,7
56
05-N
ov-0
7-
100%
-
2011
-
-
56,9
54
28-N
ov-0
8-
100%
-
2012
-
-
215,0
00
30-N
ov-0
9-
36%
137,3
61
2013
-
233,5
14
2
74,3
60
30-N
ov-1
0-
69%
83,8
32
2014
-
100,5
98
M R
Vassella
47,3
20
05-N
ov-0
7-
-
47,3
20
2011
-
301,4
28
56,0
08
28-N
ov-0
8-
-
56,0
08
2012
-
91,8
53
211,4
30
30-N
ov-0
9-
-
211,4
30
2013
-
359,4
31
2
69,8
10
30-N
ov-1
0-
-
269,8
10
2014
-
323,7
72
1,9
32,3
70
16-A
pr-
12
-
-
1,9
32,3
70
2015
-
405,7
98
P E
O'K
eefe
211,5
00
18-N
ov-0
6-
100%
-
2011
-
-
38,8
17
05-N
ov-0
7-
10%
34,9
35
2011
-
222,5
36
41,7
22
28-N
ov-0
8-
12%
36,5
07
2012
-
59,8
71
157,5
00
30-N
ov-0
9-
17%
131,2
50
2013
-
223,1
25
2
04,8
90
30-N
ov-1
0-
50%
102,4
45
2014
-
122,9
34
I R C
um
min
5
3,9
00
18-N
ov-0
6-
100%
-
2011
-
-
38,4
47
05-N
ov-0
7-
-
38,4
47
2011
-
244,9
07
42,1
12
28-N
ov-0
8-
-
42,1
12
2012
-
69,0
64
158,9
70
30-N
ov-0
9-
-
158,9
70
2013
-
270,2
49
2
02,8
60
30-N
ov-1
0-
-
202,8
60
2014
-
243,4
32
1,1
98,0
70
16-A
pr-
12
-
-
1,1
98,0
70
2015
-
251,5
95
Shar
e Ri
ghts
yet
to
ves
t
Fina
ncia
l ye
ar in
whi
ch
awar
ds m
ay
vest
Val
ue o
f Sha
re R
ight
s no
t ve
sted
30
June
201
21
2012
Num
ber
of
Shar
e Ri
ghts
aw
arde
dDa
te o
f gr
ant
% v
este
d in
ye
ar e
nded
30
Jun
e 20
12
% fo
rfei
ted
in
year
end
ed
30 J
une
2012
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M G
Barr
on
2 4
9,6
00
18-N
ov-0
6100%
-
2011
-
-
38,4
47
05-N
ov-0
7-
-
38,4
47
2011
-
244,9
07
42,1
12
28-N
ov-0
8-
-
42,1
12
2012
-
69,0
64
158,9
70
30-N
ov-0
9-
-
158,9
70
2013
-
270,2
49
2
02,8
60
30-N
ov-1
0-
-
202,8
60
2014
-
243,4
32
1,1
98,0
70
16-A
pr-
12
-
-
1,1
98,0
70
2015
-
251,5
95
S R
Elia
s44,3
62
05-N
ov-0
7-
-
44,3
62
2011
-
282,5
86
48,8
17
28-N
ov-0
8-
-
48,8
17
2012
-
80,0
60
184,2
90
30-N
ov-0
9-
-
184,2
90
2013
-
313,2
93
2
45,4
50
30-N
ov-1
0-
-
245,4
50
2014
-
294,5
40
1,4
74,4
00
16-A
pr-
12
-
-
1,4
74,4
00
2015
-
309,6
24
S D
ayal3
45,4
00
28-N
ov-0
8-
-
45,4
00
2012
-
74,4
56
180,0
00
30-N
ov-0
9-
-
180,0
00
2013
-
306,0
00
2
45,3
10
30-N
ov-1
0-
-
245,3
10
2014
-
294,3
72
1,7
00,4
80
16-A
pr-
12
-
-
1,7
00,4
80
2015
-
357,1
01
K A
Mitc
helh
ill55,2
50
28-N
ov-0
8-
-
55,2
50
2012
-
90,6
10
208,5
70
30-N
ov-0
9-
-
208,5
70
2013
-
354,5
69
2
66,1
60
30-N
ov-1
0-
-
266,1
60
2014
-
319,3
92
1,6
46,3
80
16-A
pr-
12
-
-
1,6
46,3
80
2015
-
345,7
40
P J
Fin
an
4 2
8,0
00
18-N
ov-0
6-
100%
-
2011
-
-
1
9,0
00
14-N
ov-0
7-
-
19,0
00
2011
-
121,0
30
2
5,0
00
28-N
ov-0
8-
-
25,0
00
2012
-
41,0
00
1
00,0
00
30-N
ov-0
9-
-
100,0
00
2013
-
170,0
00
1
75,2
10
30-N
ov-1
0-
-
175,2
10
2014
-
210,2
52
1,0
23,0
20
16-A
pr-
12
-
-
1,0
23,0
20
2015
-
214,8
34
R J
Moore
4 2
4,0
00
18-N
ov-0
6-
100%
-
2011
-
-
2
4,0
00
14-N
ov-0
7-
-
24,0
00
2011
-
152,8
80
2
8,0
13
28-N
ov-0
8-
-
28,0
13
2012
-
45,9
41
1
05,7
50
30-N
ov-0
9-
-
105,7
50
2013
-
179,7
75
1
83,4
20
30-N
ov-1
0-
-
183,4
20
2014
-
220,1
04
1,1
67,1
50
16-A
pr-
12
-
-
1,1
67,1
50
2015
-
245,1
02
1 E
xte
rnal valu
ation a
dvic
e f
rom
Pricew
ate
rhouseC
oopers
Securities L
imited h
as b
een u
sed t
o d
ete
rmin
e t
he v
alu
e o
f S
hare
Rig
hts
held
by K
MP
at
30 J
une 2
012.
2 A
ward
gra
nte
d 2
006 p
rior
to a
ppoin
tment
to E
LT
.
3 D
ue t
o r
estr
ictions r
ela
ting t
o a
ward
s o
f equity in S
ingapore
, M
r D
ayal w
as a
ward
ed C
ash R
ights
in 2
012 w
hic
h d
eliv
ers
a c
ash
paym
ent
on v
esting.
4 A
ward
gra
nte
d 2
006,
2007,
2008 &
2009 p
rior
to a
ppoin
tment
to K
MP
.
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sona
l use
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y
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7.5
Shar
es A
war
ded
as R
emun
erat
ion
In t
he y
ear
ended 3
0 J
une 2
012 a
num
ber
of
senio
r executives w
ere
aw
ard
ed s
hare
s u
nder
a S
pecia
l S
hare
Rete
ntion P
lan.
Full
de
tails
of
the t
erm
s o
f th
e a
ward
of
these s
hare
s a
re inclu
ded in
para
gra
ph 3
(iii)
above.
Duri
ng t
he y
ear
som
e s
hare
s t
hat
were
aw
ard
ed u
nder
pre
vio
us s
pecia
l share
aw
ard
s v
este
d in t
he y
ear
ended 3
0 J
une 2
012.
Shar
e Aw
ard
Sum
mar
y
$ M
in$
Max
Exec
utiv
e Di
rect
orP F
O'M
alle
y17,0
00
06-A
ug-0
7100
-
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7.6 Share Holdings in BlueScope Steel Limited
The following table details the shares held by KMP – Non Executive Directors and Executives, as well as any related-party interests in BlueScope Steel Limited as at 30 June 2012.
SHARE HOLDINGS1 IN BLUESCOPE STEEL LIMITED
NameOrdinary shares held as at 30 June 2012
Ordinary shares held as at 30 June 2011
Non-Executive DirectorsG J Kraehe 641,297 286,279
R J McNeilly 2,378,704 1,321,502
D J Grady 377,007 128,382
H K McCann 162,368 152,720
Y P Tan 282,809 157,116
D B Grollo 230,681 128,156
K A Dean 146,924 41,624
P Bingham-Hall 122,000 -
Executive DirectorP F O'Malley 499,704 227,613
KMP executivesN H Cornish 2 67,199 67,199
M R Vassella 707,703 57,303
P E O'Keefe 3 115,303 15,303
I R Cummin 741,892 336,679
M G Barron 595,524 191,924
S R Elias 561,480 10,000
S Dayal 4 20,000 20,000
K A Mitchelhill 674,099 77,666
P J Finan 493,851 63,695
R J Moore 1,346,708 355,315
1 lncluding related party interests.
2 Mr Cornish retired on 31 July 2011.
3 Mr O'Keefe left the company on 27 January 2012 following the restructure of the Australian businesses.
4 Mr Dayal also holds 483,800 Cash Rights awarded under the Special Retention Award.
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8. NON-EXECUTIVE DIRECTORS’ REMUNERATION
The Committee, on behalf of the Board, seeks the advice of expert external remuneration consultants to ensure that fees and payments reflect the duties of Board Members and are in line with the market. The Chairman and the Deputy Chairman of the Board do not participate in any discussions relating to the determination of their own fees.
Non-Executive Directors do not receive share rights or other performance-based rewards. Non-Executive Directors are expected to acquire over time a shareholding in the Company at least equivalent in value to their annual remuneration.
Fees are normally reviewed annually on 1 January. In response to the Company’s financial performance, the Board decided that there would be no increase in directors’ fees on 1 January 2012. The schedule of fees effective 1 January 2012, and which currently applies, is as follows:
Role Fees effective 1 Jan 2012
Chairman1 $472,500
Deputy Chairman1 $273,000
Non-Executive Director $157,500
Chairman of Audit and Risk Committee $36,750
Member of Audit and Risk Committee $18,900
Chairman of Remuneration and Organisation Committee
$26,250
Member of Remuneration and Organisation Committee
$13,650
Chairman of Health, Safety and Environment Committee
$26,250
Member of Health, Safety and Environment Committee
$13,650
Travel and Representation Allowance2 $21,000
1 Additional fees are not payable to the Chairman and Deputy Chairman for membership of Committees.
2 Allowance paid to Tan Yam Pin who is based in Singapore.
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 2012 amounted to $2,052,507.
Compulsory superannuation contributions per director capped at $16,470 per annum (commencing 1 July 2012) are paid on behalf of each Director. Compulsory superannuation contributions for the year ended 30 June 2012 were $15,775 per annum. Non-Executive Directors do not receive any other retirement benefits.
