BlueScope Steel Limited ABN Interim financial report - 31 December Contents

Transcription

1 ABN Interim financial report - Contents Page Directors' report 1 Interim financial report Consolidated income statement 6 Consolidated balance sheet 7 Consolidated statement of recognised income and expense 8 Consolidated cash flow statement 9 Notes to the consolidated financial statements 10 Directors' declaration 20 Independent auditor's review report to the members 21

2 Directors' report Directors' report Your directors present their report on the consolidated entity consisting of BlueScope Steel Limited and the entities it controlled at the end of, or during, the half-year ended. Directors The following persons were directors of BlueScope Steel Limited during the whole of the half-year and up to the date of this report: G J Kraehe AO R J McNeilly D J Grady H K McCann AM P J Rizzo Y P Tan D B Grollo P F O'Malley was appointed a director on 6 August K C Adams resigned as a director on 31 October Review of operations A summary of consolidated revenues and results by reporting segment is set out below: Segment revenues Segment EBIT $M $M $M $M Hot Rolled Products Australia 2, , Coated and Building Products Australia 2, , New Zealand and Pacific Steel Products Coated and Building Products Asia (195.4) 30.8 Hot Rolled Products North America Coated and Building Products North America Corporate and Group (14.2) Intersegment eliminations (1,440.8) (1,405.3) (28.3) (33.8) Total continuing operations 4, , Unallocated revenue less unallocated expenses (63.4) (68.4) Profit before income tax Income tax (145.1) (172.1) Profit from continuing operations Profit (loss) from discontinued operations (net of tax) (1.9) (9.5) Profit for the year Profit (loss) attributable to minority interest (4.8) (9.9) Profit attributable to members of BlueScope Steel Limited Earnings per share for profit from continuing operations (cents per share) Basic earnings per share Diluted earnings per share Earnings per share for profit (cents per share) Basic earnings per share Diluted earnings per share

3 Directors' report (continued) Review of operations (continued) The Company s half year revenue from continuing operations increased $586.7M compared to the previous comparative period to a record level of $4,732.4M, primarily through additional volumes delivered by the acquisition of Smorgon Steel Limited s distribution business, higher global slab and hot rolled coil prices, higher scrap sales from Hot Rolled Products Australia, higher Coated and Building Products Australia export volumes reflecting improved production performances and sales growth in Coated and Building Products across all regions within Asia. These were partly offset by the sale of the Vistawall business in the second half of FY 2007, a stronger average Australian dollar and a higher proportion of export sales largely due to the closure of the tinplate business in second half FY Net profit after tax attributable to the shareholders of the Company decreased $271.9M to $115.9M driven by one-off costs related to the impairment of the China Metal Coating Line and Vietnam Metal Coating Line facilities, Lysaght Home Improvements and Lysaght Fiji due to lower than expected domestic volumes and margins in these businesses. These were partly offset by the profit on sale of the 19.9% shareholding in Smorgon Steel Limited. Excluding these items the result was negatively impacted by a strong Australian dollar, reduced margins from North Star BlueScope Steel, increased iron ore, scrap, steel feed and other operational costs which were partly offset by higher international steel prices. Hot Rolled Products Australia The earnings contribution from the Hot Rolled Products segment decreased primarily as a result of higher US dollar iron ore, scrap and alloy purchase prices, higher freight and discretionary repairs and maintenance costs to support record production rates and a stronger Australian dollar. These were partly offset by higher export slab and hot rolled coil prices and higher plate and welded beam prices in the domestic market. Coated and Building Products Australia The earnings contribution from the Coated and Building Products Australia segment decreased significantly primarily driven by impairment of Lysaght Home Improvements due to lower than expected domestic volumes and margins, write off of capitalised Movex application costs resulting from the intention to migrate Lysaght Australia to BlueScope Distribution s ERP system, integration costs associated with the acquisition of Smorgon Steel Limited s distribution business and restructuring and redundancy costs associated with the announced closure of the CPL1 paint line at the CRM service centre in Port Kembla. Excluding these items the result was positively impacted by the recently acquired BlueScope Distribution business, higher export sales prices, higher steel feed and metal coating costs, partly offset by a stronger Australian dollar and higher unit costs associated with the ramp up of the Western Sydney COLORBOND Steel Centre and the ramp up of cold rolled export sales to replace domestic tinplate. New Zealand and Pacific Steel Products The earnings contribution from the New Zealand and Pacific Steel Products segment increased slightly primarily as a result of redemption of B class preference shares in Manukau International Limited an investment vehicle of the New Zealand Steel Pension Fund, which had previously been impaired, improved scrap prices combined with a higher contribution from vanadium due to strengthening world prices and an improved product mix to higher margin products. These were partly offset by higher coal prices, a strengthening New Zealand dollar relative to the US dollar and impairment of Lysaght Fiji. Coated and Building Products Asia The earnings contribution from the Coated and Building Products Asia segment was significantly lower primarily due to impairment of China Metal Coating Line and Vietnam Metal Coating Line facilities, driven by lower than expected domestic volumes and margins in these businesses, together with reduced margins driven by increases in steel feed costs more than offsetting sales price increases. These were partly offset by lower unit costs following an increase in production volumes at the China Metal Coating Line and lower metal coating costs. Hot Rolled Products North America The earnings contribution from the Hot Rolled Products North America segment was considerably lower primarily due to reduced spread at North Star BlueScope Steel with lower hot rolled coil prices combined with increases in the cost of scrap in North America, increased conversion costs driven by higher electricity cost and an unfavourable movement in the Australian dollar relative to the US dollar. -2-

