bluescope steel ltd 2005fs - amazon s3 · bluescope steel limited 29(b) 1,007.0 584.1 1,087.1 146.1...

RESULTSGROWTH.

BLUESCOPE STEEL LIMITED FINANCIAL REPORT 2004/05

BlueScope Steel Limited

ABN 16 000 011 058

Financial report - 30 June 2005

Contents

Page

Statements of financial performance 1

Statements of financial position 2

Statements of cash flows 3

Notes to the financial statements 5

Directors' declaration 68

Independent audit report to the members 69

BlueScope Steel LimitedStatements of financial performance

For the year ended 30 June 2005

Consolidated

Parent entity

Notes

2005

2004

2005

2004

$m

$m

$m

$m

Revenue from ordinary activities

4

7,981.6 5,769.6 3,821.9

2,516.3

Changes in inventories of finished goods and work

in progress

146.7 1.7 30.7

4.8Raw materials and consumables used

(3,296.8) (2,145.6) (1,840.7)

(1,446.2)

Employee benefits expense

(1,347.0) (1,075.2) (393.2)

(390.1)Depreciation and amortisation expenses

5

(306.1) (286.7) (66.6)

(68.3)

Diminution in value of non-current assets

(1.6) (1.4) -

-External services (1,093.0) (800.0) (151.0) (102.5)Freight on external dispatches (484.3) (418.7) (168.1) (178.5)Carrying amount of non-current assets (9.9) (6.0) (0.6) (0.7)Other expenses from ordinary activities (394.7) (288.7) (158.8) (131.9)Borrowing costs expense 5 (37.5) (16.8) (18.6) -Shares of net profits of associates and jointventure partnership accounted for using the equitymethod 41 196.7 71.2 - -

Profit from ordinary activities before incometax expense 5 1,354.1 803.4 1,055.0 202.9

Income tax (expense)/credit 6 (347.0) (201.6) 32.1 (56.8)

Profit from ordinary activities after income taxexpense 1,007.1 601.8 1,087.1 146.1

Net profit attributable to outside equity interest (0.1) (17.7) - -

Net profit attributable to members ofBlueScope Steel Limited 29(b) 1,007.0 584.1 1,087.1 146.1

Net increase (decrease) in foreign currency

translation reserve

29(a)

(56.7) 12.7 -

-

Total revenue, expenses and valuation

adjustments attributable to members of BlueScope Steel Limited recognised directly inequity (56.7) 12.7 - -

Total changes in equity other than thoseresulting from transactions with owners asowners 31 950.3 596.8 1,087.1 146.1

Basic earnings per share 43

Cents

137.4

Cents

77.8

The above statements of financial performance should be read in conjunction with the accompanying notes.

- 1 -

BlueScope Steel LimitedStatements of financial position

As at 30 June 2005

Consolidated

Parent entity

Notes

2005

2004

2005

2004

$m

$m

$m

$m

Current assets

Cash assets

7

84.6 119.4 0.1

0.2Receivables

8

1,052.8 989.2 1,028.9

628.1

Inventories

9

1,152.2 891.4 283.9

239.8Other

10

39.5 43.7 3.5

2.7

Total current assets

2,329.1 2,043.7 1,316.4

870.8

Non-current assets

Receivables

11

7.4 7.1 285.4

307.2Inventories 12 58.6 71.1 23.6 25.4Investments accounted for using the equitymethod 13 253.5 236.3 - -Other financial assets 14 4.6 4.6 1,654.6 1,649.5Property, plant and equipment 15 3,629.0 3,288.6 777.2 722.0Deferred tax assets 16 61.6 58.0 - -Intangible assets 17 112.4 60.1 2.2 2.5Other 18 7.5 12.6 0.4 0.8

Total non-current assets 4,134.6 3,738.4 2,743.4 2,707.4

Total assets 6,463.7 5,782.1 4,059.8 3,578.2

Current liabilitiesPayables 19 818.6 728.3 233.5 226.3Interest bearing liabilities 20 255.7 416.0 371.3 373.5Current tax liabilities 21 215.6 154.3 203.3 148.5Provisions 22 263.0 294.7 95.3 92.9Other 23 60.5 92.5 - -

Total current liabilities 1,613.4 1,685.8 903.4 841.2

Non-current liabilitiesPayables

24

5.0 - -

-

Interest bearing liabilities

25

620.2 176.7 -

-Deferred tax liabilities

26

351.9 388.3 325.8

370.0

Provisions 27 372.7 337.7 90.7 80.9Total non-current liabilities 1,349.8 902.7 416.5 450.9

Total liabilities 2,963.2 2,588.5 1,319.9 1,292.1

Net assets 3,500.5 3,193.6 2,739.9 2,286.1

EquityParent entity interest

Contributed equity 28 1,747.5 1,914.9 1,747.5 1,914.9Reserves 29(a) (131.2) (77.5) - -Retained profits 29(b) 1,841.0 1,302.9 992.4 371.2

Total parent entity interest 3,457.3 3,140.3 2,739.9 2,286.1

Outside equity interest in controlled entities 30 43.2 53.3 - -

Total equity 31 3,500.5 3,193.6 2,739.9 2,286.1

The above statements of financial position should be read in conjunction with the accompanying notes.

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BlueScope Steel LimitedStatements of cash flows

For the year ended 30 June 2005

Consolidated

Parent entity

Notes

2005

2004

2005

2004

$m

$m

$m

$m

Cash flows from operating activities

Receipts from customers

8,243.9 5,948.3 2,825.5

2,605.2Payments to suppliers and employees

(7,166.0) (5,099.9) (2,939.6)

(2,461.7)

1,077.9 848.4 (114.1)

143.5

Dividends received

125.4 1.0 1,154.9

18.1Interest received

3.7 2.6 4.3

20.0

Other revenue

21.0 43.3 8.7

8.4Borrowing costs

(26.9) (15.8) (18.6)

-

Income taxes paid (312.1) (119.4) (96.0) (53.8)Net cash inflow (outflow) from operatingactivities 42 889.0 760.1 939.2 136.2

Cash flows from investing activitiesPayments for purchase of controlled entities,net of cash acquired 40 (17.8) (290.0) (11.8) (17.1)Payments for property, plant and equipment (600.0) (289.1) (117.5) (64.0)Payments for investments (45.2) (5.5) - (4.7)Proceeds from sale of property, plant andequipment 12.8 11.8 0.5 1.6Proceeds from sale or redemption ofinvestments - 6.5 5.3 11.1Net associate loan receivable repaid(advanced) 28.5 (11.2) - -Net cash inflow (outflow) from investingactivities (621.7) (577.5) (123.5) (73.1)

Cash flows from financing activitiesProceeds from issues of shares 36.9 - 36.9 -Share buyback (327.0) (259.4) (327.0) (259.4)Employee share plan

- (9.2) -

(9.2)

Proceeds from other borrowings

2,893.9 3,469.5 -

-Proceeds from finance leases

0.6 - -

-

Net financing of related entities - - (182.7) 445.4Repayment of borrowings (2,541.0) (3,114.0) - -Repayment of finance leases (4.5) (0.3) - -Dividends paid 32 (343.0) (241.6) (343.0) (241.6)Dividends paid to outside equity interests incontrolled entities (5.2) (3.0) - -Net cash inflow (outflow) from financingactivities (289.3) (158.0) (815.8) (64.8)

Net increase (decrease) in cash held (22.0) 24.6 (0.1) (1.7)Cash at the beginning of the financial year 118.1 91.0 0.2 1.9Effects of exchange rate changes on cash (13.1) 2.5 - -Cash at the end of the financial year 7 83.0 118.1 0.1 0.2

Financing arrangements 25

The above statements of cash flows should be read in conjunction with the accompanying notes.

- 3 -

BlueScope Steel LimitedNotes to the financial statements

30 June 2005

Contents

PageNote 1.

Summary of significant accounting policies

5

Note 2.

Australian equivalents to International Financial Reporting Standards (AIFRS)

14Note 3.

Segment information

20

Note 4.

Revenue

24Note 5.

Profit from ordinary activities

25

Note 6.

Income tax

26Note 7.

Current assets - Cash assets

27

Note 8.

Current assets - Receivables

28Note 9. Current assets - Inventories 29Note 10. Current assets - Other 29Note 11. Non-current assets - Receivables 29Note 12. Non-current assets - Inventories 30Note 13. Non-current assets - Investments accounted for using the equity method 30Note 14. Non-current assets - Other financial assets 31Note 15. Non-current assets - Property, plant and equipment 31Note 16. Non-current assets - Deferred tax assets 33Note 17. Non-current assets - Intangible assets 33Note 18. Non-current assets - Other 33Note 19. Current liabilities - Payables 33Note 20. Current liabilities - Interest bearing liabilities 34Note 21. Current liabilities - Current tax liabilities 34Note 22. Current liabilities - Provisions 34Note 23. Current liabilities - Other 35Note 24. Non-current liabilities - Payables 35Note 25. Non-current liabilities - Interest bearing liabilities 36Note 26. Non-current liabilities - Deferred tax liabilities 38Note 27.

Non-current liabilities - Provisions

39

Note 28.

Contributed equity

40Note 29.

Reserves and retained profits

42

Note 30. Outside equity interests in controlled entities 43Note 31. Equity 43Note 32. Dividends 43Note 33. Financial instruments 44Note 34. Director and executive disclosures 49Note 35. Remuneration of auditors 53Note 36. Contingent liabilities and contingent assets 54Note 37. Commitments for expenditure 55Note 38. Employee benefits 56Note 39. Related parties 59Note 40. Investments in controlled entities 61Note 41. Interests in joint ventures 65Note 42. Reconciliation of profit from ordinary activities after income tax to net cash inflow from operating

activities 66Note 43. Earnings per share 67

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30 June 2005

Note 1.

Summary of significant accounting policies

This general purpose financial report has been prepared in accordance with Accounting Standards, other authoritativepronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and theCorporations Act 2001.

(a)

Basis of accounting

The accounts are prepared in accordance with the historical cost convention. Unless otherwise stated, theaccounting policies adopted are consistent with those of the previous year.

(b) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by BlueScopeSteel Limited ('company' or 'parent entity') as at 30 June 2005 and the results of all controlled entities for theyear then ended. BlueScope Steel Limited and its controlled entities together are referred to in this financialreport as the consolidated entity or the BlueScope Steel Group. The effects of all transactions between entities inthe consolidated entity are eliminated in full. Outside equity interests in the results and equity of controlledentities are shown separately in the consolidated statement of financial performance and statement of financialposition respectively.

Where control of an entity is obtained during a financial year, its results are included in the consolidatedstatement of financial performance from the date on which control commences. Where control of an entityceases during a financial year, its results are included for that part of the year during which control existed.

Investments in associates are accounted for in the consolidated financial statements using the equity method.Associates are all entities over which the group has significant influence, but not control. Under this method, theconsolidated entity's share of the post-acquisition profits and losses of associates is recognised in theconsolidated statement of financial performance, and its share of post-acquisition movements in reserves isrecognised in consolidated reserves. The cumulative post-acquisition movements are adjusted against the cost ofthe investment. Dividends receivable from associates reduce the carrying amount of the investment in theconsolidated financial statements.

Investments in joint ventures are accounted for as set out in note 1(r).

(c) Comparatives

Where applicable, comparatives have been adjusted to disclose them on a comparable basis with current periodfigures.

(d) Rounding of amounts

The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & InvestmentsCommission, relating to the 'rounding off' of amounts in the financial report. Amounts in the financial reporthave been rounded off in accordance with that Class Order to the nearest hundred thousand dollars, or in certaincases, to the nearest thousand or the nearest dollar.

- 5 -


30 June 2005(continued)

(e)

Earnings per share

(i)

Basic earnings per share

Basic earnings per share is determined by dividing the net profit after income tax attributable to members of thecompany, excluding any costs of servicing equity other than ordinary shares, by the weighted average number ofordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issuedduring the year.

(ii)

Diluted earnings per share

There is no diluted earnings per share impact from the senior manager share rights scheme disclosed in note 34as it is the current intention of the company to satisfy these entitlements through the buy back and cancellationof an equivalent number of BlueScope Steel Limited issued shares.

(f) Income tax

Tax effect accounting procedures are followed whereby the income tax expense or credit in the statements offinancial performance is matched with the accounting result after allowing for permanent differences. The futuretax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain ofrealisation. Income tax on cumulative timing differences is set aside to the deferred income tax or the futureincome tax benefit accounts at the rates which are expected to apply when those timing differences reverse.

Tax consolidation legislation

BlueScope Steel Limited and its wholly-owned Australian controlled entities are members of a tax consolidationgroup. As a consequence, BlueScope Steel Limited, as the head entity in the tax consolidated group, recognisescurrent and deferred tax amounts relating to transactions, events and balances of the controlled entities in thisgroup as if those transactions, events and balances were its own, in addition to the current and deferred taxamounts arising in relation to its own transactions, events and balances. Amounts receivable or payable under atax sharing agreement with the tax consolidated entities are recognised separately as tax-related amountsreceivable or payable. Expenses arising under the tax sharing agreement are recognised as a component ofincome tax expense.

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(g)

Foreign currencies

The BlueScope Steel Group is Australian based with significant international operations.

(i)

Transactions

Transactions in foreign currencies of entities within the consolidated entity are converted to local

currency at the rate of exchange ruling at the date of the transaction.

Foreign currency monetary items that are outstanding at the reporting date (other than monetary items

arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the

contract) are translated using the spot rate at the end of the financial year.

A monetary item arising under a foreign currency contract outstanding at the reporting date where theexchange rate for the monetary item is fixed in the contract is translated at the exchange rate fixed inthe contract.

Except for certain specific hedges, all resulting exchange differences arising on settlement or re-statement are recognised as revenues and expenses for the financial year. Any gains or costs onentering a hedge are deferred and amortised over the life of the contract.

(ii) Specific hedgesWhere a purchase or sale is specifically hedged, exchange gains or losses on the hedging transactionarising up to the date of purchase or sale and costs, premiums and discounts relative to the hedgingtransaction are deferred and included in the measurement of the purchase or sale. Exchange gains orlosses arising on the hedge transaction after that date are taken to the net profit.

(iii) Hedges of foreign operationsExchange differences relating to foreign currency monetary items forming part of the net investment ina self-sustaining foreign operation , together with hedges of such monetary items and related taxeffects, are eliminated against the foreign currency translation reserve on incorporation of the foreign

operation's financial report into the financial report of the BlueScope Steel Group.

(iv) Foreign controlled entitiesAs all foreign controlled entities are self-sustaining, their assets and liabilities are translated intoAustralian currency at rates of exchange current at balance date, while their revenues and expenses aretranslated at the monthly average rate. Exchange differences arising on translation are taken to theforeign currency translation reserve.

Upon disposal or partial disposal of a self-sustaining foreign operation, the balance of the foreigncurrency translation reserve relating to the operation, or to the part disposed of, is transferred toretained profits.

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(h)

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the

revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is

recognised:

Sale of goods

Control of the goods has passed to the buyer. This is considered to have occurred when legal title of the product

is transferred to the customer and the Company is no longer responsible for the product. The point at which title

is transferred is dependent upon the specific terms and conditions of the contract under the sale.

Rendering of services

Where the contract outcome can be reliably measured, control of the right to be compensated for the servicesand the stage of completion can be reliably measured.

Interest and dividendsControl of the right to receive the interest and dividend payment.

