Bluescope Steel

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Annual Report 2003

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BLUESCOPE STEEL LIMITED NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. BASIS OF PREPARATION OF THE CONCISE FINANCIAL REPORT

NOTE 2. SEGMENT INFORMATION

NOTE 3. REVENUE

NOTE 4. DIVIDENDS

NOTE 5. EARNINGS PER SHARE

NOTE 6. RETAINED PROFITS

NOTE 7. FULL FINANCIAL REPORT

NOTE 1. BASIS OF PREPARATION OF THE CONCISE FINANCIAL REPORT

As at 30 June 2002, BlueScope Steel Limited, formerly known as BHP Steel Limited, was a wholly owned subsidiary of the BHP Billiton Group. BlueScope Steel Limited legally separated from the BHP Billiton Group on 22 July 2002, having listed on the Australian Stock Exchange on 15 July 2002.

The concise financial report has been prepared in accordance with the requirements of the Corporations Act 2001 and Accounting Standard AASB 1039 "Concise Financial Reports".

The concise financial report relates to the consolidated entity incorporating the assets and liabilities of all entities controlled by BlueScope Steel Limited as at 30 June 2003 and the results of all controlled entities for the year then ended. The accounting policies adopted are consistent with those of the previous year.

Changes in Accounting Policies

AASB 1028 "Employee Benefits" (applicable from 1 July 2002)

Under this revised Standard, the liability for wages and salaries, annual leave and other employee entitlements to be settled within the next 12 months are recognised in the financial statements at remuneration rates at which they are expected to be settled, rather than at wage and salary rates current as at reporting date. The adjustments to the consolidated financial statements as a result of the change are:

$4.0 million increase in provision for employee benefits
$1.2 million increase in deferred taxes
$2.8 million decrease in opening retained profits.

AASB 1012 "Foreign Currency Translation" (applicable from 1 July 2002)

The impact on the consolidated financial statements from this revised Standard has been to record a receivable and a payable for $3.2 million in relation to unmatured forward exchange contracts used to hedge future export receipts.

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 financial reports. Amounts in the concise financial report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars.

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NOTE 2. SEGMENT INFORMATION

Business Segments

The consolidated entity has four business reporting segments: Hot Rolled Products, Coated Products Australia, New Zealand Steel and Coated Products Asia.

In view of the fact that certain operations forming part of the BlueScope Steel Group were legally acquired part way through the previous financial year or had not been acquired by BlueScope Steel Limited until after 30 June 2002, the previous year's segment information is not representative of the previous year's proforma results reported in the Annual Earnings Report dated 28 August 2003.

On 3 July 2002, BlueScope Steel Limited acquired BHP Steel (AIS) Pty Ltd from the BHP Billiton Group. For accounting purposes, the effective acquisition date was 1 July 2002 and therefore the financial results for the 12 month period to 30 June 2003 reflects a full year's results.

Hot Rolled Products

Hot Rolled Products includes a 50% interest in North Star BHP Steel joint venture, a steel mini-mill in the United States which was legally acquired in June 2002, and a 47.5% shareholding in Castrip LLC.

On 3 July 2002, BlueScope Steel Limited acquired BHP Steel (AIS) Pty Ltd, which includes the Port Kembla Steelworks, a Hot Rolled Products operation with an annual production capacity of 5.0 million tonnes of crude steel. The Port Kembla Steelworks manufactures and distributes slab, hot rolled coil and plate. Slab and hot rolled coil is supplied to Coated Products Australia for further processing, as well as to other domestic and export customers.

Coated Products Australia

Coated 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 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 products business comprises two main production facilities at Springhill in New South Wales and Western Port in Victoria together with a network of manufacturing and distribution facilities throughout Australia.

On 3 July 2002, BlueScope Steel Limited acquired BHP Steel (AIS) Pty Ltd which includes Packaging Products, a Coated Products Australia operation producing tinplate and blackplate in Australia which are used by the packaging industry in applications for food, beverages, paint, oil and other steel packaging.

Coated Products Asia

Coated Products Asia manufactures and distributes a range of metallic coated and painted steel products primarily to the building and construction industry and to some sections of the manufacturing industry across Asia and the Pacific.

The Indonesian metallic coating facility and two roll forming plants in China were acquired on 22 April 2002 and 15 February 2002 respectively.

New Zealand Steel

On 3 July 2002, BlueScope Steel Limited acquired BHP Steel (AIS) Pty Ltd, which includes the New Zealand Steel operation at Glenbrook, New Zealand. This operation 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.

Corporate and Group

Corporate and Group relates primarily to transport and logistics, export trading and corporate activities.

Intersegment pricing and segment accounting policies

Intersegment sales are made on a commercial basis. Segment accounting policies are the same as the consolidated entity's polices outlined in the full financial report.