4 Directors' report (continued) Review of operations (continued) Coated and Building Products North America The earnings contribution from the Coated and Building Products North America segment improved significantly primarily due to improved margins as sales price increases exceeded raw material cost increases, improved plant efficiencies, increased output at lower unit cost facilities and write back of over-provided liabilities in relation to a UK pension fund. These were partly offset by an unfavourable movement in the Australian dollar relative to the US dollar. Corporate and Group The earnings contribution from the Corporate and Group segment was significantly improved compared to the previous year s loss primarily as a result of the profit on sale of the 19.9% shareholding in Smorgon Steel Limited. This was partly offset by employee share ownership plan costs during the current period (similar costs were incurred during the second half FY 2007) and internal restructuring costs. Significant changes in the state of affairs The following significant events occured during the half-year: On 3 August 2007, BlueScope Steel Limited acquired the distribution business of Smorgon Steel Limited for $750M, including acquisition costs. As part of the consideration for this acquisition the 179,124,278 Smorgon Steel Limited shares, previously acquired by the Company for $319.3M, were bought back at $2.50 per share based on OneSteel Limited shares for each Smorgon Steel Limited share valued using the volume weighted price of OneSteel Limited shares for the 10-day period to 17 August The pre-tax gain on the disposal of the Smorgon Steel Limited shares was $128M. Paul O'Malley, previously Chief Financial Officer, succeeded Kirby Adams as Managing Director and CEO effective from 1 November As part of the transition to his new role, Mr O'Malley joined the Board of BlueScope Steel Limited. Charlie Elias was appointed as Chief Financial Officer and will take up his new role from late February Kathryn Fagg (currently President, Asia) will leave the company in April 2008 to pursue other career interests. The senior leadership team is as follows: Noel Cornish - Chief Executive, Australian and New Zealand Steel Manufacturing Businesses Paul O'Keefe - Chief Executive, Australian Coated and Industrial Markets Mark Vassella - Chief Executive, Australian Distribution and Solutions Kathryn Fagg - President, Asia (until April 2008) Brian Kruger - President, North America and Corporate Strategy and Innovation Matters subsequent to the end of the financial half-year BlueScope Steel North America Corporation has acquired the outstanding shares of IMSA Steel Corporation for US$730M from Ternium S.A., a NYSE listed public company effective 1 February IMSA Steel Corporation has four distinct businesses with manufacturing facilities throughout the United States and sales throughout North America: Varco Pruden Buildings - a leading North American manufacturer of pre-engineered building systems (PEBs) for the non-residential market with five manufacturing facilities. It has a total processing capacity of approximately 210,000 tons per annum. Steelscape - a leading west coast producer of metal coated and painted steel coils with three production facilities. Steelscape has a total capacity of approximately 500,000 tons per annum of metal coated steel products and 350,000 tons per annum of painting capacity. Metl-Span - a leading North American manufacturer of insulated steel panels for commerical, industrial and cold storage buildings. Metl-Span has five production facilities across the United States. ASC Profiles - a leading North American manufacturer of building components including architectural roof and wall systems and structural roof and floor decking. ASC has ten production facilities located primarily in western US. -3-