9. KMP EXECUTIVES – SUMMARY OF TERMS OF EMPLOYMENT
9.1 Managing Director and Chief Executive Officer – Outline of Employment Contract
Paul O’Malley was appointed to the position of Managing Director and Chief Executive Officer effective from 1 November 2007.
Mr O’Malley’s current annual base pay is $1,750,000. This has not changed since 1 September 2010 when he received a 4% increase. Prior to this his base salary had not changed since 1 September 2008. In addition, in view of the Company’s financial performance he has agreed no STI or LTI should be awarded for FY 2012 and that no increase in base pay will be made during year ending 30 June 2013.
Remuneration is reviewed annually in accordance with the Board’s senior executive salary review policy. In addition, Mr O’Malley is eligible to participate in the Short Term Incentive Plan and, subject to shareholder approval, Long Term Incentive Plan awards.
Upon appointment Mr O’Malley was provided with 50,000 BlueScope Steel Limited shares (purchased on-market) to be held subject to certain restrictions. Some or all of these shares will be forfeited by Mr O’Malley if his employment with BlueScope is terminated within the restriction period specified, other than as a result of fundamental change in his employment terms.
The employment of Mr O’Malley may be terminated in the following circumstances:
• by notice: on six months’ notice by either party. If BlueScope terminates Mr O’Malley’s employment by notice, it may provide payment in lieu of notice and must make an additional payment of 12 months’ annual base pay.
• with cause: immediate termination by BlueScope if, among other things, Mr O’Malley wilfully breaches his Service Contract, is convicted of various offences for which he can be imprisoned or is disqualified from managing a corporation, or engages in conduct which is likely to adversely impact the reputation of BlueScope. In this circumstance, Mr O’Malley will be entitled to his annual base pay up to the date of termination.
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• illness or disablement: BlueScope may terminate Mr O’Malley’s employment if he becomes incapacitated by physical or mental illness, accident or any other circumstances beyond his control for an accumulated period of six months in any 12-month period and, in this circumstance, will make payment of six months’ notice based on annual base pay.
• fundamental change: Mr O’Malley may resign if a fundamental change in his employment terms occurs and within three months of the fundamental change Mr O’Malley gives notice to BlueScope. In this event, the Company will provide Mr O’Malley with six months’ notice, or a payment in lieu of that notice, and a termination payment of 12 months’ annual base pay.
The rules governing the Company’s Long Term Incentive Plan and Short Term Incentive Plan will apply to his LTIP and STI awards on termination of his employment. These rules which provide that STI and LTIP awards will be forfeited if Mr O’Malley’s employment is terminated for cause. Provision has also been made for early vesting (subject to satisfying performance testing requirements) of LTIP awards on a change of control.
Mr O’Malley is subject to a 12-month non-compete restriction after his employment ceases with BlueScope. Mr O’Malley cannot solicit or entice away from BlueScope any supplier, customer or employee or participate in a business that competes with BlueScope during the 12-month period.
9.2 Other Key Management Personnel - Executives
Remuneration and other terms of employment for the disclosed KMP Executives are formalised in employment contracts that can be terminated with notice. Each of these agreements provide for an annual review of annual base pay, provision of performance-related STI awards, other benefits, including annual health assessment, and participation, when eligible, in the Long Term Incentive Plan. The contracts provide for notice of six months for resignation by the executive or termination by the Company. In the event of termination by the Company other than for cause, a termination payment of 12 months’ pay applies. The maximum amount payable on termination will not exceed 12 month’s fixed pay.
Agreements are also in place for KMP Executives detailing the approach the Company will take with respect to payment of their termination payments and with respect to exercising its discretion on the vesting of share rights in the event of a ‘Change of Control’ of the organisation.
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ENVIRONMENTAL REGULATION
BlueScope Steel’s Australian manufacturing operations are subject to significant environmental regulation. Throughout its Australian operations, the Company notified relevant authorities of 27 incidents resulting in statutory non-compliances with environmental licensing requirements during the financial year. During the period there were no serious environmental incidents. An incident which occurred in May 2011 resulted in a fine of $1500, issued by the regulator in August 2011. The incident related to operations at No 6 Blast Furnace at the Port Kembla Steelworks where process water discharged into a drain and then to Port Kembla Harbour. An incident occurred in February 2012 resulting in two fines of $1500 each, issued by the regulator in March 2012. The incident related to operations at the Basic Oxygen Steelmaking plant at the Port Kembla Steelworks.
BlueScope Steel reports on an annual basis to the National Pollutant Inventory and, under the National Greenhouse and Energy Reporting scheme, on its greenhouse gas emissions and energy consumption and production. BlueScope Steel also assesses and reports publicly upon its energy efficiency opportunities at the Commonwealth level and prepares and monitors progress on water and energy savings plans required under state legislation.
Each year BlueScope Steel publishes a Community Safety and Environment Report which is available on our website. The report provides further details of the Company’s environmental performance and initiatives.
INDEMNIFICATION AND INSURANCE OF OFFICERS
BlueScope Steel has entered into directors' and officers' insurance policies and paid an insurance premium in respect of the insurance policies, to the extent permitted by the Corporations Act 2001. The insurance policies cover former Directors of BlueScope Steel along with the current Directors of BlueScope Steel (listed on page 2). Executive officers and employees of BlueScope Steel and its related bodies corporate are also covered.
In accordance with Rule 21 of its Constitution, BlueScope Steel to the maximum extent permitted by law:
• must indemnify any current or former Director or Secretary; and
• may indemnify current or former executive officers,
of BlueScope Steel or any of its subsidiaries, against all liabilities (and certain legal costs) incurred in those capacities to a person, including a liability incurred as a result of appointment or nomination by BlueScope Steel or its subsidiaries as a trustee or as a director, officer or employee of another corporation.
The current Directors of BlueScope Steel, the Chief Financial Officer and the Chief Legal Officer & Company Secretary have each entered into an Access, Insurance and Indemnity Deed with BlueScope Steel. The Deed addresses the matters set out in Rule 21 of the Constitution and includes, among other things, provisions requiring BlueScope Steel to indemnify a Director to the extent to which they are not already indemnified as permitted under law, and to use its best endeavours to maintain an insurance policy covering a Director while they are in office and seven years after ceasing to be a Director.
The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors' and officers' liability insurance contract, as (in accordance with normal commercial practice) such disclosure is prohibited under the terms of the contract.
PROCEEDINGS ON BEHALF OF BLUESCOPE STEEL
As at the date of this report, there are no leave applications or proceedings brought on behalf of BlueScope Steel under section 237 of the Corporations Act 2001.
ROUNDING OF AMOUNTS
BlueScope Steel is a company of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Directors' Report. Amounts in the Directors' Report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars, or in certain cases, the nearest thousand or the nearest dollar.
AUDITOR
Ernst & Young was appointed as auditor for BlueScope Steel at the 2002 Annual General Meeting.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The Auditor’s Independence Declaration for the year ended 30 June 2012 has been received from Ernst & Young. This is set out at page 44 of the Directors’ Report. Ernst & Young provided the following non-audit services during the year ended 30 June 2012:
Audit related assurance services $178,333 equity raising related assurance; $164,403 debt funding related assurance; $175,000 restructuring activity related assurance; and $44,800 Greenhouse gas emissions related assurance. Other services $184,395 taxation compliance services.
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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.
G J KRAEHE AO Chairman
P F O’MALLEY Managing Director and Chief Executive Officer
Melbourne
20 August 2012
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Liability limited by a scheme approved under Professional Standards Legislation
Page 44 of 47
Auditor’s Independence Declaration to the Directors of BlueScope Steel Limited
In relation to our audit of the financial report of BlueScope Steel Limited for the financial year ended 30 June 2012, 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
Rodney Piltz Partner 20 August 2012
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CORPORATE GOVERNANCE STATEMENT
Introduction As a global organisation with businesses operating in many countries, the BlueScope Steel Group must comply with a range of legal, regulatory and governance requirements.
The Board places great importance on the proper governance of the Group.
The Board operates in accordance with a set of corporate governance principles that take into account relevant best practice recommendations. These include the Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council with 2010 Amendments (2nd edition) (ASX Principles and Recommendations).
The Company complies with each of the recommendations in the ASX Principles and Recommendations. A summary of BlueScope Steel's compliance with the recommendations follows, including details of specific disclosures required by a recommendation.
Further information on the Company's corporate governance policies and practices can be found on the Company’s website.
Principle 1 – Lay solid foundations for management and oversight The Board has adopted a Charter which sets out, among other things, its specific powers and responsibilities and the matters delegated to the Managing Director and Chief Executive Officer and those specifically reserved for the Board.
A statement of the matters reserved for the Board and the areas of delegated authority to senior management is available on the Company's website.
As part of the Board's oversight of senior management, all Company executives are subject to annual performance review and goal planning. This involves evaluation of the executives by their immediate superior. Each executive is assessed against a range of criteria, including achievement of goals relating to financial performance, operational excellence, safety and delivery of strategic projects and initiatives. All senior executives participated in a performance evaluation on this basis during the year ended 30 June 2012.
Principle 2 – Structure the Board to add value The Board is structured to bring to its deliberations a range of commercial, operational, financial, legal and international experience relevant to the Company's global operations.
Pages 7 and 8 set out the qualifications, expertise and experience of each Director in office at the date of this Directors' Report, and their period of office.
The Board considers all of its Non-Executive Directors to be independent. In making this assessment, the Board considers whether the Director is free of any business or other relationship that could, or could reasonably be perceived to, materially interfere with the exercise by the Director of an independent judgement in the interests of the Company as a whole.
In determining whether a relationship between the Company and a Director is material and would compromise the Director's independence, the Board has regard to all the circumstances of the relationship including, where relevant:
• the proportion of the relevant class of expenses or revenues that the relationship represents to both the Company and the Director; and
• the value and strategic importance to the Company's business of the goods or services purchased or supplied by the Company.
Further details regarding the circumstances considered by the Board in making assessments of independence are contained on the Company’s website under ‘Directors’ Independence Policy’.
The Board seeks to achieve a Board composition with a balance of diverse attributes relevant to the Company’s operations and markets including skill sets, background, gender, geography, and industry experience.
