consolidated statement of financial performance
for the year ended 30 june 2005

	Notes	2005 $M	2004 $M
Revenue from ordinary activities		7,981.6	5,769.6
Changes in inventories of finished goods and work in progress		146.7	1.7
Raw materials and consumables used		(3,296.8)	(2,145.6)
Employee benefits expense		(1,347.0)	(1,075.2)
Depreciation and amortisation expenses		(306.1)	(286.7)
Diminution in value of non-current assets		(1.6)	(1.4)
External services		(1,093.0)	(800.0)
Freight on external despatches		(484.3)	(418.7)
Carrying amount of non-current assets sold		(9.9)	(6.0)
Other expenses from ordinary activities		(394.7)	(288.7)
Borrowing costs expense		(37.5)	(16.8)
Shares of net profits of associates and joint venture partnership accounted for using the equity method		196.7	71.2
Profit from ordinary activities before income tax expense		1,354.1	803.4
Income tax expense		(347.0)	(201.6)
Profit from ordinary activities after income tax expense		1,007.1	601.8
Net profit attributable to outside equity interest		(0.1)	(17.7)
Net profit attributable to members of BlueScope Steel Limited		1,007.0	584.1
Net increase (decrease) in foreign currency translation reserve		(56.7)	12.7
Total revenue, expenses and valuation adjustments attributable to members of BlueScope Steel Limited recognised directly in equity		(56.7)	12.7
Total changes in equity other than those resulting from transactions with owners as owners		950.3	596.8
		Cents	Cents
Basic earnings per share	6	137.4	77.8

 

The above consolidated statement of financial performance should be read in conjunction
with the and discussion and analysis.

 

Discussion and analysis of consolidated statement of financial performance

A breakdown of revenue and profit from ordinary activities before income tax by reporting segment is set out in note 2.

Key points to note on the profit from ordinary activities before income tax expense are:

· Building on the strong performance of previous years, the BlueScope Steel Group has achieved a record financial result, delivering a net profit of $1,007.0 million and earnings per share of 137.4 cents.

· The Company's revenue increased $2,212.0 million to $7,981.6 million, primarily achieved through acquisitions, improved prices, and a favourable shift in mix of despatches from export to domestic. These were partly offset by a reduction in the value of USD denominated sales, due to the strengthening of the Australian dollar.

· Net profit after tax increased $422.9 million to a record $1,007.0 million. This improvement was due primarily to higher international and domestic steel prices, improved margins from North Star BlueScope Steel and a favourable shift in mix of despatches from export to domestic. These were partly offset by higher raw material and operating costs, higher planned repairs and maintenance to improved operating stability, higher business development costs and the net impact of a higher AUD/USD exchange rate on USD denominated revenues and costs.

Hot Rolled Products

· The earnings contribution from the Hot Rolled Products segment increased as a result of stronger hot rolled coil and slab pricing (to export, domestic and inter-segment customers), and a substantial increase in margins from North Star BlueScope Steel. These were partly offset by higher scrap, coking coal, iron ore, alloys and freight costs, together with an increase in repairs and maintenance expenditure to ensure reliability of operations which underpins increased production capacity together with the optimisation of asset lives.

New Zealand and Pacific Steel Products

· The earnings contribution from the New Zealand and Pacific Steel Products segment increased as a result of domestic and export price increases, higher prices for vanadium slag (a steel making by-product) and continuing strong New Zealand domestic sales volumes.

Coated and Building Products Australia

· The earnings contribution from the Coated and Building Products Australia segment was significantly affected by higher hot rolled coil and slab feed costs (from Hot Rolled Products), which compressed margins despite price increases in both domestic and export markets. Earnings were also affected by industrial action at the Western Port facility, an increase in repairs and maintenance and restructuring costs associated with the withdrawal from export tinplate. These were partly offset by a favourable shift in mix of despatches from export to domestic.

Coated and Building Products Asia

· The earnings contribution from the Coated and Building Products Asia segment was lower primarily due to an increase in business development and pre-production costs associated with developments in Vietnam, Thailand, India and China, together with operating cost increases. These were partly offset by sales volume increases as a result of market growth initiatives and the integration of BlueScope Butler China. The segment maintained gross margins despite significant increases in steel feed and coating metal costs.