5 Directors' report (continued) Auditor's independence declaration The auditors' independence declaration for the half-year ended has been received from Ernst & Young. This can be referred to on page 5 of the directors' report. Rounding of amounts The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in the directors' report and half-year financial report. Amounts in the directors' and financial report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollar. This report is made in accordance with a resolution of directors. Graham Kraehe AO Chairman Paul O'Malley Managing Director & CEO Melbourne 22 February

6 Directors' report (continued) Auditor's Independence Declaration to the Directors of BlueScope Steel Limited In relation to our review of the financial report of BlueScope Steel Limited for the half-year ended, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Bruce Meehan Partner Melbourne 22 February

7 Consolidated income statement For the half-year ended Half-year $M $M Revenue from continuing operations 4, ,145.7 Other income Changes in inventories of finished goods and work in progress (48.6) 98.3 Raw materials and consumables used (2,274.3) (1,941.8) Employee benefits expense (730.5) (651.9) Depreciation and amortisation expense (173.6) (156.1) Impairment of non-current assets (250.9) (0.6) Freight on external despatches (316.5) (280.5) External services (566.1) (468.5) Finance costs (66.0) (71.4) Other expenses (225.7) (205.0) Share of net profits of associates and joint venture partnership accounted for using the equity method Profit before income tax Income tax expense (145.1) (172.1) Profit from continuing operations Profit (loss) from discontinued operations (1.9) (9.5) Profit for the half-year Profit is attributable to: Equity holders of BlueScope Steel Limited Minority interest Cents Cents Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company: Basic earnings per share Diluted earnings per share Cents Cents Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share Diluted earnings per share The above consolidated income statement should be read in conjunction with the accompanying notes. -6-

8 Consolidated balance sheet As at 31 December 30 June $M $M ASSETS Current assets Cash and cash equivalents Receivables 1, ,219.4 Inventories 1, ,212.3 Derivative financial instruments Available-for-sale financial assets Other Total current assets 2, ,008.3 Non-current assets Receivables Retirement benefit assets Inventories Investments accounted for using the equity method Property, plant and equipment 3, ,670.7 Deferred tax assets Intangible assets Other Total non-current assets 4, ,497.9 Total assets 7, ,506.2 LIABILITIES Current liabilities Payables Interest bearing liabilities 1, Current tax liabilities Provisions Deferred income Derivative financial instruments Total current liabilities 2, ,119.4 Non-current liabilities Payables Interest bearing liabilities Deferred tax liabilities Provisions Retirement benefit obligations Derivative financial instruments Total non-current liabilities 1, ,521.8 Total liabilities 3, ,641.2 Net assets 3, ,865.0 EQUITY Contributed equity 1, ,896.0 Reserves (142.4) 7.0 Retained profits 1, ,894.7 Parent entity interest 3, ,797.7 Minority interest Total equity 3, ,865.0 The above consolidated balance sheet should be read in conjunction with the accompanying notes. -7-