Board renewal and succession planning is an ongoing process at BlueScope Steel and in recent years has seen the appointment of Ken Dean and Penny Bingham-Hall to the Board. The Nomination Committee has identified the key skills and experience desirable on the Board as including financial/risk management, legal/governance, people management and operations management expertise; experience in the building and construction and steel or other heavy manufacturing industries; strategic and M&A/transactional experience; and experience with customers. The Board also strives for both gender and geographic diversity within these skill sets. Based on the assessment by the Nomination Committee of the particular skill profile for new appointees, a sub-committee is appointed to engage a search firm to assist in identifying appropriate candidates for consideration by the Board from a broad pool of possible candidates. The renewal process has been suspended to provide continuity as the Company goes through a major re-structuring process, but will re-commence in the current financial year.
The Board (and Board Committees and individual Directors) may obtain independent professional advice, at the Company's cost, in carrying out their responsibilities. Independent advice can be obtained without the involvement of the Company's management, where the Board or the Director considers it appropriate to do so. Procedures have been adopted by the Board setting out the practical steps by which independent advice may be obtained.
All Non-Executive Directors are members of the Nomination Committee. Their attendance at meetings of the Committee are set out on page 9.
The Board reviews its effectiveness and the performance of each Director regularly.
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The Board completed an internal review of its effectiveness in August 2012 involving distribution of a questionnaire to Directors and senior management. Confidential responses were collated by the Company’s auditors and discussed by the Board. The review concluded that the Board is functioning well with an appropriate mix of skills and experience and that an effective working relationship exists among Board members and between Board and management.
In addition, each Committee reviews its performance and effectiveness periodically through a confidential questionnaire completed by members of the Committee and relevant management attendees. The results of these reviews are discussed by the Committee. Each Board Committee has conducted a review on this basis in the last 12 months. A formal review of the performance of individual Directors takes place periodically, particularly when a director is standing for re-election. The process generally involves the completion of an evaluation questionnaire by other Board members, the results of which are collated and discussed by the Chairman with the director concerned (or the Deputy Chairman in the case of the review of the Chairman) and with the Board as a whole. In addition, the performance of the Chairman and other Directors are reviewed regularly through other informal mechanisms such as meeting critiques, discussions between Directors and the Chairman, and as part of Board and Committee evaluations. Performance evaluation for individual directors has taken place consistent with the process described above.
Principle 3 – Promote ethical and responsible decision making Business Conduct The Company has a set of values known as ‘Our Bond’ and a ‘Guide to Business Conduct’, which provides an ethical and legal framework for all employees. The Guide defines how the BlueScope Steel Group relates to its customers, employees, shareholders and the community. Information relating to the Guide and ‘Our Bond’ is available on the Company's website.
In addition, the Board has established a Securities Trading Policy which governs dealing in the Company's shares and derivative securities. A copy of the policy has been lodged with ASX and is available on the Company's website.
Diversity At BlueScope Steel, we know that our success comes from our people. We understand that the range of perspectives that result from a diverse and inclusive workplace will strengthen BlueScope Steel’s capability for sustained business success. We strive to hire, develop, promote and retain the most qualified people available to reflect the global diversity of our customers, markets, and the communities in which we operate. The Board and executive leadership team of BlueScope Steel recognise and value the diversity of the skills, perspectives, and backgrounds that our employees bring to the Company. Our aim is to foster an inclusive environment and culture that values difference and thereby attracts, encourages, and develops a talented, diverse, and capable workforce. Our Board approved Diversity Policy can be found on the Company’s website. Included in the policy are the key principles that underpin our approach to Diversity along with requirements for setting objectives, reporting and monitoring. Our immediate priorities are to continue to improve gender diversity, both through the recruitment pipeline and in management positions and to maintain/improve the representation of local nationals on management teams. In terms of gender, the proportion of women as at June 30, 2012 is:
- Total employees 16.6%
- Senior Executives 10.8%
- Non-Executive Directors 22.2% Our key objective for the financial year ended 30 June 2012 was the development and launch of a Diversity Action Plan in each region (Australia/NZ, China, ASEAN, North America). These plans have been developed and identify actions around our strategic drivers for diversity – Raising Awareness, Recruitment, Development and Retention. Progress and actions to date include:
• In 2011, graduate recruitment programs were run to support business growth across the ASEAN region and in China. More than 50% of the recruits into these programs were women, hired into operational as well as functional areas of the business.
• The proportion of women participating in our leadership programmes globally has steadily improved and is now above the percentage of the workforce by category for all programs.
• Gender pay equity reviews have been conducted annually since 2000 in Australia, 2007 in New Zealand and North America, and 2008 in Asia. Results are reported to the Remuneration and Organisation Committee. Progress has been made with the average pay for female Executives in 2011 now equal to that of males in similar roles.
• The business has a mature EEO complaint investigation process in place. The Diversity Action Plans will continue to provide the framework and platform for the businesses to drive and monitor improvements in their gender profile and improve/maintain the number of local nationals on leadership teams. For the year ended 30 June 2013, our diversity objective is therefore to review the implementation and progress of the Diversity Action Plans on a quarterly basis. Each business has a plan identifying actions around recruitment, development, retention and awareness to improve/maintain the proportion of women in the business and local nationals on leadership teams.
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Principle 4 – Safeguard integrity in financial reporting The Board has established an Audit and Risk Committee which assists the Board in the effective discharge of its responsibilities for financial reporting, internal controls, risk management, internal and external audit, and insurance (with the exception of directors' and officers' liability insurance). The Committee's Charter is set out in full on the Company’s website.
Separate discussions are held with the external and internal auditors without management present.
The composition and structure of the Audit and Risk Committee complies with the requirements of the ASX Principles and Recommendations.
The names of the members of the Audit and Risk Committee and their attendance at meetings of the Committee are set out on page 9 of this Directors’ Report. The qualifications of the members are set out on pages 7 and 8.
Principle 5 – Make timely and balanced disclosure The Company is subject to continuous disclosure obligations under the ASX Listing Rules and Australian corporations legislation. Subject to limited exceptions, the Company must immediately notify the market, through ASX, of any information that a reasonable person would expect to have a material effect on the price or value of its securities. As part of its continuous disclosure responsibilities, the Company has established market disclosure protocols to promote compliance with these requirements and to clarify accountability at a senior executive level for that compliance.
A summary of the Company’s Continuous Disclosure Policy is included on the Company's website.
Principle 6 – Respect the rights of shareholders Respecting the rights of shareholders is of fundamental importance to the Company and a key element of this is how the Company communicates with its shareholders. In this regard, the Company recognises that shareholders must receive high-quality relevant information in a timely manner in order to be able to properly and effectively exercise their rights as shareholders. The Company's communications policy is summarised on the Company's website. Principle 7 – Recognise and manage risk The Board has required management to design and implement a risk management and internal control system to manage the Company's material business risks and management has reported that those risks are being managed effectively.
For the annual and half-year accounts released publicly, the Board has received assurance from the Managing Director and Chief Executive Officer and the Chief Financial Officer that, in their opinion:
• the financial records of the Group have been properly maintained;
• the financial statements and notes required by accounting standards for external reporting:
(i) give a true and fair view of the financial position and performance of the Company and the consolidated BlueScope Steel Group; and
(ii) comply with the accounting standards (and any further requirements in the Corporations Regulations) and applicable ASIC Class Orders; and
• the above representations are based on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.
Information relating to the Company's policies on risk oversight and management of material business risks is available on the Company's website.
Principle 8 – Remunerate fairly and responsibly The Remuneration Report (on pages 16 to 41) sets out details of the Company's policy and practices for remunerating Directors, key management personnel and senior executives.
The names of the members of the Remuneration and Organisation Committee and their attendance at meetings of the Committee are set out on page 9.
Information relating to:
• the role, rights, responsibilities and membership requirements for the Remuneration and Organisation Committee; and
• the Company's Securities Trading Policy which prohibits entering into transactions in associated products that limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes,
is also available on the Company's website.
Other than superannuation, there are no schemes for retirement benefits for Non-Executive Directors.
All information referred to in this Corporate Governance Statement as being on the Company’s website is included under the ‘Responsibilities/Corporate Governance’ section of the website at www.bluescopesteel.com/responsibilities/corporate-governance.
A summary of the location of corporate governance information relevant to the ASX Principles and Recommendations can also be found in this section of the website.
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CONCISE FINANCIAL REPORT
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BlueScope Steel Limited ABN 16 000 011 058
Concise Financial Report - 30 June 2012
Page
Financial reportStatement of comprehensive income 2Statement of financial position 3Statement of changes in equity 4Statement of cash flows 5Notes to the consolidated financial statements 7
Directors' declaration 24
-1-
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BlueScope Steel LimitedStatement of comprehensive income
For the year ended 30 June 2012
Consolidated
Notes2012$M
2011$M
Revenue from continuing operations 5 8,472.5 8,991.3
Other income 6 113.2 19.8
Changes in inventories of finished goods and work in progress (411.4) 223.6Raw materials and consumables used (5,032.3) (5,797.4)Employee benefits expense (1,397.1) (1,493.1)Depreciation and amortisation expense (323.3) (347.8)Impairment of non-current assets 7 (319.9) (925.9)Freight on external despatches (529.8) (586.6)External services (884.5) (935.6)Restructuring costs 7 (403.6) 1.7Finance costs (120.4) (106.1)Other expenses (192.7) (267.2)Share of net profits (losses) of associates and joint venture partnershipsaccounted for using the equity method 53.2 73.3
Loss before income tax (976.1) (1,150.0)
Income tax (expense) benefit 8 (50.2) 103.9
Loss from continuing operations (1,026.3) (1,046.1)
Profit/(loss) from discontinued operations after income tax 9 (1.6) 5.7
Net loss for the year (1,027.9) (1,040.4)
Other comprehensive incomeGain (loss) on cash flow hedges taken to equity - (0.6)Gain (loss) on cash flow hedges transferred to inventory - 1.1Net gain (loss) on hedges of subsidiaries (2.4) (13.0)Exchange differences on translation of foreign operations 43.1 (218.8)Exchange differences transferred to profit on translation of foreignoperations disposed 11.6 -Actuarial gain (loss) on defined benefit superannuation plans (278.7) (4.9)
Income tax (expense) benefit on items of other comprehensive income 8 59.0 3.4
Other comprehensive loss for the year (167.4) (232.8)
Total comprehensive loss for the year (1,195.3) (1,273.2)
Profit (loss) is attributable to:Owners of BlueScope Steel Limited (1,043.5) (1,054.2)
Non-controlling interests 15.6 13.8
(1,027.9) (1,040.4)
Total comprehensive loss for the year is attributable to:Owners of BlueScope Steel Limited (1,212.5) (1,272.1)
Non-controlling interests 17.2 (1.1)
(1,195.3) (1,273.2)
Cents CentsEarnings per share for profit (loss) from continuing operationsattributable to the ordinary equity holders of the CompanyBasic earnings per share 14 (39.0) (48.8)Diluted earnings per share 14 (39.0) (48.8)
Earnings per share for profit (loss) attributable to the ordinary equityholders of the CompanyBasic earnings per share 14 (39.1) (48.6)Diluted earnings per share 14 (39.1) (48.6)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
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BlueScope Steel LimitedStatement of financial position
As at 30 June 2012
Consolidated2012$M
2011$M
ASSETSCurrent assetsCash and cash equivalents 214.5 172.2Receivables 952.9 1,026.8Inventories 1,337.4 1,947.4Intangible assets 5.6 18.2
Other 56.7 57.5
Total current assets 2,567.1 3,222.1
Non-current assetsReceivables 42.2 22.7Inventories 71.6 81.4Investments accounted for using the equity method 117.1 142.0Property, plant and equipment 3,295.6 3,500.6Deferred tax assets 189.0 160.8Intangible assets 448.3 660.7
Other 2.6 2.7
Total non-current assets 4,166.4 4,570.9
Total assets 6,733.5 7,793.0
LIABILITIESCurrent liabilitiesPayables 1,049.1 1,156.6Borrowings 144.9 165.7Current tax liabilities 72.7 23.1Provisions 416.2 399.3Deferred income 117.6 133.5
Derivative financial instruments 1.7 -
Total current liabilities 1,802.2 1,878.2
Non-current liabilitiesPayables 7.5 6.9Borrowings 453.5 1,074.2Deferred tax liabilities 18.7 69.1Provisions 236.7 193.5Retirement benefit obligations 432.0 170.7
Deferred income 4.1 4.3
Total non-current liabilities 1,152.5 1,518.7
Total liabilities 2,954.7 3,396.9
Net assets 3,778.8 4,396.1
EQUITYContributed equity 4,650.1 4,073.8Reserves (267.0) (324.8)
Retained profits (loss) (703.8) 559.8
Parent entity interest 3,679.3 4,308.8
Non-controlling interest 99.5 87.3
Total equity 3,778.8 4,396.1
The above statement of financial position should be read in conjunction with the accompanying notes.
