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The 2006/07 financial year was our Company's second best year and a significant improvement on the previous year's results. The strong performance was due to improved pricing and sales, better performance from our existing Asian operations, and profit from the divestiture of the Vistawall business in North America.

Net Profit After Tax was $686 million, an increase of 103% on the previous year's result of $338 million. Earnings Per Share nearly doubled, increasing by 47 cents to 95 cents, and every business segment was profitable. Notwithstanding the impact on margins from higher raw material costs and adverse foreign exchange rates, this was an excellent year for BlueScope Steel.

Shareholders

Since its public listing, BlueScope Steel has remained committed to rewarding shareholders, and this year was no exception. We paid a total ordinary dividend of 47 cents per share, fully franked, up 3 cents per share or 7 per cent over the previous year. Our focus on shareholder rewards has seen us return a tax effective $3.15 per share, or a total of $2.3 billion, to shareholders in our first five years.

During the year, the Company managed its assets effectively. Significant value was generated from the sale of the Vistawall business which was acquired as part of the USA-based Butler Manufacturing Company three years ago. Vistawall, an aluminium business, was not seen as core to our US strategy. BlueScope Steel revitalised this business and the sale of Vistawall for US$190 was an excellent result for shareholders when compared with the US$206 million paid for Butler and Vistawall.

During the course of the year, BlueScope Steel also participated in the consolidation of the Australian steel industry. In August, the Company purchased 19.9 per cent of Smorgon Steel. By the end of the financial year, it had been agreed that BlueScope Steel would acquire the Smorgon Steel Distribution business for $700 million. As part of this transaction, BlueScope Steel sold its 19.9 per cent shareholding, realising a gain of $128 million (including dividends) before tax which will be reflected in the FY2008 earnings. This acquisition provides a new channel to market for our products and will strengthen our downstream market presence in Australia.

Long term strategy

BlueScope Steel has a strategy designed to differentiate itself and address the volatility which is typical in the steel sector. In accordance with this strategy, the Company continued developing its businesses around the world. During the year, major projects were completed in Asia, North America and Australia on time and on budget.

Our Asian investments position us in the world's fastest growing economies. In 2006/07 we saw significantly improved performance from existing operations in Vietnam, Thailand and Malaysia, while the Indonesian coating lines continue to exceed expectations. Our new Chinese coating line investment is on-stream and ramping up according to plan, but is operating in tough market conditions.

Succession

Last year, Managing Director and CEO Kirby Adams announced his retirement from BlueScope Steel, effective at the end of October 2007. The long notice period provided sufficient time for a smooth succession process and in August 2007, we were pleased to announce the plan to appoint Paul O'Malley as the Company's new CEO. Mr O'Malley joined BlueScope Steel as Chief Financial Officer in 2005. He is an experienced global executive and the Board is confident that he has the qualities to maintain our Company values, including our focus on long-term shareholder returns.

The Board thanks Kirby Adams for his leadership and guidance since the founding of BlueScope Steel. During his tenure, the Company re-defined itself from a steel manufacturer to a steel solutions provider and built a significant presence in Asia and North America. This was a period of growth, shareholder value creation and world class safety performance. On behalf of the Board of Directors, employees and shareholders, I wish Mr Adams well in his future endeavours.

Corporate and social responsibility

Our Bond - the Company's values statement - emphasises respect for the communities in which we do business. Accordingly, we take our environmental responsibilities seriously. During the year, BlueScope Steel launched major water saving programs at Port Kembla Steelworks and Western Port. These programs will save a combined total of nearly eight billion litres of water per year, equivalent to the annual water consumption of 29,000 households.

BlueScope Steel is also committed to reducing its energy use and greenhouse gas emissions and is actively contributing to the debate to establish a national policy framework that balances environmental sustainability with economic development, jobs and exports while acknowledging the need for global solutions for trade-exposed industries.

The Company is actively considering a project to significantly reduce greenhouse gas emissions at Port Kembla Steelworks by recycling waste gases for use in electricity generation. This project requires an appropriate policy framework, similar to that which we have negotiated with the NSW government.

The year was also a record for safety performance, with the excellent results largely due to high levels of participation in safety programs by BlueScope Steel employees.

In September 2006, we welcomed Mr Daniel Grollo to the BlueScope Steel Board, with his directorship approved at the 2006 Annual General Meeting. Mr Grollo brings valuable building and construction experience to the Board. BlueScope Steel maintains high standards of corporate governance, complying with the ASX principles of Good Corporate Governance and Best Practice Recommendations.

On behalf of the Board of Directors, I thank my fellow directors for their contribution and support. I also thank Kirby Adams, his management team and our 18,000 employees for their hard work and commitment during the year.

GRAHAM KRAEHE AO, CHAIRMAN