bluesteel limited a.b.n. 16 000 011 058 level 11, 120 ... · asx first half fy2012 earnings report...

BLUESCOPE STEEL LIMITED A.B.N. 16 000 011 058 Level 11, 120 Collins Street Melbourne, Victoria 3001 Ph: +61 (03) 9666 4000 Fax: +61 (03) 9666 4111 Website: www.bluescopesteel.com ASX Code: BSL 20 February 2012 The Manager – Listings Australian Securities Exchange Limited Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir, Re: Compliance with Listing Rule 4.2A for the six months ended 31 December 2011 Attached in accordance with Listing Rule 4.2A is the financial report for BlueScope Steel Limited (ASX Code: BSL) for the six months ended 31 December 2011. The financial report has been prepared in accordance with the Australian Accounting Standards issued by the Australian Accounting Standards Board, which are compliant with International Financial Reporting Standards (IFRS). References to ‘reported’ financial information throughout this report are consistent with IFRS financial information disclosed in the financial report. References to ‘underlying’ information are to non-IFRS financial information prepared in accordance with ASIC Regulatory Guide 230 (Disclosing non-IFRS financial information) issued in December 2011 and the principles provided by the Financial Services Institute of Australasia and the Australian Institute of Company Directors. Non-IFRS financial information, whilst not subject to audit or review, has been extracted from the interim financial report that has been subject to review by our external auditors. Yours faithfully Michael Barron Company Secretary BlueScope Steel Limited

http://www.bluescopesteel.com/

ASX First Half FY2012 Earnings Report

RESULTS FOR ANNOUNCEMENT TO THE MARKET (Under ASX listing rule 4.2A)

Melbourne – 20 February 2012 – BlueScope Steel Limited (ASX Code: BSL) today reported its financial results for the six months ended 31 December 2011.

Table 1: 1H FY2012 Headlines Financial items 1H FY2012 1H FY2011 Movements Group raw steel production 2.659mt 3.447mt - 0.788mt Sales revenue from continuing operations $4,530M $4,600M - $70M (-2%) Reported NPAT (NLAT) ($530M) ($55M) - $475M (-864%) Underlying NPAT (NLAT) (1) ($129M) ($47M) - $82M (-174%) Interim ordinary dividend 0 cps 2 cps fully franked Earnings per share (2) (26.6)cps / (6.5)cps (2.5)cps / (2.2)cps Gearing (net debt/net debt plus equity) 15.7% 14.2% Notes:

(1) Underlying results in this report are categorised as non-IFRS financial information provided to assist readers to better understand the financial performance of the underlying business in each reporting period. Please refer to Table 2(b) on page6 for a reconciliation of this information to the financial report.

(2) Shows reported / underlying.

Core outcomes/issues for the half Sales revenue of $4,530M for 1H FY2012, down $70M compared to 1H FY2011, was primarily due to stronger

A$ vs US$, lower sales volumes (largely due to halving Australian steel production from October 2011) and lower sales prices.

Reported NLAT of $530M for 1H FY2012, $475M worse off than the 1H FY2011. This includes underlying adjustments related to restructuring costs associated with closing Blast Furnace No.6 (BF No.6) and other Coated and Industrial Products Australia assets, and an impairment of Australian tax assets (refer page 5 for details), partly offset by income advanced under the Federal Governments Steel Transformation Plan (STP).

Underlying NLAT of $129M for 1H FY2012, was down $82M on 1H FY2011 largely due to lower steel spread and higher period end inventory net realisable value provision.

1H FY2012 underlying NLAT before net realisable value adjustments (NRV) of A$76M (A$129M less A$53M NRV) was in accordance with BlueScope’s 1H FY2012 earnings guidance.

Group raw steel production was 2.659Mt (vs. 3.447Mt in 1H FY2011), with Port Kembla production being 1.864Mt (vs. 2.643Mt), with the reduction being largely due to the closure of BF No.6 in October.

Australian domestic flat external sales volumes (1,013kt) in 1H FY2012 were largely in line with both 1H FY2011 (1,007kt) and 2H FY2011 (1,038kt) (exclude long product sales from AD&S).

Segment underlying EBIT results (vs. 1H FY2011): 1. New Zealand and Pacific Steel Products down A$15M due to higher utility costs and gas outage in

North Island 2. Asian EBIT produced another strong result (A$47M vs. $46M), even though BSL’s Thailand

business was impacted by the floods, and its Indonesian business had approximately $10M of start up/ramp up costs associated with the new metal coating line.

3. Coated and Building Products North America result was up 138% from ($16M) to $6M largely due to a targeted profit improvement program (lower costs).

4. Hot Rolled Products North America result was up 150% to A$20M largely due to improved steel spread (principally higher HRC prices).

5. The deterioration in Coated & Industrial Products Australia was driven by reduced steel spread, higher unit costs due to closure of BF No.6 in October and higher inventory NRV provisions.

6. Australia Distribution & Solutions result was driven by lower margins and sales volumes. Consolidated operating working capital as at 31 December 2011, was A$1,034M, vs. A$1,149M as at 30 June

2011 and A$1,391M at 31 October 2011.Net debt as at 31 December 2011 was $796M, $272M down on 30 June 2011 and $759M down on 31 October 2011. The $759M reduction included the application of net proceeds ($577M) from the December 2011 equity raising (gross $600M).

Liquidity A$1,501M at 31 December 2011 vs. A$1,137M at 30 June 2011. Coated and Industrial Products Australia restructure well advanced:

1. Assets, principally BF No.6, closed October 2011. 2. Renegotiation of supply and service contracts are advanced and well progressed, with raw material

contracts renegotiated. 3. Fixed cost reduction and working capital release targets on schedule.

BSL received $100M cash advance from the Federal Government in January 2012 under the Steel Transformation Plan. $66M recognised in 1H FY2012; $34M to be recognised in 2H FY2012.

For 2H FY2012, we expect a slightly lower underlying Net Loss After Tax (excluding period end NRV’s and/or impairments), subject to spread, FX and market conditions, compared with the 1H FY2012 result, including our expectation of a return to a profitable underlying run rate by end of FY 2012.


Consolidated Results Table 2a provides the 1H FY2012 consolidated financial results and the comparable FY2010 period. Table 2b explains why management have disclosed underlying results and reconciles underlying earnings to reported earnings. Table 2a : Financial Headlines Six months ended 31-Dec-2011 (“1H FY2012”) and 31-Dec-2010 (“1H FY2011”) Variance Financial Measure 1H FY2012 1H FY2011 $ %

Total revenue (1) A$M 4,549 4,622 (73) (2) Earnings before interest, tax, depreciation and amortisation (EBITDA) (2) – Reported A$M (270) 127 (397) (313)

– Underlying A$M 32 134 (102) (76)

EBIT/(EBIT loss)(2) – Reported A$M (435) (48) (387) (806) – Underlying A$M (132) (41) (91) (222)

Finance costs A$M (70) (52) (18) (35) NPAT/(NLAT) attributable to BlueScope Steel Shareholders – Reported A$M (530) (55) (475) (864) – Underlying A$M (129) (47) (82) (174) – Per Market Guidance A$M (76)(7) N/A N/A N/A

Earnings per share(3) – Reported ¢/s (26.6) (2.5) (24.1) (964)

– Underlying ¢/s (6.5) (2.2) (4.3) (195)

Diluted earnings per share – Reported ¢/s (26.5) (2.5) (24.0) (960)

Interim Dividend ¢/s 0 2 (2) (100) Net cash flow from operating and investing activities (pre-tax and finance costs) (135) (196) 61 31

Return on invested capital (4) – Reported % (16.1%) (1.5%)

– Underlying % (4.9%) (1.2%)

Return on equity (5) – Reported % (25.5%) (2.0%) – Underlying % (6.2%) (1.7%) Gearing (net debt / net debt plus equity) (6) % 15.7% 14.2% Net tangible assets per share $/s 1.0 2.48

(1) Excludes the company’s 50% share of North Star BlueScope Steel revenue of $340M in 1H FY2012 ($316M in 1H FY2011). Includes revenue other than sales revenue of $19M in 1H FY2012 ($22M in 1H FY2011).

(2) Includes 50% share of net profit from North Star BlueScope Steel of $21M in 1H FY2012 ($10M in 1H FY2011). (3) Earnings per share is based on the average number of shares on issue during the respective reporting periods, ie.

1,995.6M in 1H FY2012 vs. 2,164.6M in 1H FY2011. (4) Return on invested capital is defined as earnings before interest and tax (annualised in case of half year

comparison) over average monthly capital employed. (5) Return on equity is defined as net profit after tax (annualised in case of half year comparison) attributable to

shareholders over average monthly shareholders’ equity. (6) 1H FY2012 gearing was 1.5% higher than 1H FY2011 mainly driven by lower equity. (7) NLAT per market guidance reflects underlying NLAT before $53M inventory net realisable value provisions at 31

December 2011.

Variance Analysis (1H FY2012 vs. 1H FY2011)

Total revenue

The $73M (2%) decrease principally reflects: Higher average AUD:USD exchange rate for 1H FY2012 of 1.031 compared to the previous corresponding

period of 0.945 Lower domestic and export volumes combined with lower domestic selling prices at Coated & Industrial

Products Australia. Lower domestic volumes and selling prices at Australia Distribution & Solutions.

These were partly offset by: Higher international slab and hot rolled coil prices. Higher domestic selling prices and sales volumes at Coated & Building Products Asia and North America.


EBIT

The $91M (222%) decrease in underlying EBIT principally reflects: Spread ($117M unfavourable) Prices ($104M favourable)

− Higher international slab and hot rolled coil prices. − Higher domestic selling prices at Coated & Building Products North America and Asia. Partly offset by: − Lower average domestic selling prices at Coated & Industrial Products Australia. − Lower average domestic selling prices at Australia Distribution & Solutions

Raw material costs ($221M unfavourable)

− Principally higher USD coal and iron ore purchase prices combined with higher value of opening inventory carried forward in 1H FY2012 at Coated & Industrial Products Australia compared to lower value of opening inventory carried forward in 1H FY2011.

− Higher steel feed costs at Coated & Building Products North America and Asia. − Higher inventory net realisable value provisions for inventory on hand at December 2011 ($77M) compared

to December 2010 ($59M). North Star BlueScope Steel ($11M favourable)

Exchange rates ($23M favourable)

− Net favourable foreign exchange movement in the AUD:USD vs. 1H FY2011 in respect of the favourable impact on raw materials purchased in USD within Coated & Industrial Products Australia partly offset by the unfavourable impact in respect of export sales revenue. Average exchange rate for 1H FY2012 was 1.031 compared to 0.945 in 1H FY2011.

Sales volumes and product mix ($65M favourable)

− Lower export despatches at negative margins partly offset by adverse product mix at Coated & Industrial Products Australia

− Higher despatch volumes at Coated & Building Products Asia, predominantly Indonesia and Thailand, and Coated & Building Products North America.

Costs ($77M unfavourable) comprising the following components: Cost improvement initiatives ($84M favourable)

- Lower repairs and maintenance, contract labour, operational, overhead and discretionary costs delivered through cost reduction initiatives primarily Coated & Industrial Products Australia as part of the move to a one blast furnace operation.

Cost escalation ($57M unfavourable)

- Escalation of utilities, employment, consumables and other costs. One-off and discretionary costs ($105M unfavourable)

- Higher per unit fixed conversion costs as a result of reduced production volumes at Coated & Industrial Products Australia.

- Higher market development costs in Coated & Building Products Asia.

Other costs ($1M favourable)

Other items ($4M favourable) − Mainly lower depreciation expense primarily in Coated & Industrial Products Australia partly offset by

Coated & Building Products Asia. Underlying adjustments included in reported EBIT ($296M unfavourable)

− Staff redundancies and other internal restructuring costs ($348M) at Coated & Industrial Products Australia and Corporate in relation to the move to one blast furnace operation at Port Kembla Steelworks.

− Restructure and redundancy costs ($4M) at Australia Distribution & Solutions. − Restructure and redundancy costs ($16M) at Coated & Building Products North America. − Profit on sale of Packaging Products assets and favourable foreign exchange translation gains within the

Lysaght Taiwan business ($2M) during 1H FY2011.

Partly offset by:

− Partial recognition ($66M) of the $100M advance received in January 2011 in relation to the Federal Government’s Steel Transformation Plan at Coated & Industrial Products Australia.

− Net asset impairment write down in 1H FY2011 ($9M) relating to a goodwill write down at BlueScope Distribution ($77M) partly offset by reversal of previous impairment in the China Coated business ($68M).


Funding

Financing costs for the six months ended 31 December 2011 were $70M ($52M in 1H FY2011). The increase in financing costs was largely due to a $470M increase in average borrowings to $1,451M combined with one-off costs and higher margins associated with restructuring existing financing facilities following the decision to move to a one blast furnace operation ($8M).

Equity Raising Completed a 4 for 5 entitlement offer in December 2011 to raise gross $600M. The principal purpose of the raising was to strengthen BlueScope’s balance sheet and financial flexibility.

Tax

The net tax expense in 1H FY2012 was $20M (1H FY2011 $47M). 1H FY2012 includes a $204 impairment of Australian deferred tax asset generated during the period, mainly in relation to export losses and restructure costs, of which $20M has been recorded directly against retained earnings in relation to actuarial losses from the Australian Defined Superannuation Plan. Australian Accounting Standards impose a stringent test for the recognition of tax losses where there is a history of recent tax losses and the Company has deferred the recognition of any further Australian deferred tax asset until a return to taxable profits has been demonstrated. Australian tax losses are able to be carried forward indefinitely.

Table 2b: Reconciliation of Underlying Earnings to Reported Earnings 1H FY2012 vs. 1H FY2011; $ millions Management have provided an analysis of unusual items included in the reported IFRS financial information. These items have been considered in relation to their size and nature, and have been adjusted from the reported information to assist readers to better understand the financial performance of the underlying business in each reporting period. Throughout this report management have used the term ‘reported’ to reference IFRS financial information and ‘underlying’ to reference non-IFRS financial information. These adjustments are assessed on a consistent basis from period to period and include both favourable and unfavourable items. Non-IFRS financial information whilst not subject to audit or review has been extracted from the interim financial report which has been subject to review by our external auditors. An explanation of each adjustment and reconciliation to the reported IFRS financial information is provided in the table below.

EBITDA EBIT NPAT EPS$(7)

Factors 1H

FY2012 1H

FY2011 1H

FY2012 1H

FY2011 1H

FY2012 1H

FY2011 1H

FY2012 1H

FY2011 Reported earnings (270) 127 (435) (48) (530) (55) (0.27) (0.03) Net (gains)/losses from businesses discontinued (1) 0 (2) 1 (2) 0 (1) 0.00 (0.00) Reported earnings (from continuing operations) (270) 125 (434) (50) (530) (56) (0.27) (0.03)

Underlying adjustments: Restructure and redundancy costs (2) 363 0 363 0 254 0 0.13 0.00 Borrowing amendment fees associated with restructuring (3) 0 0 0 0 6 0 0.00 0.00

Steel Transformation Plan advance(4) (66) 0 (66) 0 (46) 0 (0.02) 0.00

Asset impairment (5) 5 9 5 9 3 9 0.00 0.01

Tax asset impairment (6) 0 0 0 0 184 0 0.09 0.00 Underlying Earnings 32 134 (132) (41) (129) (47) (0.06) (0.02)

(1) 1H FY2011 reflects profit on sale of Packaging Products assets and a foreign exchange translation gain within the

Lysaght Taiwan business. (2) 1H FY2012 reflects staff redundancies and restructuring costs at Coated & Industrial Products Australia, in relation

to the move to a one blast furnace operation at Port Kembla Steelworks, Coated & Building Products North America and Australia Distribution & Solutions.

(3) 1H FY2012 reflects the costs associated with restructuring existing financing facilities following the decision to move to a one blast furnace operation at Port Kembla Steelworks.

(4) 1H FY2012 reflects receipt of an advance under the Australian Federal Government’s Steel Transformation Plan (STP) with balance $34M to be recognised in 2H FY2012. As the STP is provided to assist BSL transition to a carbon tax environment, underlying earnings will be adjusted in future periods to reflect the timing of the grant under the four year STP (i.e. $25Mpa from FY13 to FY16).

(5) 1H FY2012 reflects impairment of assets in Coated & Building Products North America associated with restructuring. 1H FY2011 reflects a net asset impairment write down ($9M) comprising: BlueScope Distribution – an impairment write down of goodwill totalling $77M; and China Coated business and an impairment write back of $68M to the asset base.


(6) 1H FY2012 includes a $204M impairment of Australian deferred tax asset generated during the period mainly in relation to export losses and restructure costs incurred during the period, of which $20M has been recorded directly against retained earnings in relation to actuarial losses from the Australian Defined Benefit Superannuation Plan.

(7) Earnings per share is based on the average number of shares on issue during the respective reporting periods, ie. 1,995.6M in 1H FY2012 vs. 2,164.6M in 1H FY2011 (In accordance with AASB 133 Earnings per Share, the comparative earnings per share calculations have been restated for the bonus element of the four-for-five share rights issue undertaken in December 2011. The previously recorded December 2010 weighted average number of shares has been adjusted by a factor of 1.1823 being the market price of one ordinary share at the close of the last day at which the shares traded together with the rights $0.61, divided by the theoretical ex-rights value per share of $0.52).

Equity, Financial Flexibility and Cash Flow Table 3 below provides a summary of consolidated equity and return measures at 31 December 2011 and 2010. Table 3: Consolidated – Return Statistics 1H FY2012 and 1H FY2011

Financial Measure 1H

FY2012 1H

FY2011 %

Shares outstanding – end of period (million) 3,349.2 1,842.2 82

Average shares – for the period (million) 1,995.6 2,164.6 (8) Return on equity – based on reported NLAT attributable to shareholders (25.5%) (2.0%) (1,175)

Return on equity – based on underlying NLAT (6.2%) (1.7%) (267)

Return on invested capital – based on reported EBIT (16.1%) (1.5%) (973) Return on invested capital – based on underlying EBIT (4.9%) (1.2%) (308) Table 4 below provides a summary of key financial flexibility metrics based on underlying operational performance. Table 4: Consolidated – Financial Flexibility Measures 1H FY2012 and 1H FY2011 Variance

Financial Measure (3) 1H

FY2012 1H

FY2011

$M %

Underlying EBITDA $M

32 134 (102) (76)

Finance costs $M

70 52 18 35

Net Debt $M

796 912 (117) (13)

Underlying EBITDA / finance costs (1) times

0.5 2.6 (2) (78)

Net Debt / Underlying EBITDA (2) times

5.2 1.6 3.6 225 (1) Calculated on a 12 month trailing basis for both underlying EBITDA and finance costs. (2) Calculated on a 12 month trailing basis for underlying EBITDA, using net debt on hand at the respective balance

dates. (3) These measures are reported based on underlying results because reported includes one off restructuring costs. Table 5 below provides a summary of consolidated operating and investing cash flows.


Table 5: Consolidated Cash Flow 1H FY2012 and 1H FY2011; $ millions Variance

Factors 1H

FY2012 1H

FY2011

$M %

Reported EBITDA (1) (270) 127 (397) (313)

Add back non cash items

- Share of profits from associates and joint venture partnership not received as dividends (4) 26 (30) (115) - Impaired assets 5 9 (4) (44) - Net (gain) loss on sale of assets 1 0 1 0 - Expensing of share-based employee benefits 3 4 (1) (25)

Cash EBITDA (265) 166 (431) (260)

Changes in working capital (2) 235 (182) 417 229

Net cash from operating activities (30) (16) (14) (90)

Net cash from investing activities (105) (180) 75 42

Cash from operating and investing (pre-tax) (135) (196) 61 31 Net finance costs paid (65) (57) (8) (14)

Tax received / (paid) (3) (56) 4 (60) (1,500) Cash from operating and investing (post-tax) (as per statutory cash flow) (256) (249) (7) (3) (1) Refer EBIT Variance analysis for major changes in EBITDA. (2) 1H FY2012 changes in working capital primarily reflect lower inventories resulting from lower raw material costs and

an decrease in volumes on hand combined with higher creditors and lower receivables. 1H FY2011 changes in working capital primarily reflect an increase in inventories mainly delivered through higher raw material and steel feed costs along with an increase in volumes on hand partly offset by lower receivables.