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BlueScope Steel LimitedStatement of changes in equity
For the year ended 30 June 2012
Consolidated - 30 June 2012
Notes
Contributedequity
$MReserves
$M
Retainedearnings
$M
Non-controllinginterests
$MTotal$M
Balance at 1 July 2011 4,073.8 (324.8) 559.8 87.3 4,396.1
Profit (loss) for the period - - (1,043.5) 15.6 (1,027.9)
Other comprehensive income (loss) - 51.4 (220.4) 1.6 (167.4)
Total comprehensive loss for the year - 51.4 (1,263.9) 17.2 (1,195.3)
Transactions with owners in their capacityas owners:Shares issued
-General Employee Share Plan 0.2 (0.3) - - (0.1)-Share Plan Retention awards 11.3 - - - 11.3-Capital raisings 11 600.0 - - - 600.0
Transaction costs on share issues 11 (23.9) - - - (23.9)Share-based payment expense - 7.0 - - 7.0Dividends declared - - - (5.0) (5.0)Treasury shares (11.3) - - - (11.3)
Other - (0.3) 0.3 - -
576.3 6.4 0.3 (5.0) 578.0
Balance at 30 June 2012 4,650.1 (267.0) (703.8) 99.5 3,778.8
Consolidated - 30 June 2011
Contributedequity
$MReserves
$M
Retainedearnings
$M
Non-controllinginterests
$MTotal$M
Balance at 1 July 2010 4,032.4 (118.4) 1,747.3 94.4 5,755.7
Profit (loss) for the period - - (1,054.2) 13.8 (1,040.4)
Other comprehensive income (loss) - (212.6) (5.3) (14.9) (232.8)
Total comprehensive loss for the year - (212.6) (1,059.5) (1.1) (1,273.2)
Transactions with owners in their capacityas owners:Shares issued
-Dividend Reinvestment Plan 41.3 - - - 41.3-General Employee Share Plan 0.3 (0.3) - - --Exercise of share rights - - - - -
Transaction costs on share issues (0.3) - - - (0.3)Share-based payment expense - 6.6 - - 6.6Dividends declared - - (128.0) (6.0) (134.0)Tax credits recognised directly in equity 0.1 - - - 0.1
Other - (0.1) - - (0.1)
41.4 6.2 (128.0) (6.0) (86.4)
Balance at 30 June 2011 4,073.8 (324.8) 559.8 87.3 4,396.1
The above statement of changes in equity should be read in conjunction with the accompanying notes.
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BlueScope Steel LimitedStatement of cash flows
For the year ended 30 June 2012
Consolidated
Notes2012$M
2011$M
Cash flows from operating activitiesReceipts from customers 9,032.3 9,616.9
Payments to suppliers and employees (8,776.7) (9,630.1)
255.6 (13.2)
Associate dividends received 4.9 3.3Joint venture partnership distributions received 78.5 131.9Interest received 3.2 7.2Other revenue 15.9 19.9STP Government grant 6 100.0 -Finance costs paid (109.2) (108.3)
Income taxes (paid) received (81.5) (12.5)
Net cash (outflow) inflow from operating activities 267.4 28.3
Cash flows from investing activitiesPayments for property, plant and equipment (215.5) (387.2)Payments for intangibles (14.0) (14.8)Payments for investments in joint venture partnerships (7.0) (1.7)Payments for investments in business assets - (0.4)Proceeds from sale of property, plant and equipment 11.8 31.9Proceeds from sale of subsidiary, net of cash disposed 140.0 -
Repayment of loans by related parties 5.0 5.7
Net cash (outflow) inflow from investing activities (79.7) (366.5)
Cash flows from financing activitiesProceeds from issues of shares 11 600.0 -Capital share raising costs 11 (23.9) (0.3)Proceeds from borrowings 10,720.9 9,347.5Repayment of borrowings (11,440.2) (8,981.5)Dividends paid to Company's shareholders 10(d) - (86.7)
Dividends paid to minority interests in subsidiaries (5.0) (6.0)
Net cash inflow (outflow) from financing activities (148.2) 273.0
Net increase (decrease) in cash and cash equivalents 39.5 (65.2)Cash and cash equivalents at the beginning of the financial year 171.2 249.3
Effects of exchange rate changes on cash and cash equivalents 1.9 (12.9)
Cash and cash equivalents at end of financial year 212.6 171.2
Non-cash investing and financing activities 13
The above statement of cash flows should be read in conjunction with the accompanying notes.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012
Contents of the notes to the consolidated financial statements
Page
1 Basis of preparation of the concise financial report 72 Corporate information 73 Full Financial report 74 Segment information 85 Revenue 126 Other income 127 Expenses 138 Income tax expense 149 Discontinued operations 1610 Dividends 1811 Contributed equity 1912 Contingencies 1913 Non-cash investing and financing activities 2114 Earnings per share 2115 Events occurring after balance date 22
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012
1 Basis of preparation of the concise financial report
The concise financial report relates to the consolidated entity consisting of BlueScope Steel Limited and the entities itcontrolled at the end of or during the year end 30 June 2012. The accounting policies adopted have been consistentlyapplied to all years presented.
The full financial report on which this concise financial report is based complies with the Australian Accounting Standardsissued by the Australian Accounting Standards Board (AASB) and the International Financial Reporting Standards (IFRS)issued by the International Accounting Standards Board (IASB). This concise financial report has been prepared inaccordance with the Corporations Act 2011 and Accounting Standard 1039 Concise Financial Reports.
The concise financial report is an extract from the full financial report for the year ended 30 June 2012. The concisefinancial report cannot be expected to provide as full understanding of the financial performance, financial position andfinancing and investing activities as the full financial report. Further financial information can be obtained from the fullfinancial report.
Presentation Currency
The presentation currency used in this concise financial report is Australian Dollars.
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and InvestmentsCommission, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial statements havebeen rounded off in accordance with that Class Order to the nearest hundred thousand dollars.
2 Corporate information
The financial report of BlueScope Steel Limited for the year ended 30 June 2012 was authorised for issue in accordance with aresolution of the directors on 20 August 2012.
BlueScope Steel Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on theAustralian Securities Exchange. The registered office of the Company is Level 11, 120 Collins Street, Melbourne, Victoria,Australia 3000.
The nature of the operations and principal activities of the Group are described in note 4 and the directors' report.
3 Full Financial report
Further financial information can be obtained from the full financial report which is available from the Company, free ofcharge, on request. A copy may be requested by contacting the Company's share registrar whose details appear in theCorporate Directory. Alternatively, the full financial report can be accessed via the internet at www.bluescopesteel.com.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
4 Segment information
(a) Description of segments
The Group has six reportable operating segments: Coated & Industrial Products Australia, Australia Distribution & Solutions,New Zealand & Pacific Steel Products, Coated & Building Products Asia, Hot Rolled Products North America, and Coated &Building Products North America.
Coated & Industrial Products AustraliaCoated & Industrial Products Australia includes the Port Kembla Steelworks, a steel making operation with an annual productioncapacity of approximately 2.6 million tonnes of crude steel. The Port Kembla Steelworks is the leading supplier of flat steel inAustralia, manufacturing slab, hot rolled coil and plate products. The segment also comprises two main metallic coating andpainting facilities located in Springhill, New South Wales and Western Port, Victoria together with steel painting facilities inwestern Sydney and Acacia Ridge, Queensland. Steel from the Port Kembla Steelworks is processed by these facilities toproduce a range of COLORBOND® pre-painted steel and ZINCALUME® zinc/aluminium branded products. Export offices arealso incorporated within this segment to trade steel manufactured at these facilities on global markets.
Australia Distribution & SolutionsAustralia Distribution & Solutions contains a network of service centres and distribution sites from which it forms a key supplierto the Australian building and construction industry, automotive sector, major white goods manufacturers and generalmanufacturers. The operating segment also holds the Lysaght steel solutions business, providing a range of LYSAGHT®branded products to the building and construction sector and BlueScope's water business containing rain storage tank solutions.
