Bluescope Steel Annual Report 2004/05

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Our products are highlighted in (from left): BlueScope
Lysaght office in Indonesia - a BUTLER® pre-engineered building;
the Landcare building in New Zealand.

Investing for Growth

Since our listing on the Australian Stock Exchange in 2002, BlueScope Steel has designed and implemented an investment strategy that differentiates us from many other steel companies. A brief summary of our operations will assist your understanding of this strategy.

Our Company manufactures steel slab, hot rolled coil and plate at our three steelmaking facilities. We call these our 'upstream' businesses. However, we differ from many steel companies in that we retain a large proportion of our steel and further process it, primarily into building products, while we also supply the automotive, manufacturing, whitegoods and packaging sectors in Australia.

This processing and marketing is done through BlueScope Steel businesses such as Australian Manufacturing Markets; BlueScope Lysaght; our Asia Coated and Building Products businesses including BlueScope Buildings; and Butler Buildings in North America.

WE CONTINUE OUR PUSH INTO HIGH-VALUE STEEL MARKETS WITH OUR BRANDED STEEL SOLUTIONS.

We call these our 'downstream' businesses, and they market our brands such as COLORBOND® and ZINCALUME® steel, LYSAGHT® steel building solutions, and BUTLER® pre-engineered buildings (PEB) to intermediate suppliers, and directly to end-use customers.

Over the last three years, we have invested heavily in our downstream businesses, pushing further into high value-added, branded steel products. This investment strategy aims to capture the profit margins that accumulate as we retain steel and add progressively greater value to it.

For example, in April 2004 we acquired Butler Manufacturing, an iconic PEB business in North America and a market leader in China. So, in this niche, we now occupy every stage of the value chain. We make steel, we make building products from that steel, and we design, market and supply buildings made from those products.

Importantly, the margins on value-added steel products are less volatile than those obtainable on commodities such as steel slab and hot rolled coil. Therefore, we expect our investment strategy to help insulate BlueScope Steel against the effects of future volatility in global steel pricing. As a large part of our new capital investment is in Asia, we are also aligning our growth with that of the world's fastest growing economies.

The global steel market has been historically volatile, and this has driven capital away from steel companies. Our aim is to reduce the effects of this volatility, enhancing stable growth, and making BlueScope Steel a prosperous, long-term home for our shareholders' capital. It is this which makes us a different kind of steel company.