(i) Acquisition of assets

The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instrumentsor other assets are acquired. Cost is determined as the fair value of the assets given up, shares issued or liabilitiesundertaken at the date of acquisition plus incidental costs directly attributable to the acquisition.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discountedto their present value as at the date of the acquisition. The discount rate used is the incremental borrowing rate,being the rate at which a similar borrowing could be obtained from an independent financier under comparableterms and conditions.

A liability for restructuring costs is recognised as at the date of acquisition of an entity or part thereof when thereis a demonstrable commitment to a restructuring of the acquired entity and a reliable estimate of the amount ofthe liability can be made.

Goodwill is brought to account on the basis described in note 1(m).

Where an entity or operation is acquired and the fair value of the identifiable net assets, including any liabilityfor restructuring costs, exceeds the cost of acquisition, the difference, representing a discount on acquisition, isaccounted for by reducing proportionately the fair values of the non-monetary assets acquired until the discountis eliminated. Where, after reducing to zero the recorded amounts of the non-monetary assets acquired, adiscount balance remains it is recognised as revenue in the statement of financial performance.

(j) Inventories

Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to itspresent location and condition are accounted for as follows:

• raw materials - purchase cost on a first-in-first-out basis; and

• finished goods and work-in-progress - cost of direct material and labour and a proportion of manufacturingoverheads based on normal operating capacity.

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(k)

Recoverable amount of non-current assets

The recoverable amount of an asset is the net amount expected to be recovered through the cash inflows and

outflows arising from its continued use and subsequent disposal. All non-current assets are reviewed at least bi-

annually to determine whether their carrying amounts exceed their recoverable amount. Where the carrying

amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable

amount

Where net cash inflows are derived from a group of assets working together, recoverable amount is determined

on the basis of the relevant group of assets. The decrement in the carrying amount is recognised as an expense innet profit or loss in the reporting period in which the recoverable amount write-down occurs. Estimated

recoverable amount is determined using expected pre-tax net cash flows discounted for the current year at 14.0%(2004: 14.0%).

(l) Employee benefits

Provision is made for employee benefits accumulated as a result of employees rendering services up to thereporting date. These benefits include wages and salaries, annual leave, long service leave and the Short TermIncentive Scheme (STI).Liabilities arising in respect of wages and salaries, STI, annual leave and other employee benefits expected to besettled within twelve months of the reporting date are measured at their nominal amounts based on remunerationrates which are expected to be paid when the liability is settled. All other employee benefit liabilities aremeasured at the present value of the estimated future cash outflow to be made in respect of services provided byemployees up to the reporting date.

(i) SuperannuationBlueScope Steel's policy is to account for superannuation contributions when they are payable. Aliability is taken up for deficits in employer sponsored defined benefit superannuation funds when alegal obligation exists.

(ii)

Termination benefits

Liabilities for termination benefits, not in connection with the acquisition or the closure of an

operation, are recognised when a detailed plan for the terminations has been developed and a valid

expectation has been raised in those employees affected that the terminations will be carried out.

Liabilities for termination benefits relating to an acquired entity or operation that arise as aconsequence of acquisitions are recognised as at the date of acquisition if, at or before the acquisitiondate, the main features of the terminations were planned and a valid expectation had been raised inthose employees affected that the terminations would be carried out, and this is supported by a detailedplan developed within three months of the acquisition or prior to the completion of the financial report,if earlier. These liabilities are disclosed in aggregate with other restructuring costs as a consequence ofthe acquisition.

(iii) Employee benefit on-costsEmployee benefit on-costs, including payroll tax, are recognised and included in employee benefitliabilities and costs when the employee benefits to which they relate are recognised as liabilities.

(iv) Equity-based compensation benefitsEquity-based compensation benefits are provided to senior officers via the Long Term Incentive PlanAward. Information relating to this scheme is set out in the Remuneration Report.The amounts disclosed for remuneration of directors and executives in the Remuneration Reportinclude the assessed fair values of share rights at the date they were granted.The value of the Long Term Incentive Plan is not being recognised as an employment expense.

- 9 -



(m)

Intangible assets and expenditure carried forward

(i)

Goodwill

Where an entity or operation is acquired, the identifiable net assets acquired are measured at fair value.

The excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets

acquired, is brought to account as goodwill and amortised on a straight line basis over the period duringwhich the benefits are expected to arise, not exceeding a period of 20 years. Unamortised balances are

reviewed bi-annually to assess the probability of continuing future benefits.

(ii)

Research and development expenditure

Expenditure for research and development is included in the statement of financial performance as and

when incurred on the basis that continuing research and development is part of the overall cost of beingin business, except to the extent that future benefits deriving from development costs are expectedbeyond any reasonable doubt to exceed those costs, in which case the development costs are capitalisedand amortised over the period of the expected benefit.

(iii) Patents and trademarksAmounts paid for patents & trademarks are capitalised and then amortised on a straight-line basis overthe expected period of benefit. Unamortised balances are reviewed bi-annually to assess the probabilityof continuing future benefits.

(n) Property, plant and equipment

Valuation in accounts

Property, plant and equipment has been recorded at cost. The recoverable amounts of property, plant andequipment are determined in accordance with note 1(k).

Depreciation of property, plant and equipment

Depreciation is calculated on a straight line basis to write off the net cost or revalued amount of each item of

property, plant and equipment (excluding land) over its expected useful life. Estimates of remaining useful lives

are made on a regular basis for all assets. The expected useful lives are as follows:

Category Useful lifeBuildings Up to 40 yearsPlant, machinery and equipment Up to 30 years

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(o)

Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of

the agreement so as to reflect the risks and benefits incidental to ownership.

Operating leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the

risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis.

Finance leases

Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased

item to the group are capitalised at the present value of the minimum lease payments and disclosed as property,plant and equipment under lease. A lease liability of equal value is also recognised.

Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the leaseterm. Minimum lease payments are allocated between interest expense and reduction of the lease liability withthe interest expense calculated using the interest rate implicit in the lease and charged directly to the statement offinancial performance.

(p) Borrowing costs

Borrowing costs are generally expensed as incurred except where they relate to the financing of construction ordevelopment of assets requiring a substantial period of time to prepare for their intended future use. Borrowing costs are capitalised up to the date when the asset is ready for its intended use. The amount ofborrowing costs capitalised for the period is determined by applying the interest rate applicable to appropriateborrowings outstanding during the period to the average amount of accumulated expenditure for the assetsduring the period.

Borrowing costs include:• interest on bank overdrafts and short-term and long-term borrowings;

• amortisation of ancillary costs incurred in connection with the arrangement of borrowings; and

• finance lease charges.

(q) Provisions

Provisions are recognised when the economic entity has a legal, equitable and constructive obligation to make afuture sacrifice of economic benefits to other entities as a result of past transactions or other past events, it isprobable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of theamount of the obligation.

A provision for product claims is recognised for all products at the reporting date based on sales volume andpast experience of the level of repairs and replacements.

A provision for dividends is not recognised as a liability unless the dividends are declared, determined orpublicly recommended on or before the reporting date.

(r) Joint ventures

The interest in joint venture partnerships are accounted for using the equity method. Under this method, theinvestment is initially recorded at its cost of acquisition and its carrying value is subsequently adjusted for theshare of the profits or losses and reserves of the partnership. The investment in joint venture partnerships aredecreased by the amounts of dividends received or receivable. Details relating to joint venture partnerships areset out in note 41.

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(s)

Derivative financial instruments

The BlueScope Steel Group is exposed to changes in interest rates, foreign currency exchange rates and

commodity prices and, in certain circumstances, uses derivative financial instruments to hedge some of these

risks.

When undertaking risk mitigation transactions, hedge accounting principles are applied, whereby derivatives arematched to the specifically identified commercial risks being hedged. These matching principles are applied to

both realised and unrealised transactions. Derivatives undertaken as hedges of anticipated transactions are

recognised when such transactions are recognised. Upon recognition of the underlying transaction, derivatives

are valued at the appropriate market spot rate.

When an underlying transaction can no longer be identified, gains or losses arising from a derivative that hasbeen designated as a hedge of that transaction will be included in the statement of financial performance.

Where a hedge is terminated, the deferred gain or loss that arose prior to termination is:(a) deferred and included in the measurement of the anticipated transaction when it occurs; or(b) included in the statement of financial performance where the anticipated transaction is no longer expectedto occur.

Costs arising at the time of entering into hedging transactions are included in other assets and deferred andincluded in the settlement of the underlying transaction.

Forward exchange contractsIn certain circumstances, the BlueScope Steel Group may enter into forward exchange contracts where it agreesto sell specified amounts of foreign currencies in the future at a predetermined exchange rate. The objective is tomatch the contract with anticipated future cash flows from sales and purchases in foreign currencies, to protectthe consolidated entity against the possibility of loss from future exchange rate fluctuations. The forwardexchange contracts are usually for no longer than twelve months.

Forward exchange contracts are recognised at the date the contract is entered into. Exchange gains or losses on

forward exchange contracts are recognised in net profit except those relating to hedges of specific commitments

that are deferred and included in the measurement of the sale or purchase.

Interest rate swapsIn certain circumstances, the BlueScope Steel Group may enter into interest rate swap agreements to convertvariable interest rates on borrowings to fixed interest rates. Any swaps entered into have the objective ofreducing the risk of movements in interest rates.

It is the company's policy to not recognise interest rate swaps in the financial statements.

(t) Other financial assets

Interests in unlisted securities, other than controlled entities and associates in the consolidated financialstatements, are brought to account at cost and dividend income is recognised in the statement of financialperformance when receivable. Controlled entities and associates are accounted for in the consolidated financialstatements as set out in note 1(b).

The interest in a joint venture partnership is accounted for as set out in note 1(r).

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(u)

Restructuring costs

Liabilities arising directly from undertaking a restructuring program, defined as the closure of an operation, not

in connection with the acquisition of an entity or operations, are recognised when a detailed plan of the

restructuring activity has been developed and implementation of the restructuring program as planned has

commenced, by either entering into contracts to undertake the restructuring activities or making a detailed

announcement such that affected parties are in no doubt the restructuring program will proceed.

Liabilities for the cost of restructuring entities or operations acquired are recognised as at the date of acquisition

of an entity, or part thereof, if the main features of the restructuring were planned and there was a demonstrable

commitment to the restructuring at the acquisition date and this is supported by a detailed plan developed within

three months of the acquisition or prior to the completion of the financial report, if earlier.

Redundancy costs that are not part of a restructuring program are classified as employee benefits (refer note1(l)).

(v) Receivables

Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectibledebts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Baddebts are written-off as incurred.

Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up asincome on an accrual basis.

(w) Trade and other creditors

Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration tobe paid in the future for goods and services received, whether or not billed to the consolidated entity.

Liabilities for related party creditors are carried at principal amount. Interest is recognised as an expense on an

accrual basis.

(x) Cash

For purposes of the statement of cash flows, cash includes deposits at call with financial institutions and otherhighly liquid investments with short periods to maturity which are readily convertible to cash on hand and aresubject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

- 13 -



Note 2.

Australian equivalents to International Financial Reporting Standards (AIFRS)

The Australian Accounting Standards Board (AASB) is adopting Australian equivalents to International FinancialReporting Standards (AIFRS) for application to reporting periods beginning on or after 1 January 2005. The adoption ofAIFRS will be first reflected in the consolidated entity's financial statements for the half-year ending 31 December 2005and the year ending 30 June 2006.

Entities complying with AIFRS for the first time are required to restate their comparative financial statements to reflect theapplication of AIFRS. The majority of AIFRS transition adjustments will be made retrospectively against opening retainedearnings at 1 July 2004.

BlueScope Steel Limited is well advanced in transitioning its accounting policies, systems and financial reporting fromcurrent Australian accounting standards.

Set out below are the key areas where accounting policies are expected to change on adoption of AIFRS and our bestestimate of the quantitative impact on the changes on total equity as at the date of transition and 30 June 2005 and on netprofit for the year ended 30 June 2005. The amounts disclosed are the company's best estimates as at the date of preparingthe year-end financial report. These figures may change due to potential amendments to, and interpretations of, currentAIFRS by the standard setters together with ongoing work undertaken by the company's AIFRS project team.

(a) Reconciliation of equity as presented under AGAAP to that under AIFRS

Consolidated Parent Entity30 Jun 2005 1 Jul 2004 30 Jun 2005 1 Jul 2004

Notes $m $m $m $mTotal equity under AGAAP 3,500.5 3,193.6 2,739.9 2,286.1

Adjustments to retained earnings (net of tax)

Defined benefit superannuation

(i)

(193.2)

(130.5)

0.1

(3.9)

Impairment of assets

(ii)

(125.7)

(71.6)

-

-

Income tax methodology (iii) 86.3 80.6 - -Foreign currency translation (iv) (12.6) - - -Business combinations (v) 5.0 - 0.3 -Share based payments (vi) (9.0) (2.6) (9.0) (2.6)Equity accounting (vii) (0.1) 0.7 - -Opening exchange fluctuation reserve (viii) (77.5) (77.5) - -

Adjustments to other reserves (net of tax)

Share based payments (vi) 9.0 2.6 9.0 2.6Opening exchange fluctuation reserve (viii) 77.5 77.5 - -

Total equity under AIFRS 3,260.2 3,072.8 2,740.3 2,282.2

Estimated change $m (240.3) (120.8) 0.4 (3.9)Estimated change % (6.9%) (3.8%) 0.01% (0.2%)

- 14 -



(b)

Reconciliation of net profit as presented under AGAAP to that under AIFRS

Consolidated

Parent Entity

Year ended 30 Jun

2005 Year ended 30 Jun

2005

Notes

$m

$m

Net profit before tax as reported under AGAAP

1,354.1

1,055.0

Defined benefit superannuation

(i)

19.8

6.1

Impairment of assets

(ii)

(77.2)

-

Foreign currency translation

(iv)

22.0

-

Business combinations (v) 4.9 0.3Share based payments (vi) (6.4) (6.4)Equity accounting (vii) (0.9) -

Net profit before tax under AIFRS 1,316.3 1,055.0

Income tax (expense)/benefit - AGAAP (347.0) 32.1Income tax (expense)/benefit - AIFRS adjustment 12.7 (1.8)

Net profit after tax under AIFRS 982.0 1,085.3Net profit after tax under AGAAP 1,007.1 1,087.1

Estimated change to net profit after tax $m (25.1) (1.8)Estimated change to net profit after tax % (2.5%) (0.2%)

(i) Defined benefit superannuation

Under AASB 119 Employee Benefits, employer sponsors are required to recognise the net surplus or deficit in employersponsored defined benefit superannuation funds as an asset or liability. This asset or liability is measured as the presentvalue of the defined benefit obligation at the reporting date plus unrecognised actuarial losses (less unrecognised actuarialgains) less the fair value of the superannuation fund's assets at that date. The present value of the defined benefit obligationis based on expected future payments which arise from membership of the fund to the reporting date, calculated annuallyby independent actuaries. Consideration is given to expected future wage and salary levels, experience of employeedepartures and periods of service.

The requirements of AASB 119 change the group's current accounting policy whereby a liability is only recognised when alegal obligation exists and the defined benefit superannuation expense matches the company contribution. Under AASB119, the defined benefit superannuation expense is actuarially determined and includes current service cost, interest cost,and plan expenses offset by employee contributions and the expected return on fund assets. This expense is grossed up forany contributions tax payable (Australia 15%, New Zealand 33%).

