Search Annual Report
YOU ARE HERE: Annual Report 2004 > Reports > Concise Financial Report
Note 1. Basis Of Preparation Of The Concise Financial Report
Note 6. Movements In Ordinary Share Capital
Note 8. Events Occurring After Reporting Date
NOTE 1. BASIS OF PREPARATION OF THE CONCISE FINANCIAL REPORT
The Concise Financial Report has been prepared in accordance with the requirements of the Corporations Act 2001 and Accounting Standard AASB 1039 'Concise Financial Reports'.
The Concise Financial Report relates to the consolidated entity incorporating the assets and liabilities of all entities controlled by BlueScope Steel Limited as at 30 June 2004 and the results of all controlled entities for the year then ended. The accounting policies adopted are consistent with those of the previous year.
CHANGES IN ACCOUNTING POLICIES
AASB 1028 'Employee Benefits' (applicable from 1 July 2002)
Under this revised Standard, the liability for wages and salaries, annual leave and other employee entitlements to be settled within the next 12 months are recognised in the financial statements at remuneration rates at which they are expected to be settled, rather than at wage and salary rates current as at reporting date. The adjustments to the prior year consolidated financial statements as a result of the changes in AASB 1028 were:
- $4.0 million increase in provision for employee benefits
- $1.2 million increase in deferred taxes
- $2.8 million decrease in opening retained profits.
ROUNDING OF AMOUNTS
The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in financial reports. Amounts in the Concise Financial Report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars.
a. International Financial Reporting Standards (IFRS)
The Australian Accounting Standards Board (AASB) is adopting Australian equivalents to IFRS for application to reporting periods beginning on or after 1 January 2005. The adoption of Australian equivalents to IFRS will be first reflected in the consolidated entity's financial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006.
Entities complying with Australian equivalents to IFRS for the first time will be required to restate their comparative financial statements to amounts reflecting the application of IFRS to that comparative period. Most adjustments required on transition to IFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004.
BlueScope Steel Limited has commenced transitioning its accounting policies and financial reporting from current Australian Standards to Australian equivalents to IFRS. The company engaged its external auditors, Ernst & Young, to perform a diagnostic to isolate key areas that will be impacted by the transition to IFRS. This assessment has formed the basis of structuring the IFRS conversion project within the company. The release of the Australian equivalents to IFRS has enabled specific information to be gathered on the impact on accounting systems, future results, accounting policies and procedures.
Although the Company has not quantified the impacts on the financial statements, the transition is currently on schedule. Updates of the Company's IFRS implementation plan are provided to the Audit and Risk Committee.
Major changes identified to date that will be required to the Company's existing accounting policies include the following:
i. Employee benefits
Under AASB 119 'Employee Benefits', employer sponsors are required to recognise the net deficit in employer sponsored defined benefit funds as a liability. This will result in a change in the Group's current accounting policy in which a liability is only recognised where a legal obligation exists. The Company has defined benefit superannuation plans with deficits in Australia and New Zealand that will require an actuarially determined liability to be recorded. The company also has combined deficits in defined benefit superannuation plans in North America, however due to existing legal requirements relating to these funds, a liability has already been recognised.
The liability to be recognised under AASB 119 would be higher than the deficits disclosed in note 37 of the full Financial Report. AASB 119 requires the deficit to be grossed up for employer contributions tax (Australia 15%, New Zealand 33%) and for the accrued benefits disclosure to be discounted using a government bond rate. At present, the accrued benefits liability is discounted using the expected return on the fund assets which typically is a higher rate than the government bond rate.
ii. Income tax
Under AASB 112 'Income Taxes', the company will be required to use the balance sheet liability method. This method focuses on the tax effect of transactions and other events that affect amounts recognised in either the statement of financial position or a tax-based balance sheet. The impact of this requirement on the opening 1 July 2004 balance sheet is not expected to be significant.
Under current Australian Accounting Standards income tax losses can only be brought to account as an asset if they are considered virtually certain of realisation. AASB 112 requires income tax losses to be brought to account as an asset if they are probable of realisation. Probable is defined as more likely than not. The Group's unbooked tax losses shown in note 5(b) of the full Financial Report, will be assessed for recognition using the less stringent probable of realisation test.
iii. Impairment of assets
AASB 136 'Impairment of Assets' determines the recoverable amount of cash generating assets by assessing the higher of fair value less costs to sell and value in use. In determining value in use, future cash flows are to be discounted using a risk adjusted pre tax discount rate. Cash generating units (CGUs) are described as the smallest group of assets that generate cash flows from continuing use that are largely independent.