Coated and Building Products North America

· Butler Manufacturing Company, a leading manufacturer of pre-engineered buildings, was acquired in April 2004, bringing a new suite of building and construction products to the Company. This new segment delivered negative earnings for the year. However, when compared with comparative period earnings normalised for discontinued operations and acquisition related costs, earnings improved $8 million. This improvement was achieved primarily through higher margins but was negatively affected by costs associated with the early closure of the Galesburg, Illinois plant and start up costs of the replacement plant at Jackson, Tennessee.

 

Income Tax

· The effective tax rate for the twelve months ended 30 June 2005 was 25.6% (2004: 25.1%). The tax rate differs from the Australian tax rate of 30% primarily due to the utilisation of unbooked tax losses in New Zealand, together with the utilisation of tax exemptions in our Thailand Coating operation. These were partly offset by North Star BlueScope Steel being taxed at approximately 40% (US 35% tax rate plus state taxes).

 

consolidated statement of financial position
as at 30 june 2005

	Notes	2005 $M	2004 $M
Current assets
Cash assets		84.6	119.4
Receivables		1,052.8	989.2
Inventories		1,152.2	891.4
Other		39.5	43.7
Total current assets		2,329.1	2,043.7
Non-current assets
Receivables		7.4	7.1
Inventories		58.6	71.1
Investments accounted for using the equity method		253.5	236.3
Other financial assets		4.6	4.6
Property, plant and equipment		3,629.0	3,288.6
Deferred tax assets		61.6	58.0
Intangible assets		112.4	60.1
Other		7.5	12.6
Total non-current assets		4,134.6	3,738.4
Total assets		6,463.7	5,782.1
Current liabilities
Payables		818.6	728.3
Interest bearing liabilities		255.7	416.0
Current tax liabilities		215.6	154.3
Provisions		263.0	294.7
Other		60.5	92.5
Total current liabilities		1,613.4	1,685.8
Non-current liabilities
Payables		5.0	-
Interest bearing liabilities		620.2	176.7
Deferred tax liabilities		351.9	388.3
Provisions		372.7	337.7
Total non-current liabilities		1,349.8	902.7
Total liabilities		2,963.2	2,588.5
Net assets		3,500.5	3,193.6
Equity
Parent entity interest
Contributed equity		1,747.5	1,914.9
Reserves		(131.2)	(77.5)
Retained profits		1,841.0	1,302.9
Total parent entity interest		3,457.3	3,140.3
Outside equity interest in controlled entities		43.2	53.3
Total equity		3,500.5	3,193.6

The above consolidated statement of financial position should be read in conjunction with the and discussion and analysis.

 

Discussion and analysis of consolidated statement of financial position

Key notes on balance sheet movements are as follows:

ASSETS AND LIABILITIES

· An increase in receivables due mainly to higher sales prices.

· An increase in inventories due to higher raw material costs and timing of raw material receipts and export shipments.

· An increase in property, plant and equipment due to expenditure on new coating line facilities in Vietnam, China and a second metal coating line in Thailand and the Hot Strip Mill upgrade at Port Kembla.

· An increase in intangible assets arising from Lysaght Australia and BlueScope Water business acquisitions.

· An increase in payables due to higher capital expenditure and an increase in raw material, freight and other costs.

· An increase in provision for income tax in line with increased earnings, mainly from Australian operations.

EQUITY

· During April 2005, the company completed an off-market share buy-back of 25,856,197 shares, representing 3.5% of its issued share capital. The shares were bought back at $7.75 per share for a total cost of $202 million (includes $2 million of transaction costs). The price of $7.75 represented a 9% discount to the volume weighted average of BlueScope Steel Limited shares over the five days up to and including the closing date of the buyback.

· Shares bought back on-market totalled $125 million (15,880,095 shares).

· $37 million of share proceeds from the exercise of share rights issued in July 2002 under the senior manager long term incentive plan.