At 30 June 2005, an actuarially determined liability is to be recorded for the deficit in the New Zealand defined benefitsuperannuation fund and a small asset for the Australian defined benefit superannuation fund. Due to existing legalobligations arising from defined benefit funds in the Coated and Building Products North America Group a liability for thedefined benefit shortfall was taken up under AGAAP. However, an additional liability is required to be recognised due tothe requirements of AASB 119 to discount the accrued benefit liability using the corporate bond rate (or equivalent) whichis lower than the expected return on the fund's assets.

- 15 -



Actuarial valuations have been undertaken for each defined benefit superannuation fund in the Group. A breakdown of theAASB 119 adjustment for the surplus and shortfalls of the Group's funds, including the associated tax adjustment, is asfollows:-

Consolidated

Parent Entity

30 Jun 2005

1 Jul 2004

30 Jun 2005

1 Jul 2004

$m

$m

$m

$m

Australia entities

0.5

(14.3)

0.2

(5.6)

New Zealand Steel

(168.7)

(116.6)

-

-

Coated and Building Products

North America

(40.2)

(6.3)

-

-

Deferred tax asset/(liability)

15.2

6.7

(0.1)

1.7

Net adjustment (193.2) (130.5) 0.1 (3.9)

The increase in the liability from July 2004 is primarily due to a reduction in corporate bond interest rates in New Zealandand North America.

The AIFRS balance sheet asset and liability to be recognised under AASB 119 for the Australian and New Zealand definedbenefit superannuation fund positions differs from the information disclosed in Note 38 to the financial report due to:• AASB 119 requiring the fund surplus or deficit to be grossed up for employer contributions tax (Australia 15%, New

Zealand 33%); and• the accrued benefits liability is to be discounted using a corporate bond rate with terms to maturity that match, as

closely as possible, the estimated future cash outflows.Under current AGAAP, the accrued benefits liability is not grossed up for employer contribution tax and is discountedusing the expected rate of return on the fund assets, which is typically a higher rate than the corporate bond rate.

In December 2004, AASB 119 was reissued to provide options in accounting for actuarial gains and losses by allowingeither a direct adjustment against retained earnings, a progressive profit and loss 'corridor' approach or immediaterecognition in the profit and loss. The Company intends to early adopt the revised standard to enable actuarial gains andlosses to be taken directly to retained earnings. The post tax amount to be taken to retained earnings as an actuarial loss at30 June 2005 is $80.2M (pre tax $92.9M).

The company will recognise a $19.8M lower employment cost in the year ended 30 June 2005 under AIFRS as currentcompany contributions are in excess of the actuarial determined expense. This benefit is split between Hot Rolled Products$6.7M, Coated and Building Products Australia $5.1M, Corporate and Group $1.2M and New Zealand and Pacific SteelProducts $6.8M.

(ii) Impairment of assets

AASB 136 Impairment of Assets determines the recoverable amount of cash generating units by assessing the higher of fairvalue less costs to sell and value in use. In determining value in use, future cash flows are discounted using a risk adjustedpre-tax discount rate. Cash generating units (CGUs) are described as the smallest group of assets that generate cash flowsfrom continuing use that are largely independent.

BlueScope Steel currently assesses the recoverable value of income generating units (IGUs) using future cash flowsdiscounted at a pre-tax company-wide discount rate. IGUs are defined as a group of assets working together to generatecash flows.

The CGU approach requires certain assets to be assessed for recoverability on a standalone basis rather than being groupedinto an IGU with the discount rate including a country risk premium. Both of these differences increase the possibility ofcertain BlueScope Steel assets being impaired.

The company has defined its CGUs, reassessed its impairment testing policy and tested all assets for impairment as attransition date and at 30 June 2005. This assessment has necessitated a $102.3M ($71.6M net of tax) impairment write-down for the Packaging Products CGU at 1 July 2004 and an additional $82.3M ($57.6M net of tax) write-down at 30 June2005. The Packaging Products operational assets will have been written down to nil value at 30 June 2005 under AIFRS.

- 16 -



As a result of the 1 July 2004 write-down, depreciation expense will be $5.1M lower for the year ended 30 June 2005.

Under AGAAP, Packaging Products is grouped with other Australian steel manufacturing assets (Port Kembla Steelworks,Springhill and Western Port operations), which was treated as an IGU, and therefore Packaging Products was not tested forimpairment on a standalone basis. Packaging Products is impaired on a standalone basis primarily as a result of low growthand margin compression since the facility was upgraded in the 1990's and further impaired at 30 June 2005 due toincreases in unit costs following the withdrawal from export tinplate. The company continues to operate these assets and isinvestigating ways of improving their profitability.

The reduction in Packaging Products property, plant and equipment under AIFRS will be attributable to the Coated andBuilding Products Australia reporting segment.

(iii) Income tax methodology

AASB 112 Income Taxes requires all tax assets to be recognised if they are probable of realisation. Probable is defined asmore likely than not. Under current Australian accounting standards income tax losses can only recognised if they areconsidered to be virtually certain of realisation. The company has reassessed its accounting policy for the recognition oftax assets in accordance with AASB 112 and recognised an additional tax benefit, of $87.5M in the opening AIFRSbalance sheet at 1 July 2004 (30 June 2005 $86.3M). As a result of booking this additional benefit, the company expectsto commence recognising a tax expense on New Zealand Steel's profit during the second half of FY 2006.

A further change arising from implementing AASB 112 is the requirement to use the balance sheet liability method and totax effect fair value adjustments arising from business combinations (refer point (v)). The balance sheet approach focuseson the taxation of transactions and other events that affect amounts recognised in either the Balance Sheet or a tax-basedbalance sheet. As tax assets are not allocated to reporting segments in accordance with AASB 114 Segment Reporting this adjustment willnot impact our individual reporting segments.

(iv) Foreign currency translation

AASB 121 Effect of Changes in Foreign Exchange Rates requires exchange gains and losses arising from loan balances,including intercompany loans, to remain in the consolidated income statement unless they form part of a net investment ina foreign operation. If these tests are met, the exchange fluctuation is able to be reported in a separate component of equityand would be realised upon disposal of the foreign operation.

The company's foreign currency loans, including intercompany loans, not denominated in the functional currency of thebusiness do not currently meet the tests required under AASB 121 for a hedge of a net investment of a foreign operationresulting in exchange fluctuations on loan balances being taken to the income statement. Under AGAAP these items havebeen recorded against the exchange fluctuation reserve.

Management has undertaken a thorough review of the future impact on the income statement from foreign currencyexposures arising from the changes identified above. Future foreign currency exposure is to be managed through balancingforeign exchange debt with foreign exchange intercompany balances and no material earnings volatility is expected.

The profit and loss impact arising from exchange fluctuations on loan balances is to be allocated to the Corporate andGroup reporting segment.

(v) Business combinations

Under AASB 3 Business Combinations, goodwill will no longer be amortised but instead be subject to annual impairmenttesting. This has resulted in a change in the group's accounting policy that currently amortises goodwill over its useful lifenot exceeding 20 years. Impairment testing as at 1 July 2004 and 30 June 2005 have confirmed no impairment of goodwill.

- 17 -



The company has elected to apply the exemption under AASB 1 First-time Adoption of Australian Equivalents toInternational Financial Reporting Standards to not restate pre 1 July 2004 business combinations in accordance withAASB 3. AASB 3 applies more stringent tests in identifying acquired intangible assets than current Australian accountingstandards. This will result in a lower goodwill number being recorded on post 1 July 2004 acquisitions. AASB 136Intangible Assets requires intangible assets that do not have indefinite lives to be amortised over their useful life.

Consistent with AASB 112 Income Taxes, business combinations post 1 July 2004 are required to incorporate the tax effectof fair value adjustments. This impacts the amount of goodwill recognised.

(vi) Share based payments

Under AASB 2 Share-based Payment, the company is required to expense the fair value of share rights and awards grantedto employees as remuneration over the expected vesting period. This standard applies to all share rights and awards issuedafter 7 November 2002 which have not vested as at 1 January 2005. BlueScope Steel issues share rights to seniorexecutives in the organisation as part of its remuneration strategy which focuses on performance, accountability andaligning performance-related reward with the value delivered to shareholders.

AASB 2 requires the fair value of the share rights granted to executives in September 2003 and September 2004, and anysubsequent grants, to be expensed over the expected vesting period with a corresponding increase in an equity reserve. Notax deduction is allowed for the amount expensed. The fair values and other details on share rights granted by BlueScopeSteel are disclosed in the Remuneration Report.

A minor component of the September 2003 and September 2004 Employee Share Ownership Program (ESOP) requiresBlueScope Steel shares to be issued to employees in certain countries three years from the grant date. The fair value of thefuture share issue is required to be expensed over the remaining vesting period with a corresponding increase in an equityreserve. Future share ownership programs will require the fair value granted to be expensed to the profit and loss over thevesting period. Under current Australian accounting standards, the shares would have been issued at nil cost and noexpense recognised.

(vii) Equity accounting

Under AASB 128 Investments in Associates, where an investor holds 20% or more of the voting power of the investee, it ispresumed that the investor has significant influence, unless it can be clearly demonstrated that this is not the case. Thecompany holds some minor investments in New Zealand Steel whereby equity accounting was not previously applied withrevenue being brought to account when dividends were received.

(viii) Exchange fluctuation reserve

AASB 121 The Effects of Changes In Foreign Exchange Rates introduces a new requirement where upon disposal of aforeign operation the cumulative translation difference for that operation must be taken to the income statement as part ofthe gain or loss on disposal. Under current Australian Accounting Standards, the cumulative translation differencepertaining to the operation disposed would be transferred directly to retained earnings without impacting the incomestatement.

In accordance with AASB 1, the Company has elected to restate the exchange fluctuation reserve to nil on transition toAIFRS. In adopting this exemption the 1 July 2004 opening exchange fluctuation reserve balance will be transferreddirectly to retained earnings.

(c) Restated AIFRS Statement of Cash Flows for the year ended 30 June 2005

No material impacts are expected to the cash flows presented under AGAAP on adoption of AIFRS.

- 18 -



(d) Other impacts from adoption of AIFRS

(i) Hedge accounting

AASB 139 Financial Instruments: Recognition and Measurement states that in order to achieve a qualifying hedge, thecompany is required to meet the following criteria:

- Identify the type of hedge;

- Identify the hedged item or transaction;

- Identify the nature of the risk being hedged;

- Identify the hedging instrument;

- Demonstrate that the hedge has and will continue to be effective; and

- Document the hedging relationship.

The accounting principles outlined in AASB 139 do not require retrospective application as management have elected toapply the exemption in AASB 1 and will therefore apply from 1 July 2005. The project team is in the process ofdetermining the impact that adopting the standard would have on the financial statements of the Group. The impact of thisstandard is not expected to have a material impact on the financial statements of the Group given the low level of hedgingactivity undertaken.

(ii) Sale of receivables program

AASB 139 Financial Instruments: Recognition and Measurement only allows financial assets to be derecognised where anentity transfers substantially all the risks and rewards of ownership of the financial asset. The Group's sale of receivablesprogram does not currently meet the derecognition requirements. As a result, the program will be recorded separately as aliability rather than an offset against receivables and the expense of running the program will be shown as an interest costrather than an operating expense.

As a result of the exemption to be applied in AASB 1, these requirements will be implemented from 1 July 2005. If theprinciples were applied to the 30 June 2005 balance sheet, current receivables would have increased by $140 million with acorresponding increase in current interest bearing liabilities .

(iii) Non-operating software

AASB 138 Intangible Assets requires computer software that is not an integral part of computer hardware or is not integralto the operation of a piece of machinery to be classified as an intangible asset. BlueScope Steel currently discloses allcapitalised computer software as property, plant and equipment.

A reclassification of non-operating software will reduce the net tangible assets of the company with a correspondingincrease in intangible assets. The 30 June 2005 net book value of software to be classified as an intangible asset isapproximately $75 million.

- 19 -



Note 3.

Segment information

Business Segments

The consolidated entity has five business reporting segments: Hot Rolled Products, Coated and Building Products

Australia, New Zealand and Pacific Steel Products (formerly New Zealand Steel), Coated and Building Products

Asia and Coated and Building Products North America.

Hot Rolled Products

Hot Rolled Products includes the Port Kembla Steelworks, a steel making operation with an annual productioncapacity of approximately 5.1 million tonnes of crude steel. The Port Kembla Steelworks manufactures anddistributes slab, hot rolled coil and plate. Slab and hot rolled coil is supplied to Coated and Building ProductsAustralia for further processing, as well as to other domestic and export customers.

The segment also includes a 50% interest in the North Star BlueScope Steel joint venture, a steel mini-mill in theUnited States, and a 47.5% shareholding in Castrip LLC.

New Zealand and Pacific Steel Products (formerly New Zealand Steel)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 AustraliaCoated and Building Products Australia markets a range of products and material solutions to the Australianbuilding and construction industry and is also a key supplier to the Australian automotive sector, major whitegoods manufacturers and general manufacturers. Coated and Building Products Australia is a leader in metalliccoating 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 atSpringhill in New South Wales and Western Port in Victoria together with a network of manufacturing and

distribution facilities throughout Australia.

The segment also includes Packaging Products, an operation producing tinplate in Australia which is used by thepackaging industry in applications for food, beverages, paint, oil and other steel packaging.

- 20 -



Note 3. Segment information (continued)

Coated and Building Products Asia

Coated and Building 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.

On 27 April 2004, BlueScope Steel Limited acquired the Butler Manufacturing Company, which includes

BlueScope Butler China, a business which designs, manufacturers and markets pre-engineered steel building

systems and components across China. In addition, Vistawall has operations in China which manufacture and sellextruded aluminium and glass products for the building and construction sector.

Coated and Building Products North AmericaOn 27 April 2004, BlueScope Steel Limited acquired Butler Manufacturing Company, a leading designer andmanufacturer of pre-engineered steel building systems for the non-residential market with operations in NorthAmerica and China.

This segment includes the North American operations and has two main divisions: the North American BuildingsGroup, which designs, manufactures and markets pre-engineered steel buildings and component systems; andVistawall, which manufactures and sells extruded aluminium and glass products for the building and constructionsector.

Corporate and GroupCorporate and Group relates primarily to logistics and corporate activities.

Geographical segmentsThe consolidated entity operates in four main geographical areas being Australia, New Zealand, Asia and NorthAmerica.

Intersegment sales and accounting policiesIntersegment sales are made on a commercial, arms-length basis. Segment accounting policies are the same as theconsolidated entity's policies described in Note 1.