(3) The BlueScope Steel Australian tax consolidated group is estimated to have carry forward tax losses, as at 31 December 2011, in excess of $1.7B. There will be no Australian income tax payments until these are recovered.

Business Unit Reviews Table 6a: Sales Revenue 1H FY2012 and 1H FY2011; 2H FY2011; $ millions

Segment 1H FY2012 1H FY2011 2H FY2011

Coated & Industrial Products Australia 2,403 2,502 2,691

Australia Distribution & Solutions 841 867 808

Inter-segment (1) (294) (286) (298)

Sub-total Australia 2,950 3,083 3,201

New Zealand and Pacific Steel Products 346 330 342

Coated and Building Products Asia 839 740 747

Hot Rolled Products North America (2) 0 0 0

Coated and Building Products North America 737 675 638

Inter-segment (1) 0 0 0

Sub-total North America 737 675 638

Corporate and Group 0 0 0

Inter-segment (1) (342) (228) (416)

Continuing Businesses 4,530 4,600 4,512

Discontinued Businesses 0 0 0

Inter-segment 0 0 0

Total BLUESCOPE STEEL 4,530 4,600 4,512


Table 6b: Reported EBIT 1H FY2012 and 1H FY2011; 2H FY2011; $ millions


Coated & Industrial Products Australia (463) (97) (966)

Australia Distribution & Solutions (33) (92) (126)

Inter-segment (1) 5 1 (3)

Sub-total Australia (491) (188) (1,095)



Hot Rolled Products North America 20 8 64

Coated and Building Products North America (10) (16) (20)


Sub-total North America 10 (8) 44

Corporate and Group (34) (34) (40)

Inter-segment (1) (0) 17 1

Continuing Businesses (434) (50) (995)

Discontinued Businesses (3) (1) 2 0

Inter-segment 0 0 (0)

Total BLUESCOPE STEEL (435) (48) (995) Table 6c: Underlying EBIT 1H FY2012 and 1H FY2011; 2H FY2011; $ millions Note: A reconciliation of underlying EBIT to reported EBIT for the group is provided in Table 2b and for segments in the commentary below.


Coated & Industrial Products Australia (182) (97) (161)

Australia Distribution & Solutions (29) (15) (19)

Inter-segment (1) 4 1 (3)

Sub-total Australia (207) (111) (183)



Hot Rolled Products North America (2) 20 8 64

Coated and Building Products North America 6 (16) (4)


Sub-total North America 26 (8) 60

Corporate and Group (32) (34) (33)

Inter-segment (1) (0) 17 1

Continuing Businesses (132) (41) (60)

Discontinued Businesses 0 0 (0)

Inter-segment 0 0 0

Total BLUESCOPE STEEL (132) (41) (60)

(1) Inter-segment revenue reflects the elimination of internal sales between reporting segments. Inter-segment EBIT reflects an entry to eliminate profit-in-stock associated with inter-segment sales.

(2) Excludes the company’s 50% share of North Star BlueScope Steel’s sales revenue of A$340M in 1H FY2012 (A$316M in 1H FY2011).


BLUESCOPE STEEL AUSTRALIA Coated & Industrial Products Australia This segment comprises: Port Kembla Steelworks, NSW, Australia (coke, iron, slab, plate and hot rolled coil production); Springhill Coated, Port Kembla, NSW, Australia (cold rolled coil, metal coated and painted steel production); Western Port facility, Hastings, VIC, Australia (cold rolled coil, metal coated and painted steel production); Western Sydney COLORBOND® steel facility, NSW, Australia; Acacia Ridge COLORBOND® steel facility, Queensland, Australia; and North America, European and Asian export trading offices. Sheet and Coil Processing Services, with 6 sites across Australia. (i) Financial Performance Table 7a: Financial Performance 1H FY2012 and 1H FY2011 Variance

Financial Measure ($M, unless marked) 1H FY2012 1H FY2011 $ %

Sales revenue (1), (2) 2,403 2,502 (99) (4)

Reported EBITDA/(EBITDA loss) (2) (375) 3 (378) (12,600)

Reported EBIT loss (463) (97) (366) (377)

Underlying EBIT loss (3) (182) (97) (85) (88)

Capital and investment expenditure 46 90 (44) (49)

Net operating assets (pre tax) (4) 2,437 3,582 (1,145) (32)

Return on net assets (pre tax) (5) (34%) (5%)

Table 7b: Financial Performance 1H FY2012 vs. 2H FY2011

Financial Measure ($M, unless marked) 1H FY2012 2H FY2011 Variance

Sales revenue (1), (2) 2,403 2,691 (288)

Reported EBITDA/(EBITDA loss) (2) (375) (864) 489

Reported EBIT loss (463) (966) 503

Underlying EBIT loss (3) (182) (161) (21)

Capital and investment expenditure 46 160 (114)

Net operating assets (pre tax) (4) 2,437 2,754 (317)

Return on net assets (pre tax) (5) (34%) (55%) (1) 1H FY2012 includes coke sales of 198kt (1H FY2011 89kt and 2H FY2011 84kt). (2) Sales revenue, reported EBITDA and underlying EBIT include $1,686M, $(324M) and $(192M) respectively in

relation to the old Hot Rolled Products Australia segment (1H FY2011 $2,014M, $(49M) and $(120M) respectively and 2H FY2011 $1,985M, $(721M) and $(155M) respectively). These numbers represent sales revenue and EBITDA for the old Hot Rolled Products Australia segment and have not been adjusted for profit in stock eliminations that will now be occurring within the new Coated & Industrial Products Australia segment due to sales between the businesses in this segment.

(3) 1H FY2012 EBIT has been adjusted for staff redundancies and other internal restructuring costs ($348M) along with the partial receipt of the Steel Transformation Plan funding ($66M) booked in 1H FY2012. 2H FY2011 EBIT has been adjusted for an asset impairment write down ($797M) and staff redundancies and other internal restructuring costs ($7M).

(4) 1H FY2012 vs. 1H FY2011 decrease in net operating assets primarily driven by an asset impairment in 2H FY2011, an increase in provisions and lower inventories partly offset by a reduction in creditors as part of the restructure to move to a one blast furnace operation. 1H FY2012 vs. 2H FY2011 decrease in net operating assets primarily driven by an increase in provisions and lower inventories partly offset by lower creditors as part of the move to a one blast furnace operation.

(5) Return on net assets is defined as reported EBIT (annualised in case of half year comparisons) / average monthly net operating assets.


(ii) Variance Analysis (1H FY2012 vs. 1H FY2011) The $99M decrease in sales revenue is primarily due to a decrease in domestic and export volumes combined with adverse foreign exchange impact due to the stronger AUD partly offset by an improvement in export prices and improved destination mix. The $85M decrease in underlying EBIT was largely due to:

Reduced spread driven by: o Higher coal and iron ore purchase prices. o Lower domestic prices driven by a stronger AUD and increased competition from equivalent imports. o Lower valued opening inventory carried forward into FY2011 compared to higher valued opening

inventory carried forward into FY2012. Partly offset by

o Higher export prices driven by stronger international slab and hot rolled coil prices. Higher unit costs due to fixed conversion costs spread over lower production volumes as a result of reduced

capacity in the move to one blast furnace operation in October 2011. Higher inventory net realisable value provisions for inventory on hand at December 2011 compared to

December 2010. Adverse domestic destination mix with higher volumes into lower margin products and markets.

These were partly offset by:

A decrease in loss making export despatches combined with favourable domestic volumes. Net favourable foreign exchange movement in the AUD:USD (1H FY2012 average 1.031 vs. 1H FY2011

0.945) in respect of the favourable impact of raw material purchases in USD compared to 1H FY2011 partly offset by the unfavourable impact on sales revenue.

Underlying adjustments included in reported EBIT ($281M unfavourable)

Staff redundancies and other internal restructuring costs booked during 1H FY2012 as a result of the move to a one blast furnace operation ($348M).

Partial recognition of the Steel Transformation Plan advance ($66M) booked in 1H FY2012. (iii) Variance Analysis (1H FY2012 vs. 2H FY2011) The $21M decrease in underlying EBIT was largely due to:

Reduced spread − Higher USD denominated coal and iron ore purchase prices. − Lower export prices driven by deterioration of global HRC and slab prices as a result of negative global

economic sentiment and resultant lower demand. − Higher value of opening inventory carried forward from FY2011 into 1H FY2012.

Higher unit costs due to fixed conversion costs spread over lower production volumes as a result of reduced

capacity under the move to a one blast furnace operation in October 2011. Lower domestic despatch volumes primarily within the Distribution and Pipe & Tube markets driven by low

demand and high levels of import competition. These were partly offset by:

Lower export despatch volumes at negative margins. Net favourable foreign exchange movement in the AUD:USD. Lower inventory net realisable value provisions for inventory on hand at December 2011 compared to June

2011. Underlying adjustments included in reported EBIT ($524M favourable)

Staff redundancies and other internal restructuring costs during 1H FY2012 as a result of the move to a one blast furnace operation ($348M).

Partial recognition of Steel Transformation Plan advance ($66M) booked in 1H FY2012. Asset impairment write down ($797M), staff redundancies and other internal restructuring costs ($8M) booked

during 2H FY2011.


Operations Report

Port Kembla Steelworks Restructure – In August 2011 the company announced a major restructure of the Australian manufacturing

business to reduce its exposure to loss making export markets for steel products. At the Port Kembla Steelworks, the changes were broadly to reduce production of steel by half through the closure of a blast furnace No.6. This was accompanied by a significant reduction in the fixed cost base of operations through reduction in labour, maintenance, operations support costs and overheads, including a significant reduction in contractors.

The changes in operations and costs were largely implemented in Q2 FY2012, commencing from early October. The key facility changes were:

Closure of No 4 Coke Battery (October) Closure of No 6 Blast Furnace (BF No. 6) (October) Closure of No 3 BOS (early CY2012) Closure of No 1 Slab Caster (early CY2012) Sinter production significantly reduced

Steelmaking production capacity has been reduced from approximately 5.3Mtpa to approximately 2.6Mtpa.

Negotiations with major suppliers to amend or update supply and service contracts are advanced and well progressed, with all raw material supply contracts having been renegotiated to match the reduced requirements.

Iron & Slab

Ironmaking production of 1.86Mt in 1H FY2012 was 0.7Mt lower than the 2.56Mt in 1H FY2011 (2.5Mt in 2H FY2011) due to the idling of BF No.6 in early October in line with the restructure of operations to exit export markets.

Slab production was 1.86Mt in 1H FY2012 (vs. 2.65Mt for 1H FY2011) driven by the business restructure.

Iron ore supply arrangements: Contracts in place for the supply of iron ore as follows:

• BHP Billiton for lump and fines (as amended, total 4.2Mtpa to 30 June 2019) • Grange Resources for pellets (as amended, 0.5Mt to 31 December 2012)

The Vale contract for pellets and fines expired in December 2011

Supply of additional requirements is secured through short term supply arrangements.

Further detail on supply arrangements can be found in the 1H FY2012 investor presentation.

Coal supply arrangements:

Hard coking coal • Principally sourced from BHP Billiton Illawarra mines adjacent to the Steelworks in southern

New South Wales. There are no supply issues and the contract has approximately 21 years to run.

Semi-soft coal, primarily used for pulverised coal injection (PCI) process: • Principally sourced from Hunter Valley – Peabody (no supply issues).

Hot Strip Mill (HSM)

Hot rolled coil production of 1.35Mt (vs. 1.50Mt in 1H FY2011 and 1.3Mt in 2H FY2011). Reduced shift pattern and rolling capacity post the closure of BF No. 6 with No.2 reheat furnace turned

off for part of 1H FY2012.

Plate Mill

Plate production of 0.18Mt (vs. 0.17Mt for 1H FY2011 and 0.20Mt in 2H FY2011). Maintenance outage undertaken from mid December 2011 to early January 2012.


Coated Businesses Restructure – In August 2011 the company announced a major restructure of the Australian manufacturing

business to reduce its exposure to loss making export markets for steel products. At the Western Port facility the changes were broadly to reduce production of rolled and coated products through the closure of the hot strip mill and mothballing a metal coating line. This was accompanied by a significant reduction in the fixed cost base of operations through reduction in labour, maintenance, operations support costs and overheads, including a significant reduction in contractors.

The changes in operations and costs were largely implemented in Q2 FY2012, commencing from mid October. The key facility changes are:

Closure of the Hot Strip Mill (October) Mothballing of Metal Coating Line 5 (October)

Negotiations with suppliers to amend or update contracts are continuing.

Western Port

Hot rolled coil production of 0.28Mt in 1H FY2012 (vs. 0.48Mt in 1H FY2011 and 0.47Mt in 2H FY2011). The Hot Strip Mill was successfully decommissioned in October 2011 with no MTI’s or LTI’s.

Metal coating line production of 0.25Mt in 1H FY2012 (vs. 0.38Mt in 1H FY2011 and 0.38Mt in 2H FY2011). MCL5 was successfully decommissioned in October 2011 with no MTI’s or LTI’s. Reduced market demand saw MCL6 moved to a 5 day per week operation and MCL4 incurring periods of idle time during the half year.

Paint line production of 0.11Mt in 1H FY2012, (vs. 0.14Mt in 1H FY2011 and 0.13Mt in 2H FY2011) due to reduced domestic market demand.

Springhill

Coupled pickle cold mill production of 0.44Mt in 1H FY2012 (vs. 0.43Mt in 1H FY2011 and 0.49Mt in 2H FY2011).

Metal coating line production of 0.37Mt in 1H FY2012 (vs. 0.37Mt in 1H FY2011 and 0.39Mt in 2H FY2011).

No. 3 paint line production of 0.07Mt in 1H FY2012 (vs. 0.09Mt in 1H FY2011 and 0.1Mt in 2H FY2011). Operations were moved to 5 days per week during the half year.

Western Sydney Centre (Paint Line)

Paint line production of 0.04Mt in 1H FY2012 (vs. 0.04Mt in 1H FY2011 and 0.05Mt in 2H FY2011).

Acacia Ridge Centre

Paint line production of 0.04Mt in 1H FY2012 (vs. 0.05Mt in 1H FY2011 and 0.03Mt in 2H FY2011). Operations were moved to 5 days per week during the half year.

Sheet and Coil Processing Services (S&CPS)

Demand for processing (slit coil and sheared sheet) was at similar levels to H2 FY2011, however down 5% compared to H1 FY2011. Activity in the half was significantly impacted by continuing flatness in the building market

Reduced demand in the manufacturing markets in southern states (VIC & SA) resulted in realignment of the business to match lower demand

Mining segment demand continued to be strong with growth in NSW & WA during the first half of the year


Markets

Direct Sales to Domestic Building Sector (customers who participate in dwelling and non-dwelling segments)

This market sector is referred to as the Australian Domestic Building Sector.

Sales volumes to the domestic building sector for 1H FY2012 were largely flat when compared with 1H and 2H FY2011.

Volumes were influenced by lower housing approvals and reduced activity in non-residential construction. For the three months to October 2011, total building approvals were down 16% on the same period in the prior year.

Despite increased competition from imports, BlueScope maintained market share 1H FY2012 in the residential construction sector. Market share for Zincalume® products improved with more customers preferring to hold reduced stock levels and purchase on short lead times whilst market prices remain volatile.

Average pricing levels for metallic coated products declined in Q1 FY2012 due to the strength of the AUD and global over-supply of steel. There was some improvement in Q2 FY2012 due to a reduction in the AUD and modest increases in global steel prices.

Sales to Domestic Customers and Distributors who participate across all end market segments

These market sectors are referred to as the Australian Domestic Industrial Sector (including engineering, manufacturing, agriculture, mining and automotive / transport).

Sales volumes decreased 4% in 1H FY2012 (vs. 2H FY2011)

Declining global steel prices and market uncertainty resulted in significant de-stocking within the distribution sector in Q4 FY2011, which carried through into Q1 FY2012. Customers have continued to maintain moderate inventory levels in 1H FY2012 whilst markets remain volatile.

Sales volumes for plate, coil and welded products have been solid, particularly within mining and infrastructure.

Sheet and coil product sales have been impacted by lower demand within building and manufacturing sectors.

Manufacturing and pipe & tube sectors continue to be impacted by the high AUD, low domestic demand on the back of weak consumer confidence and high levels of import competition, particularly in finished goods.

Market share in 1H FY2012 has remained under pressure from strong import competition, largely due to the AUD remaining strong and global demand for steel remaining subdued. We have maintained relative price competiveness to defend our market share.

Average pricing for industrial markets products declined in Q1 FY2012 due to the strength of the AUD and global over-supply of steel. There was some improvement in Q2 FY2012 due to a reduction in the AUD and modest increases in global steel prices.

Export Markets

With the wind back of production to a one blast furnace operation, BSL placed lower external volumes into export markets in 1H FY2012 0.736Mt vs. 1.074Mt 1H FY2011.

Throughout Q1 FY2012 world steel markets remained surprisingly stable, despite widespread negative economic sentiment. Weighted average global Hot Rolled Coil (“HRC”) prices were lower than Q4 FY2011 but with price improvement through the quarter to September / early October, which was the high point in the price cycle this half year

Negative economic sentiment dominated global steel markets during the second half, with all regions experiencing significant price falls as the Eurozone sovereign debt crisis continued to depress equity markets, confidence and economic growth. Weak demand fundamentals, oversupply issues and cautious purchasing patterns from traders and end-users resulted in volatile export HRC prices in the period.


Australia Distribution & Solutions This segment comprises: BlueScope Distribution with 67 sites throughout Australia; BlueScope Lysaght, with 33 sites throughout Australia; BlueScope Solutions Australia (formerly Design Manufacture Construct), incorporating BlueScope Buildings,

Highline, BlueScope Water and Ranbuild with 11 sites throughout Australia. (i) Financial Performance Table 8a: Financial Performance 1H FY2012 and 1H FY2011 Variance


Sales revenue 841 867 (26) (3)

Reported EBITDA loss (22) (77) 55 71

Reported EBIT loss (33) (92) 59 64

Underlying EBIT loss (1) (29) (15) (14) (93)


Net operating assets (pre tax) (2) 603 816 (213) (26)




Sales revenue 841 808 33

Reported EBITDA loss (22) (110) 88

Reported EBIT loss (33) (126) 93

Underlying EBIT loss (1) (29) (19) (10)


Net operating assets (pre tax) 603 684 (81)

Return on net assets (pre tax) (3) (10%) (32%) (1) 1H FY2012 EBIT has been adjusted for restructure and redundancy costs ($4M). 1H FY2011 EBIT has been

adjusted for impairment write down of goodwill ($77M). 2H FY2011 EBIT has been adjusted for impairment write down of goodwill ($100M) and restructure and redundancy costs ($6M).

(2) Decrease in net operating assets primarily reflects goodwill impairment during 2H FY2011, lower fixed assets following land sales and lower inventory tonnes on hand.

(3) Return on net assets is defined as reported EBIT (annualised in case of half year comparison) / average monthly net operating assets.

(ii) Variance Analysis (1H FY2012 vs. 1H FY2011) The $26M decrease in sales revenue was mainly due to lower average selling prices and an adverse movement in mix to lower priced products. The $14M reduction in underlying EBIT was largely due to: Reduced spread due to lower average selling prices and higher steel feed costs.

Underlying adjustments included in reported EBIT ($73M favourable) Staff redundancies and other internal restructuring costs booked during 1H FY2012 ($4M). Goodwill impairment write down booked during 1H FY2011 ($77M).


(iii) Variance Analysis (1H FY2012 vs. 2H FY2011) The $10M reduction in underlying EBIT was largely due to: Reduced spread due to higher steel feed costs.