· A decrease in the exchange fluctuation reserve due to the impact of the strengthening of the AUD on foreign operations.

RELATIONSHIP BETWEEN DEBT AND EQUITY

· The current gearing ratio, calculated as net debt over net debt plus equity, is 18.4% (2004: 12.9%).

· On 1 July 2004, the Company completed a debut debt raising in the US private placement market totalling USD300 million with terms of 7 years (USD100 million) and 10 years (USD200 million).

 

 

consolidated statement of cash flows
For the year ended 30 june 2005

	Notes	2005 $M	2004 $M
Cash flows from operating activities
Receipts from customers		8,243.9	5,948.3
Payments to suppliers and employees		(7,166.0)	(5,099.9)
		1,077.9	848.4
Dividends received		125.4	1.0
Interest received		3.7	2.6
Other revenue		21.0	43.3
Borrowing costs		(26.9)	(15.8)
Income taxes paid		(312.1)	(119.4)
Net cash inflow (outflow) from operating activities		889.0	760.1
Cash flows from investing activities
Payment for purchase of controlled entities, net of cash acquired		(17.8)	(290.0)
Payments for property, plant and equipment		(600.0)	(289.1)
Payments for investments		(45.2)	(5.5)
Proceeds from sale of property, plant and equipment		12.8	11.8
Proceeds from sale or redemption of investments		-	6.5
Net associate loan receivable repaid (advanced)		(28.5)	(11.2)
Net cash inflow (outflow) from investing activities		(621.7)	(577.5)
Cash flows from financing activities
Proceeds from issues of shares		36.9	-
Share buyback		(327.0)	(259.4)
Employee share plan		-	(9.2)
Proceeds from other borrowings		2,893.9	3,469.5
Proceeds from finance leases		0.6	-
Repayment of borrowings		(2,541.0)	(3,114.0)
Repayment of finance leases		(4.5)	(0.3)
Dividends paid		(343.0)	(241.6)
Dividends paid to outside equity interests in controlled entities		(5.2)	(3.0)
Net cash inflow (outflow) from financing activities		(289.3)	(158.0)
Net increase (decrease) in cash held		(22.0)	24.6
Cash at the beginning of the financial year		118.1	91.0
Effects of exchange rate changes on cash		(13.1)	2.5
Cash at the end of the financial year		83.0	118.1

The above consolidated statement of cash flows should be read in conjunction with the and discussion and analysis.

 

Discussion and analysis of consolidated statement of cash flows

CASH FLOWS FROM OPERATING ACTIVITIES

The increase in net operating cash flows reflects an increase in operating cash profits partly offset by an increase in net working capital. The increase in net working capital primarily reflects:

· An increase in inventory due to higher raw material costs and the timing of raw material receipts and export shipments.

· An increase in receivables mainly due to higher prices.

· Partially offset by higher operating payables due to increased raw material, freight and other costs.

Other major movements in operating activities are:

· Dividend payments of $123 million received from North Star BlueScope Steel.

· Income tax payments were $193 million higher primarily due to increased profits earned from Australian operations. Tax losses and other tax exemptions exist in our New Zealand and Asian operations.

CASH FLOWS FROM INVESTING ACTIVITIES

Major movements in investing cash flows are as follows:

· The prior year cash flow included $278 million for the acquisition of the Butler Manufacturing Company.

· Payments for property, plant and equipment has increased by $311 million due mainly to expenditure on new coating line facilities in Vietnam and China, a second metal coating line in Thailand and the Hot Strip Mill upgrade at Port Kembla.

· Lysaght Australia and BlueScope Water business acquisitions.

· A loan to North Star BlueScope Steel was fully repaid during the year.

CASH FLOWS FROM FINANCING ACTIVITIES

Major financing cash flows are as follows:

· The payment of $343 million in dividends (2004: $242 million). This amount includes $75 million (2004: $53.8 million) in special dividend payments.

· $327 million of shares bought back (2004: $259 million).

· $37 million of share proceeds from the exercise of share rights issued in July 2002 under the senior manager long term incentive plan.

· The company borrowed an additional $349 million of debt.