The BlueScope Steel Group currently assesses the recoverable value of income generating units (IGUs) using future cash flows discounted at a pre tax company-wide discount rate. IGUs are defined as a groups of assets working together to generate cash flows. The concept of CGUs will require certain assets to be assessed for recoverability on a stand alone basis rather than being grouped into an IGU. As a result, an impairment may be identified through the use of a CGU approach compared to an IGU approach.
The risk adjusted discount rate required by AASB 136 requires inclusion of a country risk premium. Therefore, certain BlueScope Steel assets' future cash flows will be discounted at higher rates, increasing the possibility of asset impairment being taken through the statement of financial performance.
iv. Share based payments
Under AASB 2 'Share Based Payments', the company will be required to recognise an expense in the statement of financial performance for the fair value of share rights granted to employees as remuneration. It applies to all share rights issued after 7 November 2002 which have not vested as at 1 January 2005. BlueScope Steel Limited issues share rights to senior executives in the organisation as part of its remuneration strategy which focuses on performance and accountability and aligning performance-related reward with the value delivered to shareholders. The fair values and other details, including the expense that would otherwise have been recognised, on all outstanding share rights granted by the company are disclosed in note 33 of the full Financial Report.
AASB 2 will only apply in respect to the September 2003 share rights granted and any future grants. The fair value of these grants are to be expensed over the expected vesting period with a corresponding increase in share capital. No tax deduction is allowed for the amount expensed.
In addition, the Company announced its intention to award 150 shares at nil cost to approximately 16,000 BlueScope Steel employees in September 2004. Under AASB 2 the fair value of this issue will be required to be expensed in the year ended 30 June 2005, whereas under the current Australian Accounting Standards the shares are issued at nil cost and no expense is recognised.
v. Goodwill
Under AASB 3 'Business Combinations', goodwill will no longer be able to be amortised but instead will be subject to annual impairment testing. This will result in a change in the Group's accounting policy which currently amortises goodwill over its useful life not exceeding 20 years. Under the new policy, amortisation will no longer be charged, but goodwill will be written down to the extent it is impaired. The impact on the Company's reported results is not expected to be material given the amount of goodwill currently recorded in the financial statements (refer note 17 of the full Financial Report).
vi. Classification of financial instruments
Under AASB 139 'Financial Instruments: Recognition and Measurement', financial assets are only able to be derecognised where an entity transfers substantially all the risks and rewards of ownership of the financial asset. The Company's sale of receivable program does not currently meet the requirement of substantially transferring all of the risk and rewards of ownership. As a result, the sale of receivables program will be recorded as a liability rather than an offset against trade debtors (refer note 7 of the full Financial Report).
vii. Hedge accounting
Under AASB 139 'Financial Instruments: Recognition and Measurement', in order to achieve a qualifying hedge, the Company is required to meet the following criteria:
- Identify the type of the hedge;
- Identify the hedged item or transaction;
- Identify the nature of the risk being hedged;
- Identify the hedging instrument;
- Demonstrate that the hedge has and will continue to be effective; and
- Document the hedging relationship.
The impact of this standard is not expected to have a material impact on the financial statements of the Company given the low level of hedging activity currently undertaken (refer note 32 of the full Financial Report).
The above should not be regarded as a complete list of changes in accounting policies that will result from the transition of Australian equivalents to IFRS, as not all standards have been analysed in detail, and some decisions have not been made where specific accounting policy elections are available.
NOTE 2. SEGMENT INFORMATION
BUSINESS SEGMENTS
The consolidated entity has five business reporting segments: Hot Rolled Products, Coated and Building Products Australia (formerly Coated Products Australia), New Zealand Steel, Coated and Building Products Asia (formerly Coated Products Asia) and Coated and Building Products North America.
On 3 July 2002, BlueScope Steel Limited acquired BlueScope Steel (AIS) Pty Ltd from the BHP Billiton Group. The operating assets of BlueScope Steel (AIS) Pty Ltd includes Port Kembla Steel Works, Packaging Products and New Zealand Steel. For accounting purposes, the effective acquisition date was 1 July 2002 and therefore the financial results for the previous corresponding 12 month period to 30 June 2003 reflects a full year's results.