- 21 -




Primary reporting - business segments

Hot Rolled

Products (1)

New Zealand

and Pacific

Steel Products

Coated and

Building

Products

Australia

Coated and

Building

Products Asia

Coated and

Building

Products North

America Corporate and

Group

Consolidated

2005 $m

$m

$m

$m

$m

$m

$m

Sales to external customers

2,112.7

615.5 2,984.9 999.3 1,132.1

96.2 7,940.7

Intersegment sales 1,826.8 140.9 205.4 52.0 2.3 263.7 2,491.1Intersegment elimination (2,491.1)Total sales revenue 3,939.5 756.4 3,190.3 1,051.3 1,134.4 359.9 7,940.7Other revenue 1.9 9.0 2.0 3.1 22.5 5.4 43.9Intersegment elimination (3.0)Total other revenue 1.9 9.0 2.0 3.1 22.5 5.4 40.9Total segment revenue 3,941.4 765.4 3,192.3 1,054.4 1,156.9 365.3 7,981.6

Segment result 1,338.5 182.8 (115.7) 81.8 (19.7) (70.2) 1,397.5Intersegment elimination (9.1)Total segment result 1,338.5 182.8 (115.7) 81.8 (19.7) (70.2) 1,388.4Unallocated revenue lessunallocated expenses (34.3)Profit from ordinaryactivities before incometax expense 1,354.1Income tax expense (347.0)Net profit 1,007.1

Segment assets 2,593.9 578.7 1,917.7 1,167.6 472.2 47.3 6,777.4Unallocated assets (2) 48.8Intersegment elimination

(362.5)

Total assets

6,463.7

Segment liabilities 564.1 104.3 490.4 289.4 238.0 58.1 1,744.3Unallocated liabilities (2) 1,496.2Intersegment elimination (277.3)Total liabilities 2,963.2

Investments in associatesand joint venturepartnership 246.9 - - 1.9 4.7 - 253.5

Acquisition of property,plant and equipment,intangibles and other non-current segment assets 140.1 36.8 175.2 342.9 50.5 1.7 747.2

Depreciation andamortisation expense 131.7 28.2 98.7 25.2 20.4 1.9 306.1

Other non-cash expenses 1.0 1.3 3.9 0.9 2.9 - 10.0

(1) The Hot Rolled Products segment results includes $194 million share of net profits of joint venture partnership (refer note 41).(2) External borrowings, sale of receivables program, cash and tax balances are classified as unallocated.

- 22 -




Primary reporting - business segments (continued)

Hot Rolled

Products (2)

New Zealand

and Pacific

Steel Products

Coated and

Building

Products

Australia

Coated and

Building

Products Asia

Coated and

Building

Products North

America Corporate and

Group

Consolidated

2004 (1) $m

$m

$m

$m

$m

$m

$m

Sales to external customers 1,517.3 514.7 2,742.3 663.8 191.1 108.9 5,738.1Intersegment sales 1,321.3 75.5 141.2 34.8 0.4 264.0 1,837.2Intersegment elimination (1,837.2)Total sales revenue 2,838.6 590.2 2,883.5 698.6 191.5 372.9 5,738.1Other revenue 4.7 1.6 3.2 11.5 2.0 9.2 32.2Intersegment elimination (0.7)Total other revenue 4.7 1.6 3.2 11.5 2.0 9.2 31.5Total segment revenue 2,843.3 591.8 2,886.7 710.1 193.5 382.1 5,769.6

Segment result 563.8 62.1 192.9 104.0 (8.8) (64.0) 850.0Intersegment elimination (32.1)Total segment result 563.8 62.1 192.9 104.0 (8.8) (64.0) 817.9Unallocated revenue lessunallocated expenses (14.5)Profit from ordinaryactivities before incometax expense 803.4Income tax expense (201.6)Net profit 601.8

Segment assets

2,382.6 538.7 1,684.0 813.2 518.9 45.1 5,982.5

Unallocated assets (3)

124.7

Intersegment elimination

(325.1)

Total assets 5,782.1

Segment liabilities 524.1 97.7 428.7 204.0 286.9 70.7 1,612.1Unallocated liabilities (3) 1,225.6Intersegment elimination (249.2)Total liabilities 2,588.5

Investments in associatesand joint venturepartnership 232.1 - - - 4.2 - 236.3

Acquisition of property,plant and equipment,intangibles and other non-current segment assets (4) 64.9 27.9 101.3 162.9 176.0 3.5 536.5

Depreciation andamortisation expense 127.9 36.1 93.6 21.9 3.6 3.6 286.7

Other non-cash expenses (0.5) (0.6) 1.6 0.8 0.2 - 1.5

(1) Minor changes have been made to the comparative period results reported in the 30 June 2004 financial report. These changes relate to the reorganisationof Lysaght Pacific and International Trading activities to align with current management responsibilities.

(2) The Hot Rolled Products segment result includes $71.1 million share of net profits of joint venture partnership (refer note 41).(3) External borrowings, sale of receivables program, cash and tax balances are classified as unallocated.(4) Includes property, plant and equipment acquired on 27 April 2004 from the purchase of the Butler Manufacturing Company for $186.1 million. This is

reflected in the Coated and Building Products North America and Asia segments.

- 23 -




Secondary reporting - geographical segments

Segment external sales

revenues by location of

customer

Segment assets

Acquisition of property,

plant & equipment,

intangibles and other non-current segment assets

Geographical Classification

2005$m

2004$m

2005$m

2004$m

2005$m

2004$m

Australia 3,852.2 3,281.5 3,801.6 3,455.5 315.8 169.1New Zealand 461.5 363.6 608.6 557.2 34.4 26.5Asia 1,893.0 1,237.7 1,182.7 845.1 342.0 162.9North America 1,551.5 557.4 825.8 879.5 53.1 176.2Other 182.5 297.9 45.0 44.8 1.9 1.8

7,940.7 5,738.1 6,463.7 5,782.1 747.2 536.5

Note 4. Revenue

Consolidated Parent entity2005 2004 2005 2004$m $m $m $m

Revenue from operating activitiesSale of goods 7,780.9 5,614.5 2,653.6 2,468.2Services

159.8 123.6 -

-

7,940.7 5,738.1 2,653.6

2,468.2

Revenue from outside the operating activitiesManagement and guarantee fees related parties - - 0.6 0.6Interest related parties - - 4.0 19.9Interest external 3.6 2.5 0.2 0.1Dividends related parties - - 1,154.9 18.1Dividends external 2.1 1.0 - -Other revenue external 19.7 11.8 0.8 1.8Other revenue related parties 1.3 2.1 7.3 6.0Gross proceeds from the sale of assets 14.2 14.1 0.5 1.6

40.9 31.5 1,168.3 48.1

Revenue from ordinary activities 7,981.6 5,769.6 3,821.9 2,516.3

- 24 -



Note 5.

Profit from ordinary activities

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

(a) Net gains and expenses

Profit from ordinary activities before income tax

expense includes the following specific net gains and

expenses:Net GainsNet gain/(loss) on disposal

Property, plant and equipment 1.5 5.3 (0.1) 0.9Investments - 2.7 - -

Expenses

Cost of goods sold 5,535.9 4,000.6 2,303.9 1,880.5

DepreciationBuildings 20.2 15.9 4.0 3.7Plant and equipment 280.4 269.6 62.3 64.5

Total depreciation 300.6 285.5 66.3 68.2

AmortisationGoodwill 5.5 1.0 0.3 0.1Plant and equipment under finance lease - 0.2 - -

Total amortisation 5.5 1.2 0.3 0.1

Total depreciation and amortisation

306.1 286.7 66.6

68.3

Other charges against assets

Write down/(writeback) of inventories to NRV 3.4 (0.7) 3.6 1.3Write down of investments to recoverable amount 1.6 1.3 - - Bad and doubtful debts - trade debtors 4.7 0.8 - 0.3

Borrowing costsRelated parties 1.6 0.2 18.5 -Other parties 39.5 16.6 0.1 -Amount Capitalised (3.6) - - -

Total borrowing costs 37.5 16.8 18.6 -Borrowing costs expensed 37.5 16.8 18.6 -

Research and development 25.3 19.6 18.9 15.2

Net foreign exchange losses (25.4) (0.2) (5.3) (1.8)

Defined benefit superannuation expense (note 38) 50.5 43.2 9.6 8.2

Rental expense relating to operating leases 60.3 51.8 12.9 11.2

- 25 -



Note 6.

Income tax

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Income tax expense

(a) The income tax expense for the financial

year differs from the amount calculated on profit.

The differences are reconciled as follows:

Profit from ordinary activities before income taxexpense 1,354.1 803.4 1,055.0 202.9

Income tax calculated @ 30% (2004: 30%) 406.2 241.0 316.5 60.9Tax effect of permanent differences

Non-deductible depreciation and amortisation 9.4 5.7 1.1 0.4Investment allowance (0.3) (1.3) - -Research and development incentive (4.2) (3.0) (1.2) (0.7)Recognition of previously unbooked tax losses (4.6) (29.5) - -Utilisation of unbooked tax losses (70.1) (31.5) - -Non-assessable dividends (0.4) (0.3) (346.5) (5.4)Non taxable (gains)/losses (0.3) (1.1) - (0.4)Exempt income (11.4) (13.5) - -Non-deductible entertainment 1.1 0.7 0.4 0.3Other variations 2.3 1.2 - 0.5

Income tax adjusted for permanent differences 327.7 168.4 (29.7) 55.6Effect of differing rates of tax on overseas income 26.1 6.5 - -Under (over) provision in prior year (6.8) 26.7 (2.4) 1.2Income tax expense/(credit) attributable to profit

from ordinary activities

347.0 201.6 (32.1)

56.8


Tax losses

(b) The directors estimate that that thepotential future income tax benefit at 30 June2005 in respect of tax losses not brought to account is 85.6 135.6 - -

This benefit for tax losses will only be obtained if:(i) the entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from

the deductions for the losses to be realised, or(ii) the losses are transferred to an eligible entity in the consolidated entity, and(iii) the entity continues to comply with the conditions for deductibility imposed by tax legislation, and(iv) no changes in tax legislation adversely affect the entity in realising the benefit from the deductions for the

losses.

Future income tax benefits attributable to tax losses recognised as a future income tax benefit and as a reduction of theprovision for deferred income tax are disclosed in note 26.

- 26 -



Note 6. Income tax (continued)

Tax consolidation legislation.

BlueScope Steel Limited and its wholly-owned Australian controlled entities have entered into tax consolidation and havealso entered into a tax sharing and funding agreement. Under the terms of this agreement, the wholly-owned entitiesreimburse BlueScope Steel Limited for any current income tax payable and deferred tax payable by BlueScope SteelLimited arising in respect of their activities. The reimbursements are payable at the same time as the associated income taxliability falls due and have therefore been recognised as a current and non-current tax-related receivable by BlueScopeSteel Limited (refer notes 8 and 11). In the opinion of the directors, the tax sharing agreement is also a valid agreementunder the tax consolidation legislation and limits the joint and several liability of the wholly-owned entities in the case of adefault by BlueScope Steel Limited.

Note 7. Current assets - Cash assets


Cash at bank and on hand 83.9 117.2 0.1 0.2Short term deposits 0.7 2.2 - -

84.6 119.4 0.1 0.2The above figures are reconciled to cash at the endof the financial year as shown in the statements ofcash flows as follows:

Balances as above

84.6 119.4 0.1

0.2Less: Bank overdrafts (note 20) 1.6 1.3 - -

Balances as per statements of cash flows 83.0 118.1 0.1 0.2

- 27 -



Note 8.

Current assets - Receivables

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Trade debtors

936.4 837.7 238.1

215.9

Less: Provision for doubtful debts

21.7 18.3 2.5

2.9

914.7 819.4 235.6

213.0

Related party trade debtors

- - 76.7

46.1

Other debtors 138.1 169.8 37.1 29.1

Tax related amounts receivable from wholly-ownedentities (refer note 1 (f)) - - 275.7 108.4Loans to related parties - - 403.8 231.5

1,052.8 989.2 1,028.9 628.1

Sale of receivables program

The value of trade receivables for the parent entity and consolidated group at 30 June 2005 would have been $135.8million and $185.2 million higher respectively (2004: $129.4 million and $191.4 million respectively) but for the sale ofsuch receivables. A balance of $33.3 million for the parent entity and $45.2 million for the consolidated group (2004:$25.4 million and $39.3 million respectively) is held in other debtors in relation to the sale of receivables program,representing retentions on the amounts sold.

BlueScope Steel (Finance) Ltd purchased receivables from North Star BlueScope Steel, a 50% owned joint venturepartnership (refer note 41) and then onsold these receivables to Corporate Receivables Securitisation Limited (CRS), anasset securitisation company. This has resulted in a balance of $38.9 million (2004: $92.9 million) being recorded in otherdebtors. BlueScope Steel (Finance) Limited has also recognised an other creditor of $38.9 million (2004: $88.5 million)

pertaining to amounts owing to CRS.

- 28 -



Note 9.

Current assets - Inventories

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Raw materials and stores

At cost

314.4 205.9 42.1

29.0

314.4 205.9 42.1

29.0

Work in progressAt cost 406.2 275.2 137.1 121.6At net realisable value 9.0 2.2 3.7 1.8

415.2 277.4 140.8 123.4

Finished goodsAt cost 352.5 348.9 90.2 77.9At net realisable value 25.3 17.8 6.6 5.6

377.8 366.7 96.8 83.5

Spares and otherAt cost 44.8 41.4 4.2 3.9

44.8 41.4 4.2 3.9

Total current assets - inventoriesAt cost 1,117.9 871.4 273.6 232.4At net realisable value

34.3 20.0 10.3

7.4

1,152.2 891.4 283.9

239.8

Note 10. Current assets - Other


Deferred charges and prepayments 39.5 43.7 3.5 2.7

Note 11. Non-current assets - Receivables


Related party trade debtors (note 39) - - 16.6 8.4Other receivables 7.4 7.1 4.4 6.2Tax related amounts receivable from wholly-ownedentities (note 1(f)) - - 264.4 292.6

7.4 7.1 285.4 307.2

- 29 -



Note 12.

Non-current assets - Inventories

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Raw materials and stores

At cost

1.1 1.1 1.1

1.11.1 1.1 1.1

1.1

Finished goodsAt cost - 12.3 - -

- 12.3 - -

Spares and otherAt cost 53.4 53.0 22.5 24.3At net realisable value 4.1 4.7 - -

57.5 57.7 22.5 24.3

Total non-current inventoriesAt cost 54.5 66.4 23.6 25.4At net realisable value 4.1 4.7 - -

58.6 71.1 23.6 25.4

Note 13. Non-current assets - Investments accounted for using the equity method

Consolidated Parent entity 2005

2004

2005

2004

$m

$m

$m

$m

Equity accounted joint venture partnership (note 41(a)) 246.9 200.2 - -Loan to joint venture partnership - 31.9 - -Shares in other associates (note 41(b)) 6.6 4.2 - -

253.5 236.3 - -

Investments in joint venture partnerships and associates are accounted for in the consolidated financial statements using theequity method of accounting.

ReconciliationsReconciliations of the movement in the carrying amounts of the interest in the joint venture partnership are set out in note41.

- 30 -



Note 14.