9 Consolidated statement of recognised income and expense For the half-year ended $M $M Gain (loss) on cash flow hedges taken to equity (4.3) (2.7) Gain (loss) on revaluation of available-for-sale financial assets (29.2) 13.9 Transfer to profit of gain on disposal of available-for-sale financial assets (128.0) - Net gain (loss) on hedges of net investments 29.2 (73.3) Exchange differences on translation of foreign operations (53.0) 62.2 Actuarial gain (loss) on defined benefit superannuation plans (88.2) (24.8) Income tax on items taken directly to or transferred from equity Net income recognised directly in equity (217.0) 1.3 Profit for the half-year Total recognised income and expense for the half-year (96.3) Total recognised income and expense for the half-year is attributable to: Member of BlueScope Steel Limited (100.8) Minority interest (96.3) The above consolidated statement of recognised income and expense should be read in conjunction with the accompanying notes. -8-

10 Consolidated cash flow statement For the half-year ended Half-year $M $M Cash flows from operating activities Receipts from customers 5, ,864.4 Payments to suppliers and employees (4,645.1) (4,252.7) Dividends received Joint venture partnership distributions received Interest received Other revenue Finance costs paid (69.9) (80.0) Income taxes (paid) received (139.3) (125.7) Net cash (outflow) inflow from operating activities Cash flows from investing activities Purchases of controlled entities net of cash acquired (791.0) - Payments for property, plant and equipment (135.8) (216.9) Payments for intangibles (5.4) (3.6) Payments for investment in joint venture partnerships (12.3) (27.0) Payments for investment in business assets (1.0) (5.3) Payments for available-for-sale financial assets - (319.3) Proceeds from sale or redemption of investments Loans to related parties - (29.4) Proceeds from sale of property, plant and equipment Repayment of loans by related parties Net cash (outflow) inflow from investing activities (484.2) (563.9) Cash flows from financing activities Proceeds from issues of shares Proceeds from shares issued to minority interests Proceeds from borrowings 4, ,927.0 Repayment of borrowings (4,708.2) (5,873.7) Dividends paid to company's shareholders (131.0) (119.3) Dividends paid to minority interests in subsidiaries (1.5) (1.3) Net cash inflow (outflow) from financing activities Net increase (decrease) in cash and cash equivalents (7.2) (14.5) Cash and cash equivalents at the beginning of the half-year Effects of exchange rate changes on cash and cash equivalents - (0.8) Cash and cash equivalents at end of the half-year The above consolidated cash flow statement should be read in conjunction with the accompanying notes. -9-

11 Notes to the consolidated financial statements Contents of the notes to the financial statements Page 1 Basis of preparation of half-year report 11 2 Critical accounting estimates 11 3 Segment information 12 4 Equity securities issued 14 5 Discontinued operations 15 6 Dividends 16 7 Contingencies 16 8 Business combination 17 9 Events occurring after the balance sheet date

12 Notes to the consolidated financial statements (continued) 1 Basis of preparation of half-year report This general purpose financial report for the interim half-year reporting period ended has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001 and other mandatory reporting requirements. This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2007 and any public announcements made by BlueScope Steel Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. 2 Critical accounting estimates Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (i) Income taxes The group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. There are many jurisdictions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were actually reported, such differences will impact the current and deferred tax provisions in the period in which such determination is made. (ii) Defined benefit superannuation plans and workers compensation Calculations for the group's defined benefit superannuation plans and self-insured workers compensation are determined by external actuaries. These calculations require assumptions in relation to the expectation of future events. (iii) Product claims Provisions for claims is based on sales volume and past experience of the level of repairs and replacement. The provision requires the use of assumptions in relation to the level of future claims made. (iv) Share based payment transactions The group measures cost of equity settled transactions with employees by reference to the fair value of equity instruments at grant date. The fair value is determined by an external valuer using a binomial model. These calculations require assumptions to be made. (v) Restructuring and redundancy provisions Provisions for restructuring and redundancy are based on the group's best estimate of the outflow of resources required to settle commitments made by the group. Where the outcome of these matters is different from the amounts that were intially recorded, such differences will impact the income statement in the period in which such determination is made. (vi) Estimated impairment of cash-generating units, including goodwill The Group tests annually whether goodwill has suffered any impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. The Group assesses impairment of cash-generating units at each reporting date by evaluating conditions specific to the Group and to the particular cash-generating unit that may lead to impairment. If an impairment trigger exists the recoverable amount of the cash-generating unit is determined. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations which require the use of assumptions surrounding future cash flows and discount factors. -11-

