NORTH AMERICA

The 2007/08 financial year saw a greatly improved performance from our downstream businesses in North America, with Butler Buildings achieving an 11 per cent increase in sales volumes over the previous year. This outstanding result was particularly pleasing, given the contraction of the North American market during the year. The increased market share was due to high product quality and excellent delivery performance. Butler Buildings profit was at record levels, while major gains were also made in safety, with records set in Lost Time Injury and Medically Treated Injury Frequency Rates.

In February 2008, BlueScope Steel acquired the IMSA Steel Corp group of companies. This group comprises four distinct steel businesses withmanufacturing facilities throughout the United States and sales offices across North America.

Sales revenue for our downstream North America Coated and Building Products group increased 79 per cent to $1.407 billion, while EBIT was up 143 per cent to $90 million. This improvement reflects the additional revenue resulting from the IMSA acquisition, as well as the increased market share and greater efficiencies of Butler Buildings.

The earnings contribution of the IMSA Steel Corp group was better than expected, with EBIT of $26 million generated in the five months to 30 June 2008.

IMSA Steel Corp comprises Varco Pruden Buildings Inc. – a manufacturer of pre-engineered buildings (PEBs); Steelscape, Inc. – a producer of metal coated and painted steel coils; Metl-Span LLC – a manufacturer of insulated steel panels for commercial, industrial and cold storage buildings; and ASC Profiles Inc. – a manufacturer of building components including architectural roof and wall systems and structural roof and floor decking.

Since the acquisition we have focused on delivering value from the many opportunities created by the inclusion of these leading companies in the BlueScope Steel portfolio. For example, we have already converted the supply of all Steelscape’s hot rolled coil feedstock to Port Kembla Steelworks, and significantly increased sales of both Steelscape and Metl-Span products through the Butler and Varco Pruden builder networks. In addition, we are achieving the purchasing power synergies of a larger group of downstream businesses.

At our upstream, 50 per cent joint venture, North Star BlueScope Steel, records were achieved in safety and production performance. Production was up two per cent on 2007, which was also a record year. This was due to more efficient electric arc furnace operation, and production improvements following completion of the new baghouse. The second half saw improved financial performance as the spread between hot rolled coil selling prices and feedstock costs improved. For the sixth consecutive year, North Star BlueScope Steel was voted number one in the annual Jacobson Survey of steel customers measuring customer satisfaction.

Revenue was in line with the previous year’s result, while EBIT was down 32 per cent to $105 million, due to higher scrap costs, a stronger Australian dollar and higher electricity and alloy costs.

Our Castrip joint venture with Nucor continued its exciting journey in 2007/08. This innovative process involves casting a continuous thin strip of steel, directly from the furnace. During the year, Nucor’s Castrip plant at Crawfordsville, Indiana continued to ramp up production and our technical specialists gained a clearer understanding of the unique product attributes of steel produced by continuous strip casting. Construction of Nucor’s second Castrip plant at Blytheville, Arkansas is well advanced and due to be commissioned in December 2008.

Opportunities

In 2007/08, our North America businesses performed very well. The acquisition of the IMSA group of companies will provide many opportunities in the future, not least the combining of best practices from Varco Pruden Buildings and Butler Buildings to create the world’s leading PEB business. This will give us a much enhanced capability, offering our customers the best products and services and producing them more cost-effectively than anyone else. These capabilities can then be leveraged into our PEB businesses outside North America. We will also be introducing global BlueScope Steel knowledge into North America. For example, we have a high level of expertise in metal coating and painting that can be applied to our Steelscape operations, while our considerable knowledge of roll-formed products, gained through our Lysaght business, can be shared with ASC profiles.

In the 2008/09 financial year, we will continue to implement BlueScope Steel’s leading safety practices, aiming for a rapid improvement in the safety performance of our recently acquired businesses in North America. Our businesses will also be communicating the sustainable aspects of steel to our customers in the building sector. We will continue our efforts in the green buildings market, in keeping with increased demand for environmentally advanced building products. One example of this trend is the growing use of Metl-Span’s insulated panel products in commercial buildings. This application of thermally efficient steel building materials represents yet another opportunity for growth.

Our acquisition of the IMSA Steel Corp group provides a range of opportunities to combine best practices and derive additional value from our North America businesses. We are increasing sales between our business and ACHIEVING purchasing power SYNERGIES.