CHAIRMAN'S MESSAGE
FROM GRAHM KRAHE
Once again, BlueScope Steel has emphasised its commitment to shareholders
The 2007/08 financial year was an excellent one for BlueScope Steel. Our businesses in Australia, New Zealand, Asia and North America all performed well, meeting the various challenges that occurred in these markets.
World steel demand was strong and prices remained high during the year, which offset rising raw material costs. Our underlying net profit after tax (NPAT) of $816 million represents a 27 per cent increase over 2006/07, while our strategy and domestic and international acquisitions see us well positioned for future growth.
Leadership
In August 2007, Paul O’Malley was appointed CEO, following a rigorous selection process, which included an international search.
The task of appointing a CEO is one of the most important functions of the Board of Directors and the appointment of Paul O’Malley was managed in a most effective manner. The transition of leadership was seamless and BlueScope Steel continued operating smoothly throughout the process, as evidenced in its strong performance in 2007/08.
Shareholder value
BlueScope Steel again emphasised its strong tradition and commitment to rewarding shareholders. The Company paid a total ordinary dividend of 49 cents per share, fully franked, up 2 cents on the previous year. Underlying earnings per share was $1.10, up from 89 cents in 2007. Since BlueScope Steel’s public listing, nearly $2.7 billion, or $3.64 per share, has been returned to shareholders in the form of share buybacks and dividends. We are also pleased to see that today more than 90 per cent of BlueScope Steel employees are shareholders of the Company.
During the year, the Board supported senior management in executing the growth strategy through two significant acquisitions. In August 2007, we announced the purchase of the Smorgon Steel Distribution business at a cost of $750 million. This move has greatly increased our presence in the Australian market.
In February, we acquired the North American steel group, IMSA Steel Corp, for US$730 million.
IMSA Steel Corp comprises four distinct businesses with manufacturing facilities throughout the United States and sales throughout North America. This acquisition reflects our growth strategy and will greatly strengthen our downstream presence in North America, making us the global leader in the pre-engineered building market. Both acquisitions increase the market presence of BlueScope Steel, providing greater scope and reach for its products and solutions. BlueScope is not exposed to the US residential housing market.
STrategic direction
In November, following Paul O’Malley’s appointment, the Company launched its new Blueprint strategy. This strategy focuses on reinvigorating our Australian and New Zealand businesses, continuing to improve our Asia and North America businesses, and growing or acquiring new businesses that build on BlueScope Steel's competitive advantage. The Blueprint places strong emphasis on customer relationships, operational excellence,
shareholder value, innovation and sustainability while maintaining our focus on safety.
It defines our way forward and will build a Company that is even more streamlined and efficient. The Blueprint is already serving BlueScope Steel well, and represents an excellent guide to building long-term value.
Corporate citizenship
The Board and management of BlueScope Steel are committed to playing our part to address the issue of climate change. We are extremely conscious of our responsibilities as global citizens.
However, we are also aware that around 80 per cent of the greenhouse gas emitted is a direct result of the chemical processes of steelmaking, and this is common to all steelmaking companies around the world. Reducing direct emissions will require a major technology breakthrough and is a long-term project. BlueScope Steel is participating in international research efforts, including with the International Iron and Steel Institute, to find new breakthrough technology.
Throughout the year, we have been actively engaged on policy matters with the Australian and New Zealand Governments, so that steelmaking in these countries is not made uncompetitive against other international steelmakers who all have a similar carbon emissions profile.
In the immediate term, our focus is on reducing the 20 per cent of emissions from processes which we can control, for example in our use of energy. During the year, the feasibility study into the co-generation project at the Port Kembla Steelworks progressed. While the project has the potential to offset approximately 800,000 tonnes of greenhouses gases each year, the Company requires a framework of regulatory support before we can invest the $1 billion-plus required to develop this project.
The Company has also continued to improve water efficiency, with Port Kembla Steelworks increasing the amount of recycled water it uses. At Western Port, work is commencing on a project that will deliver major reductions in fresh water use and waste water discharge.
Governance
BlueScope Steel is committed to the highest standards of corporate governance and we comply with the ASX Corporate Governance Principles and Recommendations.
Our current board, with the exception of Daniel Grollo, has been in place for five years. We recently announced the appointment of a new director, Mr Doug Jukes, with effect from 20 October 2008 as part of our ongoing process of regeneration and continued broadening of the Board’s expertise. Our Board brings great breadth of experience to the Company and I thank my fellow directors for their hard work.
On behalf of the Board of Directors, I congratulate Paul O’Malley on his first year as CEO of BlueScope Steel. I thank the senior management team and our 21,000 employees for their excellent operational and financial performance and their continued focus on Zero Harm.
GRAHAM KRAEHE AO CHAIRMAN