13 Notes to the consolidated financial statements (continued) 3 Segment information (a) Description of segments Business segments The consolidated entity has six business reporting segments: Hot Rolled Products Australia, Coated and Building Products Australia, New Zealand and Pacific Steel Products, Coated and Building Products Asia, Hot Rolled Products North America and Coated and Building Products North America. Hot Rolled Products Australia Hot Rolled Products includes the Port Kembla Steelworks, a steel making operation with an annual production capacity of approximately 5.1 million tonnes of crude steel. The Port Kembla Steelworks manufactures slab, hot rolled coil and plate. Slab and hot rolled coil is supplied to Coated and Building Products Australia for further processing, as well as to other domestic and export customers. Coated and Building Products Australia Coated and Building Products Australia markets a range of products and material solutions to the Australian building and construction industry and is also a key supplier to the Australian automotive sector, major white goods manufacturers and general manufacturers. Coated and Building Products Australia is a leader in metallic coating and painting technologies supplying a wide range of branded products such as COLORBOND pre painted steel, ZINCALUME zinc/aluminium alloy coated steel and the LYSAGHT range of building products. The Coated and Building Products business comprises two main metallic coating production facilities at Springhill in New South Wales and Western Port in Victoria together with a network of manufacturing and distribution facilities throughout Australia, including BlueScope Distribution (formerly Smorgon Distribution). New Zealand and Pacific Steel Products The New Zealand Steel operation at Glenbrook, New Zealand, produces a full range of flat steel products for both domestic and export markets. It has an annual production capacity of 0.6 million tonnes. The segment also includes facilities in New Caledonia, Fiji and Vanuatu which manufacture and distribute the LYSAGHT range of products. Coated and Building Products Asia Coated and Building Products Asia manufactures and distributes a range of metallic coated, painted steel products and pre-engineered steel building systems primarily to the building and construction industry and to some sections of the manufacturing industry across Asia. Hot Rolled Products North America Hot Rolled Products North America includes a 50% interest in the North Star BlueScope Steel joint venture, a steel mini mill in the United States, a 47.5% shareholding in Castrip LLC, and North American export trading activities. Coated and Building Products North America Coated and Building Products North America includes the North American Buildings Group, which designs, manufactures and markets pre-engineered steel buildings and component systems. Corporate and Group Corporate and Group relates primarily to logistics and corporate activities. -12-

14 Notes to the consolidated financial statements (continued) 3 Segment information (continued) (b) Primary reporting format - business segments Half-year 2007 Hot Rolled Products Coated and Building Products New Zealand and Pacific Steel Coated and Building Products Hot Rolled Products North Coated and Building Products North Corporate Intersegment eliminations/ Total Continuing Discontinued Australia Australia Products Asia America America and Group unallocated Operations Operations Consolidated $M $M $M $M $M $M $M $M $M $M $M Segment revenue 2, , (1,440.8) 4, ,734.5 Segment result (195.0) (66.3) (28.3) (2.9) Share of net profits of associates and joint venture partnership (0.4) Share of gains(loss) on sale of investments Segment EBIT (195.4) (28.3) (2.9) Unallocated revenue less unallocated expenses (63.4) Profit before income tax Half-year 2006 Hot Rolled Products Coated and Building Products New Zealand and Pacific Steel Coated and Building Products Hot Rolled Products North Coated and Building Products North Corporate Intersegment eliminations/ Total Continuing Discontinued Australia Australia Products Asia America America and Group unallocated Operations Operations Consolidated $M $M $M $M $M $M $M $M $M $M $M Segment revenue 2, , (1,405.3) 4, ,528.5 Segment result (14.2) (33.8) (12.9) Share of net profits of associates and joint venture partnership (2.1) Share of gains(loss) on sale of investments Segment EBIT (14.2) (33.8) (12.7) Unallocated revenue less unallocated expenses (68.4) Profit before income tax