HOT ROLLED PRODUCTS
Hot Rolled Products includes the Port Kembla Steelworks, a steel making operation with an annual production capacity of 5.1 million tonnes of crude steel. The Port Kembla Steelworks manufactures and distributes slab, hot rolled coil and plate. Slab and hot rolled coil is supplied to Coated and Building Products Australia for further processing, as well as to other domestic and export customers.
The segment also includes a 50% interest in the North Star BlueScope Steel joint venture, a steel mini-mill in the United States, and a 47.5% shareholding in Castrip LLC.
COATED AND BUILDING PRODUCTS AUSTRALIA
Coated and Building Products Australia (formerly Coated Products Australia) markets a range of products and material solutions to the Australian building and construction industry and is also a key supplier to the Australian automotive sector, major white goods manufacturers and general manufacturers. Coated and Building Products Australia is a leader in metallic coating and painting technologies supplying a wide range of branded products such as COLORBOND pre-painted steel, ZINCALUME zinc/aluminium alloy-coated steel and the LYSAGHT range of building products. The Coated and Building Products business comprises two main production facilities at Springhill in New South Wales and Western Port in Victoria together with a network of manufacturing and distribution facilities throughout Australia.
The segment also includes Packaging Products, an operation producing tinplate and blackplate in Australia which are used by the packaging industry in applications for food, beverages, paint, oil and other steel packaging.
COATED AND BUILDING PRODUCTS NORTH AMERICA
On 27 April 2004, BlueScope Steel Limited acquired Butler Manufacturing Company, a leading designer and manufacturer of pre-engineered steel building systems for the non-residential market in North America, with six manufacturing plants across the US and Mexico.
Butler has two main North American divisions: the North American Buildings Group, which designs, manufactures and markets pre-engineered steel buildings and component systems; and Vistawall, which manufactures and sells extruded aluminium and glass products for the building and construction sector.
COATED AND BUILDING PRODUCTS ASIA
Coated and Building Products Asia (formerly Coated Products Asia) manufactures and distributes a range of metallic coated and painted steel products primarily to the building and construction industry and to some sections of the manufacturing industry across Asia and the Pacific.
On 27 April 2004, BlueScope Steel Limited acquired the Butler Manufacturing Company, which includes BlueScope Butler China, a business which designs, manufacturers and markets pre-engineered steel building systems and components across China. In addition, Vistawall has operations in China which manufacture and sell extruded aluminium and glass products for the building and construction sector.
NEW ZEALAND STEEL
The New Zealand Steel operations at Glenbrook, New Zealand, produces a full range of flat steel products for both domestic and export markets. It has an annual production capacity of 0.6 million tonnes.
CORPORATE AND GROUP
Corporate and Group relates primarily to logistics, export trading and corporate activities
INTERSEGMENT PRICING AND SEGMENT ACCOUNTING POLICIES
Intersegment sales are made on a commercial arm's-length basis. Segment accounting policies are the same as the consolidated entity's policies outlined in the full Financial Report.
PRIMARY REPORTING - BUSINESS SEGMENTS
|
Hot Rolled Products1a |
New Zealand Steel |
Coated and Building Products Australia |
Coated and Building Products Asia |
Coated and Building Products North America |
Corporate and Group |
Consolidated | |
| 2004
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
| Sales to external customers |
1,268.6 |
484.7 |
2,742.3 |
673.8 |
191.1 |
377.6 |
5,738.1 |
| Intersegment sales |
1,462.9 |
75.5 |
141.2 |
15.3 |
0.4 |
291.4 |
1,986.7 |
| Intersegment elimination |
(1,986.7) | ||||||
| Total sales revenue |
2,731.5 |