Underlying adjustments included in reported EBIT ($103M favourable) Staff redundancies and other internal restructuring costs booked during 1H FY2012 ($4M). Goodwill impairment write down booked during 2H FY2011 ($100M). Plant rationalisation costs booked during 2H FY2011 ($5M). Staff redundancies and other internal restructuring costs booked during 2H FY2011 ($2M).

(iv) Operations Report

BlueScope Distribution

Sales volumes in H1 FY2012 increased by 6% compared to H1 FY2011 with BlueScope manufactured products up 16%. All other products were marginally down. H1 FY2012 volumes also increased, up 3%, on H2 FY2011.

The volume increase in BlueScope’s manufactured products reflected continued growth in the mining, oil and gas segment, however available domestic volumes continued to be adversely impacted by steel related requirements, particularly in the infrastructure space, moving to offshore fabrication. BlueScope manufactured volumes also benefited from the ongoing increase in investment in green energy, in particular wind towers.

The decline in the manufacturing sector coupled with continued weakness in the construction industry hampered further volume growth. Major drivers behind subdued business confidence and activity levels over the period have included soft underlying demand, the strong Australian dollar, import competition, uncertainty around interest rates, soft housing market, retail sales downturn and uncertainty surrounding the carbon tax and the overall global economy.

Price rises for some products were implemented in Q2 FY2012 however spreads remain at low levels. The high AUD and resulting import price offers have resulted in ongoing margin pressure.

Site rationalisation, as part of the ongoing focus on costs, has seen 6 locations closed; Kingaroy, Capalaba, Kawana, Burnie, Canberra and Westall Cash Sales Outlet (H1 FY2011 compared to H1 FY2012).

BlueScope Lysaght

Sales volumes in 1H FY2012 were down 11% on 1H FY2011 and flat compared to 2H FY2011.

Overall market conditions were weak reflecting low levels of residential, commercial and public construction investment

Consumer confidence in the residential segment continued to be subdued as reflected in low levels of new housing starts.

Commercial construction activity levels continued to decline since mid-CY2010 with historically low private investment and weakening public construction

Market softness is evident across all states, albeit with some modest respite from rebuilding activity in far north Queensland

Further cost initiatives including site rationalisation activities in Launceston and the Sunshine Coast were implemented in 1H FY2012 and will deliver ongoing operating and overhead cost benefits.

BlueScope Solutions Australia (formally known as Design Manufacture Construct)

The Highline Buildings business revenue in relation to Commercial Buildings increased 43% on the back of a strong project order pipeline.

Commercial building enquiries remain strong and it is expected that growth in this sector will continue.

The commercial tank segment remains strong in WA (mining sector) but export tank sales are down 40% on price pressures relating to the Australian dollar.

The rural market for BlueScope’s products remains weak on lower economic sentiment and unusual weather conditions

Ranbuild sales were down 20% as a result of subdued market conditions particularly across the rural and residential markets.


BLUESCOPE STEEL NEW ZEALAND New Zealand and Pacific Steel Products This segment comprises: New Zealand Steel; and Lysaght Pacific Islands (i) Financial Performance Table 9a: Financial Performance 1H FY2012 and 1H FY2011 Variance


Sales revenue 346 330 16 5

Reported EBITDA 55 67 (12) (18)

Reported EBIT 34 49 (15) (31)

Underlying EBIT 34 49 (15) (31)



Return on net assets (pre tax) (2) 18% 25%

Table 9b: Financial Performance 1H FY2012 vs. 2H FY2011; $ millions



Reported EBITDA 55 55 0

Reported EBIT 34 33 1

Underlying EBIT 34 33 1


Net operating assets (pre tax) (1) 243 406 (163)

Return on net assets (pre tax) (2) 18% 17% (1) Decrease in net operating assets primarily reflects higher provisions in relation to defined benefit superannuation

fund. (2) Return on net assets is defined as reported EBIT (annualised in case of half year comparisons) / average monthly

net operating assets. (ii) Variance Analysis (1H FY2012 vs. 1H FY2011)

The $16M increase in sales revenue is primarily due to higher export volumes and higher international selling prices partly offset by an unfavourable movement in the USD relative to the NZD. The $15M decrease in underlying EBIT was largely due to: Higher fixed conversion costs driven by higher utilities costs. Net unfavourable movement in the USD relative to the NZD (1H FY2012 average 0.804 vs. 1H FY2011 average

0.738) impacting export revenue partly offset by a favourable impact in respect to raw materials purchased in USD.

Lower production and higher costs driven by Melter 2 taphole failure and North Island Natural Gas pipeline outage.

Partly offset by: Improved spread driven by higher international hot rolled coil prices partly offset by a full six month impact of the

NZ Emissions Trading Scheme.


(iii) Variance Analysis (1H FY2012 vs. 2H FY2011)

The $1M increase in underlying EBIT was largely due to: Improved spread with higher export and domestic selling prices combined with lower cost raw materials. Additional Taharoa Iron Ore shipment in 1H FY2012 vs. 2H FY2011.

Partly offset by: Higher utility costs. Adverse domestic and export product mix to lower margin products. Lower domestic dispatch volumes Lower production and higher costs driven by Melter 2 taphole failure and North Island Natural Gas pipeline

outage.


Steel production of 301kt (vs. 305kt 1H FY2011 and 310kt in 2H FY2011). Two one-off incidents contributed to the small reduction in production, namely; 1) Melter 2 Breakout through taphole and 2) Natural Gas pipeline outage in the North Island. These one off impacts were partially recovered in November and December by strong plant performance.

Total external steel product despatches were up 7% on 1H FY2011; ie. 278kt vs. 260kt, with domestic sales flat and exports up 19kt.

Hot rolled production of 299kt (vs. 300kt 1H FY2011 and 313kt in 2H FY2011) was impacted by a the North Island gas pipeline outage in October 2011 which limited production capacity for over a week.

Metal coating production of 110kt (vs. 107kt 1H FY2011 and 110kt 2H FY2011).

Paint line production of 25kt (vs. 26kt in 1H FY2011 and 27kt in 2H FY2011) with volumes continuing to be impacted by soft domestic market conditions.

Cost control continues to be a major focus for all operational areas with maintenance and labour spend reduction being the priority, along with business improvement initiatives across the site through an employee driven improvement scheme.

Vanadium volumes were up 22% on 2H FY2011 due to process improvements in vanadium recovery.

Iron sands exports from Taharoa of 467kt were in line with 1H FY2011. Shipments were 33% up on 2H FY2011, due to timing of shipments.

(v) New Zealand Markets

Domestic

External domestic sales were 1% down on 1H FY2011 (1H FY2011 124kt vs. 1H FY2012 122kt). Construction activity remained soft and has not recovered as quickly as expected.

Consents for commercial building were down 8% on 1H FY2011, reflecting reduced demand across most sectors.

Residential consents (annual, year ended October) had fallen by 15% compared to the same period in 2010 and the lowest level in over 30 years.

Domestic demand for cold rolled increased in line with the increased output from the dairy sector.

Ongoing earthquakes in Christchurch have delayed any significant rebuilding activity.

Export

1H FY2012 volumes were up 14% on 1H FY2011 (1H FY2011 136kt vs. 1H FY2012 155kt) primarily due to soft domestic market.

Global demand in 1H FY2012 was flat with prices continuing to decline. The weakness of the US$ has also impacted on margins for export sales.

Iron sand prices were up on 1H FY2011, consistent with the relative movement in iron ore spot pricing. However, a significant iron ore market dip occurred late in 1H FY2012 (late October). Market indices have partly recovered since this low, but remain below the average obtained during 2H FY2011.


BLUESCOPE STEEL ASIA Coated and Building Products Asia This segment comprises: Metal coating and paint line operations in Thailand, Indonesia, Malaysia, Vietnam and China; Butler Pre-Engineered Buildings (“PEB”) and Lysaght businesses across Asia (use product from the coating lines). Joint venture in India with Tata Steel Limited covering the recently completed metal coating line and paint line and

existing Butler PEB and 3 Lysaght rollforming operations. (i) Financial Performance (Refer to Attachment 2(a) for a breakdown of half year financial data by country and

Attachment 2(b) for a breakdown of the annual China data by principal business)

Table 10a: Financial Performance 1H FY2012 and 1H FY2011 Variance



Reported EBITDA 71 134 (63) (47)

Reported EBIT 47 114 (67) (59)

Underlying EBIT (1) 47 46 1 2


Net operating assets (pre tax) 890 867 23 3





Reported EBITDA 71 84 (13)

Reported EBIT 47 62 (15)

Underlying EBIT 47 62 (15)


Net operating assets (pre tax) 890 814 76

Return on net assets (pre tax) (2) 11% 15% (1) 1H FY2011 EBIT has been adjusted for part reversal of prior impairment write downs ($68M) at China Coated. (2) Return on net assets is defined as reported EBIT (annualised in case of half year comparisons) / average monthly

net operating assets. (ii) Variance Analysis (1H FY2012 vs. 1H FY2011) The $99M increase in sales revenue is primarily due to higher volumes in Thailand, Indonesia and Vietnam and prices in Thailand and China, partly offset by unfavourable exchange rate movements versus the AUD in Indonesia, Thailand, China and Malaysia. Underlying EBIT is $1M higher largely due to: Higher domestic selling prices mainly in Thailand, China and Indonesia. Higher despatch volumes in Indonesia and Thailand and improved product mix in Thailand and Malaysia. Partly offset by: Higher steel feed costs predominantly in Thailand and Indonesia. Higher conversion costs driven by the start up of the second metal coating line in Indonesia and higher

overheads in China. Net adverse foreign exchange impacts mainly in Thailand. Adverse impact of floods in Thailand on volumes and costs.

Underlying adjustments included in reported EBIT ($68M favourable) Part reversal of prior impairment write downs ($68M) at Coated China booked in 1H FY2011.


(iii) Variance Analysis (1H FY2012 vs. 2H FY2011) The $15M decrease in underlying EBIT is largely due to: Higher steel feed costs, partly offset by stronger domestic prices, mainly in Thailand, Indonesia, China and

Malaysia. Higher start up costs mainly driven by the start up of the second metal coating line in Indonesia and the coating

and painting line in India.

Partly offset by: Improved despatch volumes mainly in China, Thailand, Vietnam and Indonesia.

(iv) Operations and Market Report China (BSC)

Markets

China overview

China’s 12th 5-year plan (from 2011-2015) focuses on moving Chinese industry up the value chain, increasing domestic consumption versus reliance on exports, and continuing urbanization (particularly in interior cities). The government set the annual GDP growth target at 7% for the plan (vs. 7.5% target in the previous 5-year plan). GDP growth is estimated at 9% for CY2011 and actual GDP growth was around 11% in previous 5-year plan period.

During CY 2011, Chinese monetary policy tightened on government efforts to manage inflation concerns for property prices and overall consumer prices. During November and December, as the government managed / balanced both global and domestic economic issues, monetary (credit) policies were loosened.

Coated

BlueScope Steel Suzhou (BSS) produces and sells metallic-coated and pre-painted steel primarily for the China non-residential building and construction market.

Approximately 50% of BSS sales volume is through its China downstream affiliates (Butler and Lysaght).

Butler

BlueScope Butler principally sells low-rise metal building systems into the industrial, commercial, and community segments of the non-residential building market in China.

Sales mix is approximately 60% to China domestic enterprises and 40% to multi-national corporations investing into the China market.

Lysaght

Lysaght supplies metal components to China’s residential, commercial, non-residential, and government (typically infrastructure) construction markets.

Lysaght has focused on increasing sales across non-residential industrial and commercial end use markets (to approximately 70% of sales) as government stimulus investment into infrastructure has diminished.

Current Operations

Coated

Metal coating production was 89kt in 1H FY2012 (vs. 77kt 1H and 78kt 2H FY2011) whilst paint line production was 30kt (vs. 34kt 1H and 33kt 2H FY2011). The increase in metallic coated demand was driven by improving external sales volumes on top of its downstream affiliate requirements.

For 1H FY2012, metal coating capacity utilization was 80% (vs. 70% in 2H FY2011) and the paint lines at Suzhou operated at approx. 40% (in line with 2H FY2011).

Butler Buildings (PEB)

1H FY2012 sales volumes down 12% on 1H FY2011, and 5% higher than 2H FY2011 on strong backlog from June 2011 and seasonal impacts.

The business continues to have a strong backlog; however order intake in 1H FY2012 was slightly lower than 1H FY2011 and in line with 2H FY2011. This resulted from the tighter credit conditions for end customers causing short-term project delays during 1H FY2012. Delayed projects are beginning to move forward again following monetary policy loosening and we are seeing increased quoting activity moving into 2H FY2012.


Lysaght

1H FY2012 sales volume was in line with 1H FY2011 and 2H FY2011.

The business continues to have a solid backlog; however order intake in 1H FY2012 was lower than 1HFY2011 and in line with 2H FY2011. Tighter credit conditions for end customers caused short-term project delays but the demand trend in 2H FY2012 so far is positive on favourable monetary policy trends.

Capital Growth Project Status

The Company has approved development of a new Butler PEB and Lysaght rollforming plant

Details: Located in Xi’an, Shaanxi province (geographic centre of China) Capital cost approximately A$60M. Construction: expected to be operational by 2H FY2013 (previously end CY2012).

Thailand (BST) Markets

Thailand started FY2012 on a positive note with the early July elections delivering a majority win which gave hope for political stability and better economic prospects. Unfortunately, the floods which began in late October this year turned out to be the worst in more than half a century, fed by heavy monsoon rains and a series of tropical storms, affecting two-thirds of the country’s 77 provinces and claiming more than 600 lives. As a result of the flooding, the Bank of Thailand has nearly halved its projection of economic growth for CY2011 to 2.6% from July’s 4.1% estimate.

During the height of the floods, BST successfully launched the Thailand Flood “stimulus offer” which was successful in generating an increased order back log, thereby mitigating to some extent, the impact of the floods. The Map Ta Put facility remained dry throughout the floods while the Lysaght facility at Rangsit, which was closed in October and November, re-commenced operations in mid December.

By the end of December the floods had completely dissipated. The reconstruction effort by the government is expected to commence in the March quarter of CY2012. While the Thailand buying high season (December to March) is slightly delayed and expected to be weaker than normal, due to customers trying to clear inventory positions built up after the floods, we expect the benefit of floods recovery effort to support demand from March onwards given the lead time it requires to scope the reconstruction projects.

Import competition, while still very strong, has somewhat abated given: (i) the impact of the floods, (ii) depreciation of the Baht against the USD during the period, and (iii) the effect of the new products designed to counter import competition launched by BST in July this year.

Downstream operations saw a doubling in profits against the previous corresponding period when the country was recovering from the political coup in May 2010. The PEB business continues to perform steadily, having despatched volume of 9.9kt in this half year, exceeding those in the preceding two half year periods, while the new building solution launched in 2H FY2011 continues to gain traction.

Two anti-dumping applications are being processed,

Current Operations BST continues to work on improvement and cost reduction initiatives in its manufacturing and procurement

processes to enhance its operational reliability and efficiency. Production improved in 1H FY2012 after resumption of the Cold Roll Mill on 30 June 2011. The mill had suffered a transformer failure which led to its closure between May and June 2011.

Production (kt) 1H FY2012 2H FY2011 1H FY2011 Cold Rolling Mill 105 97 115 Metallic Coating Lines 135 120 115 Paint Line 32 34 27

Vietnam (BSV)

Markets High inflation (approx 18% in CY2011), prolonged high interest rates and tightened credit growth have

adversely impacted foreign and local investments, resulting in further cooling down in building and construction activities as we enter CY2012. Companies in the steel industry have reduced their operations and market offers as they struggle to maintain healthy cash flows given payments of high interest on loans. Overall market demand for steel remains soft in this unfavourable macroeconomic environment and fluctuations in steel prices.


BSV focuses on delivery of long-term strategy of a) expanding geographically in the domestic markets through channel development, b) seeding and expanding to the provincial residential segment with new products, and c) aggressively penetrating the downstream market with new light-weight-steel building solution and new building products. In the short term, BSV is also focused on cost efficiency and flexible pricing to combat the unfavourable macroeconomic environment.

Current Operations Despite overall softer market demand, and a reduction of seeding volume to Indonesia now that the second

Indonesian coating line has been commissioned, BSV’s total sales and production volumes were higher than the prior two half year periods. The improvement came mostly from the residential segment. An improvement in sales mix to higher premium products has also been achieved, and domestic/export mix maintained.

Production (kt) 1H FY2012 2H FY2011 1H FY2011 Metallic Coating Lines 58 47 52 Paint Line 28 29 29

Despite cost inflation, especially in energy prices, the business is focusing on improving business processes

and energy efficiency to neutralise the unit cost increase. Seasonal shortage of electricity supply has recently been somewhat alleviated by the commissioning of several new power plants in the region.

Indonesia (BSI) Markets

The Indonesian economy is strongly supported by government investment in infrastructure, Foreign Direct Investment (FDI) and strong consumer and business confidence, in an environment of low interest rates and easy access to financing. FDI rose 16% in the nine months to September 2011 and the country’s investment board is optimistic that it could reach its FDI target of approximately US$20bn for the year. The Bank of Indonesia estimated GDP growth in CY2011 to hit 6.6% (vs. 6.1% in CY2010).

Demand for steel in the building and construction market remains strong, contributing to BSI’s healthy order book. In May 2011, BSI commissioned its second Metal Coating Line with in-line painting capability to overcome its capacity constraints to address market demand and to gain market share.

The residential market is expected to grow at a robust rate over the medium term. There is significant backlog in the demand for housing and demand growth is expected to be sustained by increasing population and household income (as a result of economic growth and an increase in the middle/upper classes). Major property developers have reported gains in revenue and continue to report ambitious development plans. Strong growth in the non-residential segment (in particular industrial and commercial) is expected to continue, driven by general economic growth and an expected significant increase in foreign direct investment over the next few years.

Competition from imports, in particular those from Korea, Taiwan, China and Vietnam, is still an issue although the strengthening USD against IDR in recent months has had some mitigating effect

BSI’s downstream business continues to grow, by introducing new profiles and extending geographic reach and scope outside Jakarta including the islands of Kalimantan and Sulawesi.

Current Operations The existing Cilegon Metal Coating Line 1 and the Coil Paint Line were operating at full capacity in 1H

FY2012. The second metal coating line, with in-line painting capability (innovative steel painting technology),

commissioned in May 2011, is expected to enable BSI to more than double production capacity. The metal coating line production ramp-up was the best ever achieved by BlueScope Steel. However, commissioning of the paint-line was affected by bedding down the new technology associated with the in-line painting process, impacting in particular painted product production volume. The principal issue was developing a suitable paint formulation to match the infrared ovens and the high speed operation of this line. These issues have been resolved and the full potential of the line is expected to be realised in 2H FY2012. To address the market demand, BSI continues to import finished goods from BSV/BST albeit at much lower levels (less than 10kt vs. 42kt in FY2011).

Production (kt) 1H FY2012 2H FY2011 1H FY2011 Metallic Coating Line 1 55 56 42 Paint Line 23 20 17 Metallic Coating Line 2 (with in-line painting) 33 - -


Malaysia (BSM) Markets

Malaysia’s GDP has been more moderate in 2H CY2011 given the global economic uncertainties. Several Foreign Direct Investment projects were delayed or put on hold, and there were no significant new projects from the government segment. For CY2012, GDP growth in Malaysia is expected to be largely domestically driven due to the heightened uncertainties in the global economy.

There has been an increase of low cost material from Vietnam as a result of the depreciation of the Dong as well as the benefit received from the ASEAN free trade agreement. However, the impact to BSM is currently limited to the lower value hardware segment. BSM has launched a new Zn-Al substrate painted product, CoolZal Plus, to improve growth in the pre-painted zinc-based product segment.

With the development of the Malaysian Economic Corridors, BSM has taken the opportunity to expand its geographical footprint through the development of new channels and customers. Its downstream solution based business (PEB and Ranbuild) continues to grow riding on the increase in Foreign Direct Investment.