15 Notes to the consolidated financial statements 4 Equity securities issued Shares Shares $M $M Issues of ordinary shares during the Interim Opening balance 733,828, ,856,440 1, ,653.9 Dividend reinvestment plan - shareholders 5,552,248 7,494, Dividend reinvestment plan - underwritten - 17,856, Exercise of share rights under the Long Term Incentive Plan 1,488,252 2,101, Exercise of share rights under the Special Share Rights Plan - 40, General Employee Share Plan issues 1,564, , Forfeited shares from employee share plans ,433, ,552,877 1, ,830.2 Dividend Reinvestment Plan The dividend reinvestment plan enables shareholders to receive some or all of their future dividends as ordinary BlueScope Steel Limited shares instead of cash. The dividend reinvestment plan was fully underwritten in respect of the financial year 2006 final ordinary dividend. Long Term Incentive Plan The Long Term Incentive Plan is an award of share rights to eligible senior managers. The September 2004 award was 48% vested in the current period with the September 2005 and November 2006 awards partially vesting at 1% and 2% respectively due to Vistawall executives leaving the Plans as a result of the sale of Vistawall on 29 June The September 2003 award fully vested in the previous period. The full details of the operation of the plan are detailed in the June 2007 Remuneration Report. Special Share Rights Plan Special share rights are awarded from time to time to meet specific or exceptional demands. Special share rights which were awarded in 2004 to Mr Lance Hockridge, to facilitate the effective integration and turn around of the North American Coated and Building Products business, vested and were exercised in the comparative period. General Employee Share Plan In Thailand and New Zealand, shares were granted under the September 2004 General Employee Share Plan which vested during the period. In addition, employees from Australia and USA were issued shares under the November 2007 General Employee Share Plan. The aim of this plan is, in recognition of company performance, to assist employees to build a stake in the company by enabling each eligible employee to acquire a parcel of shares. Employees who become shareholders have the potential to benefit from dividends paid on the shares, growth in the market value of their shares and any bonus shares or rights issues the Board of Directors may approve from time to time. -14-

16 Notes to the consolidated financial statements 5 Discontinued operations (a) Description In June 2007, Coated and Building Products North America sold its Vistawall division, which manufactured and sold extruded aluminium and glass products for the building and construction sector. The current year result is due to working capital completion adjustments. In April 2007, the Company closed its loss making tinplate manufacturing facility which was the major component of the Packaging Products cash generating unit. Divestment of remaining components of the Packaging Products cash generating unit have continued in the six months to. Following a series of construction contract losses in the financial year 2006, the Company closed down and sold the assets of its Lysaght Taiwan business. The company continues to progressively complete pre-existing construction projects. (b) Financial performance of discontinued operations The results of the discontinued operations for the half-year until disposal are presented below: Consolidated Lysaght Lysaght Vistawall Packaging Taiwan TOTAL Vistawall Packaging Taiwan TOTAL $M $M $M $M $M $M $M $M Revenue Expenses (3.4) (1.4) (0.2) (5.0) (198.1) (191.4) (6.3) (395.8) Share of net profit (loss) of equity accounted associate Gross profit (loss) (3.4) 0.6 (0.1) (2.9) 13.0 (28.6) 2.8 (12.8) Finance costs - - (0.1) (0.1) - - (0.1) (0.1) Loss before tax from discontinued operations (3.4) 0.6 (0.2) (3.0) 13.0 (28.6) 2.7 (12.9) Income tax (expense) credit 1.3 (0.2) (5.0) 8.6 (0.2) 3.4 Profit (loss) for the half-year from discontinued operations (2.1) 0.4 (0.2) (1.9) 8.0 (20.0) 2.5 (9.5) (c) Cash flow information - discontinued operations The net cash flows of discontinued operations held are as follows: Consolidated Lysaght Lysaght Vistawall Packaging Taiwan TOTAL Vistawall Packaging Taiwan TOTAL $M $M $M $M $M $M $M $M Net cash inflow (outflow) from operating activities (1.7) 30.0 (1.2) (25.0) (0.4) (18.4) Net cash inflow (outflow) from investing activities (0.5) (0.9) Net cash inflow (outflow) from financing activities 1.7 (31.8) 0.9 (29.2) (5.1) 25.9 (4.8) 16.0 Net increase in cash generated by the operation - - (0.3) (0.3) (0.2)