560.2 |
2,883.5 |
689.1 |
191.5 |
669.0 |
5,738.1 |
| Other revenue |
4.7 |
1.3 |
3.2 |
11.5 |
2.0 |
9.5 |
32.2 |
| Intersegment elimination |
|
|
|
|
|
|
(0.7)
|
| Total other revenue |
4.7
|
1.3
|
3.2
|
11.5
|
2.0
|
9.5
|
31.5
|
| Total segment revenue |
2,736.2
|
561.5
|
2,886.7
|
700.6
|
193.5
|
678.5
|
5,769.6
|
| Segment result |
565.1 |
58.5 |
196.7 |
100.2 |
(8.8) |
(61.7) |
850.0 |
| Intersegment elimination |
|
|
|
|
|
|
(32.1)
|
| Total segment result |
565.1
|
58.5
|
196.7
|
100.2
|
(8.8)
|
(61.7)
|
817.9 |
| Unallocated revenue less unallocated expenses |
(14.5)
| ||||||
| Profit from ordinary activities before income tax expense |
803.4 | ||||||
| Income tax expense |
(201.6)
| ||||||
| Net profit |
601.8
| ||||||
| Segment assets |
2,311.8
|
520.9
|
1,684.0
|
822.7
|
518.9
|
124.2
|
5,982.5 |
| Unallocated assets2a |
124.7 | ||||||
| Intersegment elimination |
(325.1)
| ||||||
| Total assets |
5,782.1
| ||||||
| Segment liabilities |
452.6
|
92.8
|
428.7
|
203.3
|
286.9
|
147.8
|
1,612.1 |
| Unallocated liabilities2a |
1,225.6 | ||||||
| Intersegment elimination |
(249.2)
| ||||||
| Total liabilities |
2,588.5
| ||||||
| Investments in associates and joint venture partnership |
232.1
|
-
|
-
|
-
|
4.2
|
-
|
236.3
|
| Acquisition of property, plant and equipment intangibles and other non-current segment assets3a |
64.5
|
26.5
|
104.2
|
164.1
|
176.0
|
4.0
|
539.3
|
| Depreciation and amortisation expense |
127.8
|
35.4
|
93.6
|
22.3
|
3.6
|
4.0
|
286.7
|
| Other non-cash expenses |
0.4
|
(1.0)
|
1.6
|
1.2
|
0.2
|
(0.9)
|
1.5
|
1a. The Hot Rolled Products segment results includes $71.1 million share of net profits of joint venture partnership.
2a. External borrowings, sale of receivables program, cash and tax balances are classified as unallocated.
3a. Includes property, plant and equipment acquired on 27 April 2004 from the purchase of the Butler Manufacturing Company for $186.1 million.
This is reflected in the Coated and Building Products North America and Asia segments.
PRIMARY REPORTING - BUSINESS SEGMENTS CONTINUED
|
Hot Rolled Products1b |
New Zealand Steel |
Coated and Building Products Australia |
Coated and Building Products Asia |
Corporate and Group |
Consolidated | |
| 2003
|
$M
|
$M
|
$M
|
$M
|
$M
|
$M
|
| Sales to external customers |
1,198.7 |
468.7 |
2,622.9 |
553.5 |
428.3 |
5,272.1 |
| Intersegment sales |
1,426.8 |
79.9 |
105.4 |
15.1 |
287.6 |
1,914.8 |
| Intersegment elimination |
(1,914.8) | |||||
| Total sales revenue |
2,625.5 |
548.6 |
2,728.3 |
568.6 |
715.9 |
5,272.1 |
| Other revenue |
6.3 |
2.0 |
6.9 |
6.7 |
6.2 |
28.1 |
| Intersegment eliminations |
|
|
|
|
|
1.9
|
| Total other revenue |
6.3
|
2.0
|
6.9
|
6.7
|
6.2
|
30.0
|
| Total segment revenue |
2,631.8
|
550.6
|
2,735.2
|
575.3
|
722.1
|
5,302.1
|
| Segment result |
471.2 |
44.4 |
118.5 |
84.0 |
(101.8) |
616.3 |
| Intersegment eliminations |
|
|
|
|
|
(5.2)
|
| Total segment result |
471.2
|
44.4
|
118.5
|
84.0
|
(101.8)
|
611.1 |
| Unallocated revenue less unallocated expenses |
(17.5)
| |||||
| Profit from ordinary activities before income tax expense |
593.6 | |||||
| Income tax expense |
(120.9)
| |||||
| Net profit |
472.7
| |||||
| Segment assets |
2,236.3
|
501.4
|
1,607.1
|
483.2
|
108.1
|
4,936.1 |
| Unallocated assets2b |
28.6 | |||||
| Intersegment elimination |
(211.6)
| |||||
| Total assets |
4,753.1
| |||||
| Segment liabilities |
396.5
|
78.0
|
399.0
|
79.3
|
138.3
|
1,091.1 |
| Unallocated liabilities2b |
738.6 | |||||
| Intersegment elimination |
(167.7)
| |||||
| Total liabilities |
1,662.0
| |||||
| Investments in associates and joint venture partnership |
151.6
|
-
|
-
|
-
|
-
|
151.6
|
| Acquisition of property, plant and equipment intangibles and other non-current segment assets3b |
1,898.4
|
346.5
|
49.2
|
40.3
|
10.8
|
2,345.2
|
| Depreciation and amortisation expense |
119.9
|
37.0
|
83.5
|
24.6
|
5.1
|
270.1
|
| Other non-cash expenses |
(0.9)
|
11.9
|
1.0
|
0.9
|
0.2
|
13.1
|
1b. The Hot Rolled Products segment result includes $69.2 million share of net profits of joint venture partnership.