Current Operations

Production volume in 1H FY2012 was largely in line with the preceding 2 half year periods. Production (kt) 1H FY2012 2H FY2011 1H FY2011 Metallic Coating Lines 69 72 66 Paint Line 37 37 35

India (in joint venture with Tata Steel (50:50) for all operations) Current Operations / Markets

Tata BlueScope Steel (TBSL) operates PEB and Building Products & Distribution (BPD) businesses. PEB business operates with two brands being Butler and Ecobuild and has been operating at full capacity. The BPD business has several branded products and significant volumes are sold through Lysaght and Durashine brands.

During 1H FY2012, BPD business grew 64% year-on-year (17kt to 28kt). The Durashine brand, which is mainly sold through distributors, has been well accepted in the market.

PEB’s are gaining acceptance in the manufacturing and warehousing segments, with customers preferring to contract with a single supplier who takes responsibility for full design, supply and erection. During 1H FY2012, PEB segment in India grew year-on-year from approx 15kt to 17kt. The Zn-Al coated steel market has shown a healthy growth of 44% in 1H FY2012 compared to 1H FY2011. The trend of migration from low quality galvanized (zinc base) product to higher performance Galvalume (Zinc/Aluminium base) continues. The TBSL market share of Zn-Al coated steel (including non-BSL products) amongst steel roofing in India has grown to 23% in 1H FY2012 from 18% in 1H FY2011. Painted product demand continues to grow, vis-à-vis bare product, as customers trade up to those offering better aesthetics.

India’s economic growth rate has recently slowed with GDP growth for Q2 slipping to 6.9% from 7.7% in Q1 of FY2012. The slippage has been primarily attributed to a high interest rate regime set up to curb inflation. Inflation is 9.7% with an expectation it will moderate to 7.0-7.5% by March 2012.

Capital Growth Project Status The coating and painting line in Jamshedpur commenced operations, starting with the Colour Coating Line

(CCL) on 19 November 2011. The Metal Coating Line (MCL) commenced coating trials on 15 December 2011. Project capital cost was A$270m (100% project).


BLUESCOPE STEEL NORTH AMERICA Hot Rolled Products North America BlueScope Steel’s 50% interest in North Star BlueScope Steel, USA (hot rolled coil production). BlueScope Steel’s 47.5% interest in Castrip LLC, USA (thin strip casting technology), in joint venture with Nucor and

IHI Ltd. (i) Financial Performance Table 11a: Financial Performance 1H FY2012 and 1H FY2011 Variance


Sales revenue (1) 0 0 0 0

Reported EBITDA (2) 20 8 12 150

Reported EBIT (2) 20 8 12 150

Underlying EBIT 20 8 12 150

Capital and investment expenditure 1 1 0 0


Return on net assets (pre tax) (4) 44% 11% Table 11b: Financial Performance 1H FY2012 vs. 2H FY2011


Sales revenue (1) 0 0 0

Reported EBITDA (2) 20 64 (44)

Reported EBIT (2) 20 64 (44)

Underlying EBIT 20 64 (44)

Capital and investment expenditure 1 1 0

Net operating assets (pre tax) (3) 96 82 14


(1) Excludes the company’s 50% share of North Star BlueScope Steel’s sales revenue being A$340M in 1H FY2012 (A$316M in 1H FY2011).

(2) Includes 50% share of net profit before tax from North Star BlueScope Steel of A$21M in 1H FY2012 (A$10M 1H FY2011).

(3) 1H FY2012 vs. 1H FY2011 decrease in net operating assets primarily reflects lower dividend payments. 1H FY2012 vs. 2H FY2011 increase in net operating assets primarily effects a weaker AUD:USD exchange rate resulting in a lower AUD equivalent net operating assets balance partly offset by dividend payments.

(4) Return on net assets is defined as reported net profit before tax (annualised in case of half year comparison) / average monthly net operating assets (includes equity investment).

(ii) Variance Analysis (1H FY2012 vs. 1H FY2011) The $12M increase in underlying EBIT was largely due to:

Increased spread driven by higher hot rolled coil prices partly offset by higher scrap costs. Flat volumes reflecting the ongoing high capacity utilisation rates. Conversion cost improvement and various cost reduction initiatives more than offsetting escalating energy

costs.

(iii) Variance Analysis (1H FY2012 vs. 2H FY2011) The $44M decrease in underlying EBIT was largely due to:

Reduced spread as a result of lower hot rolled coil prices, consistent with external market prices which saw the average weekly prices for Midwest USA hot rolled band in 1H FY2012 being down 17% on the average for 2H FY2011 combined with marginally higher raw material costs.

Volumes slightly down on the comparable period.



North Star BlueScope Steel (BlueScope Steel has a 50% interest)

Despatches for 1H FY2012 were materially in line with 1H FY2011, and down 2% on 2H FY2011. High capacity utilisation rates, relative to the market, (average USA steel mill output capacity utilization

rate of 75% during 1H FY2012 (source: American Iron & Steel Institute), have been maintained at North Star due to its ability to retain existing and procure new customers as well as its performance for on-time delivery and quality.

During the period, North Star was again voted the #1 North American flat rolled steel supplier in the Jacobson survey for customer satisfaction. North Star has now held this title for nine consecutive years.

Dividends paid to BSL in 1H FY2012 totalled US$12M (US$30M in 1H FY2011 and US$105M in 2H FY2011).

Castrip LLC

Castrip LLC is a joint venture that owns the Castrip technology, a revolutionary process for the direct casting of steel strip. It is owned 47.5% by BlueScope; 47.5% by Nucor and 5% by IHI. BlueScope has exclusive rights to use and license the technology in Australia, New Zealand, Thailand, Indonesia, Malaysia and the Philippines.

(v) Markets

North Star BlueScope Steel

North Star sells approximately 80% of its production in the Mid-West, U.S.A, with its end customer segment mix being broadly 35% automotive, 25% construction, 10% agricultural and 30% manufacturing/industrial applications.

Steel prices have continued to be highly volatile through the period. Based on external market data (source: CRU Midwest), the average weekly prices for Midwest USA Hot Rolled Band during 1H FY2012 were US$673/ton, compared to US$578/ton during 1H FY2011 and US$808/ton during 2H FY2011.

North Star continues to make good progress with planning for the potential upgrade in production capacity, from 2.1 million tons per annum to 2.5 million tons per annum, which would involve installation of a second slab caster and a new shuttle furnace.

Coated and Building Products North America This segment comprises: BlueScope Buildings North America’s Pre-Engineered Buildings business; Steelscape’s pickling, cold rolling, metal coating and paint lines; Metl-Span’s metal insulated panel business; and ASC Profiles’ West Coast steel components business. (i) Financial Performance and Operating Report Table 12a: Financial Performance 1H FY2012 and 1H FY2011 Variance



Reported EBITDA 9 4 5 125

Reported EBIT/(EBIT loss) (10) (16) 6 38

Underlying EBIT/(EBIT loss) (1) 6 (16) 22 138


Net operating assets (pre tax) 685 692 (7) (1)






Reported EBITDA/(EBITDA loss) 9 0 9

Reported EBIT/(EBIT loss) (10) (20) 10

Underlying EBIT/(EBIT loss) (1) 6 (4) 10

Capital and investment expenditure ` 6 12 (6)

Net operating assets (pre tax) 685 695 (10)


(1) 1H FY2012 EBIT has been adjusted for restructure and redundancy costs ($16M). 2H FY2011 EBIT has been adjusted for an asset impairment write down ($16M).

(2) Return on net assets is defined as reported EBIT (annualised in case of half year comparison) / average monthly net operating assets.

(ii) Variance Analysis (1H FY2012 vs. 1H FY2011)

The $62M increase in sales revenue is primarily due to higher volumes and higher average selling prices from all businesses. The $22M increase in underlying EBIT was largely due to: Higher margins generated by BlueScope Buildings as a result of a targeted profit improvement program and the

manufacturing integration process. Higher volumes and average selling prices from BlueScope Buildings, Metl-Span and ASC Profiles despite the

relatively weak U.S. non-residential construction market.

Underlying adjustments included in reported EBIT ($16M unfavourable) Restructure and redundancy costs at BlueScope Buildings ($13M) and ASC Profiles ($3M) in 1H FY2012.

(iii) Variance Analysis (1H FY2012 vs. 2H FY2011)

The $10M increase in underlying EBIT was largely due to: Lower costs and higher margins generated by BlueScope Buildings as a result of a targeted profit improvement

program and the manufacturing integration process. Higher volumes from all businesses, despite the relatively weak U.S. non-residential construction market,

particularly from BlueScope Buildings, Metl-Span and ASC Profiles. Average selling prices were also higher.

Partly offset by: Reduced spreads at Steelscape as a result of higher cost raw material inventory not being fully offset by selling

price increases.

Underlying adjustments included in reported EBIT (Nil variance) Restructure and redundancy costs at BlueScope Buildings ($13M) and ASC Profiles ($3M) in 1H FY2012. Asset impairment write down of ($16M) during 2H FY2011.


BlueScope Buildings (Pre-Engineered Buildings)

BlueScope Buildings returned to profitability during H1 FY2012 largely due to the benefits derived from a targeted profit improvement project and the manufacturing integration process.

The profit improvement project was focused on improving manufacturing efficiency, plant capacity optimization and various overhead initiatives. Execution of this project was in part facilitated by the manufacturing integration efforts, which included rolling out the Vision engineering system into the last of nine manufacturing facilities in H2 FY2011. Vision is BlueScope Building’s integrated engineering design platform.

The manufacturing efficiency initiatives have enabled management to more accurately schedule work-loads proportionately with demand, thereby improving flexibility to manage the cost base in line with production activity.


Manufacturing efficiency improvements have resulted in plant capacities increasing across the BlueScope Buildings North America network. This led to the decision to close the Arlington, WA plant and partially idle the San Marcos, TX plant, with the remaining facilities being able to more than absorb the volumes that were produced by the affected plants.

Overhead costs have been permanently reduced through a range of initiatives, including the consolidation of certain regional support activities.

External despatches for 1H FY2012 were up 7% on 1H FY2011, and up 17% on 2H FY2011, in an otherwise weak U.S. non-residential construction market. This increase was influenced by a significant refocus on new product development and enhanced product differentiation.

Steelscape (metal coating & pre-painted steel)

Steelscape continued to operate efficiently and at high utilization compared to market averages. This was achieved despite the transition during the period from a single source feed supply arrangement with BlueScope Steel’s Port Kembla Steelworks to feed being supplied from a portfolio of qualified external suppliers.

Earnings in 1H FY2012 were higher than 1H FY2011 as a result of higher sales, lower conversion costs and improved margins. However, it was lower than 2H FY2011 which benefited from higher margins during a period of steel price escalation.

Total Steelscape despatches for 1H FY2012 were up 2% compared to 1H FY2011 (+1% compared to 2H FY 2011). The increase in despatches was primarily due to intercompany sales to sister companies.

Metl-Span (insulated metal panels)

Profit growth for the period was assisted by a mix of margin improvement, cost reductions and volume growth

Margins further strengthened due to an improvement in product quality control (lower cost of defects), lower conversion costs and general cost containment.

Metl-Span external despatches for 1H FY2012 were up 9% on 1H FY2011 (+18% on 2H FY2011). Improved sales performance in 1H FY2012 was driven by continued demand for cold storage product, as

well as a mild start to the winter weather season which assisted with shipments.

ASC Profiles (components)

External despatches for 1H FY2012 were up 14% on both 1H FY2011 and 2H FY2011. An improvement in production efficiency, assisted by volume increase and overall general cost

containment throughout the business, countered the continued competitive pressures resulting from the depressed West Coast U.S. non-residential construction market, to which ASC Profiles is largely exposed.

During the period, the BlueScope U.S.A. Water business, which has operations in Madera, California and a distribution facility in Austin, Texas was realigned to become part of ASC Profiles. Restructuring efforts will be completed during FY2012 to integrate the BlueScope Water product lines into ASC Profiles as well as other BlueScope North America business to drive improved sales volumes and reduce operating costs.

(v) Markets U.S. overview (Noting: Coated & Building Products North America is almost solely exposed to the U.S. non-

residential construction market.)

The U.S. non-residential construction market saw continued, but moderating, declines in 1H FY2012 due to a sluggish U.S. economy. F.W. Dodge sq. ft contract awards were down 2.4% for the 12 months to December 2011 when

compared to the previous 12 month period.

The AIA Architectural Billings Index (ABI), a leading economic indicator of construction activity, finished December 2011 at 52.0. The index is at its highest level since December 2010. The ABI reflects the approximate nine to twelve month lag between architectural billings and construction spending.

The Industrial Capacity Utilization Rate, a leading indicator of industry despatches was at 78.1 in December 2011. The rate is at the highest level since late 2008, but remains below the index average from 1972 to 2010 of 80.4.


BlueScope Buildings

BlueScope Buildings primarily sells low-rise metal building systems into the industrial, commercial and community segments of the non-residential building market in North America.

During the period, the broader metal buildings industry, experienced a decrease in despatches consistent with the broad decline in the U.S. non-residential construction market. Domestic industry despatches (tonnage) in the six months to December 2011, as reported by the MBMA, declined 0.4% over the same period last year.

Market indicators have shown there is increased interest in traditional design-build projects compared to pure bid projects. Design-build work puts control of project delivery under a single project owner as opposed to bid projects, which utilize open bidding for different project deliverables. There are also signs of increased interest in manufacturing and industrial related projects.

Steelscape

Steelscape produces metallic-coated and pre-painted steel primarily for the U.S. non-residential building and construction market.

Despite broader non-residential construction market weakness, Steelscape’s volumes remained high primarily due to active customer recruitment efforts and innovation with new product lines.

ASC Profiles

ASC Profiles supplies metal components to the West Coast U.S. residential, agricultural, commercial, non-residential and governmental construction markets.

The weak U.S.A. non-residential construction market, particularly on the West Coast, continues to be challenging. However, steady demand was seen in the segment supplying metal structural components to the solar industry.

Metl-Span

Metl-Span sells composite insulated metal panels into the cold storage, commercial and industrial segments of non-residential construction across the North America.

The green building segment is expected to continue to grow in North America aided by changing building energy codes, which should result in increased demand for Metl-Span products.

OTHER INFORMATION

Capital Management

Dividend

The Directors did not declare an interim dividend for 1H FY2012.

Debt facilities update

On 19 August 2011, BlueScope entered into a receivables securitisation program, up to A$150M, over the Distribution business receivables.

Committed available undrawn capacity at 31 December 2011 under bank debt facilities (A$1,315M), plus cash (A$186M) was A$1,501M (A$1,137M at 30 June 2011).

Current average cost of drawn debt is approximately 7.16% (1H FY2011 7.55%). In addition finance costs include commitment fees on undrawn facilities, amortisation of facility establishment fees and the discount cost of long-term provisions.

Net debt

During the period, the company’s net debt decreased by $272M to $796M resulting in a gearing ratio of 15.7% (net debt/(net debt plus equity)). During the half year, debt was drawn principally to fund capital and investment expenditure ($105M), net interest payments ($65M), tax payments ($56M), and operating cash outflows ($265M) and other items ($3M). Cash received from release of working capital ($235M) and the equity raising ($577M) contributed to a reduction in debt. Net debt also increased with the impact of foreign exchange translation on foreign currency debt ($35M) and finance leases ($12M).


Safety, Environment & Health Safety

The company remains committed to its goal of Zero Harm for all of its people anywhere in the world.

The annual Zero Harm Awards recognise and reward achievements in our Zero Harm journey. The broad range of initiatives highlighted in this year’s awards demonstrates the enormous effort and commitment BlueScope people are making right across our business to make our workplaces safer. Some of the noteworthy safety achievements in the period include:

Asia – Lysaght Thailand, Map Ta Phut – 1 year injury free. Lysaght Singapore achieved 13 years LTI free. Lysaght Vietnam achieved the milestone of 17 years LTI free. Malaysia, Lysaght Shah Alam – 10 years LTI free.

China – Butler BLiSS achieved 4 years LTI free. Lysaght Langfang & Lysaght Chengdu achieved 9 years LTI free. Suzhou – 4 continuous months injury free and 6 years/6 million hours LTI free.

BANZ –New Zealand Steel, Slabmaking - 1 year LTI & MTI free, and Hot Strip Mill – 16 years LTI free. Mills & Coating, Platemill, Port Kembla – 1 million hours LTI free. Supply Chain, Processing Acacia Ridge achieved the milestone of 5 years LTI free. Steelmaking, Energy Services Operations, Port Kembla – 6 years LTI free. Distribution - 26 of 65 sites greater than 10 years LTI free

North America – Buildings, Evansville – 18 months LTI free and St Joseph – 1 million hours LTI free (both a new record). ASC Anchorage – 2 years MTI free. Steelscape Kalama – 7 years LTI free.

GBCM – Bellevue site passed one year MTI free.

Tata BlueScope Steel (JV), Hinjewadi plant – 1 year LTI free.

Noteworthy external recognition includes:

Asia - BlueScope Steel Indonesia was awarded the “Zero Accident Award from the Minister of Manpower & Transmigration Republic Indonesia”.

Asia – BlueScope Thailand was awarded the Corporate Social Responsibility Award from the Rayong Governor.

BANZ – Lysaght won the Improvement Initiative award in the Australian Steel Institute National Health & Safety Excellence Awards.

These are a selection of examples of the sustained commitment that Bluescope steel has to the Health and Safety of its people, and the hard work they themselves have put into looking after themselves and their colleagues.

Steel Transformation Plan During the half year the Australian parliament passed the Steel Transformation Plan Act 2011. The Steel Transformation Plan (STP) is a $300 million program operating over six payments a year from 2011-12 that aims to encourage investment, innovation and competitiveness in the Australian steel manufacturing industry in order to assist the industry to transform into an efficient and economically sustainable industry in a low carbon economy.

Companies manufacturing iron and steel in Australia via the integrated or cold ferrous feed methods are eligible to apply for funding under the STP. The STP contains two elements: the first is a $300 million entitlement (self-assessment) scheme (the Plan) that will operate over the five payment years from FY2013; while the second provides for competitiveness assistance advance payments (advances) up to the value of $164 million ($100M in respect of BlueScope and $64M for OneSteel) in FY2012. Entitlements under the Plan will be reduced by the value of any advance payments made.

On 21 December 2011, the government announced that it would provide BlueScope Steel with a competitiveness assistance advance of $100 million. Under the agreement with the government, BlueScope will use the advance to undertake activities that enhance the competitiveness and economic sustainability of the company’s Australian operations. These activities will include operations restructure, research & development, environmental projects and programs to improve the efficiency of plant and equipment. Payment of the $100 million advance by the government to the company took place in January 2012. Given payment of the advance, the company will be eligible for a further $80 million in total over the Plan years.


Environmental Management

The company remains committed to continuously improving the environmental footprint of its operations.

The BlueScope Steel Environment Management System comprises the following major elements:

Our Bond

HSEC Policy

Environment Principles

Environment Standards

BSL wide Procedures and Guidelines

Operational Procedures BlueScope continues to work on improving its systems and performance through its network of

environment reviews and audits, implementation of the compliance system, the business planning process and development of an environment e-learning package.

Even in difficult times, BlueScope Steel’s commitment to caring for the environment remains strong, and the performance of a number of BlueScope Steel sites has been recognised by external bodies:

ISO 14001 - Many BlueScope Steel sites continue certification.

World Steel Association – Continued membership of the Climate Action program as participants in the worldsteel CO2 data collection program.

Krakatau Industrial Estate Cilegon (KIEC) - BSI Cilegon won the inaugural award for Plant with Cleanest Environment.

Lysaght Kuching - Won two Prime Minister's Hibiscus Malaysia Awards 2010/2011. State Award (the best awardees from participating states) The Notable Achievement Award in Environmental Performance

American Metal Market Awards - North Star BlueScope Steel nominated as a finalist for the Steel Excellence Environmental Stewardship category.