17 Notes to the consolidated financial statements (continued) 6 Dividends Half-year ended $M $M (a) Ordinary shares Dividends provided for or paid during the half-year A dividend reinvestment plan is established to enable shareholders to receive some or all of their future dividends as ordinary BlueScope Steel Limited shares instead of cash. Dividends provided for or paid during the half-year Paid in cash Satisfied by issue of shares Movement in DRP residual owing (b) Dividends not recognised at the end of the half-year In addition to the above dividends, since the end of the half-year the directors have authorised the payment of an interim dividend of 22 cents per fully paid ordinary share ( cents), fully franked based on tax paid at 30%. The aggregate amount of the dividend to be paid on 1 April 2008 out of retained profits at, but not recognised as a liability at the end of the half-year, is Contingencies (a) Contingent liabilities Since the last annual reporting date, there have been no material changes of any contingent liabilities or contingent assets. -16-

18 Notes to the consolidated financial statements (continued) 8 Business combination (i) Smorgon Distribution (a) Summary of acquisition On 3 August 2007, BlueScope Steel Limited acquired the distribution business of Smorgon Steel Limited. The legal entities forming the distribution business of Smorgon Steel Limited includes Smorgon Steel Distribution Pty Ltd, Metalcorp Steel Pty Ltd; and Metalcorp Manufacturing Pty Ltd. The 179,124,278 of Smorgon Steel Limited shares previously held by BlueScope Steel Limited were bought back for $2.50 per share ($447.3M) realising a pre-tax gain on disposal of $128M. The proceeds were utilised to acquire Smorgon Distribution. From the date of acquisition, Smorgon Distribution has contributed $10.5M to the earnings before interest and tax of the Group. Details of net assets acquired and goodwill are as follows: Purchase consideration Cash paid Direct costs relating to the acquisition 19.8 Total purchase consideration Fair value of net identifiable assets acquired (refer (c) below) Goodwill $M (b) Purchase consideration Outflow of cash to acquire business, net of cash acquired Cash consideration Less: Balances acquired Cash 0.1 Outflow of cash (c) Assets and liabilities acquired The assets and liabilities arising from the acquisition are as follows: Acquiree s carrying amount Fair value $M $M Cash and cash equivalents Receivables Inventories Property, plant and equipment Intangible assets Deferred tax asset Other assets Payables (219.3) (218.9) Provisions (18.8) (27.8) Net identifiable assets acquired The fair value of assets and liabilities acquired may be subject to future adjustments upon finalisation of the initial accounting. In accordance with AASB 3 "Business Combinations" fair value adjustments more than twelve months from the acquisition date, excluding unrecognised deferred tax assets, are to be accounted for in accordance with AASB 108 "Accounting Policies, Changes in Accounting Estimates and Errors". -17-