2b. External borrowings, sale of receivables program, cash and tax balances are classified as unallocated.
3b. Includes property, plant and equipment acquired on 3 July 2002 from the purchase of BlueScope Steel (AIS) Pty Limited for $2,175.5 million.
This is primarily reflected in the Hot Rolled Products and New Zealand Steel reporting segments.
NOTE 3. REVENUE
|
2004 $M |
2003 $M | |
| Sale of goods |
5,614.5 |
5,144.6 |
| Services |
123.6 |
127.5 |
| Sales revenue |
5,738.1 |
5,272.1 |
| Other revenue |
31.5
|
30.0
|
| Total revenue |
5,769.6
|
5,302.1
|
NOTE 4. DIVIDENDS
|
2004 $M |
2003 $M | |
| Total dividends paid |
241.6
|
71.4
|
As at 30 June 2004, the Company's franking credits available for subsequent years is $148.0 million (2003: $85.3 million). The franking credits balance includes franking credits that are expected to arise from the payment of income tax payable as at the end of the financial year.
A fully franked final dividend of 13 cents ($100 million) and a fully franked special dividend of 7 cents ($53.8 million) per fully paid ordinary share was paid on 10 October 2003. A fully franked interim dividend of 12 cents per fully paid ordinary share was paid on 29 March 2004 ($87.9 million).
The Directors have declared a fully franked final dividend of 18 cents and a fully franked special dividend of 10 cents per fully paid ordinary share. The estimated final dividend payable of $131.8 million and the special dividend payable of $73.2 million, to be paid on 18 October 2004 (record date 5 October 2004), have not been recognised as a liability at 30 June 2004.
NOTE 5. EARNINGS PER SHARE
NOTE 7. RETAINED PROFITS
|
Notes |
2004 $M |
2003 $M | |
| Retained profits | |||
| Retained profits at the beginning of the financial year |
961.4 |
387.7 | |
| Net profit attributable to members of BlueScope Steel Limited |
584.1 |
451.7 | |
| Adjustment resulting from adoption of revised accounting standard AASB 1028 'Employee Benefits' |
- |
(2.8) | |
| Dividends paid |
(241.6) |
(71.4) | |
| Aggregate of amounts transferred from reserves |
(1.0)
|
196.2
| |
|
1,302.9
|
961.4
|
NOTE 8. EVENTS OCCURRING AFTER REPORTING DATE
PRIVATE PLACEMENT - DEBT
On 1 July 2004, the BlueScope Steel Group completed a debut debt raising in the US private placement market for US$300 million. These funds have been used to refinance existing borrowings including bridging finance utilised for the acquisition of Butler Manufacturing Company.
Of the US$300 million notes issued, US$100 million are due for repayment in 2011, and US$200 million are due in 2014.
HOT STRIP MILL UPGRADE
On 28 July 2004, the BlueScope Steel Group announced Board approval for investment of approximately $100 million to increase the nominal capacity of the Hot Strip Mill at Port Kembla Steelworks from 2.4 to 2.8 million tonnes per annum. The upgrade is expected to be completed in the first quarter of the 2006/07 financial year and will be undertaken in a manner that will minimise the impact on current plant operations.
NOTE 9. FULL FINANCIAL REPORT
Further financial information can be obtained from the full Financial Report which is available from the Company, free of charge, on request. A copy may be requested by contacting the Company's share registrar whose details appear in the Corporate Directory. Alternatively, both the full Financial Report and the Concise Financial Report can be accessed via the internet at: www.bluescopesteel.com
Email This Pagecontact us | terms and conditions | privacy policy
BlueScope Steel Limited ABN 16 000 011 058 BlueScope is a trademark of BlueScope Steel Limited