New Zealand Institution of Professional Engineers Environmental Awards - New Zealand Steel received a Merit Award for the new Taharoa fish pass.

Energy Efficiency and Greenhouse Gas Regulation

The production of greenhouse gases is inherent in the integrated iron and steelmaking processes and there is currently no technology capable of substantially reducing or mitigating emissions of these greenhouse gases.

As a result of the restructure of the company’s Australian operations announced on 22nd August 2011, Australian Greenhouse Gas emissions are expected to be reduced, in absolute terms, by the order of 5MT CO2-equivalent per annum once the changes have been fully implemented. While absolute levels of greenhouse gas emissions will be reduced, overall the resulting reduction in plant utilisation rates is expected to adversely influence near term environmental emission intensities (in terms of emissions per tonne of product).

BlueScope remains focussed on reducing emissions intensity and it is expected over time that continual improvement of emissions can be achieved off the new production baseline. The company is also playing an active role in the global steel industry’s efforts to reduce greenhouse gas emissions.

BlueScope Steel’s steel products will play an integral role in reducing society’s greenhouse gas emissions, including as components in renewable energy infrastructure (e.g. wind towers; solar power plants), in more sustainable transport infrastructure (e.g. trains, buses; lighter, more efficient steel products for cars), and in greener, more energy efficient buildings. Steel is 100% recyclable and its life is potentially infinite.

A range of BlueScope Steel’s operations, particularly iron and steelmaking in Australasia and the U.S., are emissions intensive and trade exposed, and consequently the company continues to participate in the ongoing national and international debate about the regulation of greenhouse gas emissions, including carbon taxes and emissions trading schemes.


Australian Carbon Pricing Mechanism

The Australian Government has enacted a national greenhouse gas emissions trading scheme through a proposed Carbon Pricing Mechanism ("CPM"). The CPM will come into operation on 1 July 2012.

The CPM will require the Company to annually obtain and surrender emission units to cover the Company’s direct greenhouse gas emissions from facilities within Australia (Scope 1 emissions). The CPM will also increase the costs of electricity (Scope 2 emissions) and is likely to increase the cost of inputs of other goods and services to the Company’s operations (Scope 3 emissions). The CPM will begin with a three-year escalating price phase, before converting to a flexible price, cap-and-trade emissions trading scheme. During the fixed price phase prices will be set by the Australian Government. For the first three years of the flexible price phase the price of emission units will be determined by the market but will be subject to regulated floor and ceiling prices. From 1 July 2018, the price cap and floor will be removed and the emission unit price will be determined wholly by the market.

The Australian Government has enacted a program to allocate some permits to emissions-intensive trade exposed activities, including integrated iron and steelmaking. This will involve the allocation of permits at the maximum rate (94.5% in the first year of the CPM) to iron and steelmaking activities up to and including hot rolled activities. The permit allocation will decrease by 1.3% per annum, with the Australian Productivity Commission to review arrangements for emissions-intensive trade exposed industries in 2014/2015 with a minimum three years' notice of any changes. This review is expected to take into account a range of factors, including whether 70% of international sectoral competitors face comparable carbon constraints.

The Company will incur significant additional costs as a result of the introduction of the CPM. However, the STP is expected to largely offset the direct cost of the CPM on the Company for the first four years of the CPM. The potential impact of the CPM beyond the first four years is difficult to assess and will depend on a range of factors, including the outcome of the proposed Productivity Commission review, and the government of the day’s response to this review. Please refer to the slides in on pages 59 and 60 in the Supporting Information section of the presentation pack for additional information.

New Zealand Emissions Trading Scheme

Legislation was passed in October 2008 implementing an Emissions Trading Scheme (“ETS”) for greenhouse gas emissions in New Zealand and was subsequently modified by the National led Government that was elected in November 2008. New Zealand Steel is subject to the present ETS with approximately two million tonnes of carbon emissions per annum. The activity of Iron and steel manufacturing from iron sand as undertaken by New Zealand Steel has been assessed to be highly emissions intensive trade exposed and New Zealand Steel therefore qualifies for the free allocation of Emission Units at the maximum rate (90%). Under the modified scheme, allocation is based on the production of prescribed products (Tonnes of molten iron, Tonnes of cast carbon steel products, Tonnes of vanadium bearing materials and Tonnes of flat product of hot-rolled carbon steel).

The ETS is currently in a ‘transition period’. During this period participants must surrender one emission unit for two tonnes of carbon dioxide equivalent emissions, with free allocation of units to energy-intensive and trade-exposed activities (EITE) also halved, and an unlimited number of units priced at NZ$25 are available from the Government. A review of the scheme was undertaken in 2011 and among its recommendations were: phasing out the one Emission Unit for two tonnes surrender obligation from 2013-2015; progressively increasing the $25 fixed price cap to $50 from 2013-2017, and that assistance provided to entities undertaking EITE activities would begin to decay by 1.3 percentage points per annum from 2013. A General election was held on New Zealand on Saturday 26 November 2011. The incumbent government was returned and prior to the election had indicated it would retain the $25 cap until at least 2015. It will need to make decisions as to which of the review’s recommendations will be enacted. Phasing out of the 50% surrender obligation and the introduction of a decay rate could materially increase the ETS costs faced by New Zealand Steel.

Water efficiency The company continues to focus on reducing consumption of fresh water including:

Increasing the use of recycled water sourced from municipal sewage treatment facilities at BlueScope Steel’s Port Kembla Steelworks and Western Port facility in Australia.

Improving process management has enabled incremental improvements in water consumption. The high awareness of BSL employees to the matter of water conservation has led to a number of successful operational improvements. Port Kembla Steelworks has saved more than one million litres of water a day by actively promoting water efficiency in new capital projects and improving existing manufacturing processes.


In addition to increasing the use of recycled water from municipalities, further investigations are underway to determine if there are other alternative water supplies that could be used to displace fresh water consumption. The harvesting of stormwater and the beneficial reuse of waste water from other industries are two significant potential ideas.

Non-compliances, Fines and Prosecutions:

BlueScope Steel notified relevant authorities of 11 statutory non-compliances with environmental regulations during the six months to 31 December 2011. During the period there were no serious environmental incidents. An incident which occurred in May 2011 resulted in a fine of $1500, issued by the regulator in August 2011. The incident related to operations at No 6 Blast Furnace at the Port Kembla Steelworks where process water discharged into a drain and then to Port Kembla Harbour. The Environment Protection Licence discharge limit for ammonia concentration was exceeded.

Senior Management Changes Mark Vassella – Chief Executive, BlueScope ANZ

Effective 1 July 2011, Mark Vassella was appointed as Chief Executive for BlueScope ANZ and continues to be a member of the Executive Leadership Team.

Mr Vassella leads a business comprising all operations in Australia and New Zealand.

Previously, Mr Vassella headed BlueScope’s North American businesses, and prior to that, he was Chief Executive of Australian Distribution and Solutions following BlueScope’s acquisition of Smorgon Steel Distribution in 2007.

Keith Mitchelhill – President, BlueScope Steel North America

Effective 1 July 2011, Keith Mitchelhill was appointed as President, BlueScope Steel North America, based in Kansas City, Missouri and continues to be a member of the Executive Leadership Team.

Mr Mitchelhill is responsible for the Company’s businesses in the North American markets including BlueScope Buildings North America, Steelscape, ASC Profiles, Metl-Span and the North Star BlueScope Steel joint venture.

Prior to this role, Mr Mitchelhill was Chief Executive, BlueScope Australian Distribution and Solutions, and before joining the Company, he was an Executive General Manager at Boral. He joined BlueScope Steel in 2008.

Noel Cornish, previously Chief Executive Australian and New Zealand Steel Manufacturing Businesses, retired effective 31 July 2011 and acts as a consultant to the Company.

Paul O’Keefe, previously Chief Executive Australian Coated and Industrial Markets, left the Company effective 27 January 2012 as this position became redundant following a restructure of the business.

For further information: Media: Michael Reay, Manager – Corporate Affairs

Tel: +61 3 9666 4004 +61 (0) 437 862 472 Gerry Tidd, Executive Vice President - Corporate Affairs Tel: +61 3 9666 4075 +61 (0) 418 179 081

Investor Relations: John Knowles, Vice President Investor Relations

Tel: +61 3 9666 4150 +61 (0) 419 893 491

Don Watters, Manager – Investor Relations Tel: +613 9666 4206 +61 (0) 409 806 691


ATTACHMENT 1 PRODUCTION AND DESPATCH REPORT Note: shows external despatch volumes. Notes regarding internal despatches (between BlueScope Steel segments) are found below the table

000 Tonnes 1H FY2012 1H FY2011 Variance 2H FY2011 AUSTRALIA Raw Steel Production (1)

1,864 2,643 (29%) 2,530

External Despatches Coated & Industrial Products Australia - Domestic - Slab 0 0 - 0 - HRC(2) 260 289 (10%) 281 - Plate 106 83 28% 108 - Other 419 426 (2%) 428 - Total 785 798 (2%) 817 - Export - Slab 141 351 (60%) 503 - HRC (3) 349 479 (27%) 255 - Plate (11) 32 54 (41%) 36 - Other 219 191 15% 267 - Total 741 1,074 (31%) 1,061 Sub-total (external)(4) (5) 1,526 1,872 (18%) 1,878 Australia Distribution & Solutions - Domestic (6) 389 370 5% 380 - Export (6) 6 8 (25%) 7 Sub-total (external) 395 378 5% 387 Total Australian Despatches - Domestic 1,174 1,168 1% 1,197 - Export 747 1,082 (31%) 1,068 Total (external) 1,921 2,250 (15%) 2,265 NEW ZEALAND / PACIFIC (7) Raw Steel Production 301 305 (1%) 310 External Despatches - Domestic 122 124 (1%) 129 - Export (11) 156 136 15% 163 Total (external) 278 260 7% 292 ASIA (Coated & Building Products) Raw Steel Production (8) - - - - External Despatches - Domestic 598 516 16% 544 - Export (9) 34 33 3% 39 Total (external) 632 549 15% 583 NORTH AMERICA Raw Steel Production (10) 494 499 (1%) 498 External Despatches North Star BlueScope Steel (10) - Domestic 479 484 (1%) 491 - Export 0 0 - 0 Coated & Building Products North America

- Domestic 301 282 7% 275 - Export 2 8 (70%) 6 Total (external) 783 774 1% 772 GROUP Raw Steel Production 2,659 3,447 (23%) 3,338 External Despatches - Domestic 2,675 2,574 4% 2,637 - Export 939 1,259 (25%) 1,276 Total 3,614 3,833 (6%) 3,913


Notes: (1) Raw steel production at Port Kembla Steelworks (PKSW). (2) 53kt of the 260kt of domestic despatches for 1H FY2012 were from Western Port (1H FY2011 76kt and 2H FY2011

64kt). (3) 0kt of the 349kt of export despatches for 1H FY2012 were from Western Port (1H FY2011 0kt and 2H FY2011 5kt). (4) Total 1H FY2012 internal and external despatches from PKSW (slab, HRC and plate) were 1,937kt (1H FY2011

2,494kt and 2H FY2011 2,421kt). (5) Total 1H FY2012 internal and external despatches from Coated & Industrial Products Australia (C&IPA) were

2,110kt (1H FY2011 2,375kt and 2H FY2011 2,453kt), comprised of: external 1,526kt (1H FY2011 1,872kt and 2H FY2011 1,878kt); and internal 584kt (1H FY2011 503kt and 2H FY2011 575kt). C&IPA internal despatches comprised: 197kt of despatches to Steelscape Inc (1H FY2011 182kt and 2H FY2011 202kt); 129kt to BlueScope Thailand (1H FY2011 91kt and 2H FY2011 112kt); and 258kt of despatches to other BlueScope businesses including Distribution, Lysaght and BlueScope Malaysia

and Vietnam (1H FY2011 230kt and 2H FY2011 261kt). (6) 1H FY2012 includes 160kt of domestic despatches and 4kt of export despatches via BlueScope Distribution (1H

FY2011 160kt and 5kt and 2H FY2011 160kt and 4kt respectively), which were not sourced internally, i.e. long products.

(7) Includes New Zealand Steel & Pacific Island operations. (8) BlueScope Steel does not make steel in Asia. The Asian businesses source steel from a range of local suppliers

as well as from BlueScope Steel’s Port Kembla or New Zealand operations. (9) Reflects despatches from the Asian country of production to external customers in other countries within Asia, the

Pacific Islands, South Africa and Europe. (10) Reflects BlueScope Steel’s 50% share from North Star BlueScope Steel. (11) 1H FY2011 and 2H FY2011 have been revised from previously reported information to correctly reflect treatment of

intercompany despatches and despatch timings.


ATTACHMENT 2(a) COATED AND BUILDING PRODUCTS ASIA – COUNTRY DESPATCH AND FINANCIAL DETAILS 1H FY2012 and 1H FY2011; 2H FY2011


FY2012 1H

FY2011

Change 2H

FY2011

External Despatches (tonnes)

- Thailand 157 117 40 141 - Indonesia 94 67 27 89 - Malaysia 82 76 6 84 - Vietnam 48 38 10 39 - China 204 216 (12) 183 - Other 48 35 13 47 - Total 633 549 84 583 Sales Revenue ($M) - Thailand 215 154 61 186 - Indonesia 137 107 30 129 - Malaysia 124 122 2 123 - Vietnam 80 72 8 67 - China 310 320 (10) 271 - Other (27) (35) 8 (29) - Total 839 740 99 747 Reported EBIT ($M) - Thailand 11 5 6 15 - Indonesia 1 10 (9) 12 - Malaysia 13 12 1 18 - Vietnam 4 4 0 5 - China 24 88 (64) 19 - Other (6) (5) (1) (7) - Total 47 114 (67) 62 Underlying EBIT ($M) - Thailand 11 5 6 15 - Indonesia 1 10 (9) 12 - Malaysia 13 12 1 18 - Vietnam 4 4 0 5 - China 24 21 3 18 - Other (6) (6) 0 (6) - Total 47 46 1 62 Net operating Assets (pre tax) ($M)

- Thailand 275 249 26 222 - Indonesia 212 184 29 204 - Malaysia 97 103 (5) 97 - Vietnam 75 80 (5) 70 - China 168 176 (9) 149 - Other 63 75 (13) 72 - Total 890 867 23 814


ATTACHMENT 2(b) COATED AND BUILDING PRODUCTS ASIA – COUNTRY DESPATCH AND FINANCIAL DETAILS – CHINA 1H FY2012 and 1H FY2011; 2H FY2011


FY2012 1H

FY2011

Change 2H

FY2011

External despatches (tonnes)

- China Coated 55 47 8 43 - China Buildings (1) 149 169 (20) 140 - Other / Eliminations 0 0 0 0 - Total 204 216 (12) 183 Sales revenue ($M) - China Coated 100 93 7 92 - China Buildings (1) 253 272 (19) 228 - Other / Eliminations (43) (45) 2 (49) - Total 310 320 (10) 271 EBIT ($M) – Reported - China Coated 10 78 (68) 8 - China Buildings (1) 18 14 4 12 - Other / Eliminations (4) (4) 0 (1) - Total 24 88 (64) 19 EBIT ($M) – Underlying Operational

- China Coated 10 10 0 8 - China Buildings (1) 18 14 4 12 - Other / Eliminations (4) (3) (1) (2) - Total 24 21 3 18 Notes:

(1) Includes BlueScope Lysaght businesses.


ATTACHMENT 2(c) DISCONTINUED BUSINESSES 1H FY2012 and 1H FY2011; 2H FY2011


FY2012 1H

FY2011

Change 2H

FY2011

External Despatches (tonnes)

- Packaging Products 0 0 0 0 - Lysaght Taiwan 0 0 0 0 - Total 0 0 0 0 Sales revenue ($M) - Packaging Products 0 0 0 0 - Lysaght Taiwan 0 0 0 0 - Total 0 0 0 0 EBIT ($M) - Packaging Products 0 1 (1) 0 - Lysaght Taiwan 0 0 0 0 - Total 0 1 (1) 0 Net operating assets (pre-tax) ($M)

- Packaging Products (7) (5) (1) (7) - Lysaght Taiwan (3) (5) 1 (4) - Total (10) (10) 0 (11) ATTACHMENT 3 RECONCILIATION OF UNDERLYING EBIT TO UNDERLYING NLAT

$M 1H

FY2012 1H

FY2011

Change 2H

FY2011 Underlying EBIT (132) (41) (91) (60) Underlying finance costs (1) (62) (52) (10) (54) Interest revenue 2 5 (3) 2 Tax on Underlying Earnings 70 47 23 49 Outside equity interest (7) (5) (2) (8) Underlying NLAT (129) (46) (83) (71) Notes:

(1) 1H FY2012 reflects finance costs of $70M (refer to Table 2a) adjusted for pre-tax value of underlying adjustment relating to borrowing amendment fees (refer to Table 2b).

BlueScope Steel Limited

ABN 16 000 011 058

Level 11, 120 Collins St

Melbourne VIC 3000

AUSTRALIA

Telephone +61 3 9666 4000

Facsimile +61 3 9666 4111

www.bluescopesteel.com

ASX Media Release Release Time: 8:30am

Date: 20 February 2012

BLUESCOPE LAYS FOUNDATION FOR RETURN TO PROFITABILITY DELIVERS $357M WORKING CAPITAL RELEASE (SINCE 31 OCTOBER 2011) AND REDUCES NET DEBT

BlueScope today reported a $530 million net loss after tax (NLAT) for the first half FY2012, including significant one-off restructuring costs ($260 million), impairment of deferred tax assets ($184 million) and income advanced under the Federal Government’s Steel Transformation Plan (STP) ($46 million). This compares with a $55 million reported NLAT in the previous corresponding period. Underlying NLAT1 for the half was $129 million, which includes year end net realisable value (NRV) adjustments of $53 million. Excluding NRVs, the result was $76 million. This compares to an underlying NLAT of $47 million for the prior corresponding period (1H FY2011). BlueScope Steel’s Managing Director and CEO, Mr Paul O’Malley said the Company was on track to deliver a full year working capital release of $400-500 million and had initiatives for further debt reduction. The company has deferred the recognition of a tax asset totalling $184 million in respect of tax losses generated during the half year, largely due to export losses and restructuring costs. Australian Accounting Standards impose a stringent test for the recognition of a deferred tax asset where there is a history of recent tax losses. The company has deferred the recognition of any further tax asset for the Australian tax group until a return to taxable profits has been demonstrated. Australian tax losses are able to be carried forward indefinitely. Mr O’Malley said “the first half result demonstrated delivery of our improvement plan and was in line with market guidance. Particularly pleasing is the significant reduction in net debt beyond the impact of the capital raising. “Since the onset of the GFC, BlueScope has acted to overcome the effects of poor global economic conditions and steel industry overcapacity and set the foundation for future business improvement. These include:

A cost reduction program that achieved $696 million of cumulative cost savings (relative to our FY2008 cost base) through to June 2011

Restructuring the Asian business, which has since delivered consistent profits and lays the foundation for further growth

Restructuring our North American business, by consolidating the Buildings business and implementing a targeted profit improvement program, resulting in a step improvement in profitability in the first half FY2012

Safely restructuring the Australian business, which is well advanced, by closing No.6 Blast Furnace and associated assets, materially reducing our export exposure

Launched the global Building Solutions business with a strong growth focus

Initiating a major performance improvement program for the Australian Distribution and Solutions business

Secured advance payment of $100 million STP funding in January 2012.

“At 31 December 2011 net debt was $796 million, a reduction of $759 million since October 31 2011 including a working capital reduction of $357 million. We expect an additional reduction in working capital in the second half, noting in Q3 there will be a seasonal increase in working capital and further payments associated with the restructure of the Australian business. The current total cost of the Australian restructure is still in the range of $430-450 million, of which $350-370 million is expected to be paid in FY2012,” Mr O’Malley said.