New Zealand & Pacific Steel ProductsThe New Zealand Steel operation at Glenbrook, New Zealand, produces a full range of flat steel products for both domestic andexport markets. It has an annual production capacity of approximately 0.6 million tonnes. The segment also includes facilities inNew Caledonia, Fiji and Vanuatu, which manufacture and distribute the LYSAGHT® range of products.
Coated & Building Products AsiaCoated & Building Products Asia manufactures and distributes a range of metallic coated, painted steel products and preengineered steel building systems primarily to the building and construction industry and to some sections of the manufacturingindustry across Asia.
Hot Rolled Products North AmericaHot Rolled Products North America includes a 50% interest in the North Star BlueScope Steel joint venture, a steel mini mill inthe United States and a 47.5% shareholding in Castrip LLC.
Coated & Building Products North AmericaCoated & Building Products North America includes the North American Buildings Group, which designs, manufactures andmarkets pre engineered steel buildings and component systems; Steelscape, producer of metal coated and painted steel coilsand ASC Profiles, manufacturer of building components including architectural roof and wall systems and structural roof anddecking.
Geographical informationThe Group's geographical regions are determined based on the location of markets and customers. The Group operates in fourmain geographical regions being Australia, New Zealand, Asia and North America.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
4 Segment information (continued)
(b) Reportable segments
The segment information provided to the strategic steering committee for the reportable segments for the year ended 30 June2012 is as follows:
30 June 2012
Coated &IndustrialProductsAustralia
AustraliaDistribution& Solutions
NewZealand &
PacificSteel
Products
Coated &BuildingProducts
Asia
Hot RolledProducts
NorthAmerica
Coated &BuildingProducts
NorthAmerica
DiscontinuedOperations Total
$M $M $M $M $M $M $M $M
Total segment sales revenue 4,279.6 1,612.4 755.0 1,625.8 - 1,257.5 164.1 9,694.4Intersegment revenue (897.7) (1.7) (125.9) (15.0) - (36.4) (15.0) (1,091.7)
Revenue from externalcustomers 3,381.9 1,610.7 629.1 1,610.8 - 1,221.1 149.1 8,602.7
Segment EBIT (725.8) (259.7) 64.7 101.9 62.2 (24.4) 38.5 (742.6)
Depreciation and amortisation 176.8 23.2 44.6 46.4 - 29.6 7.6 328.2Impairment (write-back) ofnon-current assets 136.0 178.9 - 0.1 1.4 3.5 - 319.9Share of profit (loss) fromassociates and joint venturepartnerships - - 3.1 (14.3) 63.9 0.5 - 53.2
Total segment assets 3,037.4 691.0 647.0 1,127.1 72.9 839.1 0.2 6,414.7
Total assets includes:Investments in associates andjoint venture partnerships - 2.8 6.8 33.9 72.6 1.0 - 117.1Additions to non-current assets(other than financial assets anddeferred tax) 116.6 8.8 82.1 48.4 - 16.8 2.9 275.6
Total segment liabilities 1,034.0 308.5 350.8 335.3 - 303.1 3.9 2,335.6
(6,727.5) (2,350.5) (1,691.6) (3,175.1) (135.1) (2,338.9) (191.7) (16,610.4)
30 June 2011
Coated &IndustrialProductsAustralia
AustraliaDistribution& Solutions
NewZealand &
PacificSteel
Products
Coated &BuildingProducts
Asia
Hot RolledProducts
NorthAmerica
Coated &BuildingProducts
NorthAmerica
DiscontinuedOperations Total
$M $M $M $M $M $M $M $M
Total segment sales revenue 5,193.0 1,675.4 672.1 1,486.8 - 1,197.1 159.4 10,383.8Intersegment revenue (1,084.2) (3.5) (122.8) (6.2) - (38.5) (16.2) (1,271.4)
Revenue from externalcustomers 4,108.8 1,671.9 549.3 1,480.6 - 1,158.6 143.2 9,112.4
Segment EBIT (1,062.5) (217.9) 82.5 175.6 72.3 (42.1) 8.0 (984.1)
Depreciation and amortisation 201.9 31.1 39.3 42.3 - 39.3 - 353.9Impairment (write-back) ofnon-current assets 797.3 179.1 - (67.8) 1.7 15.6 (1.0) 924.9Share of profit (loss) fromassociates and joint venturepartnerships - - 2.9 (4.1) 74.3 0.2 - 73.3
Total segment assets 3,837.5 994.4 623.0 1,132.2 82.3 833.4 119.3 7,622.1
Total assets includes:Investments in associates andjoint venture partnerships - 2.9 8.0 49.2 81.0 0.9 - 142.0Additions to non-current assets(other than financial assets anddeferred tax) 253.0 36.1 85.1 60.4 - 19.8 - 454.4
Total segment liabilities 1,083.3 310.6 217.5 318.1 - 242.1 26.1 2,197.7
(7,967.1) (2,759.0) (1,472.3) (3,106.5) (154.6) (2,192.0) (296.6) (17,948.1)
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
4 Segment information (continued)
(c) Geographical information
Segment revenues from sales toexternal customers Non-current assets
2012$M
2011$M
2012$M
2011$M
Australia 3,924.0 4,006.7 2,275.2 2,664.3New Zealand 407.1 336.0 412.8 372.9Asia 1,934.4 2,482.9 651.2 641.7North America 1,760.2 1,525.5 613.7 727.1
Other 577.0 761.3 3.3 4.1
8,602.7 9,112.4 3,956.2 4,410.1
Segment revenues are allocated based on the country in which the customer is located.
Segment non-current assets exclude deferred tax assets and are allocated based on where the assets are located.
(d) Other segment information
(i) Segment revenueSales between segments are carried out at arm's length and are eliminated on consolidation. The revenue from external partiesis measured in a manner consistent with that in the statement of comprehensive income.
Segment revenue reconciles to total revenue from continuing operations as follows:
Consolidated
Notes2012$M
2011$M
Total segment revenue 9,694.4 10,383.8Intersegment eliminations (1,091.7) (1,271.4)Revenue attributable to discontinued operations 9 (149.1) (143.2)
Other revenue 5 18.9 22.1
Total revenue from continuing operations 8,472.5 8,991.3
(ii) Segment EBITPerformance of the operating segments is based on EBIT. This measurement basis excludes the effects of interest and taxes.Interest income and expense are not allocated to segments, as this type of activity is driven by the centralised treasury function,which manages the cash position of the Group.
A reconciliation of total segment EBIT to operating profit before income tax is provided as follows:
Consolidated2012$M
2011$M
Total segment EBIT (742.6) (984.1)Intersegment eliminations 3.1 15.6Interest income 3.1 7.1Finance costs (120.4) (106.0)EBIT (gain) loss attributable to discontinued operations (38.5) (8.0)
Corporate operations (80.8) (74.6)
Profit (loss) before income tax from continuing operations (976.1) (1,150.0)
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
4 Segment information (continued)
(iii) Segment assetsSegment assets are measured in a manner consistent with that of the financial statements. These assets are allocated basedon the operations of the segment and the physical location of the asset.
Cash is not considered to be a segment asset as it is managed by the Group's centralised treasury function.
As the segment information is focused on EBIT, deferred tax assets, which by their nature do not contribute towards EBIT, arenot allocated to operating segments.
Reportable segment assets are reconciled to total assets as follows:
Consolidated2012$M
2011$M
Segment assets 6,414.7 7,622.1Intersegment eliminations (128.4) (191.9)Unallocated:
Deferred tax assets 189.0 160.8Cash 214.5 172.2Corporate operations 15.6 29.8
Tax receivables 28.1 -
Total assets as per the statement of financial position 6,733.5 7,793.0
(iv) Segment liabilitiesSegment liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocatedbased on the operations of the segment.
Liabilities arising from borrowing and funding initiatives are not considered to be segment liabilities due to these being managedby the Group's centralised treasury function. As the segment information is focused on EBIT, tax liabilities, which by their naturedo not impact EBIT, are not allocated to operating segments.
Reportable segment liabilities are reconciled to total liabilities as follows:
Consolidated2012$M
2011$M
Segment liabilities 2,335.6 2,197.7Intersegment eliminations (119.2) (179.3)Unallocated:
Current borrowings 144.9 165.7Non-current borrowings 453.5 1,074.2Current tax liabilities 72.7 23.1Deferred tax liabilities 18.7 69.1Accrued borrowing costs payable 11.2 11.0
Corporate operations 37.3 35.4
Total liabilities as per the statement of financial position 2,954.7 3,396.9
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
5 Revenue
ConsolidatedNotes 2012
$M
2011$M
Revenue from operating activities
Sales revenueSale of goods 8,428.4 8,947.2
Services 25.2 22.0
Total sales revenue 8,453.6 8,969.2
Other revenueInterest external 2.9 5.9Interest related parties 0.2 1.2Royalties external 1.6 1.6Rental external 5.3 5.3
Other 8.9 8.1
Total other revenue 18.9 22.1
Total revenue from ordinary activities 8,472.5 8,991.3
From discontinued operationsSales revenue 164.1 159.4
Intersegment eliminations (15.0) (16.2)
Total revenue from discontinued operations 9 149.1 143.2
6 Other income
Loss before income tax includes the followingspecific income for continuing operations:
Consolidated2012$M
2011$M
STP Government grant 100.0 -
Steel Transformation Plan Government grantA $100M advance payment under the Federal Government Steel Transformation Plan (STP) was received on 13 January 2012.The STP was established to encourage investment, innovation and competitiveness in the Australian steel manufacturingindustry. In accordance with the Company's accounting policy on accounting for Government grants (refer to note 1(h) of the fullfinancial statements), the $100M STP advance payment has been recognised as income in line with the related costs which it isintended to compensate.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
7 Expenses
Consolidated2012$M
2011$M
Loss before income tax includes the following specificexpenses for continuing operations:
Restructure provision expense (a) 403.6 1.7
Impairment of non-current assetsCGU goodwill (i) 174.3 261.4Coated & Industrial Products Australia PP&E (ii) 136.0 728.7Australia Distribution & Solutions PP&E and other intangibles (iii) 4.7 1.9BlueScope Buildings North America (iv) 3.5 -Castrip joint venture 1.4 1.7
Reversal of impairment loss - (67.8)
Total impairment of non-current assets 319.9 925.9
(a) Restructuring costs
The current year restructuring costs includes $365.7M for incurred and estimated future costs arising from the closure of theNo.6 Blast furnace at Port Kembla and other equipment to reflect the reduced ironmaking capacity, as announced to the marketon 22 August 2011. The remaining current year restructuring costs relates to Coated & Buildings North America and AustraliaDistribution & Solutions segments.
