BlueScope Steel Limited ABN 16 000 011 058 Level 11, 120 Collins Street Melbourne VIC 3000 AUSTRALIA P +61 3 9666 4000 www.bluescope.com 24 September 2019 Company Announcements ASX Limited 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam, Re: BlueScope Steel Limited (BSL) FY2019 Annual Report Attached is a copy of the Annual Report for the year ended 30 June 2019 which is being sent to shareholders on 24 September 2019. Yours sincerely Debra Counsell Company Secretary BlueScope is a trademark of BlueScope Steel Limited ANNUAL REPORT 2018/2019 BlueScope Steel Limited ABN 16 000 011 058 CHAIRMAN’S MESSAGE BlueScope delivered another very good financial result in 2019 – our third year with back to back underlying Earnings Before Interest & Tax (EBIT) above $1.1 billion. This occurred despite some softening in commodity steel spreads and volumes in the second half and, of course, rising uncertainty in global markets caused by geopolitical factors and the US-China trade dispute. At the time of writing, 1H FY2020 outlook sees weaker commodity steel prices and spreads across our steelmaking businesses in the US, Australia and New Zealand. Accordingly we expect underlying EBIT around 45 per cent lower than 2H FY2019. This is the short term outlook, but we are now a very resilient global Company with a strong balance sheet and high quality assets which provide the capacity to withstand and potentially take advantage of tough cyclical conditions. BlueScope is very focused on generating returns above its cost of capital so we create value for shareholders. Your Company has delivered $1.14 billion in shareholder returns since FY2017 to June this year with up to a further $281 million in dividends and buy-back this half. Long term investment focus The United States is an attractive market for BlueScope, and the North Star BlueScope Steel facility in Delta, Ohio, is recognised as a best-in-class asset. After careful due diligence your Board has approved a US$700 million expansion of this successful business, subject to anticipated receipt of necessary air permits JOHN BEVAN and local and state incentives. The expansion will add around 850,000 metric tonnes per annum of domestic steelmaking Chairman capacity in the US taking annual output from about two million tonnes to three million tonnes in a 100 million tonne per annum US domestic market. BLUESCOPE IS VERY This project is a perfect fit with our strategy,offering long term FOCUSED ON GENERATING sustainable earnings growth from a high-quality asset. It is a RETURNS ABOVE ITS COST significant tribute to the approximately 390 employees who work OF CAPITAL SO WE CREATE hard to make it such a strongly performing business. VALUE FOR SHAREHOLDERS. 1 Safety Regrettably, last November a contractor was fatally injured FY2019 FINANCIAL HEADLINES in Thailand. He was working on an independently managed REPORTED NET PROFIT AFTER TAX (NPAT) construction site for a contracting company engaged by $1,015.8 million BlueScope Lysaght Thailand. We are using the lessons learnt from this tragic incident to make sure we do all we can to UNDERLYING NPAT prevent this happening again. This includes conducting safety $966.3 million training for customers and contractors at the dedicated training UNDERLYING EBIT centre at our Map Ta Phut site in Thailand. $1,348.3 million Your Directors and I continue to drive safety in the business, UNDERLYING PRE-TAX ROIC focusing on better managing risk and ensuring the care of 19.5% our people. We are reviewing our traditional approach and response to workplace injuries, with a greater focus on the CAPITAL MANAGEMENT severity of injuries and the time and care given to injured 1H FY2020 BUY-BACK employees to pave their return to meaningful work. During the year we experienced an increased number of soft tissue up to $250 million injuries that often require longer time, care and proper FINAL DIVIDEND (UNFRANKED) treatment to ensure a full return to work, and this contributed 8 cents per share to an increased Lost Time Injury Frequency Rate of 1.16, and Medically Treated Injury Frequency Rate of 5.6 in FY2019. Strategy Sustainability Our Bond, our Strategy, our Financial Framework and our BlueScope continues to embed sustainability approach to Sustainability continue to guide what we aim in all that we do. Our FY2019 Sustainability to achieve and how we do it. Report published in September provides further disclosures aligned to TCFD (Task A new Strategy & Transformation team was charged with Force on Climate-related Financial designing BlueScope for the future. The team’s work focuses Disclosure), and our achievements on innovation, digital transformation, strategic marketing and to date on supply chain sustainability. research and development. To date transformation