1 Underlying financial results reflect the Company’s assessment of financial performance after excluding certain unusual items. Unusual items in the reported NLAT

for the half year FY2012 include restructuring costs ($260m), asset impairment costs mainly related to tax assets ($187m) and income advanced under the Federal Governments Steel Transformation Plan ($46m). This financial information is provided to assist readers to better understand the financial performance of the underlying business. A detailed reconciliation of adjustments to the reported financial information is provided in the half year Earnings Report available on the company’s website.

2 of 3

Australian Restructure Update Mr O’Malley said “the operational restructure, with associated plant closures in Australia, significantly reduces our exposure to the loss-making export market. The complex restructure has been implemented by our team very effectively and in a very tight timeframe. This is a positive step in turning around the performance of the Australian business and lays the foundation for a return to profitability.”

Global Trading Conditions “Even though capacity utilisation internationally remains below 80%, there are some encouraging signs of supply-side response. Other steel companies around the world are also shutting or mothballing plants. “Whilst steel spreads remain at historical lows, we are encouraged by the recent step-down in raw material input costs. “The Asian economies remain strong and we are seeing some signs of recovery in the US economy, albeit off a low base,” said Mr O’Malley. Asia “Our Asian business achieved an underlying $47 million EBIT contribution for the first half and is consistently delivering good returns on invested capital. China continued its strong contribution ($24m underlying EBIT) and our expansion in Xi’an will capitalise on strong demand in Central and Western China. The new $60m facility is expected to be operational by 2HFY2013. “The Asian result is despite the negative impact of the Thailand floods and the start-up costs associated with commissioning the second metal coating line with innovative in-line painting technology in Indonesia. New Zealand “The New Zealand and Pacific Islands business delivered $34 million in underlying EBIT for the first half. This was despite soft domestic steel demand, a period of record low residential and commercial building approvals and the impacts of a natural gas supply outage. “This business benefits from access to low cost captive iron units and the export of Taharoa iron sands. We continue to invest in this business to expand production, introducing a larger replacement vessel, the Taharoa Destiny, which will increase annual capacity to 1.2 million tonnes. We expect to see the new vessel come into service by mid CY2012. North America “In North America, the Coated and Building Products business contributed $6 million in underlying EBIT, up from the $16 million underlying EBIT loss recorded a year earlier. This targeted profit improvement program lays a firm foundation for our business to continue to improve its performance even if volumes remain flat. “Hot Rolled Products North America, which comprises our 50% interest in North Star BlueScope Steel, delivered $20 million in underlying EBIT for the half, up from $8 million in the previous corresponding period. Australia “The Australian steel industry is experiencing weak trading conditions. Coated and Industrial Products Australia (C&IPA) saw a $182 million underlying EBIT loss for the half with performance driven principally by weaker steel spread compared to first half FY2011. We have identified further productivity improvements that we will implement in the Australian business to continue to lower our cost base and improve our competitiveness in the market place. “The Australian Distribution and Solutions business experienced lower domestic volumes, reduced margins and increased import competition, leading to a $29 million underlying EBIT loss for the first half. A major improvement program is underway,” said Mr O’Malley.

BlueScope’s Outlook Commenting on the outlook, Mr O’Malley said, “For 2H FY2012, we expect a slightly lower underlying Net Loss After Tax (excluding period end NRVs and/or impairments), subject to spread, FX and market conditions, compared with the 1H FY2012 result, including our expectation of a return to a profitable underlying run rate by the end of FY2012.”

***

3 of 3

For further information about BlueScope Steel Limited: www.bluescopesteel.com

Contacts: Media Investor

Michael Reay

Manager Corporate Affairs and Corporate Brand


Tel: +61 3 9666 4004

Mobile: +61 (0) 437 862 472

E-mail: [email protected]

John Knowles

Vice President Investor Relations


Tel: +61 3 9666 4150

Mobile: +61 (0) 419 893 491 E-mail: [email protected]

Don Watters

Manager Investor Relations


Tel: +61 3 9666 4206

Mobile: +61 (0) 409 806 691

E-mail: [email protected]

mailto:[email protected]

BlueScope Steel LimitedABN 16 000 011 058

Interim Financial Report - 31 December 2011

PageDirectors' report 1Interim financial report

Consolidated statement of comprehensive income 8Consolidated statement of financial position 9Consolidated statement of changes in equity 10Consolidated statement of cash flows 11Notes to the consolidated financial statements 12Directors' declaration 27

Independent auditor's review report on the interim financial report 28

BlueScope Steel Limited Directors’ Report

31 December 2011

-1-

DIRECTORS’ REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2011 Your directors present their report on the consolidated entity consisting of BlueScope Steel Limited and the entities it controlled at the end of, or during, the half-year ended 31 December 2011.

Directors The following persons were directors of BlueScope Steel Limited during the whole of the half-year and up to the date of this report:

G J Kraehe AO R J McNeilly D J Grady AM H K McCann AM Y P Tan D B Grollo P F O'Malley K A Dean P Bingham-Hall SIGNIFICANT CHANGES IN STATE OF AFFAIRS In August 2011, the Company announced a major restructure of the Australian manufacturing business to reduce its exposure to loss-making export markets for steel products. At the Port Kembla Steelworks, the changes were broadly to reduce production of steel by half through the closure of Blast Furnace No.6. Steelmaking production capacity at Port Kembla has been reduced from approximately 5.3Mtpa to approximately 2.6Mtpa. At the Western Port facility the changes were broadly to reduce production of rolled and coated products through the closure of the Hot Strip Mill and mothballing of Metal Coating Line 5. These changes were accompanied by a significant decrease in the fixed cost base of operations through lower labour, maintenance, operations support costs and overheads, including a significant reduction in contractors. The changes in operations and costs were largely implemented in the second quarter of FY2012, commencing from early October 2011. MATTERS SUBSEQUENT TO THE HALF-YEAR ENDED 31 DECEMBER 2011 The $100M advance payment under the Federal Government Steel Transformation Plan (STP), which was approved for payment on 21 December 2011, was received by the company on 13 January 2012. The STP was established to encourage investment, innovation and competitiveness in the Australian Steel manufacturing industry. There were no other significant matters that have arisen subsequent to 31 December 2011 and up until the date of this report.


31 December 2011 (continued)

-2-

REVIEW AND RESULTS OF OPERATIONS The BlueScope Steel Group comprises six reportable operating segments: Coated & Industrial Products Australia, Australia Distribution & Solutions, New Zealand & Pacific Steel Products, Coated & Building Products Asia, Hot Rolled Products North America and Coated & Building Products North America. A summary of consolidated revenues and results for the half-year by reporting segment is set out below.

REPORTED (1) UNDERLYING (1)

REVENUES Six-months

to December

2011 $M

REVENUES Six-months

to December

2010 $M

EARNINGS Six-months

to December

2011 $M

EARNINGS Six-months

to December

2010 $M

EARNINGS Six-months

to December

2011 $M

EARNINGS Six-months

to December

2010 $M

Sales revenue/EBIT (2)

Coated & Industrial Products Australia 2,403.4 2,501.6 (463.0) (96.9) (181.9) (96.9)

Australia Distribution & Solutions 841.1 866.5 (33.5) (92.4) (29.5) (15.4)

New Zealand & Pacific Steel Products 345.7 330.3 33.8 48.6 33.8 48.6

Coated & Building Products Asia 838.9 739.7 47.2 113.9 47.2 46.1

Hot Rolled Products North America - - 20.1 8.5 20.1 8.5

Coated & Building Products North America 736.9 674.6 (9.9) (16.5) 6.0 (16.5)

Discontinued operations - - (0.5) 1.8 - -

Segment sales revenue/EBIT (2) 5,166.0 5,112.7 (405.8) (33.0) (104.3) (25.6)

Inter-segment eliminations (636.2) (512.3) 4.8 18.5 4.8 18.5

Segment external sales revenue/EBIT (2)

4,529.8 4,600.4 (401.0) (14.5) (99.5) (7.1)

Other revenue (net unallocated expenses) 18.7 21.6 (33.5) (33.8) (32.2) (33.8)

Total revenue/EBIT (2) 4,548.5 4,622.0 (434.5) (48.3) (131.7) (40.9)

Net borrowing costs (69.1) (47.4) (60.8) (47.4)

Profit/(loss) from ordinary activities before income tax (503.6) (95.7) (192.5) (88.3)

Income tax (expense)/benefit (20.1) 46.5 69.8 47.0

Profit/(loss) from ordinary activities after income tax expense (523.7) (49.2) (122.7) (41.3)

Net (profit)/loss attributable to outside equity interest (6.7) (5.4) (6.7) (5.4)

Net (profit)/loss attributable to equity holders of BlueScope Steel (530.4) (54.6) (129.4) (46.7)

Basic Earnings per share (cents) (26.6) (2.5) (6.5) (2.2)

(1) The use of the terms ‘reported’ refers to IFRS financial information and ‘underlying’ to non-IFRS financial

information. Underlying earnings are categorised as non-IFRS financial information prepared in accordance with ASIC Regulatory Guide 230 – Disclosing non-IFRS financial information, issued in December 2011. Underlying adjustments have been considered in relation to their size and nature, and have been adjusted from the reported information to assist readers to better understand the financial performance of the underlying business in each reporting period. These adjustments are assessed on a consistent basis from period to period and include both favourable and unfavourable items. The non-IFRS financial information, whilst not subject to an audit or review, has been extracted from the interim financial report which has been subject to review by our external auditors.

(2) Performance of operating segments is based on EBIT which excludes the effects of interest and taxes. The Company considers this a useful and appropriate segment performance measure because interest income and expense are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group.



-3-

Reconciliation of Underlying Earnings to Reported Earnings

(1) Six months to December 2010 reflects profit on sale of Packaging Products assets and a foreign exchange

translation gain within the Lysaght Taiwan business.

(2) Six months to December 2011 reflects staff redundancies and restructuring costs at Coated & Industrial Products Australia, in relation to the move to a one blast furnace operation at Port Kembla Steelworks, Coated & Building Products North America and Australia Distribution & Solutions.

(3) Six months to December 2011 reflects the costs associated with restructuring existing financing facilities following

the decision to move to a one blast furnace operation at Port Kembla Steelworks. (4) Six months to December 2011 reflects receipt of a $100.0 million advance under the Australian Federal

Government’s Steel Transformation Plan (STP). In accordance with Australian Accounting Standards, the $100.0 million STP advance payment has been recognised over the 2012 financial year in line with the related costs which it is intended to compensate.

(5) Six months to December 2011 reflects impairment of assets in Coated & Building Products North America

associated with restructuring. Six months to December 2010 reflects a net asset impairment write-down of $9.2 million, comprising an impairment write-down of $77.0 million of goodwill in BlueScope Distribution and an impairment write-back of $67.8 million to the asset base in China Coated business.

(6) Six months to December 2011 includes a $183.9 million impairment of Australian deferred tax assets generated

during the period mainly in relation to export losses and restructure costs incurred during the period. Australian Accounting Standards impose a stringent test for the recognition of a deferred tax asset arising from unused tax losses where there is a history of recent tax losses. The Company has deferred the recognition of any further tax asset for the Australian tax group until a return to taxable profits has been demonstrated. Australian tax losses are able to be carried forward indefinitely.

EBIT/(EBIT loss) $M

NPAT/(NLAT) $M

Earnings per share (cents)

Six- months to

December 2011 $M

Six-months to

December 2010 $M

Six-months to

December 2011 $M

Six-months to

December 2010 $M

Six-months to

December 2011 $M

Six-months to

December 2010 $M

Reported Earnings (loss) (434.5) (48.3) (530.4) (54.6) (26.6) (2.5) Net (gains) / losses from businesses discontinued (1)

0.5 (1.8) 0.6 (1.3) - (0.1)

Reported earnings (from continuing operations) (434.0) (50.1) (529.8) (55.9) (26.6) (2.6)

Underlying adjustments:

Restructure costs, including redundancy (2) 363.6 - 253.9 - 12.7 -

Borrowing amendment fees associated with restructuring (3) - - 5.8 - 0.3 -

Steel Transformation Plan advance (4) (66.1) - (46.3) - (2.3) -

Asset impairment (5) 4.8 9.2 3.1 9.2 0.2 0.4

Tax asset impairment (6) - - 183.9 - 9.2 -

Underlying Earnings (131.7) (40.9) (129.4) (46.7) (6.5) (2.2)



-4-

Group Review

The Company reported a $530.4 million net loss after tax (NLAT) for the first half FY2012, including significant restructuring costs ($259.7 million), impairment of deferred tax assets ($183.9 million) and income advanced under the Federal Government’s Steel Transformation Plan (STP) ($46.3 million). This compares with a $54.6 million reported NLAT in the previous corresponding period.

Underlying NLAT for the half was $129.4 million, which includes year end net realisable value (NRV) adjustments of $53.9 million. Excluding NRVs, the result was $75.5 million. This compares to an underlying NLAT of $46.7 million for the prior corresponding period (first half FY2011).

The Company reported it was on track to deliver a full year working capital release of $400-500 million and had initiatives for further debt reduction.

As at 31 December 2011, $183.9 million of Australian deferred tax assets generated during the period, mainly in relation to export losses and restructure costs, have been impaired. Australian Accounting Standards impose a stringent test for the recognition of a deferred tax asset arising from unused tax losses where there is a history of recent tax losses. The Company has deferred the recognition of any further tax asset for the Australian tax group until a return to taxable profits has been demonstrated. Australian tax losses are able to be carried forward indefinitely.

The first half result demonstrated delivery of the Company’s improvement plan and was in line with market guidance. Particularly pleasing is the significant reduction in net debt beyond the impact of the December 2011 capital raising. Since the onset of the GFC, BlueScope has acted to overcome the effects of poor global economic conditions and steel industry overcapacity and set the foundation for future business improvement. These include:

• A cost reduction program that achieved $696 million of cumulative cost savings (relative to our FY2008 cost base) through to June 2011

• Restructuring the Asian business, which has since delivered consistent profits and lays the foundation for further growth

• Restructuring our North American business, by consolidating the Buildings business and implementing a targeted profit improvement program, resulting in a step improvement in profitability in the first half FY2012

• Safely restructuring the Australian business, which is well advanced, by closing No.6 Blast Furnace and associated assets, materially reducing our export exposure

• Launched the global Building Solutions business with a strong growth focus • Initiating a major performance improvement program for the Australian Distribution and Solutions business • Secured advance payment of $100.0 million STP funding in January 2012.

At 31 December 2011 net debt was $795.9 million, a reduction of $759.0 million since 31 October 2011 including a working capital reduction of $357 million. The Company expects an additional reduction in working capital in the second half, noting in Q3 there will be a seasonal increase in working capital and further payments associated with the restructure of the Australian business. The current total cost of the Australian restructure is still in the range of $430-450 million, of which $350-370 million is expected to be paid in FY2012. Australian Restructure Update The operational restructure, with associated plant closures in Australia, significantly reduces our exposure to the loss-making export market. The complex restructure has been implemented by our team very effectively and in a very tight timeframe. This is a positive step in turning around the performance of the Australian business and lays the foundation for a return to profitability.

Global Trading Conditions Even though capacity utilisation internationally remains below 80%, there are some encouraging signs of supply-side response. Other steel companies around the world are also shutting or mothballing plants. Whilst steel spreads remain at historical lows, the Company is encouraged by the recent step-down in raw material input costs. The Asian economies remain strong and there are some signs of recovery in the US economy, albeit off a low base. Asia The Asian business achieved an underlying $47.2 million EBIT contribution for the first half and is consistently delivering good returns on invested capital. China continued its strong contribution ($24.5 million underlying EBIT) and the expansion in Xi’an will capitalise on strong demand in Central and Western China. The new $60 million facility is expected to be operational by the second half FY2013. The Asian result is despite the negative impact of the Thailand floods and the start-up costs associated with commissioning the second metal coating line with innovative in-line painting technology in Indonesia.



-5-

Group Review (continued) New Zealand The New Zealand and Pacific Islands business delivered $33.8 million in underlying EBIT for the first half. This was despite soft domestic steel demand, a period of record low residential and commercial building approvals and the impacts of a natural gas supply outage. This business benefits from access to low cost captive iron units and the export of Taharoa iron sands. The Company continues to invest in this business to expand production, introducing a larger replacement vessel, the Taharoa Destiny, which will increase annual capacity to 1.2 million tonnes. It is expected the new vessel will come into service by mid calendar year 2012. North America In North America, the Coated and Building Products business contributed $6.0 million in underlying EBIT, up from the $16.5 million underlying EBIT loss recorded a year earlier. This targeted profit improvement program lays a firm foundation for our business to continue to improve its performance even if volumes remain flat. Hot Rolled Products North America, which comprises the Company’s 50% interest in North Star BlueScope Steel, delivered $20.1 million in underlying EBIT for the half, up from $8.5 million in the previous corresponding period. Australia The Australian steel industry is experiencing weak trading conditions. Coated and Industrial Products Australia (C&IPA) saw a $181.9 million underlying EBIT loss for the half with performance driven principally by weaker steel spread compared to first half FY2011. BlueScope has identified further productivity improvements that will be implemented in the Australian business to continue to lower the cost base and improve its competitiveness in the market place. The Australia Distribution and Solutions business experienced lower domestic volumes, reduced margins and increased import competition, leading to a $29.5 million underlying EBIT loss for the first half. A major improvement program is underway. LIKELY DEVELOPMENTS AND EXPECTED RESULTS For the second half FY2012, the Company expects a slightly lower underlying Net Loss After Tax (excluding period end NRVs and/or impairments), subject to spread, FX and market conditions, compared with the first half FY2012 result, including our expectation of a return to a profitable underlying run rate by the end of FY2012.

BlueScope Steel LimitedDirectors' report

31 December 2011(continued)

Auditor's independence declaration

The auditor's independence declaration for the half-year ended 31 December 2011 has been received from Ernst &Young. This can be referred to on page 7 of the directors' report.

Rounding of amounts

The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and InvestmentsCommission (ASIC), relating to the 'rounding off' of amounts in the directors' report and half-year financial report. Amountsin the directors' and financial report have been rounded off in accordance with that Class Order to the nearest hundredthousand dollars.

This report is made in accordance with a resolution of directors.