Current period impairment losses
The Group tests for impairment and measures recoverable amount based on value in use based on the discounted futurecash flows derived from continued use of assets. Refer to note 4 of the full financial report for the testing methodologyand details of assumptions, including discount rates used. Impairment losses are included in the line item 'impairment ofnon current assets' in the profit or loss.
(i) Goodwill impairment chargesAt 30 June 2012, a total of $174.3M of goodwill impairments were recognised. The goodwill impairments were recorded againstBlueScope Distribution ($156.8M), Lysaght Australia ($10.0M) and BlueScope Water ($7.5M) due to a slower than previouslyexpected recovery in Australian domestic demand.
(ii) Coated and Industrial Products AustraliaProperty, plant and equipment totalling $136.0M has been impaired as a result of a slower than previously expected recovery inAustralian domestic demand, and an increase in the discount rate being been applied to expected future cash flows due toincreased volatility in equity markets.
(iii) Australia Distribution & SolutionsProperty, plant and equipment and other intangibles totalling $4.7M have been impaired as a result of business restructuring inAustralia Distribution, BlueScope Buildings and BlueScope Water.
(iv) BlueScope Buildings North AmericaProperty, plant and equipment totalling $3.5M has been impaired as a result of further plant restructuring to align BlueScopeBuildings North America production capacity with market demand.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
7 Expenses (continued)
Prior period impairment losses and reversals
Goodwill impairment chargesAt 30 June 2011, a total of $184.4M of goodwill impairments were recognised. The goodwill impairments were recordedagainst Coated and Industrial Products ($68.6M) due to macroeconomic factors including the strength of the AUD:USD, lowspread (selling price less raw material cost) and low domestic demand, BlueScope Distribution ($100.2M) due to thestrength of the AUD:USD which improved the affordability of imports resulting in margin compression and Steelscape($15.6M) due to to a reduction in forecast margins.
At 31 December 2010, the Australia Distribution & Solutions segment impaired $77.0M of goodwill in relation to itsDistribution business acquired from Smorgon Steel in August 2007. The impairment was due to a revised medium termoutlook influenced by reduced market demand and increased import competition driving margins lower.
Coated and Industrial Products Australia (CIPA)At 30 June 2011, a total of $728.7M of property, plant and equipment impairments were recorded against CIPA assets dueto macroeconomic factors including the strength of the AUD:USD, low spread (selling price less raw material cost) and lowdomestic demand. The BlueScope Water business, included in the Australia Distribution & Solutions segment, impaired $1.8Mof property, plant and equipment due to restructuring of the business.
A deferred tax asset of $218.6M was not recognised on the $728.7M write down of CIPA property, plant andequipment due to the existence of significant tax losses in the Australian tax consolidated Group.
Australia Distribution & SolutionsThe BlueScope Water business, impaired $1.8M of property, plant and equipment due to restructuring of the business and$0.1M in other intangibles due to restructuring of the business.
Reversal China coating line and Packaging ProductsThe Coated & Building Products Asia segment has partially reversed impairments previously recognised for plant andequipment at the metallic coating and painting facility in Suzhou, China. Previously booked impairment losses have beenreversed to the extent of $67.8M following the material improvement in financial performance and positive outlook of thebusiness.
8 Income tax expense
(a) Income tax expense (benefit)
Consolidated2012$M
2011$M
Current tax 105.0 29.1Deferred tax (19.1) (126.2)
Adjustments for current tax of prior periods 4.8 (4.1)
90.7 (101.2)
Income tax expense (benefit) is attributable to:Profit (loss) from continuing operations 50.2 (103.9)
Profit (loss) from discontinued operations 40.5 2.7
Aggregate income tax expense 90.7 (101.2)
Deferred income tax (benefit) expense included in income tax expense comprises:Decrease (increase) in deferred tax assets 2.6 (65.5)(Decrease) increase in deferred tax liabilities (22.4) (64.6)Investments in subsidiaries 0.7 3.9
(19.1) (126.2)
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
8 Income tax expense (continued)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Consolidated
Notes2012$M
2011$M
Loss from continuing operations before income tax expense (976.1) (1,150.0)
Profit from discontinuing operations before income tax expense 9 38.9 8.4
(937.2) (1,141.6)Tax at the Australian tax rate of 30.0% (2011 - 30.0%) (281.2) (342.5)Tax effect of amounts which are not deductible (taxable)in calculating taxable income:
Depreciation and amortisation 0.6 0.6Manufacturing credits (2.6) (1.4)Research and development incentive (7.3) (9.3)Withholding tax 3.3 2.5Non-taxable (gains) losses (5.1) (5.7)Disposal of subsidiary 25.6 -Goodwill impairment 52.3 78.4Share of net profits (losses) of associates 3.5 0.4Entertainment 1.1 1.3Share-based payments 2.4 2.0
Sundry items 5.0 5.5
(202.4) (268.2)
Difference in overseas tax rates (5.2) (12.4)Adjustments for current tax of prior periods 4.8 (4.1)Temporary differences and tax losses not recognised 312.3 220.4Deferred tax restatement for New Zealand tax rate change - (0.2)Previously unrecognised tax losses and temporary differences now recognised (15.3) (32.2)Previously unrecognised tax losses now recouped to reduce current tax expense (4.7) (4.5)
Previously recognised tax losses now derecognised 1.2 -
Income tax expense (benefit) 90.7 (101.2)
846.5 1,242.8(c) Amounts recognised directly in equity
Consolidated2012$M
2011$M
Aggregate current and deferred tax arising in the reporting period and not recognised in netprofit or loss or other comprehensive income but directly debited (credited) to equity
Net deferred tax - credit recognised directly in equity - 0.1
- 0.1
(d) Tax expense (benefit) relating to items of other comprehensive income
Cash flow hedges - 0.1Actuarial gain/(loss) on defined benefit superannuation plans (58.3) 0.4
Net (gain) loss on investments in subsidiaries (0.7) (3.9)
Total income tax expense (benefit) on items of other comprehensive income (59.0) (3.4)
(e) Tax losses
Unused tax losses for which no deferred tax asset has been recognised 1,013.5 95.7
Potential tax benefit 295.1 18.8
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
8 Income tax expense (continued)
As at 30 June 2012, $296.0M of Australian deferred tax assets generated during the period, mainly in relation to export lossesand restructure costs, have been impaired with $27.7M of this amount recognised directly against retained earnings due toactuarial losses from the Australian Defined Benefit Superannuation Plan. Australian Accounting Standards impose a stringenttest for the recognition of a deferred tax asset arising from unused tax losses where there is a history of recent tax losses. TheCompany has deferred the recognition of any further tax asset for the Australian tax group until a return to taxable profits hasbeen demonstrated. Australian tax losses are able to be carried forward indefinitely.
The Group also has unrecognised tax losses arising in Vietnam of $7.2M (2011: $19.6M) and China of $92.1M (2011: $57.5M)which are able to be offset against taxable profits within five years of being incurred. Other unrecognised tax losses can becarried forward indefinitely but can only be utilised in the same tax group in which they are generated.
Tax disputeThe Australian Taxation Office (ATO) has issued BSL with amended assessments in relation to a sale and leasebacktransaction entered into by BSL in the 2007 income year (refer to note 12).
In accordance with ATO guidelines, BSL made a $21.2M part payment on 9 July 2012 pending determination of the dispute.Any amount paid will be fully refundable in the event that the matter is resolved in favour of BSL. As at 30 June 2012, thisamount has been provided for in the income tax provision with a corresponding increase in non-current tax receivable.
(f) Unrecognised temporary differences
Consolidated2012$M
2011$M
Temporary difference relating to investment in subsidiaries for which deferred tax liabilities havenot been recognised 88.3 133.6
Unrecognised deferred tax liabilities relating to the above temporary differences 13.3 17.2
Overseas subsidiaries have undistributed earnings, which, if paid out as dividends, would be subject to withholding tax. Anassessable temporary difference exists, however no deferred tax liability has been recognised as the parent entity is able tocontrol the timing of distributions from their subsidiaries and is not expected to distribute these profits in the foreseeable future.
Unrecognised deferred tax assets for the Group totalling $159.2M (2011: $290.2M) have not been recognised as they are notprobable of realisation.
9 Discontinued operations
(a) Description
On 22 June 2012, the Group sold Metl-Span, its North American insulated metal panels business, to NCI Group Inc. As at 30June 2012 the results of Metl-Span have been included as part of discontinued operations, with a retrospective change made tothe comparative period results.
In June 2007, the Group closed its loss making tinplate manufacturing operation, which was the major component of itsPackaging Products cash generating unit.
Following a series of construction contract losses in the financial year 2006, the Group closed down and sold the assets of itsLysaght Taiwan business.
The financial information for these operations identified as discontinued operations is set out below and is reported in thisfinancial report as discontinued operations.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
9 Discontinued operations (continued)
(b) Financial performance of discontinued operations
The results of discontinued operations are presented below.
Consolidated2012 2011
Metl-SpanPackagingProducts
LysaghtTaiwan Total Metl-Span
PackagingProducts
LysaghtTaiwan Total
$M $M $M $M $M $M $M $M
Revenue 149.1 - - 149.1 143.2 - - 143.2Other income 29.4 - - 29.4 - - - -Depreciation andamortisation (7.6) - - (7.6) (7.9) - - (7.9)Other expenses excludingfinance costs (131.6) - (0.4) (132.0) (128.7) - 0.7 (128.0)Unutilised provisionswritten back - - - - - 0.1 - 0.1Impairment reversal (i) - - - - - 1.0 - 1.0
Finance costs - - - - - - - -
Profit (loss) before incometax (ii) 39.3 - (0.4) 38.9 6.6 1.1 0.7 8.4
Income tax (expense)benefit (ii) (40.4) - (0.1) (40.5) (2.4) (0.3) - (2.7)
Profit (loss) after incometax from discontinuedoperations (1.1) - (0.5) (1.6) 4.2 0.8 0.7 5.7
The results and cash flows from discontinued operations are required to be presented on a consolidated basis. Therefore, theimpact of intercompany sales, profit in stock eliminations, intercompany interest income and expense and intercompany fundinghave been excluded. The profit attributable to the discontinued segment is not affected by these adjustments. As a result ofthese adjustments the discontinued operations result and cash flows do not represent the operations as stand alone entities.