Non-current assets - Other financial assets

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Non-traded investments

Shares in controlled entities - at cost (note 40)

- - 1,661.3

1,656.2Less: Provision for write down

- - 6.7

6.7

Shares in other corporations - at cost

17.0 17.0 -

-Less: Provision for write down (note 5) 12.4 12.4 - -Total non-traded shares - at recoverableamount 4.6 4.6 1,654.6 1,649.5

Partnerships 11.3 10.8 - -Less: Provision for write down 11.3 10.8 - -Total partnerships - at recoverable amount - - - -

4.6 4.6 1,654.6 1,649.5

Note 15. Non-current assets - Property, plant and equipment


Land and buildings

Land and buildings (a)

At cost

739.3 687.6 171.1

154.1Less: Accumulated depreciation

285.6 262.6 81.1

77.7

Total land and buildings 453.7 425.0 90.0 76.4

Plant, machinery and equipment

Plant, machinery and equipment (b)At cost 6,658.6 6,125.0 1,580.3 1,509.8Less: Accumulated depreciation 3,486.5 3,268.0 893.1 864.2Total plant, machinery and equipment 3,172.1 2,857.0 687.2 645.6

Plant, machinery and equipment under finance lease(c)At cost 3.4 6.8 - -Less: Accumulated depreciation 0.2 0.2 - -Total plant, machinery and equipment under financelease 3.2 6.6 - -

Total plant, machinery and equipment 3,175.3 2,863.6 687.2 645.6

Total property, plant and equipment 3,629.0 3,288.6 777.2 722.0

- 31 -



Note 15. Non-current assets - Property, plant and equipment (continued)

Reconciliations

Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the

current year are set out below:

Consolidated

Parent entity

2005

2004

2005

2004

$m $m $m $m

(a) Land and buildingsOpening carrying value 425.0 340.6 76.4 78.0

Additions 56.2 13.6 17.6 2.3Additions through acquisitions of entities - 82.3 - -Depreciation (20.2) (15.9) (4.0) (3.7)Disposals (3.2) (2.2) - (0.2)Class reclassification 15.1 1.8 - -Exchange variations/other (19.2) 4.8 - -

Closing carrying value 453.7 425.0 90.0 76.4

(b) Plant, machinery and equipmentOpening carrying value 2,857.0 2,745.0 645.6 633.0

Additions 628.6 286.2 104.5 75.9Additions through acquisition of entities 17.0 98.5 - 1.7Depreciation (280.2) (269.6) (62.3) (64.5)Disposals (3.6) (3.8) (0.6) (0.5)Class reclassification (4.9) (1.8) - -Exchange variations/other

(41.8) 2.5 -

-

Closing carrying value

3,172.1 2,857.0 687.2

645.6

(c) Plant, machinery and equipment under financelease

Opening carrying value 6.6 - - -Additions 0.6 - - -Additions through acquisition of entities - 6.3 - -Depreciation (0.2) (0.2) - -Disposals (3.1) - - -Exchange variations/other (0.7) 0.5 - -

Closing carrying value 3.2 6.6 - -

Valuation of land and buildingsLand 234.1 216.5 38.5 40.2Buildings 561.3 572.2 121.7 122.8

795.4 788.7 160.2 163.0

The current value of land is determined mainly by reference to rating authority valuations, or fair value for recentacquisitions, except where land is an integral part of a producing asset with no significant value beyond such use, in whichcase book value is used.

The current value of buildings is based primarily on depreciated replacement value. Buildings which are integral parts ofproducing plant are classified as plant and equipment and accordingly excluded from this valuation.

- 32 -



Note 16.

Non-current assets - Deferred tax assets

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Future income tax benefit (refer note 1(f))

61.6 58.0 -

-

The consolidated future income tax benefit includes income tax losses of $56.9 million (2004: $54.8 million).

Note 17. Non-current assets - Intangible assets


Goodwill at cost 118.8 61.6 2.6 2.6Less: Accumulated amortisation 6.8 1.5 0.4 0.1

112.0 60.1 2.2 2.5

Patents - at cost 8.9 9.9 0.1 0.1Less: Accumulated amortisation 8.9 9.9 0.1 0.1

- - - -

Other intangibles at cost 0.4 - - -

112.4 60.1 2.2 2.5

Note 18.

Non-current assets - Other


Deferred charges and prepayments 7.5 12.6 0.4 0.8

Note 19. Current liabilities - Payables


Trade creditors 685.4 562.1 91.5 79.2Related party trade creditors - - 111.0 118.6Other creditors 133.2 166.2 31.0 28.5

818.6 728.3 233.5 226.3

- 33 -



Note 20.

Current liabilities - Interest bearing liabilities

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Secured

Bank loans (note 33(a))

3.2 4.4 -

-

Other loans (note33(a))

- 0.5 -

-

Lease liabilities (note 37) 0.4 1.7 - -3.6 6.6 - -

UnsecuredBank overdraft (note 7) 1.6 1.3 - -Bank loans (note 33(a)) 250.5 364.6 - -Associate loans (note 33(a)) - 43.5 - -Loans from related parties - - 371.3 373.5

252.1 409.4 371.3 373.5

255.7 416.0 371.3 373.5

Details of the security relating to each of the secured liabilities and further information on the bank overdrafts and bankloans are set out in note 25.

Note 21. Current liabilities - Current tax liabilities

Consolidated Parent entity2005 2004 2005 2004 $m

$m

$m

$m

Income tax (refer note 1(f))

215.6 154.3 203.3

148.5

Note 22. Current liabilities - Provisions


Product claims 27.0 22.7 14.9 10.6Employee benefits 197.1 215.5 73.5 74.5Restructure 20.5 25.3 - -Workers compensation 16.2 23.5 6.9 6.3Other 2.2 7.7 - 1.5

263.0 294.7 95.3 92.9

- 34 -



Note 22. Current liabilities - Provisions (continued)

Product claims

A provision for product claims is recognised for all products at the reporting date based on sales volumes and past

experience of the level of repairs and replacements.

Restructure

The restructure provision primarily relates to the mid-2005 closure of the Butler Buildings North America plant located in

Galesburg and the withdrawal of Packaging Products from the export tinplate market.

Workers compensationIn Australia and North America, BlueScope Steel Limited is a registered self-insurer for workers compensation. Provisionsare recognised based on calculations performed by an external actuary.

Restoration and rehabilitationRestoration and rehabilitation provisions exist for New Zealand Steel which operate two iron sand mines.

OtherInsurance provisions exist for policy deductibles on general insurance policies in Butler Manufacturing Company and onexposures arising from our group captive insurer.

Movements in provisionsThe reconciliation of movement in provisions is provided in note 27.

Note 23. Current liabilities - Other


2004

2005

2004

$m

$m

$m

$m

Deferred income 60.5 92.5 - -

60.5 92.5 - -

Note 24. Non-current liabilities - Payables


Other creditors 5.0 - - -

- 35 -



Note 25.

Non-current liabilities - Interest bearing liabilities

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Secured

Bank loans (note 33(a))

6.8 39.7 -

-

Other loans (note 33(a))

- 1.1 -

-

Lease liabilities (note 37) 1.7 5.1 - -8.5 45.9 - -

UnsecuredBank loans (note 33(a)) 182.3 99.4 - -Other loans (note 33(a)) 429.4 31.4 - -

611.7 130.8 - -

Total non-current interest bearing liabilities 620.2 176.7 - -


Secured liabilitiesTotal secured liabilities (current and non-current) are:Loans 10.0 45.7 - -Lease liabilities 2.1 6.8 - -

Total secured liabilities

12.1 52.5 -

-

Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the

lessor in the event of default.

Assets pledged as securityThe carrying amounts of non-current assets pledged as security are:


First mortgageFreehold land and buildings 10.0 34.9 - -Lien on financed property - 10.8 - -

Total assets pledged as security 10.0 45.7 - -

- 36 -



Note 25. Non-current liabilities - Interest bearing liabilities (continued)

Financing arrangements

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Unrestricted access was available at balance date tothe following lines of credit:

Credit standby arrangements

Total facilities

Bank overdrafts 23.9 23.6 - -Bank loan facilities 802.9 915.0 - -

826.8 938.6 - -

Used at balance date

Bank overdrafts 1.6 1.3 - -Bank loan facilities 442.8 508.1 - -

444.4 509.4 - -

Unused at balance date

Bank overdrafts

22.3 22.3 -

-Bank loan facilities

360.2 406.9 -

-

382.5 429.2 - -

Bank loan facilities

Australian

Bank loan facilities for Australian operations consist of the following facilities:

(a) a $600 million syndicated bank facility with a syndicate of banks. The facility is comprised of a 364 day tranche of$100 million, a 3 year tranche of $300 million, and a 5 year tranche of $200 million maturing in December 2005,December 2007 and in December 2009.

(b) $50 million of 364 day facilities to support working capital and other short term cash requirements. This is comprisedof one $50 million facility maturing in December 2005.

- 37 -



Note 25. Non-current liabilities - Interest bearing liabilities (continued)

Non Australian

Bank loan facilities are arranged for several non-Australian businesses and are with a number of banks. Terms and

conditions are agreed to on a periodic basis appropriate to the needs of the relevant businesses. Facilities for non-

Australian businesses include:

(a) a MYR 50 million (AUD 17 million) long term amortising loan held by BlueScope Steel (Malaysia) Sdn Bhd. This

facility expires in 2008.

(b) three short term facilities totalling MYR 169 million (AUD 58 million ) to support working capital and other short termcash requirements for BlueScope Steel (Malaysia) Sdn Bhd.

(c) two short term facilities totalling USD 31 million (AUD 41 million) to support working capital and other short termcash requirements for BlueScope Steel Thailand Limited.

Other facilities

On the 1 July 2004, the BlueScope Steel Group completed a debut debt raising in the US private placement market forUS$300 million (A$435 million). These funds have been used to refinance existing borrowings including bridging financeutilised for the acquisition of Butler Manufacturing Company.

Of the US$300 million notes issued, US$100 million are due for repayment in 2011, and US$200 million are due in 2014.

Bank overdraft

Bank overdraft facilities are arranged with a number of banks with the general terms and conditions agreed to on a periodicbasis.

Note 26. Non-current liabilities - Deferred tax liabilities


Provision for deferred income tax (refer note 1 (f)) 351.9 388.3 325.8 370.0

The consolidated provision for deferred income tax has been reduced by $6.6 million (2004: $29.0 million) in respect offuture income tax benefits attributable to tax losses (see also note 6).

- 38 -



Note 27.

Non-current liabilities - Provisions

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Product claims

38.8 31.0 18.2

11.2Employee benefits

221.7 208.1 62.1

59.0

Restoration and rehabilitation

2.6 2.1 -

-Workers compensation

89.5 83.0 10.4

10.7

Other 14.0 13.5 - -Restructure 6.1 - - -

372.7 337.7 90.7 80.9

Movements in provisionsMovements in each class of provision during the financial year, other than employee benefits, are set out below.

Productclaims Restructure

Restoration&

rehabilitationWorkers

Compensation Other Total$m $m $m $m $m $m

Consolidated

Current and Non-currentCarrying amount at 1 July 2004 53.7 25.3 2.1 106.5 21.2 208.8Additional provisions recognised 40.3 15.7 0.5 10.0 (0.4) 66.1Payments (32.6) (7.4) - (10.6) (2.8) (53.4)Provisions acquired

3.3 - - - - 3.3

Exchange fluctuations

(1.1) (2.4) - (0.2) (1.8) (5.5)Transfers

0.5 (4.6) - - - (4.1)

Other 1.7 - - - - 1.7Carrying amount at 30 June 2005 65.8 26.6 2.6 105.7 16.2 216.9

Productclaims Restructure

Restoration&

rehabilitationWorkers

Compensation Other Total$m $m $m $m $m $m

Parent entity

Current and Non-currentCarrying amount at July 1 2004 21.8 - - 17.0 1.5 40.3Additional provisions recognised 37.5 - - 3.6 - 41.1Payments (26.7) - - (3.3) (1.5) (31.5)Transfers 0.5 - - - - 0.5Carrying amount at 30 June 2005 33.1 - - 17.3 - 50.4

Description of provisionsFor a description of the above provisions please refer to note 22.

- 39 -



Note 28. Contributed equity

Parent entity Parent entity2005 2004 2005 2004

Shares Shares $m $m

Issued and paid up capital 707,941,710 732,320,847 1,747.5 1,914.9

(a) Movements in ordinary share capital

serahsforebmuNsliateDetaD

Issue/redemption

price $m

30-6-2003 Balance 784,685,949 2,182.1

31-7-2003 Share buy )3.73(80.4$)768,131,9(kcab31-8-2003 Share buy )4.02(34.4$)836,895,4(kcab30-9-2003 Share buy )2.94(49.4$)186,359,9(kcab

31-10-2003 Share buy )0.63(82.5$)344,028,6(kcab30-11-2003 Share buy )0.83(51.5$)088,983,7(kcab31-12-2003 Share buy )3.93(22.5$)187,235,7(kcab30-01-2004 Share buy )5.73(14.5$)218,739,6(kcab30-01-2004 Employee share plan (9.2)

Less: Transaction costs arising on sharebuyback 0.3

30-6-2004 Balance 732,320,847 1,914.9

31-10-2004 Share buyback (6,469,882) $7.88 (51.0)30-11-2004 Share buyback (2,524,680) $7.75 (19.6)31-12-2004 Share buy )3.4(89.7$)170,045(kcab19-04-2005 Share buy )4.97(70.3$)791,658,52(kcab

01-09-2004 Employ 4.0001,349,14002-nalperahsee01-10-2004 Long 5.6358.2$556,808,212002-nalpevitnecnimret01-10-2004 Long -004,506,22002-nalpevitnecnimret

31-05-2005 Share buy )5.34(87.7$)630,345,5(kcab)4.6(89.7$)624,208(kcabyuberahS5002-60-03

Less: Transaction costs arising on shareissues 0.1

30-6-2005 Balance 707,941,710 1,747.5

- 40 -



Note 28. Contributed equity (continued)

(b) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in

proportion to the number of and amounts paid on the shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

(c) Share buyback

(i) On-market share buyback.

In August 2004, the company announced its intention to buyback on-market 18.4 million shares. Up until 30April 2005 the company purchased on-market 9,534,633 shares at an average market price of $7.86 per share. InMay 2005, the company announced the maximum number for the on-market share buyback would be increased to35 million shares. A total of 15,880,095 shares were purchased for the 12 months at an average price of $7.83 pershare.

The previous year's share buyback reflects the publicly announced on-market share buyback program, whichconcluded in March 2004.

(ii) Off-market share buyback.

On 19 April 2005, the company outlayed $200.4 million buying back 3.5% of its issued capital at $7.75 per sharewhich represented a 9% discount to the volume weighted average share price over the five-day period to April 8.

In accordance with the principles outlined in UIG22 "Accounting for share Buybacks of No Par Value Shares",

the capital component of $3.07 per share has been debited against the Share Capital Account while the remaining

amount, including transaction costs of $1.7 million, has been debited against retained earnings.

(d) Employee share plan

In September 2004, the company issued 150 BlueScope Steel Limited shares at nil cost to 12,954 eligibleemployees (1,943,100 shares). In September 2003, the company provided 200 BlueScope Steel shares at nil costto 9,403 eligible employees (1,880,600 shares). An equivalent number of shares were bought back at $4.88 pershare. The objective of these share issues is to recognise and reward employees for their contribution toBlueScope Steel's financial results and workplace safety performance and provide them with the opportunity tobecome long term shareholders.

(e) Share rights

The long term incentive plan is an award of share rights to eligible senior managers. The full details of theoperation of the plan are detailed in the Remuneration Report. In September 2004, 12,808,655 shares were issuedat $2.85 per share and 2,605,400 shares were issued at nil cost in accordance with the terms in the July 2002award.

- 41 -



Note 29.