G J Kraehe, AOChairman

P F O'MalleyManaging Director & CEO

Melbourne20 February 2012

-6-

-7- Liability limited by a scheme approved under Professional Standards Legislation

Auditor’s Independence Declaration to the Directors of BlueScope Steel Limited

In relation to our review of the interim financial report of BlueScope Steel Limited for the half-year ended 31 December 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

Rodney Piltz Partner 20 February 2012

BlueScope Steel LimitedConsolidated statement of comprehensive income

For the half-year ended 31 December 2011

Half-year2011 2010

Notes $M $M

Revenue from continuing operations 4,548.5 4,622.0

Other income 4 68.1 0.7

Changes in inventories of finished goods and work in progress (192.5) 109.1Raw materials and consumables used (2,766.3) (2,915.3)Employee benefits expense (749.5) (773.7)Depreciation and amortisation expense (164.2) (175.2)Impairment of non-current assets 4 (5.5) (10.2)Freight on external despatches (284.6) (293.5)External services (434.0) (492.7)Finance costs (70.3) (51.9)Restructuring costs 4 (363.6) (0.4)Other expenses (106.9) (124.7)Share of net profits of associates and joint venture partnershipsaccounted for using the equity method 17.8 8.5Profit (loss) before income tax (503.0) (97.3)

Income tax benefit (expense) 5 (20.1) 46.8Profit (loss) from continuing operations after income tax (523.1) (50.5)

Profit (loss) from discontinued operations after income tax 7 (0.6) 1.3Net profit (loss) for the half-year (523.7) (49.2)

Other comprehensive incomeGain (loss) on cash flow hedges taken to equity - 0.5Net gain (loss) on hedges of net investments in foreign subsidiaries 15.1 13.1Exchange differences on translation of foreign operations 9.4 (205.6)Actuarial gain (loss) on defined benefit superannuation plans 8 (249.8) 64.8Income tax on items of other comprehensive income 5 50.8 (24.5)Other comprehensive income for the half-year (174.5) (151.7)

Total comprehensive income for the half-year (698.2) (200.9)

Profit (loss) is attributable to:Owners of BlueScope Steel Limited (530.4) (54.6)Non-controlling interests 6.7 5.4

(523.7) (49.2)

Total comprehensive income is attributable to:Owners of BlueScope Steel Limited (706.0) (196.2)Non-controlling interests 7.8 (4.7)

(698.2) (200.9)

Cents CentsEarnings per share for profit (loss) from continuing operations attributable tothe ordinary equity holders of the CompanyBasic earnings per share 11 (26.6) (2.6)Diluted earnings per share 11 (26.5) (2.6)

Cents CentsEarnings per share for profit (loss) attributable to the ordinary equity holdersof the CompanyBasic earnings per share 11 (26.6) (2.5)Diluted earnings per share 11 (26.5) (2.5)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

-8-

BlueScope Steel LimitedConsolidated statement of financial position

As at 31 December 2011

31 December 30 June2011 2011

Notes $M $M

ASSETSCurrent assetsCash and cash equivalents 186.0 172.2Receivables 1,036.8 1,026.8Inventories 1,711.1 1,947.4Intangible assets 17.6 18.2Other 65.5 57.5Total current assets 3,017.0 3,222.1

Non-current assetsReceivables 22.7 22.7Inventories 80.0 81.4Investments accounted for using the equity method 146.1 142.0Property, plant and equipment 3,466.4 3,500.6Deferred tax assets 5 197.4 160.8Intangible assets 668.5 660.7Other 2.8 2.7

Total non-current assets 4,583.9 4,570.9

Total assets 7,600.9 7,793.0

LIABILITIESCurrent liabilitiesPayables 980.8 1,156.6Interest bearing liabilities 119.4 165.7Current tax liabilities 8.1 23.1Provisions 497.4 399.3Deferred income 162.0 133.5Derivative financial instruments 0.7 -

Total current liabilities 1,768.4 1,878.2

Non-current liabilitiesPayables 7.3 6.9Interest bearing liabilities 862.5 1,074.2Deferred tax liabilities 39.1 69.1Provisions 234.0 193.5Retirement benefit obligations 8 408.7 170.7Deferred income 4.2 4.3

Total non-current liabilities 1,555.8 1,518.7

Total liabilities 3,324.2 3,396.9

Net assets 4,276.7 4,396.1

EQUITYContributed equity 6 4,651.4 4,073.8Reserves (303.6) (324.8)Retained profits (165.1) 559.8Parent entity interest 4,182.7 4,308.8

Non-controlling interest 94.0 87.3

Total equity 4,276.7 4,396.1

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

-9-

BlueScope Steel LimitedConsolidated statement of changes in equity


31 December 2011Contributed

equity ReservesRetainedearnings

Non-controlling

interest Total$M $M $M $M $M

Balance at 1 July 2011 4,073.8 (324.8) 559.8 87.3 4,396.1

Profit (loss) for the half-year - - (530.4) 6.7 (523.7)Other comprehensive income - 18.9 (194.5) 1.1 (174.5)Total comprehensive income for thehalf-year - 18.9 (724.9) 7.8 (698.2)

Transactions with owners in their capacityas owners:Shares issued

General Employee Share Plan 6 0.2 (0.3) - - (0.1)Share Plan Retention Awards 6 11.3 - - - 11.3Capital raisings 6 600.0 - - - 600.0

Transaction costs on capital raisings 6 (22.6) - - - (22.6)Share-based payment expense - 2.7 - - 2.7Dividends declared - - - (1.1) (1.1)Treasury shares 6 (11.3) - - - (11.3)Other - (0.1) - - (0.1)

577.6 2.3 - (1.1) 578.8

Balance at 31 December 2011 4,651.4 (303.6) (165.1) 94.0 4,276.7

31 December 2010Contributed

equity ReservesRetainedearnings

Non-controlling

interestTotalequity

$M $M $M $M $M

Balance at 1 July 2010 4,032.4 (118.4) 1,747.3 94.4 5,755.7

Profit (loss) for the half year - - (54.6) 5.4 (49.2)Other comprehensive income - (185.9) 44.3 (10.1) (151.7)Total comprehensive income for thehalf-year - (185.9) (10.3) (4.7) (200.9)

Transactions with owners in their capacity asowners:Shares issued

General Employee Share plan 0.3 (0.3) - - -Excercise of share rights 0.1 (0.1) - - -

Share-based payment expense - 3.6 - - 3.6Dividends declared - - (91.2) (1.5) (92.7)Dividend reinvestment plan 41.3 - - - 41.3Other (0.1) - 0.1 0.1 0.1

41.6 3.2 (91.1) (1.4) (47.7)

Balance at 31 December 2010 4,074.0 (301.1) 1,645.9 88.3 5,507.1

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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BlueScope Steel LimitedConsolidated statement of cash flows


Half-year2011 2010

Notes $M $M

Cash flows from operating activitiesReceipts from customers 4,825.9 4,963.9Payments to suppliers and employees (4,877.5) (5,028.0)

(51.6) (64.1)

Dividends received 2.3 2.5Joint venture partnership distributions received 11.8 32.5Interest received 1.4 5.0Other revenue 7.7 12.6Finance costs paid (66.8) (62.5)Income taxes refunded (paid) (55.8) 4.3Net cash (outflow) inflow from operating activities (151.0) (69.7)

Cash flows from investing activitiesPayments for property, plant and equipment (106.2) (177.3)Payments for intangibles (3.9) (4.8)Payments for investment in joint venture partnership (0.7) (1.0)Payments for investment in business assets - (0.4)Proceeds from sale of property, plant and equipment 0.8 1.6Repayment of loans by related parties 5.0 2.7Net cash (outflow) inflow from investing activities (105.0) (179.2)

Cash flows from financing activitiesProceeds from issues of shares 600.0 -Capital share raising costs (22.6) -Proceeds from borrowings 6,141.5 2,920.8Repayment of borrowings (6,450.5) (2,775.5)Dividends paid to Company's shareholders 9 - (49.9)Dividends paid to non-controlling interests in subsidiaries (1.1) (1.5)Net cash inflow (outflow) from financing activities 267.3 93.9

Net increase (decrease) in cash and cash equivalents 11.3 (155.0)Cash and cash equivalents at the beginning of the half-year 171.3 249.3Effects of exchange rate changes on cash and cash equivalents 0.9 (9.2)Cash and cash equivalents at end of the half-year 183.5 85.1

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

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BlueScope Steel LimitedNotes to the consolidated financial statements

31 December 2011

Contents of the notes to the consolidated financial statements

Page1 Basis of preparation of the interim report 132 Critical accounting estimates and judgements 133 Segment information 164 Other income and expenses 205 Income tax 216 Equity securities issued 217 Discontinued operations 228 Non-current liabilities - Retirement benefit obligations 239 Dividends 2510 Contingencies 2511 Earnings per share 2612 Events occurring after the balance sheet date 26

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1 Basis of preparation of the interim report

This condensed consolidated interim financial report for the half-year reporting period ended 31 December 2011 has beenprepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting, the Corporations Act 2001 andother mandatory reporting requirements.

This condensed consolidated interim financial report does not include all the notes of the type normally included in anannual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by BlueScope Steel Limited during the interim reporting period inaccordance with the continuous disclosure requirements of the Corporations Act 2001.

There have been no changes to the Group's accounting policies during the half-year. Accounting policies and methods ofcomputation remain the same as those adopted and disclosed in the most recent annual financial report.

2 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, includingexpectations of future events that may have a financial impact on the Group and that are believed to be reasonable underthe circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities within the current financial year are discussed below.

(i) Estimated impairment of cash-generating units, including goodwillThe Group tests at least annually whether goodwill, other intangible assets with indefinite useful lives and other assetshave suffered any impairment or a reversal of a previous impairment loss. All cash-generating units (CGUs) were reviewedfor impairment at the half-year. The recoverable amounts of CGUs have been determined based on value-in-use (VIU)calculations. The following describes assumptions on which management has based its cash flow projections whendetermining VIU:

Cash flows VIU calculations use pre-tax cash flow projections based on financial projections approved by management covering athree year period, being the basis of the Group's forecasting and planning processes or up to five years where thecircumstances pertaining to a specific CGU support a longer period. Cash flows beyond the projection period areextrapolated to provide a maximum of 30 years of cash flows with adjustments where necessary to reflect changes in long-term operating conditions. No terminal value is calculated.

Raw material cost and selling price assumptions used for cash flow projections are based on global commodity prices,taking into account forecast and past actual pricing. Sales volume assumptions are based on management forecasts,taking into account actual historical sales volumes and external forecasts of underlying economic activity for the marketsectors and geographies in which each CGU operates.

Growth rate The growth rate used to extrapolate the cash flows beyond the projection period is typically 2.5% (30 June 2011: 2.5%).The growth rate represents a steady indexation rate which does not exceed management's expectations of the long-termaverage growth rate for the business in which each CGU operates.

Discount rate The base discount rate applied to the cash flow projections is 10.5% post-tax (30 June 2011: 10.5%), with the exception ofCGUs located in North America which is 8.5% post-tax (30 June 2011: 10.5%). The discount rate is a post-tax rate thatreflects the current assessment of the time value of money and the overall perceived risk profile of the Company.

Given the differing characteristics, currencies and geographical locations of the Group's CGUs, where appropriate thediscount rate is adjusted by a country risk premium (CRP) to reflect country specific risks. Such adjustments do not reflectrisks for which cash flow forecasts have already been adjusted. The CRP is derived from a combination of externalsources including observed bond market spreads, market commentator surveys and analysis, and Standard & Poor'sforeign currency ratings. This adjusted discount rate is then translated to a pre-tax rate for each CGU based on the specifictax rate applicable to where the CGU operates.

All foreign currency cash flows are discounted using a discount rate appropriate for that currency.

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2 Critical accounting estimates and judgements (continued)

Cash generating units with significant goodwillThe significant proportion of the Group’s goodwill has been allocated to two CGUs, being BlueScope Steel Distribution(a business within Australia Distribution and Solutions segment) and BlueScope Buildings North America (a businesswithin the Coated & Building Products North America segment).

BlueScope Steel DistributionBlueScope Steel Distribution has $156.8 million of goodwill (31.0% of the Group's goodwill) and is tested for impairment ona VIU basis using 4.5 year cash flow projections, followed by a long-term growth rate of 2.5% for a further 25.5 years. Pre-tax VIU cash flows are discounted utilising a 15.0% pre-tax discount rate.

At 30 June 2011, a $100.2 million goodwill impairment was recognised.The recoverable amount at 31 December 2011continues to be materially in line with the carrying amount.

This CGU is most sensitive to assumptions in relation to spread (selling price less raw material purchase price). As therecoverable amount is materially in line with the carrying amount, in the absence of mitigating factors, any materialadverse change in forecast spread assumptions could give rise to a circumstance where the recoverable amount ismaterially lower than the carrying amount.

BlueScope Buildings North AmericaBlueScope Buildings North America has $204.1 million of goodwill (40.4% of the Group's goodwill) and is tested forimpairment on a VIU basis using 3.5 year cash flow projections, followed by a long-term growth rate of 2.5% for a further26.5 years. Pre-tax VIU cash flows are discounted utilising a 13.8% pre-tax discount rate.

At 31 December 2011 the recoverable value of this CGU is 1.8 times the carrying amount. This CGU is most sensitive toassumptions in relation to North American non-residential building and construction activity, in particular the magnitudeand timing of a recovery to pre global financial crisis activity levels. Taking into account external forecasts, the Companyexpects non-residential building and construction activity to increase significantly (20% per annum from the currenthistorically low base over the 3.5 year projection period) when general market conditions improve in North America butremain 21% below the levels experienced prior to the 2008 global financial crisis.

However, the timing and extent of this recovery is uncertain and in the absence of mitigating factors, a permanent 33%reduction in non-residential construction activity below pre global financial crisis levels, or more than a six year period toachieve the projected recovery, would be required for the recoverable amount to be equal to the carrying amount.

Carbon pricing schemesThe estimated impact of the New Zealand Emissions Trading Scheme (ETS), which came into effect on 1 July 2010, andthe Australian Carbon Pricing Mechanism (CPM), to come into effect on 1 July 2012, have been included in determiningcash flow projections.

The carbon pricing schemes (CPS) requires the Company to annually obtain and surrender emission units to cover theGroups direct greenhouse gas emissions for our facilities in Australia and New Zealand (scope 1 emissions). The CPSincreases the costs of electricity (scope 2 direct emissions) and the cost of other goods and services (scope 3 indirectemissions).

The Australian and New Zealand Governments have enacted programs to allocate some permits to emissions-intensivetrade exposed activities, including integrated iron and steel making. In Australia this will involve the allocation of permits atthe maximum rate (94.5% in first year) with the permit allocation decreasing by 1.3% per annum. New Zealand Steel hasqualified for a free allocation of emission unit permits at the maximum rate (90%) with no decision yet to be reached on thereduction rate of permits to be allocated.

The Australian Government has also announced a Steel Transformation Plan (STP) to encourage investment, innovationand competitiveness in the Australian steel manufacturing industry in order to assist the industry to transform into anefficient and economically sustainable industry in a low carbon economy. The STP will provide $300M of funding to theAustralian steel industry over a four year period for eligible expenditure on innovation, investment and production. TheGroup expects to receive 60% of this funding. The STP included an advance payment mechanism which the Companyutilised with a $100M advance received in January 2012.

The Group will incur significant additional costs from these schemes. In Australia, the STP is expected to offset the directcost of the CPM for the first four years. The potential impact of the CPM beyond the first four years is difficult to assessand will depend upon a range of factors.

In estimating the impact of carbon pricing schemes for impairment testing purposes the Group has taken into account theassistance provided by the STP for the first four years, net of any advance already received, the pass through of costs bysuppliers and the ability of the Group to implement mitigation plans.

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2 Critical accounting estimates and judgements (continued)

(ii) Income taxesThe Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgementis required in determining the worldwide provision for income taxes. There are many transactions and calculations duringthe ordinary course of business for which the ultimate tax determination is uncertain.The Group recognises liabilities foranticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome ofthese matters is different from the amounts that were initially recorded, such differences will impact the current anddeferred tax provisions in the period in which such determination is made.

In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it isprobable that future taxable profits are available to utilise those temporary differences and losses, and the tax lossescontinue to be available having regard to the nature and timing of their origination and compliance with the relevant taxlegislation associated with their recoupment.

(iii) Workers compensationCalculations for the Group's self-insured workers compensation are determined at least annually by external actuaries.These calculations require assumptions in relation to the expectation of future events.

(iv) Product claimsProvision for claims is based on modelled data combining sales volumes with past experiences of repair and replacementlevels in conjunction with any specifically identified product faults. The provision requires the use of assumptions in relationto the level of future claims made.

(v) Share-based payment transactionsThe Group measures the cost of equity settled transactions with employees by reference to the fair value of equityinstruments at grant date.The fair value is determined by an external valuer using a Black-Scholes Option Pricing Model.These calculations require the use of assumptions.

(vi) Defined benefit plansVarious actuarial assumptions underpin the determination of the Group's pension obligations. These assumptions and therelated carrying amounts are discussed in note 8.

(vii) Restructuring and redundancy provisionsProvisions for restructuring and redundancy are based on the Group's best estimate of the outflow of resources required tosettle commitments made by the Group to those likely to be affected. Where the outcome of these matters is different fromthe amounts that were initially recorded, such differences will impact the income statement in the period in which suchdetermination is made (refer note 4).

(viii) Plant and machinery useful livesThe estimation of the useful lives of plant and machinery has been based on historical experience and judgement withrespect to technical obsolescence, physical deterioration and usage capacity of the asset in addition to any legalrestrictions on usage.The condition of the asset is assessed at least once per year and considered against the remaininguseful life. Adjustments to useful lives are made when considered necessary.

(ix) Restoration and rehabilitation provisionsProvisions have been made for the present value of anticipated costs for future restoration of leased premises and iron-sand mine operations in New Zealand. Recognising restoration and rehabilitation provisions across the Group requiresassumptions to be made as to the application of environmental legislation, site closure dates, available technologies andengineering cost estimates.These uncertainties may result in future actual expenditure differing from the amounts currentlyprovided.

(x) Legal claimsRecognising legal provisions requires judgement as to whether a legal claim meets the definition of a liability. There is aninherent uncertainty where the validity of claims are to be determined by the courts or other processes which may result infuture actual expenditure differing from the amounts currently provided.

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3 Segment information

(a) Description of segments

The Group has six reportable operating segments: Coated & Industrial Products Australia, Australia Distribution &Solutions, New Zealand & Pacific Steel Products, Coated & Building Products Asia, Hot Rolled Products North America,and Coated & Building Products North America.

Coated & Industrial Products AustraliaCoated & Industrial Products Australia includes the Port Kembla Steelworks, a steel making operation with a revisedannual production capacity of approximately 2.6 million tonnes of crude steel, following the closure of one of the two steelblast furnaces in October 2011. The Port Kembla Steelworks is the leading supplier of flat steel in Australia, manufacturingslab, hot rolled coil and plate products. The segment also comprises two main metallic coating and painting facilitieslocated in Springhill, New South Wales and Western Port, Victoria together with steel painting facilities in western Sydneyand Acacia Ridge, Queensland. Steel from the Port Kembla Steelworks is processed by these facilities to produce a rangeof COLORBOND® pre-painted steel and ZINCALUME® zinc/aluminium branded products.

Australia Distribution & SolutionsAustralia Distribution & Solutions contains a network of service centres and distribution sites from which it forms a keysupplier to the Australian building and construction industry, automotive sector, major white goods manufacturers andgeneral manufacturers. The operating segment also holds the Lysaght steel solutions business, providing a range ofLYSAGHT® branded products to the building and construction sector and BlueScope's water business containing rain-storage tank solutions.

New Zealand & Pacific Steel ProductsThe New Zealand Steel operation at Glenbrook, New Zealand, produces a full range of flat steel products for bothdomestic and export markets. It has an annual production capacity of approximately 0.6 million tonnes. The segment alsoincludes facilities in New Caledonia, Fiji and Vanuatu, which manufacture and distribute the LYSAGHT® range ofproducts.

Coated & Building Products AsiaCoated & Building Products Asia manufactures and distributes a range of metallic coated, painted steel products and pre-engineered steel building systems primarily to the building and construction industry and to some sections of themanufacturing industry across Asia.

Hot Rolled Products North AmericaHot Rolled Products North America includes a 50% interest in the North Star BlueScope Steel joint venture, a steel minimill in the United States and a 47.5% shareholding in Castrip LLC.

Coated & Building Products North AmericaCoated & Building Products North America includes the North American Buildings Group, which designs, manufacturesand markets pre-engineered steel buildings and component systems; Steelscape, producer of metal coated and paintedsteel coils; Metl-Span, manufacturer of insulated steel panels for commercial, industrial and cold-storage buildings; andASC Profiles, manufacturer of building components including architectural roof and wall systems and structural roof anddecking.