(i) Reversal of impairment lossIn the prior period, Packaging Products recognised an impairment reversal for $1M against property, plant and equipment afterselling previously impaired assets.
(ii) Details on sale of Metl-SpanIncluded in the 2012 Metl-Span results is a $29.4M pre-tax disposal gain and a $37.2M tax disposal expense. Details of the 22June 2012 sale are as follows:
2012$M
Cash consideration received 146.2Consideration receivable 0.4Selling expenses (6.2)
Net disposal consideration 140.4
Carrying amount of net assets sold (99.9)Exchange loss transferred from foreign currency translation reserve (11.1)
Gain on sale before income tax 29.4
Income tax expense 37.2
Loss on sale after income tax (7.8)
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
9 Discontinued operations (continued)
(c) Cash flow information - discontinued operations
The net cash flows of discontinued operations held are as follows:
Consolidated2012 2011
Lysaght LysaghtMetl-Span Packaging Taiwan Total Metl-Span Packaging Taiwan Total
$M $M $M $M $M $M $M $M
Net cash inflow(outflow) fromoperating activities 14.5 - (0.6) 13.9 10.6 (1.7) 0.4 9.3Net cash inflow(outflow) frominvesting activities (i) 137.0 - - 137.0 (1.8) 1.0 - (0.8)Net cash inflow(outflow) fromfinancing activities - - - - - - - -
Net increase in cashgenerated by theoperation 151.5 - (0.6) 150.9 8.8 (0.7) 0.4 8.5
(i) The cash received from the sale of Metl-Span on 22 June 2012 is as follows:
2012$M
Cash consideration received 146.2Selling expenses paid (1.5)Net cash received 144.7
Net cash disposed (4.7)
Investing cash inflow 140.0
10 Dividends
(a) Ordinary shares
Parent entity2012$M
2011$M
In the comparative period, a final dividend of 5 cents per fully paid share waspaid on 20 October 2010 in relation to the year ended 30 June 2010.There was no final dividend declared in relation to the year ended 30 June 2011.
Final fully franked based on tax paid @ 30% - 91.2
In the comparative period, an interim dividend of 2 cents per fully paid share waspaid on 4 April 2011 in relation to the year ended 30 June 2011. There was nointerim dividend declared for the year ended 30 June 2012.
Final fully franked based on tax paid @ 30% - 36.8
Total dividends provided for or paid - 128.0
(b) Dividends not recognised at year-end
For the year ended 30 June 2012 the directors recommended that there will be no final dividend declared (June 2011: $Nil).
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
10 Dividends (continued)
(c) Franked dividends
Parent entity2012$M
2011$M
Actual franking account balance as at the reporting date 72.1 52.6
Franking credits available for subsequent financial years based on a tax rate of 30% 72.1 52.6
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) franking credits (debits) that will arise from the payment (receipt) of the amount of the provision for income tax;(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
(d) Dividend cash flows
The total cash paid to shareholders in respect of dividends during the period is $Nil (2011: $86.7M) as presented in thestatement of cash flows.
11 Contributed equity
Capital raising
On 22 November 2011, BlueScope Steel Limited announced a fully underwritten four-for-five accelerated renounceableentitlement offer with rights trading of new BlueScope Steel shares at an offer price of $0.40 per new share, which raised$600.0M ($576.1M, net of transaction costs). Refer to note 35 of the full financial report for further details.
12 Contingencies
(a) Contingent liabilities
The Group had contingent liabilities at 30 June 2012 in respect of:
(i) Outstanding legal matters
Outstanding legal matters Consolidated2012$M
2011$M
Contingencies for various legal disputes 10.5 1.0
10.5 1.0
A range of outstanding legal matters exist that are contingent on court decisions, arbitration rulings and private negotiations todetermine amounts required for settlement. It is not practical to provide disclosure requirements relating to each and every case.
In addition to the above contingencies, a supplier commenced legal proceedings seeking damages for alleged breaches ofcontract totalling approximately $16.5M, plus interest. The court held BlueScope Steel not liable for the damages claimed. Thesupplier has appealed the court's decision with the hearing set for October 2012.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
12 Contingencies (continued)
GuaranteesIn Australia, BlueScope Steel Limited has provided $139.6M (2011: $140.3M) in guarantees to various state workerscompensation authorities as a prerequisite for self insurance. An amount, net of recoveries, of $99.1M (2011: $92.8M) has beenrecorded in the consolidated financial statements as recommended by independent actuarial advice.
Bank guarantees have been provided to customers in respect of the performance of goods and services supplied. Bankguarantees outstanding at 30 June 2012 totalled $46.1M (2011: $42.1M).
Associates and joint venturesFor contingent liabilities relating to associates and joint ventures refer to notes and respectively.
TaxationThe Australian Taxation Office (ATO) has issued BSL with amended assessments in relation to a sale and leasebacktransaction entered into by BSL in the 2007 income year for the purpose of raising funding of approximately $270M inconnection with its general business operations. The assessments are in respect of the 2007 and 2008 income tax years for atotal amount of $174.2M, including penalties and interest of approximately $65M. These assessments are based on twoalternative determinations by the ATO relating, firstly, to the assessment of the gain made on the sale of the equipment and,secondly, to the denial of the deduction for lease rentals paid to the new owner of the equipment.
If BSL is unsuccessful, BSL’s maximum liability in relation to the first assessment would be approximately $140M (includingpenalties and interest of $53M) and BSL’s maximum liability in relation to the second assessment (after appropriatecompensatory adjustments) would be approximately $51M to $63M (including penalties and interest of $18M to $22M). BSLconsiders that these assessments involve mutually exclusive outcomes and that the real amount of tax in dispute relates to thesecond assessment.
BSL believes that its treatment of the transaction is correct and is supported by both the existing case law and the ATO’spublished ruling on sale and leaseback transactions. BSL will defend the assessments and pursue all necessary avenues ofobjection. However, resolution of this matter is likely to take some time. In accordance with ATO guidelines, BSL made a$21.2M part payment on 9 July 2012 pending determination of the dispute. Any amount paid will be fully refundable in the eventthat the matter is resolved in favour of BSL. As at 30 June 2012, this amount has been provided for in the income tax provisionwith a corresponding increase in non-current tax receivable.
In addition to this matter, the Group operates in many countries across the world, each with separate taxation authorities, whichresults in significant complexity. At any point in time there are tax computations which have been submitted but not agreed bythose tax authorities and matters which are under discussion between Group companies and the tax authorities. The Groupprovides for the amount of tax it expects to pay taking into account those discussions and professional advice it has received.While conclusion of such matters may result in amendments to the original computations, the Group does not believe that suchadjustments will have a material adverse effect on its financial position, although such adjustments may be significant to anyindividual year's income statement.
(b) Contingent assets
No assets have been booked in relation to the recovery of any of the following claims due to the inherent uncertaintysurrounding these amounts:
• The Group has lodged a claim for the cumulation of workers compensation insurance recoveries on old 'pre demerger'policies. The insurance company's position is unclear and therefore recoveries remain uncertain.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
13 Non-cash investing and financing activities
Consolidated2012$M
2011$M
Acquisition of plant and equipment by means of finance leases (i) 34.8 56.0
Dividend Reinvestment Plan (ii) - 41.3
34.8 97.3
(i) New Zealand entered into a finance lease agreement of USD 34.2M for the use of equipment associated with thetransport of iron sands.
(ii) There were no dividends paid in the current period. In the comparative period, the Company had a formal DividendReinvestment Plan (DRP) in relation to the June 2010 final dividend, enabling participating shareholders to receivedividends as ordinary BlueScope Steel Limited shares instead of cash. A total of 18,839,253 shares were issued underthe DRP connected to the June 2010 final dividend. There was no DRP attached to the December 2010 interimdividend.
14 Earnings per share
(a) Basic earnings (loss) per share
Consolidated2012Cents
2011Cents
From continuing operations attributable to the ordinary equity holders of the Company (39.0) (48.8)
From discontinued operations (0.1) 0.2
Total basic earnings (loss) per share attributable to the ordinary equity holders of the Company (39.1) (48.6)
(b) Diluted earnings per share
Consolidated2012Cents
2011Cents
From continuing operations attributable to the ordinary equity holders of the Company (39.0) (48.8)
From discontinued operations (0.1) 0.2
Total diluted earnings (loss) per share attributable to the ordinary equity holders of the Company (39.1) (48.6)
(c) Reconciliation of earnings used in calculating earnings (loss) per share
Consolidated2012$M
2011$M
Basic and diluted earnings per shareProfit (loss) attributable to the ordinary equity holders of the Group used in calculating basicearnings per share:
From continuing operations (1,041.9) (1,059.9)
From discontinued operation (1.6) 5.7
(1,043.5) (1,054.2)
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
14 Earnings per share (continued)
(d) Weighted average number of shares used as denominator
Consolidated2012
Number
2011Number
Weighted average number of ordinary shares used as the denominator in calculatingbasic earnings per share
2,668,690,595 2,171,250,627
Adjustments for calculation of diluted earnings per share:
Weighted average number of share rights - 8,294Weighted average number of ordinary and potential ordinary shares used as thedenominator in calculating diluted earnings per share 2,668,690,595 2,171,258,921
(e) Earnings per share restated
In accordance with AASB 133 Earnings per Share, the comparative earnings per share calculations have been restated for thebonus element of the four-for-five share rights issue undertaken in December 2011. The previously reported June 2011weighted average number of shares has been adjusted by a factor of 1.1823 being the market price of one ordinary share at theclose of the last day at which the shares traded together with the rights $0.61, divided by the theoretical exrights value per shareof $0.52.
(f) Information on the classification of securities
(i) Basic earnings per shareBasic earnings per share is calculated by dividing net profit (loss) attributable to the ordinary equity holders of theCompany by the weighted average number of ordinary shares outstanding during the period.
(ii) Diluted earnings per shareDiluted earnings per share is calculated by dividing the net profit (loss) attributable to the ordinary equity holders of theCompany by the weighted average number of ordinary shares outstanding during the year plus the weighted averagenumber of ordinary shares that would be issued upon the conversion of all dilutive potential ordinary shares intoordinary shares.
Share rights granted to eligible senior managers under the Long Term Incentive Plan are considered to be potentialordinary shares and have been included in the determination of diluted earnings per share to the extent that they areexpected to vest based on current TSR (Total Shareholder Return) ranking as per the 30 June 2012 RemunerationReport. Details relating to the share rights are set out in note 50 of the full financial report.