Primary Reporting - Business Segments

 
Hot Rolled Products1 $m
Coated Products Australia $m
Coated Products Asia $m
New Zealand Steel $m
Corporate and Group $m
Inter-segment eliminations $m
Consolidated $m
2003
Sales to external customers
1,198.7
2,622.9
553.5
468.7
428.3
-
5,272.1
Intersegment sales
1,426.8
105.4
15.1
79.9
287.6
(1,914.8)
-
Total sales revenue
2,625.5
2,728.3
568.6
548.6
715.9
(1,914.8)
5,272.1
Other revenue
6.3
6.9
6.7
2.0
6.2
1.9
30.0
Total segment revenue
2,631.8
2,735.2
575.3
550.6
722.1
(1,912.9)
5,302.1
Segment result
471.2
118.5
84.0
44.4
(101.8)
(5.2)
611.1
Unallocated revenue less unallocated expenses
(17.5)
Profit/(loss)from ordinary activities before income tax expense
593.6
Income tax credit/(expense)
(120.9)
Net profit
472.7
Segment assets
2,236.3
1,607.1
483.2
501.4
108.1
(211.6)
4,724.5
Unallocated asset2
28.6
Total assets
4,753.1
Segment liabilities2
396.5
399.0
79.3
78.0
138.3
(167.7)
923.4
Unallocated liabilities
738.6
Total liabilities
1,662.0
Investments in associates and joint venture partnership
151.6
-
-
-
-
-
151.6
Acquisition of property, plant and equipment intangibles and other non-current segment assets3
1,898.4
49.2
40.3
346.5
10.8
-
2,345.2
Depreciation and amortisation expense
119.9
83.5
24.6
37.0
5.1
-
270.1

Primary Reporting - Business Segments

 
Hot Rolled Products1 $m
Coated Products Australia $m
Coated Products Asia $m
New Zealand Steel $m
Corporate and Group $m
Inter-segment eliminations $m
Consolidated $m
2002
Sales to external customers
-
1,937.0
372.6
16.4
132.5
-
2,458.5
Intersegment sales
-
28.7
42.5
-
68.2
(139.4)
-
Total sales revenue
-
1,965.7
415.1
16.4
200.7
(139.4)
2,458.5
Other revenue
-
1.3
6.5
-
0.8
21.6
30.2
Total segment revenue
-
1,967.0
421.6
16.4
201.5
(117.8)
2,488.7
Segment result
(10.8)
49.5
54.6
0.3
(74.6)
2.3
21.3
Unallocated revenue less unallocated expenses
(38.6)
Profit from ordinaryactivities before income taxexpense
(17.3)
Income tax expense
21.1
Net profit
3.8
Segment assets
157.5
1,218.2
509.3
17.0
25.9
(60.9)
1,867.0
Unallocated assets4
1,890.6
Total assets
3,757.6
Segment liabilities
-
301.9
72.4
13.5
87.6
-53.8
421.6
Unallocated liabilities4
2,564.3
Total liabilities
2,985.9
Investments in associates and joint venture partnership
146.3
-
-
-
-
-
146.3
Acquisition of property, plant and equipment, intangibles and other non-current segment assets
-
55.2
118.3
-
8.6
-
182.1
Depreciation and amortisation expense
-
58.2
17.8
-
1.2
-
77.2

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NOTE 3. REVENUE

 
2003
$m
2002
$m
Sale of goods
5,144.6
2,425.3
Rendering of services
127.5
33.2
Sales revenue
5,272.1
2,458.5
Other revenue
30.0
30.2
Total revenue
5,302.1
2,488.7

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NOTE 4. DIVIDENDS

 
2003
$m
2002
$m
Total dividends provided for or paid
71.4
-

As at 30 June 2003, the franking account balance for the company is $105.8 million (2002: $nil). The franking account balance includes franking credits that are expected to arise from the payment of income tax payable as at the end of the financial year.

An interim fully franked dividend of 9 cents per fully paid ordinary share was paid on 22 April 2003. The total interim dividend paid was $71.4 million. The directors have declared a fully franked final dividend of 13 cents and a special fully franked dividend of 7 cents per fully paid ordinary share. The estimated final dividend payable of $100.2 million and the special dividend payable of $54.0 million to be paid on 10 October 2003 (record date 16 September 2003), have not been recognised as a liability at 30 June 2003.

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NOTE 5. EARNINGS PER SHARE

   
2003
Cents
2002
Cents
Basic earnings per share5  
57.1
(16.3)
 
   
2003
Number
2002
Number
Weighted average number of shares      
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share  
791,544,061
63,247,945
   
2003
$m
2002
$m
Reconciliations of earnings used in calculating earnings per share      
Basic earnings per share      
       Net profit  
472.7
3.8
       Net profit attributable to outside equity interest  
(21.0)
(14.1)
       Earnings used in calculating basic earnings per share  
451.7
(10.3)

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NOTE 6. RETAINED PROFITS
 
Notes
2003
$m
2002
$m
Retained profits      
Retained profits at the beginning of the financial year  
387.7
392.1
Net profit/(loss) attributable to members of BlueScope Steel Limited  
451.7
(10.3)
Adjustment resulting from adoption of revised accounting standard AASB 1028  
"Employee Benefits"  
(2.8)
-
Dividends provided for or paid
(71.4)
-
Aggregate of amounts transferred from reserves  
196.2
5.9
   
961.4
387.7

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NOTE 7. FULL FINANCIAL REPORT

Further financial information can be obtained from the full financial report which is available from the company free of charge, on request. A copy may be requested by contacting the company's share registrar whose details appear in the Corporate Directory. Alternatively, both the full financial report and the concise financial report can be accessed via the internet at: www.bluescopesteel.com

1 The Hot Rolled Products segment result includes $69.2 million share of net profits of associates.

2 External borrowings, cash and tax balances are classified as unallocated.

3 Includes property, plant and equipment acquired on 3 July 2002 from the purchase of BHP Steel (AIS) Pty Limited for $2,175.5 million. This is primarily reflected in the Hot Rolled Products and New Zealand Steel reporting segments.

4 Related party loans receivable and payable, external borrowings, cash and tax balances are classified as unallocated.

5 There is no diluted earnings per share impact from the executive share rights scheme as it is the current intention of the company to satisfy their entitlements by purchasing BlueScope Steel Limited Shares on the market.

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