Reserves and retained profits

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

(a) Reserves

Foreign currency translation reserve

(134.2) (77.5) -

-Non distributable profits reserve

3.0 - -

-

(131.2) (77.5) - -

Movements:

Asset revaluation reserveOpening balance - - - -Closing balance - - - -

Foreign currency translation reserve Opening balance (77.5) (91.2) - -Net exchange differences on translation offoreign controlled entities (56.7) 12.7 - -Transfers to retained profits - 1.0 - -

Closing balance (134.2) (77.5) - -

Non distributable profit reserveOpening balance - - - -Transfer from retained profits 3.0 - - -Closing balance 3.0 - - -

Consolidated

Parent entity

Notes

2005

2004

2005

2004

$m $m $m $m

(b) Retained profitsRetained profits at the beginning of thefinancial year 1,302.9 961.4 371.2 466.7Net profit attributable to members ofBlueScope Steel Limited 1,007.0 584.1 1,087.1 146.1Share buyback (122.9) - (122.9) -Dividends paid 32 (343.0) (241.6) (343.0) (241.6)Aggregate of amounts transferred to reserves 29(a) (3.0) (1.0) - -

1,841.0 1,302.9 992.4 371.2

(c) Nature and purpose of reserves

(i) Foreign currency translation reserveExchange differences arising on translation of the foreign controlled entity are taken to the foreigncurrency translation reserve, as described in note 1 (g)(iv).

(ii) Non distributable profitIn certain overseas operations local regulations require a set amount of retained profit to be set aside andnot be distributed as a dividend.

- 42 -



Note 30.

Outside equity interests in controlled entities

Consolidated

2005

2004

$m

$m

Interest in:

Share capital

52.6

52.6Reserves

(23.1)

(19.1)

Retained profits

13.7

19.8

43.2 53.3

Note 31. Equity

Consolidated Parent entityNotes 2005 2004 2005 2004

$m $m $m $m

Total equity at the beginning of the financialyear 3,193.6 3,091.1 2,286.1 2,648.8Total changes in equity recognised in thestatement of financial performance 950.3 596.8 1,087.1 146.1Transactions with owners as owners:

Share issue 28 36.9 - 36.9 -Share buyback 28 (327.2) (258.0) (327.2) (258.0)Dividends paid 32 (343.0) (241.6) (343.0) (241.6)Employee share plan 28 - (9.2) - (9.2)

Total changes in outside equity interest

30

(10.1) 14.5 -

-Total equity at the end of the financial year

3,500.5 3,193.6 2,739.9

2,286.1

Note 32. Dividends


Total dividends paid 343.0 241.6 343.0 241.6

As at 30 June 2005, the company's franking credits available for subsequent years is $257.8 million (2004: $147.4 million).The franking credits balance includes franking credits that are expected to arise from the payment of income tax payable asat the end of the financial year.

The directors have declared a fully franked final dividend of 24 cents and a fully franked special dividend of 20 cents perfully paid ordinary share. The estimated final dividend payable of $170 million and the special dividend payable of $142million to be paid on 24 October 2005 (record date 5 October 2005), have not been recognised as a liability at 30 June2005.

A fully franked final dividend of 18 cents ($134.9 million) and a fully franked special dividend of 10 cents ($74.9 million)per fully paid ordinary share was paid on 18 October 2004. A fully franked interim dividend of 18 cents per fully paidordinary share was paid on 4 April 2005 ($133.2 million).

- 43 -



Note 33.

Financial instruments

The BlueScope Steel Group's financial risks are categorised under the following headings.

• Liquidity and Credit risk; and

• Price risk.

The nature of these risks and the policies the BlueScope Steel Group has for controlling them and any

concentrations of exposure are discussed under each risk category.

The BlueScope Steel Group's accounting policies for financial instruments are set out in note 1(s).

Liquidity and Credit Risk

The BlueScope Steel Group will satisfy its ongoing capital expenditure requirements and meet its working capitalneeds through cash generated from operations, together with cash on hand and borrowings made available underexisting and new financing facilities.

Credit risk in relation to business trading activities arises from the possibility that counterparties may not be ableto settle obligations to the BlueScope Steel Group within the normal terms of trade. To manage this risk, theBlueScope Steel Group periodically assesses the financial viability of its counterparties.

Credit risk represents the risk of counterparties defaulting on their contractual obligations and is managed by theapplication of credit approvals, limits and monitoring procedures.

The extent of the BlueScope Steel Group's combined trade and financial counterparty credit risk exposure isrepresented by the aggregate of amounts receivable, reduced by the effects of any netting arrangements withfinancial institution counterparties.

These risks are categorised under the following headings:

Counterparties

The BlueScope Steel Group conducts transactions with the following major types of counterparties.

• Receivables counterparties

Sales to BlueScope Steel Group customers are made either on open terms or subject to independent paymentguarantees. The BlueScope Steel Group has a significant concentration of credit risk with three major customers,being OneSteel Ltd, Smorgon Steel Ltd group, and Fletcher Building. These entities are all major customers ofthe BlueScope Steel Group in Australia and credit risk with these businesses is managed on an active and on-going basis, using both quantitative and qualitative evaluation.

• Payment guarantee counterparties

These counterparties are comprised of prime financial institutions. Under payment guarantee arrangements, theBlueScope Steel Group has no significant concentration of credit risk with any single counterparty or group ofcounterparties.

• Financial markets counterparties

These counterparties consist of a number of prime financial institutions in the relevant markets. The BlueScopeSteel Group has no significant concentration of credit risk with any single counterparty or group of counterparties.

The BlueScope Steel Group generally does not require collateral in relation to the settlement of financialinstruments.

- 44 -



Note 33. Financial instruments (continued)

Geographic

The BlueScope Steel Group trades in several major geographic regions and where appropriate export finance

insurance and other risk mitigation facilities are utilised to ensure settlement. Regions in which the BlueScope

Steel Group has a significant credit exposure are Australia, the US, and others including China, South-East Asia

and New Zealand.

Terms of trade are continually monitored by the BlueScope Steel Group.

Selective receivables are covered for both commercial and sovereign risks by payment guarantee arrangementswith various banks and Atradius Credit Insurance N.V.

IndustryThe BlueScope Steel Group trades in the building and construction, automotive and transport, manufacturing andpackaging industries.

Price Risk

Portfolio approachThe BlueScope Steel Group manages its exposure to price risk, including interest rates, exchange rates andcommodity prices through a set of policies, procedures and limits approved by the Board.

The BlueScope Steel Group takes a portfolio approach to market price risk management. Hedging of marketprice risks is not undertaken as a normal activity due to the inherent limitations in being able to reduce volatilityin earnings and cashflow. The primary limitation is that the group's most significant market price risk isinternational steel prices, particularly Hot Rolled Coil and Slab. The current absence of a derivative market forsteel prices means that any hedging program for other price risks would be largely ineffective in reducingcashflow at risk as the primary driver of cashflows would remain unhedged.

Interest Rate Risk

The BlueScope Steel Group is exposed to interest rate risk on its outstanding interest bearing liabilities and

investments. Interest rate risk is managed as part of the BlueScope Steel Group price risk management strategy.

Foreign Exchange Risk - Interest Bearing LiabilitiesIn addition to transactional exposures related to sales and purchases, the BlueScope Steel Group has interestbearing liabilities denominated in foreign currencies. The BlueScope Steel Group has a partial natural hedgebetween net foreign assets and interest bearing liabilities in certain currencies.

Forward exchange contractsThe BlueScope Steel Group is exposed to exchange rate transaction risk on foreign currency sales and purchases.The most significant exchange rate risk is the anticipated US dollar receipts of Australian-based entities. Foreignexchange risk is managed as part of the BlueScope Steel Group price risk management strategy.

Commodity price riskThe BlueScope Steel Group is exposed to price risk on steel that it produces and on the commodities that itutilises in its production processes. Commodity price risk is managed as part of the BlueScope Steel Group pricerisk management strategy.

Butler Manufacturing Company have $4 million of outstanding aluminium contracts. This is made up of 63contracts with each contract buying 25-tonnes of aluminium at an average price of $2,349 per tonne. Thesecontracts currently have a mark to market loss of $0.1 million. This amount has been taken up in the financialstatements.

- 45 -




(a) Interest rate risk exposures

The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate by maturity

periods is set out in the following table. For interest rates applicable to each class of asset or liability refer to

individual notes to the financial statements.

Exposures arise predominantly from assets and liabilities bearing variable interest rates as the consolidated entity

intends to hold fixed rate assets and liabilities to maturity.

2005

Weightedaverage

interest rateFloating

interest rate1 year or

lessOver 1 to 5

years

Fixedinterest

maturing inmore than 5

years

Noninterestbearing Total

Notes % $m $m $m $m $m $m

Financial assetsCash and deposits 7 3.6 84.6 - - - - 84.6Other financialassets - investments 14 - - - - 4.6 4.6External receivables 8,11 - - - - 1,060.2 1,060.2

84.6 - - - 1,064.8 1,149.4

Financial liabilitiesTrade and othercreditors

19,24

- - - - 823.6 823.6

Bank overdraft

20

7.1

1.6 - - - - 1.6Bank loans

20,25

5.0

442.8 - - - - 442.8

Other loans 20,25 5.4 8.2 - - 421.2 - 429.4Lease liabilities 20,25 6.2 - 0.4 1.0 0.7 - 2.1

452.6 0.4 1.0 421.9 823.6 1,699.5

Net financial assets(liabilities) (368.0) (0.4) (1.0) (421.9) 241.2 (550.1)

- 46 -




2004

Weighted

average

interest rate Floating

interest rate1 year or

less Over 1 to 5

years

Fixed

interest

maturing in

more than 5

years

Non

interest

bearing

Total

Notes % $m $m $m $m $m $m

Financial assetsCash and deposits 7 2.3 119.4 - - - - 119.4Loan to jointventure partnership 13 1.9 31.9 - - - - 31.9Other financialassets - investments 14 - - - - 4.6 4.6External receivables 8,11 - - - - 996.3 996.3

151.3 - - - 1,000.9 1,152.2

Financial liabilitiesTrade and othercreditors 19 - - - - 728.3 728.3Bank overdrafts 19 2.3 1.3 - - - - 1.3Bank loans 20,25 3.8 484.4 23.7 - - - 508.1Other loans 25 5.4 43.5 - 1.2 31.8 - 76.5Lease liabilities 20,25 6.0 - - 5.4 1.4 - 6.8Interest rate swaps* 26.5 (26.5) - - - -

555.7 (2.8) 6.6 33.2 728.3 1,321.0

Net financial assets

(liabilities) (404.4) 2.8 (6.6) (33.2) 272.6 (168.8)* Notional principal amounts

(b) Net fair value of financial assets and liabilities

(i) On-balance sheetThe net fair value of cash and cash equivalents and non-interest bearing monetary financial assets andfinancial liabilities of the consolidated entity approximates their carrying amounts.

The net fair value of other monetary financial assets and financial liabilities is based upon market priceswhere a market exists or by discounting the expected future cash flows by the current interest rates forassets and liabilities with similar risk profiles.

For non-traded equity investments, the net fair value is deemed to be its carrying value. Non-tradedequity investments are carried at the lower of cost or net realisable value.

- 47 -




The carrying amounts and net fair values of financial assets and liabilities at balance date are:

2005

2004

Carrying

Net fair

Carrying

Net fair

amount

value

amount

value

$m

$m

$m

$m

On-balance financial instrumentsFinancial assetsCash 84.6 84.6 117.2 117.2Deposits - - 2.2 2.2Trade debtors 914.7 914.7 819.4 819.3Other debtors 145.5 145.5 176.9 176.9Equity accounted investments 253.5 253.5 236.3 236.3Shares in other corporations 4.6 4.6 4.6 4.6Non-traded financial assets 1,402.9 1,402.9 1,356.6 1,356.5

Financial liabilitiesTrade creditors 685.4 685.4 562.1 562.1Other creditors 138.2 138.2 166.2 166.2Bank overdraft 1.6 1.6 1.3 1.3Bank loans 442.8 442.8 508.1 508.1Other loans 429.4 460.6 76.5 81.5Lease liabilities 2.1 2.1 6.8 6.8Non-traded financial liabilities 1,699.5 1,730.7 1,321.0 1,326.0

Off-balance sheet financial instruments

Financial assets

Interest rate swaps

- - -

1.0

- 48 -



Note 34.

Director and executive disclosures

Directors

The following persons were Directors of BlueScope Steel Limited during the financial year:

Chairman - non executive

G J Kraehe, AO

Executive Directors

K C Adams

Non-executive DirectorsR J McNeillyJ CrabbD J GradyH K McCann, AMP J RizzoY P Tan

J Crabb resigned as a director of BlueScope Steel Limited on 28 July 2004.

Executives (other than directors) with the greatest authority for strategic direction and management The following persons form part of the Executive Leadership Team ("ELT") and are the executives with the greatestauthority for the strategic direction and management of the consolidated entity (“specified executives”) during the financialyear:

Name PositionL E Hockridge President - BlueScope Steel North America (formerly President Industrial Markets)K J Fagg President - Market and Logistics SolutionsB G Kruger

President - Australian Building and Manufacturing Markets

(formerly Chief Financial Officer)

N H Cornish

President - Australian and New Zealand Industrial Markets

(formerly President Australian Building and

Manufacturing Markets)M Courtnall President - Asian Building and Manufacturing MarketsI R Cummin Executive Vice President - Human Resources

All of the above persons were also specified executives during the year ended 30 June 2005.

Information relating to director and executive remuneration is included in the Remuneration Report and has been audited.

- 49 -



Note 34. Director and executive disclosures (continued)

Share rights holdings

The number of share rights over ordinary shares in the company held during the financial year by the Managing Director

and CEO, and each of the six specified executives of the consolidated entity, are set out below.

No non-executive directors received share rights during the period.

Name

Balance at thestart of the

year

Granted

during theyear as

remuneration

Exercised

during theyear

Balance at theend of the

year

Directors of BlueScope Steel Limited

K C Adams 1,448,800 181,200 685,000 945,000

Specified executives of the consolidated entity

L E Hockridge 552,900 68,700 289,800 331,800 K J Fagg 488,700 53,900 258,200 284,400 B G Kruger 425,700 53,900 221,300 258,300 N H Cornish 419,200 48,800 221,300 246,700 M Courtnall 342,300 43,200 176,500 209,000 I R Cummin 94,700 41,700 - 136,400

These share rights arise from the following long term incentive plans:

Grant Date

Expiry Date

Exercise Price

Value per share

right at grant date*Date exercisable

25 Jul 2002 31 Mar 2006 Nil $1.34 From 30 Sep 200430 Sep 2002 30 Sep 2006 Nil $1.26 From 01 Oct 200524 Oct 2003 30 Oct 2008 Nil $3.23 From 01 Oct 200613 Nov 2003 30 Oct 2008 Nil $3.15 From 01 Oct 200631 Aug 2004 31 Oct 2009 Nil $5.14 From 01 Oct 2007

* External valuation advice from Pricewaterhouse Coopers Securities Limited has been used to determine the value of executive share rights at grant date.The valuation has been made using the Binomial Option Pricing Model using standard option pricing inputs such as the underlying stock price, exerciseprice, expected dividends, expected risk free interest rates and expected share price volatility.

Share rights granted under these plans carry no dividend or voting rights. When exercisable, each share right is convertibleinto one ordinary share. As at 30 June 2005, all share rights are exercisable. There are no outstanding exercisable sharerights for the specified director and executives at 30 June 2005.

- 50 -




Share holdings

The number of shares in the company held during the financial year by each director of BlueScope Steel Limited and each

of the six specified executives of the consolidated entity, including their personally-related entities, are set out below.