There are 61,631,740 share rights relating to the 2007, 2008, 2009, 2010 and 2012 LTIPs that are not included in thecalculation of diluted earnings per share because they are not dilutive for the year ended 30 June 2012. These sharerights could potentially dilute basic earnings per share in the future.
15 Events occurring after balance date
(i) New segmentsBlueScope Steel Limited has announced a reorganisation to establish two businesses to focus on growth in the globalpre-engineered building market and building products market to take effect on 1 July 2012. As a result of these changes,on 26 July 2012, the Company announced changes to its external reporting segments.
• BlueScope Global Building Solutions comprises the Company's North American pre-engineered buildings (PEB)businesses, the entire China business and all PEB businesses in ASEAN.
• BlueScope Building Products comprises the Company's metal coating, painting and roll-forming businesses in ASEANand North America.
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BlueScope Steel LimitedNotes to the consolidated financial statements
30 June 2012(continued)
15 Events occurring after balance date (continued)
Mr Bob Moore, BlueScope's President, China and a member of the Executive Leadership Team (ELT), will become ChiefExecutive Global Building Solutions leading more than 5,000 employees across 21 manufacturing plants in eight countries.Mr Sanjay Dayal, Chief Executive BlueScope Asia and a member of the ELT will take on a new role as Chief Executive BuildingProducts with additional responsibility for the North American Steelscape and ASC Profiles businesses, leading 3,300employees at 29 manufacturing plants in seven countries.
These reporting segement changes will be applied in respect of the half-year ending 31 December 2012 and thereafter.
(ii) BlueScope Steel and Nippon Steel Joint VentureAs announced to the market on 13 August 2012, BlueScope and Nippon Steel Corporation (NSC) have agreed to form a newjoint venture encompassing BlueScope’s ASEAN and North American building products businesses.
The new 50:50 joint venture, called NS BlueScope Coated Products, provides a strong platform to capture expected growth inthe $40 billion per annum building and construction sector in ASEAN and North America. The JV will facilitate entry into newmarkets not currently accessible to BlueScope. For example, the JV will supply whitegoods manufacturers offering products toAsia’s fast growing middle class. The JV will also speed up entry into emerging markets in the ASEAN region.
NSC’s investment recognises an agreed enterprise valuation for the JV of US$1.36 billion. BlueScope will receive approximatelyUS$540 million in net proceeds through NSC’s 50% acquisition of BlueScope’s interest in the businesses after allowing fortaxes, minority interests and transaction costs. BlueScope will continue to control and consolidate the business for financialreporting purposes. The cash consideration received from NSC will be recognised within equity, therefore no gain or loss on thistransaction will be recorded in the income statement.
The joint venture will comprise BlueScope’s current building products businesses in ASEAN (Indonesia, Malaysia, Thailand,Vietnam, Singapore and Brunei) and North America (Steelscape and ASC Profiles). The footprint of this business also coversMyanmar, Cambodia, Laos and the Philippines.
NSC and BlueScope will each hold 50 per cent of a new joint venture company, headquartered in Singapore. BlueScope willappoint the Chief Executive of NS BlueScope Coated Products. NSC will appoint the Chairman and a number of key executivesto assist with business development and the introduction of new technology and products. The transaction is expected tocomplete in the March 2013 quarter, once regulatory approvals have been obtained.
The JV does not include BlueScope’s building products businesses in Australia, China and India, or its Global Building Solutionsbusiness that operates across the world (including in ASEAN countries).
(iii) US private placement repurchaseOn 7 August 2012, the Company repurchased a further US$88.2M of its US Private Placement Notes (subsequent to therepurchase of US$305.4M in May 2012) at par, plus accrued interest. The repurchase has been funded in US dollars usingexisting undrawn lines under the Company’s syndicated bank facility. No early redemption or make-whole costs were incurredby BlueScope in effecting the repurchase, and based on the Company’s drawn debt balance at 30 June 2012, the US$88.2Mrepurchase is expected to realise a pro-forma reduction in the Company’s annual interest expense of approximately A$6M perannum.
(iv) Changes to Malaysia minority interestsOn 16 August 2012, the Company acquired the 40% interest of the BlueScope Steel Malaysia business that it did not own.
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BlueScope Steel LimitedDirectors' declaration
30 June 2012
Directors' declaration
The directors declare that in their opinion, the concise financial report of the consolidated entity for the year ended 30 June 2012as set out in pages 1 to 23 complies with Accounting Standard AASB 1039 Concise Financial Reports.
The concise financial report is an extract from the full financial report for the year ended 30 June 2012. The financialstatements and specific disclosures included in the concise financial report have been derived from the full financial report.
The concise financial report cannot be expected to provide as full an understanding of the financial performance, financialposition and financing and investing activities of the consolidated entity as the full financial report, which is available onrequest.
This declaration is made in accordance with a resolution of the directors.
G J Kraehe, AOChairman
P F O'MalleyManaging Director & CEO
Melbourne20 August 2012
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AUDITOR’S REPORT
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Liability limited by a scheme approved under Professional Standards Legislation
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Independent auditor’s report to the members of BlueScope Steel Limited Report on the Concise Financial Report
We have audited the accompanying concise financial report of BlueScope Steel Limited which comprises the statement of financial position as at 30 June 2012, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended and related notes, derived from the audited financial report of BlueScope Steel Limited for the year ended 30 June 2012. The concise financial report also includes the directors’ declaration. The concise financial report does not contain all the disclosures required by the Australian Accounting Standards.
Directors’ Responsibility for the Concise Financial Report
The Directors are responsible for the preparation of the concise financial report in accordance with Accounting Standard AASB 1039 Concise Financial Reports, and the Corporations Act 2001, and for such internal controls as the directors determine are necessary to enable the preparation of the concise financial report.
Auditor’s Responsibility
Our responsibility is to express an opinion on the concise financial report based on our audit procedures which were conducted in accordance with ASA 810 Engagements to Report on Summary Financial Statements. We have conducted an independent audit, in accordance with Australian Auditing Standards, of the financial report of BlueScope Steel Limited for the year ended 30 June 2012. We expressed an unmodified audit opinion on the financial report in our report dated 20 August 2012. The Australian Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report for the year is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the concise financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the concise financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of the concise financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. Our procedures included testing that the information in the concise financial report is derived from, and is consistent with, the financial report for the year, and examination on a test basis, of audit evidence supporting the amounts and other disclosures which were not directly derived from the financial report for the year. These procedures have been undertaken to form an opinion whether, in all material respects, the concise financial report complies with AASB 1039 Concise Financial Reports. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
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Auditor’s Opinion
In our opinion, the concise financial report and the directors’ declaration of BlueScope Steel Limited for the year ended 30 June 2012 complies with Accounting Standard AASB 1039 Concise Financial Reports.
Report on the Remuneration Report
The following paragraphs are copied from our Report on the Remuneration Report for the year ended 30 June 2012.
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of BlueScope Steel Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001.
Ernst & Young
Rodney Piltz Partner Melbourne 20 August 2012
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SHAREHOLDER INFORMATION
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SHAREHOLDER INFORMATION As at 13 August 2012
Distribution Schedule Range No. of Holders No. of shares % of Issued Capital 1 to 1,000 74,978 32,309,894 0.96
1,001 to 5,000 55,789 136,129,801 4.06
5,001 to 10,000 16,209 118,778,028 3.55
10,001 to 50,000 14,971 308,530,785 9.21
50,001 to 100,000 1,548 109,699,570 3.28
100,001 and Over 997 2,643,737,169 78.94
Total 164,492 3,349,185,247 100.00 The number of shareholders holding less than a marketable parcel of 1,429 securities ($0.3501 on
13/08/2012) is 87,437 and they hold 47,147,279 shares.
Twenty Largest Registered Shareholders Rank Name of shareholder Total Units % Issued
Capital 1 J P MORGAN NOMINEES AUSTRALIA LIMITED 538,492,229 16.08%
2 NATIONAL NOMINEES LIMITED 520,935,825 15.55%
3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 503,916,874 15.05%
4 CITICORP NOMINEES PTY LIMITED 357,546,050 10.68%
5 BNP PARIBAS NOMS PTY LTD 139,702,332 4.17%
6 CITICORP NOMINEES PTY LIMITED 94,262,038 2.81%
7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 43,593,681 1.30%
8 JP MORGAN NOMINEES AUSTRALIA LIMITED 42,669,965 1.27%
9 QUEENSLAND INVESTMENT CORPORATION 16,308,020 0.49%
10 AMP LIFE LIMITED 14,180,882 0.42%
11 PACIFIC CUSTODIANS PTY LIMITED 10,122,041 0.30%
12 SHARE DIRECT NOMINEES PTY LTD 10,000,000 0.30%
13 IQ RENTAL & FINANCE PTY LTD 9,000,004 0.27%
14 BOND STREET CUSTODIANS LIMITED 8,101,661 0.24%
15 Y S CHAINS PTY LTD 7,900,000 0.24%
16 RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED 7,707,888 0.23%
17 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 7,163,039 0.21%
18 BLUESCOPE STEEL EMPLOYEE SHARE PLAN PTY LTD 6,935,600 0.21%
19 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 6,893,351 0.21%
20 BNP PARIBAS NOMS PTY LTD 4,181,500 0.12%
TOTAL
2,349,612,980 70.15%
Balance of Register
999,572,267 29.85%
Grand TOTAL
3,349,185,247 100.00% Substantial Shareholders As at 13 August 2012, BlueScope Steel has been notified of the following substantial shareholdings:
Name Number of securities held
IOOF Holdings Limited 176,057,173
Government of Singapore Investment Corporation Pte Ltd 172,628,663
Commonwealth Bank of Australia 169,973,347
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.
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spine 8mm
BLUESCOPE STEEL LIMITED AN
NUAL REPORT 2011/2012
BLUESCOPE STEEL LIMITED ANNUAL REPORT 2011/2012
CONTENTSChairman’s MessageAnnual Results ASX Media ReleaseInvestor PresentationDirectors’ ReportConcise Financial ReportAuditor’s ReportShareholder Information
BLUESCOPE STEEL LIMITED ABN 16 000 011 058 LEVEL 11, 120 COLLINS STREET MELBOURNE, VICTORIA 3000 AUSTRALIA WWW.BLUESCOPESTEEL.COM
XXX-XXX-XXXXX
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