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3 Segment information (continued)

(b) Reportable segments

The segment information provided to the Managing Director and Chief Executive Officer for operating segments for thehalf-year ended 31 December 2011 is as follows:

Half-year2011

Coated &IndustrialProductsAustralia

AustraliaDistribution& Solutions

NewZealand &

Pacific SteelProducts

Coated &BuildingProducts

Asia

Hot RolledProducts

NorthAmerica


NorthAmerica

DiscontinuedOperations Total

$M $M $M $M $M $M $M $M

Total segment sales revenue 2,403.4 841.1 345.7 838.9 - 736.9 - 5,166.0Intersegment revenue (572.2) (1.1) (54.3) (4.6) - (4.0) - (636.2)

Revenue from external customers 1,831.2 840.0 291.4 834.3 - 732.9 - 4,529.8

Segment EBIT (463.0) (33.5) 33.8 47.2 20.1 (9.9) (0.5) (405.8)

Depreciation and amortisation 87.7 11.8 21.1 23.4 - 18.8 - 162.8Impairment (write-back) of non-currentassets - - - - 0.7 4.8 - 5.5Share of profit (loss) from associates andjoint venture partnerships - - 1.3 (4.8) 20.9 0.4 - 17.8

Total segment assets 3,573.0 866.2 601.8 1,213.1 95.5 976.8 0.2 7,326.6

Total assets includes:Investments in associates and jointventure partnerships - 2.9 7.4 39.8 95.1 0.9 - 146.1

Additions to non-current assets (otherthan financial assets and deferred tax) 45.9 3.1 32.0 10.6 - 6.9 - 98.5

Total segment liabilities 1,136.1 262.9 358.3 323.2 - 291.6 10.6 2,382.7

Half-year2010

Coated &IndustrialProductsAustralia

AustraliaDistribution& Solutions

NewZealand &

Pacific SteelProducts


Asia

Hot RolledProducts

NorthAmerica


NorthAmerica

DiscontinuedOperations Total

$M $M $M $M $M $M $M $M

Total segment sales revenue 2,501.6 866.5 330.3 739.7 - 674.6 - 5,112.7Intersegment revenue (450.7) (1.5) (50.6) (2.9) - (6.6) - (512.3)

Revenue from external customers 2,050.9 865.0 279.7 736.8 - 668.0 - 4,600.4

Segment EBIT (96.9) (92.4) 48.6 113.9 8.5 (16.5) 1.8 (33.0)

Depreciation and amortisation 100.0 15.2 18.2 20.5 - 20.5 - 174.4Impairment (write-back) of non-currentassets - 77.0 - (67.8) 1.0 - (1.0) 9.2Share of profit from associates and jointventure partnerships - - 1.1 (2.5) 9.7 0.2 - 8.5

Total segment assets 4,482.7 1,108.4 554.7 1,163.8 123.4 935.7 1.3 8,370.0

Total assets includes:Investments in associates and jointventure partnerships - 2.9 6.9 53.3 122.1 0.8 - 186.0

Additions to non-current assets (otherthan financial assets and deferred tax) 91.3 11.9 17.0 29.5 - 7.7 - 157.4

Total segment liabilities 901.0 292.2 154.6 296.5 - 244.1 11.5 1,899.9

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(c) Other segment information

(i) Segment revenue

Sales between segments are carried out at arm's length and are eliminated on consolidation.The revenue from externalparties is measured in a manner consistent with that in the statement of comprehensive income.

Segment revenue reconciles to total revenue from continuing operations as follows:

Half-year2011 2010$M $M

Total segment revenue 5,166.0 5,112.7Intersegment eliminations (636.2) (512.3)Other revenue 18.7 21.6Total revenue from continuing operations 4,548.5 4,622.0

(ii) Segment EBIT

Performance of the operating segments is based on EBIT.This measurement basis excludes the effects of interest andtaxes. Interest income and expense are not allocated to segments, as this type of activity is driven by the central treasuryfunction, which manages the cash position of the Group.

A reconciliation of total segment EBIT to operating profit from continuing operations before income tax is provided asfollows:


Total segment EBIT gain (loss) (405.8) (33.0)Intersegment eliminations 4.8 18.5EBIT (gain) loss attributable to discontinued operations 0.5 (1.8)Corporate operations (33.5) (33.8)Total EBIT gain (loss) from continuing operations (434.0) (50.1)Interest income 1.4 4.9Finance costs (70.4) (52.1)Profit (loss) before income tax from continuing operations (503.0) (97.3)

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(iii) Segment assets

Segment assets are measured in a manner consistent with that of the financial statements. These assets are allocatedbased on the operations of the segment and the physical location of the asset.

Cash is not considered to be a segment asset as it is managed by the Group's centralised treasury function.

As the segment information is focused on EBIT, deferred tax assets, which by their nature do not contribute towards EBIT,are not allocated to operating segments.

Reportable segment assets are reconciled to total assets as follows:

December2011

June2011

$M $M

Segment assets 7,326.6 7,616.1Intersegment eliminations (139.4) (186.0)Unallocated:

Cash 186.0 172.2Deferred tax assets 197.4 160.8Corporate operations 30.3 29.9

Total assets as per the statement of financial position 7,600.9 7,793.0

(iv) Segment liabilities

Segment liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocatedbased on the operations of the segment.

Liabilities arising from borrowing and funding initiatives are not considered to be segment liabilities due to these beingmanaged by the Group's centralised treasury function. As the segment information is focused on EBIT, tax liabilities, whichby their nature do not impact EBIT, are not allocated to operating segments.

Reportable segment liabilities are reconciled to total liabilities as follows:

December2011

June2011

$M $M

Segment liabilities 2,382.7 2,192.1Intersegment eliminations (131.8) (173.7)Unallocated:

Current interest bearing liabilities 119.4 165.7Non-current interest bearing liabilities 862.5 1,074.2Current tax liabilities 8.1 23.1Deferred tax liabilities 39.1 69.1Accrued borrowing costs payable 9.6 11.0Corporate operations 34.6 35.4

Total liabilities as per the statement of financial position 3,324.2 3,396.9

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4 Other income and expenses


Profit (loss) before income tax includes the following specific income andexpenses for continuing operations:

Other incomeSTP Government Grant (a) 66.1 -Net foreign exchange gains 2.0 -Litigation settlement - 0.7

Total other income 68.1 0.7

Impairment of non-current assetsBlueScope Buildings North America impairments (b) 4.8 -BlueScope Distribution goodwill (c) - 77.0China coating line reversal (d) - (67.8)Castrip joint venture 0.7 1.0

Total impairment of non-current assets 5.5 10.2

Restructuring costs (e) 363.6 0.4

Inventory net realisable value expense (write-back)During the six month period to 31 December 2011 a $77.0M expense was recognised in connection to the write-down ofinventories to net realisable value as a result of an expected decline in future selling prices (31 December 2010: $59.4M).

(a) Steel Transformation Plan Government Grant A $100M advance payment under the Federal Government Steel Transformation Plan (STP) was approved for payment on21 December 2011.The STP was established to encourage investment, innovation and competitiveness in the AustralianSteel manufacturing industry. In accordance with the requirements of AASB 120 'Accounting for Government Grants andDisclosure of Government Assistance', the $100M STP advance payment has been recognised over the 2012 financialyear in line with the related costs which it is intended to compensate.

(b) BlueScope Buildings North America impairmentsIn order to further align BlueScope Buildings North America production capacity with market demand, the frame productionat San Marcos facility has been idled and the Arlington plant permanently closed, with the remaining production diverted to the Visalia facility. The fixed assets impaired as a result of this restructure totals $4.8M, $0.9M recorded againstleasehold improvements and $3.9M recorded against plant and equipment.

(c) Impairment - BlueScope Distribution goodwillAt 31 December 2010, the Australia Distribution & Solutions segment impaired $77.0M of goodwill in relation to itsDistribution business acquired from Smorgon Steel in August 2007. An additional goodwill impairment of $100.2M wasrecorded at 30 June 2011. These impairments were due to a revised medium-term outlook influenced by reduced marketdemand and increased import competition driving margins lower.

(d) Reversal - China coating lineThe Coated & Building Products Asia segment has partially reversed impairments previously recognised for plant &equipment at the metallic coating and painting facility in Suzhou, China. Previously booked impairment losses have beenreversed to the extent of $67.8M following prolonged improvements in coated product margins.

Refer to note 2(i) for the key estimates and assumptions used for impairment testing.

(e) Restructuring costsThe current year restructuring costs includes $347.8M for incurred and estimated future costs arising from the closure ofthe No. 6 Blast furnace at Port Kembla and other equipment to reflect the reduced ironmaking capacity, as announced tothe market on 22 August 2011. The remaining current year restructuring costs relate to our Coated and Buildings NorthAmerica segment and BlueScope Distribution to better align cost structures to market demand.

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5 Income tax

2011 2010$M $M

Disclosure of tax effects relating to each component of other comprehensiveincome:

Gain on cash flow hedges taken to equity - (0.1)Actuarial (gain) loss on defined benefit superannuation plans 55.3 (20.5)Net (gain) loss on hedges of net investments in subsidiaries (4.5) (3.9)

50.8 (24.5)

As at 31 December 2011, $203.9M of Australian deferred tax assets generated during the period, mainly in relation toexport losses and restructure costs, have been impaired with $20.0M of this amount being directly against retainedearnings, due to actuarial losses from the Australian Defined Benefit Superannuation Plan. Australian AccountingStandards impose a stringent test for the recognition of a deferred tax asset arising from unused tax losses where there isa history of recent tax losses. The Company has deferred the recognition of any further tax asset for the Australian taxgroup until a return to taxable profits has been demonstrated. Australian tax losses are able to be carried forwardindefinitely.

The Australian Taxation Office (ATO) is conducting a specific issue audit on the sale and leaseback transaction that wasentered into by the Company in August 2006. Whilst the final outcome of the audit is uncertain, the ATO has formed apreliminary view that the general anti-avoidance provisions of the Australian tax laws (Part IVA) apply to the transaction.The Company is working with the ATO to provide information that demonstrates the general anti-avoidance provisions donot apply. No provision has been recognised in the interim financial report.

6 Equity securities issued

Six-months to31 Dec 2011




Shares Shares $M $M

Issues of ordinary shares during the half-yearOpening balance 1,842,207,385 1,823,322,017 4,073.8 4,032.4Dividend reinvestment plan - shareholders (i) - 18,839,253 - 41.2Exercise of share rights under the Long TermIncentive Plan (ii) - 17,000 - 0.1General Employee Share Plan issues (iii) 27,371 29,115 0.2 0.3Share plan retention awards (iv) 6,935,600 - 11.3 -Capital raising (v) 1,500,014,891 - 600.0 -Transaction costs on capital raisings (v) - - (22.6) -

3,349,185,247 1,842,207,385 4,662.7 4,074.0

Movements in treasury shares during the half-yearShare plan retention awards (iv) (11.3) -Net movement (4,651.4) 4,074.0

(i) Dividend Reinvestment PlanThe Dividend Reinvestment Plan enables shareholders to receive some or all of their future dividends as ordinaryBlueScope Steel Limited shares instead of cash.

(ii) Long Term Incentive PlanThe Long Term Incentive Plan is an award of share rights to eligible employees.The full details of the operation of theseplans are detailed in the June 2011 Remuneration Report.

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6 Equity securities issued (continued)

(iii) General Employee Share PlansThe aim of General Employee Share Plans is, in recognition of Company performance, to assist employees to build astake in the Company by enabling each eligible employee to acquire a parcel of shares. Employees who becomeshareholders have the potential to benefit from dividends paid on the shares, growth in the market value of their sharesand any bonus shares or rights issues the Board of Directors may approve from time to time.

As at 31 December 2011, there was no general employee share plans outstanding.

(iv) Retention share awardsShare based retention schemes were put in place with shares issued and held on trust for three years and are subject toforfeiture should an employee leave.

(v) Capital raisingOn 22 November, BlueScope Steel Limited announced a fully underwritten four-for-five accelerated renounceableentitlement offer with rights trading of new BlueScope Steel shares at an offer price of $0.40 per new share, which raised$600.0M ($577.4M, net of transaction costs).

7 Discontinued operations

(a) Description

In June 2007, the Group closed its loss-making tinplate manufacturing operation, which was the major component of itsPackaging Products cash-generating unit.

Following a series of construction contract losses in the financial year 2006, the Group closed down and sold the assets ofits Lysaght Taiwan business.

The financial information for these operations identified as discontinued operations is set out below and is reported in thisfinancial report as discontinued operations.

(b) Financial performance of discontinued operations

The results of discontinued operations for the half-year are presented below.

ConsolidatedSix-months to 31 Dec 2011 Six-months to 31 Dec 2010

PackagingLysaghtTaiwan Total Packaging

LysaghtTaiwan Total

$M $M $M $M $M $M

Revenue - - - - - -Expenses other than finance costs - (0.5) (0.5) - 0.8 0.8Impairment reversal (i) - - - 1.0 - 1.0Finance costs - (0.1) (0.1) - (0.2) (0.2)Gross profit/(loss) - (0.6) (0.6) 1.0 0.6 1.6

Income tax (expense) benefit - - - (0.3) - (0.3)Profit (loss) after income tax from discontinuedoperations - (0.6) (0.6) 0.7 0.6 1.3

(i) Reversal of impairment loss

In December 2010, Packaging Products recognised an impairment reversal of $1.0M against property, plant andequipment after securing a contract for the sale of the previously impaired Coil Temper Mill.

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8 Non-current liabilities - Retirement benefit obligations

(a) Defined benefit funds to which BlueScope Steel employees belong

December 2011 BlueScope SteelSuperannuation

Fund

New ZealandPension Fund

Coated &Building

Products NorthAmerica

Total

$M $M $M $M

Present value of the defined benefit obligation (465.5) (432.8) (368.6) (1,266.9)Fair value of defined benefit plan assets 363.5 222.2 272.5 858.2

Net (liability) asset in the statement offinancial position

(102.0) (210.6) (96.1) (408.7)

Defined benefit expense (half-year) 4.2 4.1 0.0 8.3Employer contributions (half-year) 8.2 8.1 5.8 22.1

Principal net liability actuarial assumptions % % %Discount rate (gross of tax) 3.7 3.8 4.6Expected return on plan assets (net of tax) 7.0 6.3 7.0Future salary increases 3.5 4.0 4.0

June 2011 BlueScope SteelSuperannuation

Fund

New ZealandPension Fund

Coated &Building

Products NorthAmerica

Total

$M $M $M $M

Present value of the defined benefit obligation (484.3) (307.4) (301.8) (1,093.5)Fair value of defined benefit plan assets 445.0 234.2 243.6 922.8

Net (liability) asset in the statement offinancial position

(39.3) (73.2) (58.2) (170.7)

Defined benefit expense (full year) 10.0 8.8 1.4 20.2Employer contributions (full year) 16.4 14.3 28.0 58.7

Principal net liability actuarial assumptions % % %Discount rate (gross of tax) 5.3 5.1 5.5Expected return on plan assets (net of tax) 7.5 6.3 7.5Future salary increases 3.5 4.0 4.0

The net liability is not immediately payable.The expected rate of return on assets has been based on historical and futureexpectations of returns for each of the major categories of asset classes as well as the expected and actual allocation ofplan assets to these major categories.

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8 Non-current liabilities - Retirement benefit obligations (continued)

(b) Reconciliations

Six-monthsending

31 December

Twelve-monthsending

30 June2011 2011$M $M

Reconciliation of the present value of the defined benefit obligation, which is partlyfunded:Opening balance 1,093.5 1,126.8Current service cost 12.8 26.3Interest cost 28.1 53.7Actuarial losses (gains) 219.9 38.3Foreign currency exchange rate changes 11.7 (91.4)Benefits paid (96.1) (54.2)Allowance for contributions tax on net liability (2.5) (4.0)Loss (gains) on curtailments - (0.4)Other (0.5) (1.6)Closing balance 1,266.9 1,093.5

Reconciliation of the fair value of plan assets:Opening balance 922.8 896.7Expected return on plan assets 32.2 57.0Actuarial gains (losses) (29.9) 33.4Foreign currency exchange rate changes 9.6 (65.6)Contributions by the Group 22.1 58.7Tax on employer contributions (3.9) (6.5)Contributions by plan participants 2.4 4.9Benefits paid (96.1) (54.2)Other (1.0) (1.6)Closing balance 858.2 922.8

(c) Amounts recognised in profit or loss

The amounts recognised in profit or loss in respect of defined benefit plans are as follows:

Current service cost 12.8 26.3Contributions by plan participants (2.4) (4.9)Interest cost 28.1 53.7Expected return on plan assets (32.2) (57.0)Allowance for contributions tax on net liability 1.4 2.5Losses (gains) on curtailments and settlements - (0.4)Other 0.6 -Total included in employee benefits expense 8.3 20.2

Actual return on plan assets 2.3 90.4

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9 Dividends


(a) Ordinary shares

Dividends provided for or paid during the half-year - 91.2

A dividend reinvestment plan is established to enable shareholders to receive some or allof their future dividends as ordinary BlueScope Steel Limited shares instead of cash.

Dividends provided for or paid during the half-yearPaid in cash - 49.9Satisfied by issue of shares - 41.3

- 91.2

(b) Dividends not recognised at the end of the half-year

For the half-year ended 31 December 2011 the directors recommended that will be nointerim dividend declared (December 2010: 2 cents, fully franked at 30%). - 36.8

10 Contingencies

(a) Contingent liabilities and assets

Since the last annual reporting date, there have been no material changes of any contingent liabilities or contingentassets.

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11 Earnings per share

Half-year2011 2010Cents Cents

(a) Basic earnings (loss) per share

From continuing operations attributable to the ordinary equity holders of the Company (26.6) (2.6)From discontinued operations - 0.1Total basic earnings (loss) per share attributable to the ordinary equity holders of theCompany (26.6) (2.5)

(b) Diluted earnings (loss) per share

From continuing operations attributable to the ordinary equity holders of the Company (26.5) (2.6)From discontinued operations - 0.1Total diluted earnings (loss) per share attributable to the ordinary equity holders of theCompany (26.5) (2.5)

(c) Reconciliation of earnings used in calculating earnings (loss) per shareHalf-year

2011 2010$M $M

Basic and diluted earnings per shareProfit (loss) attributable to the ordinary equity holders of the Group used in calculatingearnings per share:

From continuing operations (529.8) (55.9)From discontinued operations (0.6) 1.3

(530.4) (54.6)

(d) Weighted average number of shares used as the denominatorHalf-year

2011 2010Number Number

Weighted average number of ordinary shares used in calculating basic earningsper share 1,995,592,622 2,164,570,189Adjustments for calculation of diluted earnings per share:

Weighted average number of share rights 4,013,621 16,449Weighted average number of ordinary shares and potential ordinary shares used as thedenominator in calculating diluted earnings per share

1,999,606,243 2,164,586,638

(e) Earnings per share restated

In accordance with AASB 133 Earnings per Share, the comparative earnings per share calculations have been restated forthe bonus element of the four-for-five share rights issue undertaken in December 2011. The previously reported December2010 weighted average number of shares has been adjusted by a factor of 1.1823 being the market price of one ordinaryshare at the close of the last day at which the shares traded together with the rights $0.61, divided by the theoretical ex-rights value per share of $0.52.

12 Events occurring after the balance sheet date

The $100M advance payment under the Federal Government Steel Transformation Plan (STP), which was approved forpayment on 21 December 2011, was received by the Company on 13 January 2012. The STP was established toencourage investment, innovation and competitiveness in the Australian steel manufacturing industry.

There were no other significant events that have arisen subsequent to 31 December 2011 and up until the date of thisreport.

-26-

BlueScope Steel LimitedDirectors' declaration

31 December 2011

Directors' declaration

In the directors’ opinion:

(a) the financial statements and notes set out on pages 8 to 26 are in accordance with the Corporations Act 2001,including:

(i) complying with AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and othermandatory professional reporting requirements; and

(ii) giving a true and fair view of the consolidated entity's financial position as at 31 December 2011 and ofits performance, as represented by the results of its operations and its cash flows, for the half-yearended on that date; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they becomedue and payable.

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

G J Kraehe, AOChairman

P F O'MalleyManaging Director & CEO

Melbourne20 February 2012

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-28- Liability limited by a scheme approved under Professional Standards Legislation

To the Members of BlueScope Steel Limited

Review Report on Interim Financial Report We have reviewed the accompanying interim financial report of BlueScope Steel Limited, which comprises the statement of financial position as at 31 December 2011, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a statement of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

Directors’ Responsibility for the Interim Financial Report The directors of the company are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the interim financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of Interim and Other Financial Reports Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of BlueScope Steel Limited and the entities it controlled during the half-year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the Directors’ Report.

Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of BlueScope Steel Limited is not in accordance with the Corporations Act 2001, including:

a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and

b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Ernst & Young

Rodney Piltz Partner Melbourne 20 February 2012

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