Name

Balance

at the start

of

the year

Received

during the year

on the exercise

of options

Other

changes

during

the year

Balance

at the end

of

the year

Directors of BlueScope Steel Limited G J Kraehe 104,190 - 5,486 109,676 R J McNeilly 512,239 - 2,348 514,587 J Crabb (resigned 28 July 2004) 41,572 - (11,428) 30,144 D J Grady 30,432 - 5,926 36,358 H K McCann 20,131 - 1,782 21,913 P J Rizzo 22,657 - 2,045 24,702 Y P Tan 131 - 11,849 11,980 K C Adams (1) 902,212 685,000 238,669 1,825,881

Specified executives of the consolidated entity

L E Hockridge 53,751 289,800 150 343,701 K J Fagg 200 258,200 150 258,550 B G Kruger (2)

2,885 221,300 150

224,335

N H Cornish(2)

12,200 221,300 (75,350)

158,150 M Courtnall 7,841 176,500 150 184,491 I R Cummin 30,000 - 38,378 68,378(1) Mr Adams' current holding of BlueScope Steel Limited shares includes 685,000 arising from the BlueScope Steel Limited executive remunerationprogram. The remaining shares have been acquired with his own funds.(2) Includes transactions made during the year by personally-related entities.

- 51 -




Loans to directors and executives

No loans were made to directors of BlueScope Steel Limited or the six specified executives of the consolidated entity,including their personally-related entities, during the current and prior period.

Other transactions with directors and specified executives

Directors of BlueScope Steel Limited

Mr Graham Kraehe is a non-executive chairman of National Australia Bank and Mr Paul Rizzo is an independant nonexecutive director of the National Australia Bank, a supplier of banking services and funding facilities. National AustraliaBank forms part of a consortium of eleven banks providing funding to the BlueScope Steel Group. Decisions required bythe consortium are by majority (as a minimum), and as such is not disclosed as a related party transaction. Other netinterest and banking service fees charged to the BlueScope Steel Group by National Australia Bank for the twelve monthsended 30 June 2005 was $0.6 million (2004: $1.3 million).

Mr Kevin McCann was a partner of Allens Arthur Robinson, a national law firm, until 30 June 2004, at which time hebecame a non-partner Chairman of the firm. Allens Arthur Robinson is one of a number of legal firms that provide legalservices to the company on normal commercial terms and conditions. Total fees charged to the BlueScope Steel Group byAllens Arthur Robinson for the twelve months ended 30 June 2005 was $0.3 million (2004: $0.8 million). Mr KevinMcCann retired as non-partner Chairman of the firm in December 2004.

Mr Kevin McCann is chairman of Origin Energy Limited. Origin Energy Limited is one of a number of suppliers thatprovide energy to the company on normal commercial terms and conditions. Total amount charged to the BlueScope SteelGroup by Origin energy for the twelve months ended 30 June 2005 was $14.3 million (2004: $13.8 million).

The above directors of BlueScope Steel have not participated in any decisions regarding these transactions. Transactionswith these entities have been made on commercial arms-length terms and conditions

- 52 -



Note 35.

Remuneration of auditors

During the year the following services were paid to the auditor of the parent entity, its related practices and non-related audit

firms:

Consolidated

Parent entity

2005

2004

2005

2004

$

$

$

$

Assurance services1. Audit services -

Fees paid to Ernst & Young Australian firm:

Audit or review of financial reports and otheraudit work under the Corporations Act 2001 1,540,423 1,424,000 1,044,923 885,000

Fees paid to related practices of Ernst & YoungAustralian firm (including overseas Ernst & Youngfirms) 1,361,893 1,032,087 - -Non-Ernst & Young audit firms 10,000 11,500 - -Total remuneration for audit services 2,912,316 2,467,587 1,044,923 885,000

2. Other assurance services

Fees paid to Ernst & Young Australian firm: Fees paid to related practices of Ernst & YoungAustralian firm (including overseas Ernst & Youngfirms)

- 5,000 -

-

Total remuneration for other assurance services

- 5,000 -

-

Total remuneration for assurance services 2,912,316 2,472,587 1,044,923 885,000

3. Non-audit servicesFees paid to Ernst & Young Australian firm:

Tax compliance services - 108,000 - 108,000International tax consulting 497,000 310,000 497,000 310,000

Fees paid to related practices of Ernst & YoungAustralian firm (including overseas Ernst & Youngfirms) for tax compliance services 348,000 147,000 - -Total remuneration for non-audit services 845,000 565,000 497,000 418,000

- 53 -



Note 36.

Contingent liabilities and contingent assets

Contingent liabilities

Details and estimates of maximum amounts of contingent liabilities are as follows:

Outstanding Legal Matters

Consolidated

Parent entity

2005

2004

2005

2004

$m $m $m $m

Other persons(a) Unsecured 5.5 2.6 - 1.1(b) Secured - 0.3 - -

5.5 2.9 - 1.1

GuaranteesIn Australia, BlueScope Steel Limited has given $116.6 million (June 2004: $126.4 million) in guarantees to various stateworker's compensation authorities as a pre-requisite for self insurance. Of this amount, a total of $98.2 million (June 2004:$99.2 million) has been provided for in the consolidated financial statements as recommended by independent actuarialadvice.

SuperannuationThe defined benefit divisions of the BlueScope Steel Superannuation Fund, and the New Zealand Steel Pension Fund, havea combined deficiency of the present value of accrued benefits over the net market of value of assets totalling $24.2 million(June 2004: $50.8 million) (refer note 38). This deficiency represents potential additional contributions the company may

make in the future.

The deficiency in the Butler Manufacturing Company defined benefit plans has been recognised as a liability at 30 June2005 as the company has a legal obligation to make good this deficit (refer note38).

For contingent liabilities relating to joint ventures refer to note 41.

Contingent assets

Butler Manufacturing Company was awarded damages from Louisiana Pacific Corporation arising out of its purchase ofdefective Inner-Seal products, and subsequently received cash of $30.4 million (US$21 million). An additional amount of$16.2 million (US$11.2 million) is currently subject to appeal. This contingent asset has not been recognised as areceivable at 30 June 2005 as the amount is dependent on the future outcome of the appeal.

Port Kembla Steelworks is entitled to a discount to the value of $7.5 million on the supply of a portion of its iron orerequirements arising from the modification of pricing arrangements under a supply agreement. This contingent asset hasnot been recognised as a receivable at 30 June 2005 as the value is dependant upon future supply of iron ore. This value isexpected to be realised during the year ending 30 June 2006.

- 54 -



Note 37.

Commitments for expenditure

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Capital commitments

Commitments for the acquisition of plant and

equipment contracted for at the reporting date but not

recognised as liabilities, payable:

Within one year 139.7 82.6 6.6 7.3Later than one year but not later than 5 years - 4.6 - -

139.7 87.2 6.6 7.3


Operating lease commitmentsCommitments in relation to leases contracted for atthe reporting date but not recognised as liabilities,payable:Within one year 73.6 94.5 15.6 12.0Later than one year but not later than 5 years 153.8 183.5 23.3 32.4Later than 5 years 91.8 100.0 4.6 7.4

319.2 378.0 43.5 51.8

Consolidated Parent entity2005 2004 2005 2004 $m

$m

$m

$m

Other commitmentsCommitments for the cost of various goods andservices supplied to the company but not recognisedas liabilities, payable:Within one year 566.3 192.5 5.4 15.8Later than one year but not later than 5 years 1,476.1 458.1 18.3 18.7Later than 5 years 205.1 128.3 22.5 28.7

2,247.5 778.9 46.2 63.2

- 55 -



Note 37. Commitments for expenditure (continued)

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Finance lease commitments

Commitments in relation to finance leases are payableas follows:Within one year 0.4 2.0 - -Later than one year but not later than 5 years 1.2 5.0 - -Later than 5 years 0.8 0.9 - -Minimum lease payments 2.4 7.9 - -Less: Future finance charges 0.3 1.1 - -Total lease liabilities 2.1 6.8 - -

Representing lease liabilities:Current (note 20) 0.4 1.7 - -Non-current (note 25) 1.7 5.1 - -

2.1 6.8 - -

For commitments relating to joint ventures refer to note 41.

Note 38. Employee benefits


2004

2005

2004

$m

$m

$m

$m

Employee benefit liabilitiesCurrent (note 22) 197.1 215.5 73.5 74.5Non Current (note 27) 221.7 208.1 62.1 59.0

Aggregate employee benefit liability 418.8 423.6 135.6 133.5

Number NumberEmployee numbersAverage number of employees during the financialyear 17,063 12,815 3,911 3,720

- 56 -



Note 38. Employee benefits (continued)

Superannuation Benefits

All employees of the consolidated entity are entitled to benefits on resignation, retirement, death or disablement.

Australian employees are members of either the BlueScope Steel Superannuation Fund or an industry superannuation fund,the Superannuation Trust of Australia ("STA"). New Zealand employees are members of either the New Zealand Steel

Pension Fund or the Retirement Savings Plan, a master trust managed by Tower Employee Benefits Limited. Butler

Manufacturing Company employees in the United States are members of either one of four Butler Manufacturing defined

benefit plans, the Individual Retirement Asset Account Plan ("IRAA"), or a combination of both types of plans. TheBlueScope Steel Group also makes superannuation contributions to defined contribution funds in respect of the entity'semployees located in other countries.

STA, the Retirement Savings Plan, and the IRAA provide accumulation style benefits. The New Zealand Steel PensionFund and the four Butler Manufacturing plans provide defined benefits, and the BlueScope Steel Superannuation Fundprovides both accumulation style benefits and defined benefits.Defined benefit funds provide defined lump sum monthly benefits based on years of service and final average salary. TheButler Manufacturing defined benefit plans are integrated into a floor-offset arrangement in which the plan entitlements areoffset to an extent by the accumulated entitlements of the IRAA.

Actuarial assessments of the defined benefit funds are made at no more than three yearly intervals, with summaryassessments performed annually. The last formal actuarial investigations were made of the BlueScope SteelSuperannuation Fund as at 1 July 2002 (the date it was established), the New Zealand Steel Pension Fund as at 31 March2004, and the four Butler Manufacturing defined benefit plans as at 1 January 2004. Summary actuarial assessments wereperformed for all of these funds as at 30 June 2005, to provide information that is more up to date than that of the mostrecent formal actuarial investigation.

Information relating to these defined benefit funds based on the latest actuarial assessments is set out below.

Defined Benefit Funds to which BlueScope Steel employees belong

2005 BlueScope Steel Superannuation

Fund

$m

New Zealand Steel Pension Fund

$m

ButlerManufacturing

Company definedbenefit plans

$m

Aggregate

$mPresent value ofemployees' accruedbenefits

522.0 204.4 193.6 920.0

Net market value of assetsheld by the Fund to meetfuture benefit payment

531.9 170.3 140.5 842.7

Excess/(Shortfall) of assetsover the present value ofemployees' accruedbenefits

9.9 (34.1) (53.1) (77.3)

Vested benefits 522.0 194.1 188.1 904.2

Employer contributions 20.8 20.4 12.1 53.3Movement in liability - - (6.1) (6.1)Defined benefit expense 20.8 20.4 9.3 50.5

- 57 -



Note 38. Employee benefits (continued)

These amounts were measured as at 30 June 2005 (employer contributions relate to the year ended 30 June 2005). The net

market value of assets of the BlueScope Steel Superannuation Fund and the New Zealand Pension Fund are estimates as

the valuations have not been finalised.

Vested benefits are benefits which are not conditional upon continued membership of the Fund (or any factor other than

resignation from the Fund) and include benefits which members were entitled to receive had they terminated their Fund

membership as at the reporting date.

The company meets regularly with the trustees of these Funds to review the actions being taken to recover the deficienciesin the Funds identified.

The combined deficiency of the Butler Manufacturing defined benefit plans has been recognised as a liability as thecompany has a legal obligation to make good the deficit. The combined deficiency of the BlueScope Steel SuperannuationFund and the New Zealand Steel Pension Fund has been recognised as a contingent liability at 30 June 2005 (refer note36).

Comparative information is provided in respect of the year ended 30 June 2004 in the table below.

2004 BlueScope SteelSuperannuation

Fund

$m

New Zealand SteelPension Fund

$m

ButlerManufacturing

Company definedbenefit plans

$m

Aggregate

$mPresent value ofemployees' accruedbenefits

474.0 182.6 198.8 855.4

Net market value of assets

held by the Fund to meet

future benefit payment

458.7

147.1

139.6

745.4

(Shortfall) of assets overthe present value ofemployees' accruedbenefits

(15.3) (35.5) (59.2) (110.0)

Vested benefits 473.6 181.8 184.9 840.3Employer contributionsMovement in liability

20.9-

20.8-

-1.5

41.71.5

Defined benefit expense 20.9 20.8 1.5 43.2

.

- 58 -



Note 39.

Related parties

Directors and specified entities

Disclosures relating to directors and specified executives are set out in note 34.

Related parties

Aggregate amounts included in the determination of profit from ordinary activities before income tax that resulted from

transactions with each class of related party:

Consolidated

Parent entity

2005

2004

2005

2004

$m $m $m $m

Interest revenueCommonly controlled entities - - 4.0 19.9

Dividend revenueControlled entities - - 1,154.9 18.1

Management and guarantee fee revenueCommonly controlled entities - - 0.6 0.6

Other revenueCommonly controlled entities - - 7.3 6.0Associates 1.3 2.1 - -

Interest expenseAssociates 1.6 0.2 - -

Aggregate amounts brought to account in relation to other transactions with each class of other related parties:

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Net loan receivable repayments/(advances)Commonly controlled entities - - (182.7) 445.4Associates 28.5 (11.2) - -

Net loan payable proceeds/(repayments) Associates (37.1) 41.2 - -

All related party transactions are made under normal commercial terms and conditions.

- 59 -



Note 39. Related parties (continued)

Aggregate amounts receivable from, and payable to, each class of other related parties at balance date:

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Current receivablesCommonly controlled entities - - 756.2 386.0Associate loan (refer note 13) - 31.9 - -Associate other 38.9 92.9 - -

Non-current receivablesCommonly controlled entities - - 281.0 301.0

Current interest bearing liabilitiesCommonly controlled entities - - 371.3 373.5Associates (refer note 20) - 43.5 - -

Ownership interests in related parties Interests held in the following classes of related parties are set out in the following notes:(a) controlled entities - note 40(b) joint venture partnership - note 41.

Other director transactions with group entities

Transactions with related parties of directors of wholly owned subsidiaries within the BlueScope Steel Group total $1.5million (June 2004: $1.4 million). These transactions have been made on commercial arms-length terms and conditions.

- 60 -



Note 40.