opportunities have been identified in coating and painting technology, while Also, the report highlights our progress on robotics and automation are also unlocking the next wave of the five key material sustainability topics: productivity and cost savings in manufacturing. Safety, health & wellness – A new five year health, safety and environment Financial Framework strategy focuses on rigorously challenging the effectiveness of our critical risk Our financial framework is focused on delivering returns to controls, and adopting a more holistic our shareholders, disciplined capital allocation and an optimal approach. As we have pursued our goal capital structure. It guides our measurement and rewarding of of Zero Harm year on year, it has become financial performance. The Company achieved a very creditable harder to make continuous improvements. underlying ROIC of 19.5 per cent in FY2019. Underlying EBIT and While we will continue to report on lost ROIC across all business units underpin our focus on delivering time and medically treated injury frequency top quartile shareholder returns. rates, we are also looking at other BlueScope finished FY2019 with net cash of nearly $693 million. indicators to guide us in adequately Given the transformation of the business in recent years – where managing health and safety risks and drive we now have strong earnings and cash flows through prudent toward Zero Harm. These include building balance sheet management - we will now target a capital leadership awareness of safety risks, structure of around zero net debt for the consolidated Company. and increasing employee engagement in safety improvement projects. We continually watch for appropriate growth opportunities, that fit our strategy. Our capital expenditure focus is: to maintain Climate change and energy – We safe and reliable operations; to invest in foundation and new developed a shadow carbon pricing technologies; to invest to maximise value from ‘best in class’ approach in our Capital Investment assets; and to invest for growth in premium branded products. Framework, climate risk scenarios and GHG emissions intensity reduction target In the short term, we will continue with our 1H FY2020 buy-back – which we met, with a one per cent of up to $250 million, and your Board approved the payment of a reduction of CO2 emissions per tonne final unfranked dividend of 8 cents per share for FY2019. of steel produced. 2 Supply chain sustainability – We have improved sourcing Business performance standards and due diligence capabilities, published a Supplier Code of Conduct, implemented a supplier assessment Turning to BlueScope’s performance framework in all business units, and are well advanced in across its portfolio, produced by 14,000 preparing for our reporting obligations under Australia’s employees at 162 sites in 18 countries: new Modern Slavery Act. In the US, North Star BlueScope Steel Governance & business conduct – The Company promotes delivered underlying EBIT of $654.7 million, a culture of integrity and the highest possible standards up 52 per cent on FY2018, driven by strong across our global operations. A new ‘Speak Up’ policy steel spreads combined with a favourable offers whistleblower protection to all employees, we have foreign exchange translation. The business strengthened the ethics and compliance function, and continues to operate at full capacity. conducted extensive business conduct training throughout In Australian Steel Products, realised steel the Company. spreads were stronger, particularly due As previously disclosed, the Australian Competition and to pricing lags, however domestic volumes Consumer Commission (ACCC) has been investigating weakened due to some slowing in potential cartel conduct by BlueScope. In late August, residential construction activity and the ACCC announced it had commenced civil proceedings customer destocking. More positively, ® against the Company and a former employee alleging demand for COLORBOND steel remained contraventions of the Australian competition law broadly resilient. The business delivered cartel provisions. underlying EBIT of $535.4 million, down 9 per cent on FY2018. The proceedings relate to conduct that allegedly involve the employee, during the period September 2013 to June 2014, In Building Products Asia and North attempting to induce various steel distributors in Australia America, margins in ASEAN and North and overseas manufacturers to enter agreements containing America were lower due to higher steel a price fixing provision. The ACCC has not alleged that an feed costs combined with weaker despatch agreement was reached or that an agreement was volumes. The businesses are focused on implemented. The ACCC disclosed that it has been working ‘getting