19 Notes to the consolidated financial statements (continued) 8 Business combination (continued) (ii) HCI Steel Building Systems (a) Summary of acquisition On 1 November 2007, Butler Manufacturing Company acquired HCI Steel Building Systems Incorporated (HCI). HCI designs and manufactures steel building solutions for the heavy industrial, commercial and community end-use segments. It has a manufacturing plant in Arlington, Washington. HCI complements Butler's current operations in North America and services customers in the north western region of the US and western Canada through a network of authorised builders. From the date of acquisition, HCI has contributed $0.4M to the earnings before interest and tax of the Group. Details of net assets acquired and goodwill are as follows: Purchase consideration Cash paid 40.4 Direct costs relating to the acquisition 0.6 Total purchase consideration 41.0 Fair value of net identifiable assets acquired (refer (c) below) 8.0 Goodwill 33.0 $M (b) Purchase consideration $M Outflow of cash to acquire business, net of cash acquired Cash consideration 41.0 Less: Balances acquired Cash 3.4 Outflow of cash 37.6 (c) Assets and liabilities acquired Acquiree s carrying amount Fair value $M $M Cash & cash equivalents Receivables Inventories Property, plant and equipment Intangible assets Other assets Payables (4.5) (4.5) Provisions (0.4) (1.2) Other liabilities (2.1) (3.3) Interest bearing liabilities (0.1) (0.1) Net identifiable assets acquired The fair value of assets and liabilities acquired may be subject to future adjustments upon finalisation of the initial accounting. In accordance with AASB 3 "Business Combinations" fair value adjustments more than twelve months from the acquisition date, excluding unrecognised deferred tax assets, are to be accounted for in accordance with AASB 108 "Accounting Policies, Changes in Accounting Estimates and Errors". -18-

20 Notes to the consolidated financial statements (continued) 9 Events occurring after the balance sheet date Acquisition of IMSA Steel Corporation BlueScope Steel North America Corporation has acquired the outstanding shares of IMSA Steel Corp for US$730M from Ternium S.A., a NYSE listed public company effective 1 February IMSA Steel Corporation has four distinct businesses with manufacturing facilities throughout the United States and sales throughout North America: Varco Pruden Buildings - a leading North American manufacturer of pre-engineered building systems (PEBs) for the non-residential market with five manufacturing facilities. It has a total processing capacity of approximately 210,000 tons per annum. Steelscape - a leading west coast producer of metal coated and painted steel coils with three production facilities. Steelscape has a total capacity of approximately 500,000 tons per annum of metal coated steel products and 350,000 tons per annum of painting capacity. Metl-Span - a leading North American manufacturer of insulated steel panels for commerical, industrial and cold storage buildings. Metl-Span has five production facilities across the United States. ASC Profiles - a leading North American manufacturer of building components including architectural roof and wall systems and structural roof and floor decking. ASC has ten production facilities located primarily in western US. -19-

21 Directors' declaration Directors' declaration In the directors opinion: (a) the financial statements and notes set out on pages 5 to 19 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and giving a true and fair view of the consolidated entity's financial position as at and of their performance, as represented by the results of their operations and their cash flows, for the half-year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors. Graham Kraehe AO Chairman Paul O'Malley Managing Director & CEO Melbourne 22 February

22 Independent Review report Independent Review Report To the members of BlueScope Steel Limited Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of BlueScope Steel Limited, which comprises the balance sheet as at 31 December 2007, and the income statement, statement of recognised income and expense and cash flow statement for the half-year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration of the consolidated entity comprising of the company and the entities it controlled at or from time to time during the half-year then ended. Directors Responsibility for the Half-Year Financial Report The directors of the company are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on the half-year ended financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including; giving a true and fair view of the consolidated entity s financial position as at and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of BlueScope Steel Limited and the entities it controlled during the half-year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review we have met the independence requirements of the Corporations Act We have given to the directors of the company a written Auditor's Independence Declaration, a copy of which is included in the directors' report. Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of BlueScope Steel Limited is not in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity s financial position as at and of its performance for the half-year ended that date; and (ii) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations Ernst & Young Bruce Meehan Partner Melbourne 22 February