Investments in controlled entities

Name of entity

Country of incorporation

Equity holding

2005

2004

%

%

Amari Wolff Steel Pty Ltd

Australia

100 100Australian Iron & Steel Pty Ltd

Australia

100 100

BlueScope Steel Asia Holdings Pty Ltd

Australia

100 100BlueScope Steel (AIS) Pty Ltd Australia 100 100BlueScope Steel Employee Share Plan Pty Ltd Australia 100 100BlueScope Steel (Finance) Ltd Australia 100 100BlueScope Steel Logistics Co Pty Ltd Australia 100 100BlueScope Steel Middle East Investments Pty Ltd Australia 100 100BlueScope Pty Ltd Australia 100 100BlueScope Water Pty Ltd Australia 100 100Glenbrook Holdings Pty Ltd Australia 100 100John Lysaght (Australia) Pty Ltd Australia 100 100Lysaght Building Solutions Pty Ltd Australia 100 100Lysaght Design & Construction Pty Ltd Australia 100 100New Zealand Steel (Aust) Pty Ltd Australia 100 100Pioneer Water Tanks (Australia 94) Pty Ltd (d) Australia 100 -The Roofing Centre (Tasmania) Pty Ltd Australia 100 100Butler Argentina S.A. Argentina 100 100Butler Do Brazil Ltda (e) Brazil 100 100BlueScope Lysaght (Brunei) Snd Bhd Brunei 60 60Endeavour Industries Ltd British Virgin Islands 100 100BlueScope Lysaght (Guangzhou) Ltd

China

100 100

BlueScope Steel Building Solutions (Guangzhou) Ltd (c)

China

100 -BlueScope Lysaght (Shanghai) Ltd

China

100 100

BlueScope Steel (Shanghai) Co Ltd (c) China 100 -BlueScope Steel International Trading (Shanghai) Co Ltd China 100 100BlueScope Lysaght (Langfang) Ltd China 100 100BlueScope Lysaght (Chengdu) Ltd China 100 100BlueScope Steel (Suzhou) Ltd China 100 100Butler (Shanghai) Inc China 100 100Butler (Tianjin) Inc China 100 100Comercial Butler Limitada (e) Chile 99 99BlueScope Lysaght Fiji Ltd Fiji 64 64Butler Europe GmbH (e) Germany 100 100NPDC Holding (Hong Kong) Ltd (e) Hong Kong 100 100NPDC (Hong Kong) Ltd Hong Kong 100 100BlueScope Steel North Asia Ltd Hong Kong 100 100Butler Europe Kft Hungary 96 96BlueScope Steel India (Private) Ltd India 100 100BlueScope Steel Building Solutions (Private) Ltd (c) India 100 -PT BlueScope Steel Indonesia Indonesia 100 100PT BlueScope Lysaght Indonesia Indonesia 100 100PT BRC Lysaght Distribution Indonesia 80 80BlueScope Steel Transport (Malaysia) Sdn Bhd Malaysia 100 100BlueScope Steel Logistics (Malaysia) Sdn Bhd Malaysia 100 100BlueScope Steel (Malaysia) Sdn Bhd

Malaysia

60 60

BlueScope Steel Lysaght (Malaysia) Sdn Bhd

Malaysia

60 60

- 61 -



Note 40. Investments in controlled entities (continued)

Name of entity


Equity holding

2005

2004

%

%

BlueScope Lysaght (Sabah) Sdn Bhd (a)

Malaysia

49 49BlueScope Steel Asia Sdn Bhd

Malaysia

100 100

Global BMC (Mauritius) Holdings Ltd Mauritius 100 100Butler S.A. de C.V. Mexico 100 100Butler Construcciones S.A. de C.V. Mexico 100 100Butler Manufacturas S de R.L. de C.V. Mexico 100 100Butler de Mexico S. de R.L. de C.V. Mexico 100 100Butler Europe B.V. Netherlands 100 100BlueScope Acier Nouvelle - Caledonie SA * New Caledonia 65 65BlueScope Steel Finance NZ Ltd New Zealand 100 100Tasman Steel Holdings Ltd New Zealand 100 100New Zealand Steel Holdings Ltd New Zealand 100 100New Zealand Steel Ltd New Zealand 100 100Glenbrook Representatives Ltd New Zealand 100 100New Zealand Steel Development Ltd New Zealand 100 100Toward Industries Ltd New Zealand 100 100Steltech Structural Ltd New Zealand 100 100BlueScope Steel Trading NZ Ltd New Zealand 100 100New Zealand Steel Mining Ltd New Zealand 100 100BlueScope Steel International Holdings SA Panama 100 100BlueScope Steel Philippines Inc Philippines 100 100NPAH Holdings Ltd (e)

PNG

100 100

BlueScope Lysaght Rabaul Ltd (e)

PNG

100 100Titan Properties Ltd (e)

PNG

100 100

Butler Europe SP.ZO.O. (e) Poland 97.5 97.5BlueScope Lysaght (Singapore) Pte Ltd Singapore 100 100BlueScope Steel Asia Pte Ltd Singapore 100 100Steelcap Insurance Pte Ltd Singapore 100 100BlueScope Steel Southern Africa (Pty) Ltd South Africa 100 100BlueScope Lysaght Lanka (Pvt) Ltd Sri Lanka 82 82BlueScope Lysaght Taiwan Ltd Taiwan 80 80BlueScope Steel (Thailand) Ltd Thailand 75 75Steel Holdings Co Ltd Thailand 100 100BlueScope Lysaght (Thailand) Ltd Thailand 75 75BlueScope Steel International Ltd UK 100 100Butler Europe Ltd UK 96 96BIEC International Inc USA 100 100BlueScope Steel Technology Inc USA 100 100BlueScope Steel Americas LLC USA 100 100BlueScope Steel Investments Inc USA 100 100Butler Manufacturing Company USA 100 100Lester Holdings Inc (f) USA - 100Lester Buildings Inc USA 100 100Innovative Building Technology, Inc (f) USA - 100Bucon Inc USA 100 100Butler Real Estate Inc

USA

100 100

- 62 -




Name of entity


Equity holding

2005

2004

%

%

BMC Real Estate Inc

USA

100 100Butler Holdings Inc

USA

100 100

Liberty Building Systems Inc USA 100 100Moduline Windows Inc USA 100 100Butler Construction Inc USA 100 100Butler Pacific Inc USA 100 100BlueScope Lysaght (Vanuatu) Ltd (b)* Vanuatu 39 39BlueScope Lysaght (Vietnam) Ltd Vietnam 100 100BlueScope Steel Vietnam Ltd Vietnam 100 100

* These controlled entities are audited by firms other than Ernst & Young and affiliates.

(a) The BlueScope Steel Group holds an ownership interest of 49% in BlueScope Steel Lysaght (Sabah) Sdn Bhd,which is classified as a controlled entity pursuant to Australian Accounting Standard AASB 1024: ConsolidatedAccounts because the BlueScope Steel Group can exercise voting control.

(b) The BlueScope Steel Group's ownership of the ordinary share capital in this entity represents a beneficial interestof 39% represented by its 65% ownership in BlueScope Acier Nouvelle - Caledonie SA, which in turn has 60%ownership of this entity.

(c) These controlled entities were established during the year.

(d) The following controlled entity was acquired during the year:

Pioneer Water Tanks (Austalia 94) Pty Ltd 10 May 2005

(e) These controlled entities are in the process of being liquidated.

(f) These controlled entities were liquidated during the year.

- 63 -




Acquisition of controlled entities

During the year the BlueScope Steel Group acquired Pioneer Water Tanks (Australia 94) Pty Ltd. During the previous

year, the BlueScope Steel Group acquired the Butler Manufacturing Company and its controlled entities, The Roofing

Centre (Tasmania) Pty Ltd and City Rainwater Tanks (Aust) Pty Ltd. The operating results of these entities have been

included in the consolidated statement of financial performance since the respective acquisition dates.

Details of these acquisitions are as follows:

2005$m

2004$m

Fair value of identifiable net assets of controlled entities acquiredCash 0.1 72.5External receivables 2.4 211.0Inventories 1.5 174.2Property, plant and equipment 0.8 187.0Deferred tax assets 0.1 43.3Other financial assets - 3.8Other assets - 35.1External payables (1.6) (178.4)Deferred tax liability - (0.9)Provision for restructuring, including employee retrenchment payments - (23.4)Other provisions (0.3) (167.5)Borrowings - (194.0)Other (0.2) -

2.8

162.7Goodwill on consolidation

14.9

51.5

Deferred purchase price 0.2 (1.3)Payout of Butler Manufacturing noteholder borrowings - 149.6Cash consideration 17.9 362.5


Outflow of cash to acquire controlled entities, net ofcash acquired

Cash consideration 17.9 362.5 11.8 17.1

Less: Balances acquired

Cash 0.1 72.5 - -Outflow of cash 17.8 290.0 11.8 17.1

- 64 -



Note 41.

Interests in joint ventures

(a) Joint venture partnership

The parent entity has a 50% interest in North Star BlueScope Steel, the principal activity of which is the manufacturing of

steel. Information relating to the joint venture partnership, presented in accordance with the accounting policy described innote 1, is set out below.

Consolidated

2005

2004

$m

$m

Movement in carrying amount of investment in partnership

Carrying amount at the beginning of the financial year 200.2 130.6Share of profit from ordinary activities before tax 194.0 71.1Currency fluctuation (23.9) (1.5)Distributions received (123.4) -Carrying amount at the end of the financial year 246.9 200.2

Share of partnership's assets and liabilitiesCurrent assets 120.5 162.2Non-current assets 174.7 211.1

Total assets 295.2 373.3Current liabilities 48.3 137.6Non-current liabilities - 35.5

Total liabilities 48.3 173.1Net assets 246.9 200.2

Share of partnership's revenues, expenses and resultsRevenues 763.2 487.2Expenses

569.2

416.1

Profit from ordinary activities before tax

194.0

71.1

Retained profits attributable to the partnership at the end of the financial year 210.9 140.3

Share of partnership's commitmentsOther commitments - information technology contract 4.2 5.8Other commitments - long term utility supply contracts 4.7 8.7Total expenditure commitments 8.9 14.5

Reporting date

North Star BlueScope Steel has a 31 May reporting date.

(b) Shares in other associatesThe BlueScope Steel Group holds other minor investments in associates totalling $6.6m (2004: $4.2m) which have beenequity accounted. These investments consist of a 40% interest in Vistawall International (UAE) Ltd, a joint venture locatedwithin the United Arab Emirates, a 30% interest in Saudi Steel Building Manufacturing Company, a joint venture locatedin Saudi Arabia, and a 49% interest in BlueScope Steel Lysaght (Sarawak) Sdn Bhd, a roll former in Sarawak Malaysia.These associates contributed $2.7m profit for the year ended 30 June 2005.

- 65 -



Note 42.

Reconciliation of profit from ordinary activities after income tax to net cash inflow from

operating activities

Consolidated

Parent entity

2005

2004

2005

2004

$m

$m

$m

$m

Profit from ordinary activities after income tax

1,007.1 601.8 1,087.1

146.1Depreciation and amortisation

306.1 286.7 66.6

68.3

Write down of other assets to recoverable amount

1.6 1.3 -

-Capitalised borrowing costs (3.6) - - -Net (gain) loss on sale of non-current assets (1.5) (8.0) 0.1 (0.9)Share of profits of associates and joint venturepartnership (196.7) (71.2) - -Associate dividends received 123.4 - - -Change in operating assets and liabilities

Decrease (increase) in trade debtors (131.3) (123.0) (51.5) (70.7)Decrease (increase) in other debtors 29.5 5.9 (8.0) 0.1Decrease (increase) in inventories (308.8) (73.6) (42.3) (8.5)Decrease (increase) in other operating assets 11.8 4.2 (0.5) 1.1Increase (decrease) in trade creditors 63.1 22.6 0.1 25.4Increase (decrease) in other creditors (36.7) 12.2 3.7 (4.8)Increase (decrease) in income taxes payable 86.9 120.7 (112.3) 1.4Increase (decrease) in deferred tax balances (55.7) (34.7) (15.9) 0.3Increase (decrease) in other provisions andliabilities 14.9 5.6 12.1 (21.8)Increase (decrease) in deferred income (23.9) 12.0 - -Other variations 2.8 (2.4) - 0.2

Net cash inflow from operating activities 889.0 760.1 939.2 136.2

- 66 -



Note 43.

Earnings per share

Consolidated

2005

2004

Cents

Cents

Basic earnings per share

137.4

77.8

There is no diluted earnings per share impact from the senior managers long term incentive plan disclosed in the

Remuneration Report as it is the current practice of the company to satisfy these entitlements through the buyback and

cancellation of an equivalent number of BlueScope Steel Limited issued shares.

Consolidated2005 2004

Number Number

Weighted average number of sharesWeighted average number of ordinary shares used as the denominator in calculating basicearnings per share 733,031,445 750,542,940

Consolidated2005 2004$m $m

Reconciliations of earnings used in calculating earnings per shareBasic earnings per share

Net profit

1,007.1

601.8Net profit attributable to outside equity interest

(0.1)

(17.7)

Earnings used in calculating basic earnings per share

1,007.0

584.1

- 67 -

BlueScope Steel LimitedDirectors' declaration30 June 2005

The directors declare that the financial statements and notes set out on pages 1 to 67:

(a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professionalreporting requirements; and

(b) give a true and fair view of the company's and consolidated entity's financial position as at 30 June 2005 and oftheir performance, as represented by the results of their operations and their cash flows, for the financial yearended on that date.

In the directors' opinion:

(a) the financial statements and notes are in accordance with the Corporations Act 2001; 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.

The directors have been given the declaration by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001 for the year ended 30 June 2005.

This declaration is made in accordance with a resolution of the directors.

G J KraeheChairman

K C AdamsManaging Director and CEO

Melbourne22 August 2005

- 68 -

Independent audit report to the members of

BlueScope Steel Limited

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cashflows, accompanying notes to the financial statements, and the directors' declaration for both BlueScope Steel and theconsolidated entity, for the year ended 30 June 2005. The consolidated entity comprises both the company and the entitiesit controlled during that year.

The directors of the company are responsible for preparing a financial report and the additional disclosures included in theDirectors' Report designated as audited ('the additional disclosures'):

• directors remuneration table on p. 18 of the Directors' Report;

• senior executives' remuneration table on p. 19 of the Directors Report; and

• share rights holdings table for specified executives on p. 21 of the Directors Report,

that gives a true and fair view of the financial position and performance of the company, and that complies withAccounting Standards, in accordance with the Corporations Act 2001. This includes responsibility for the maintenance ofadequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for theaccounting policies and accounting estimates inherent in the financial report.

Audit approach

We conducted an independent audit of the financial report in order to express an opinion on it to the members of thecompany. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonableassurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factorssuch as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availabilityof persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements havebeen detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance withthe Corporations Act 2001, Accounting Standards and other mandatory financial reporting requirements in Australia, aview which is consistent with our understanding of the company's and the consolidated entity's financial position, and ofit's performance as represented by the results of it's operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financialreport, and

• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significantaccounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining thenature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

We performed procedures to assess whether the substance of business transactions was accurately reflected in the financialreport. These and our other procedures did not include consideration or judgment of the appropriateness or reasonablenessof the business plans or strategies adopted by the directors and management of the company.

- 69 -

Independent audit report to the members ofBlueScope Steel Limited (continued)

Independence

We are independent of the company, and have met the independence requirements of Australian professional ethicalpronouncements and the Corporations Act 2001. We have given to the directors of the company a written Auditor'sIndependence Declaration, a copy of which is included in the Directors Report. In addition to our statutory audit work, wewere engaged to undertake the services disclosed in the notes to the financial statements. The provision of these serviceshas not impaired our independence.

Audit opinion

In our opinion, the financial report and the additional disclosures included in the Directors Report designated as audited ofBlueScope Steel Limited are in accordance with:

(a) the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position of BlueScope Steel Limited and the consolidated entity at 30 June 2005 and of their performance for the year ended on that date; and

(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

(b) other mandatory financial reporting requirements in Australia.

Ernst & Young

A I BeckettPartner

Melbourne22 August 2005

- 70 -

Level 11, 120 Collins StreetMelbourne, Victoria 3000 Australia

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