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BlueScope Steel Limited

ABN 16 000 011 058

Interim financial report - 31 December 2006

Contents

Page

Directors' report

2

Interim financial report

Consolidated income statement

6

Consolidated balance sheet

7

Consolidated statement of recognised income and expense

8

Consolidated cash flow statement

9

Notes to the consolidated financial statements

11

Directors' declaration

18

Independent review report to the members

19

BlueScope Steel LimitedDirectors' report

31 December 2006

Directors' report

Your directors present their report on the consolidated entity consisting of BlueScope Steel Limited and the entities it

controlled at the end of, or during, the half-year ended 31 December 2006.

Directors

The following persons were directors of BlueScope Steel Limited during the whole of the half-year and up to the date of

this report:

G J Kraehe AO

R J McNeilly

K C Adams

D J Grady

H K McCann AM

P J Rizzo

Y P Tan

D B Grollo was appointed a director on 27 September 2006.

Review of operations

A summary of consolidated revenues and results by reporting segments is set out below:

Segment revenues

Segment EBIT

2006

2005

2006

2005

$M

$M

$M

$M

Hot Rolled Products Australia

2,000.8

1,816.0

438.3

410.4

Coated and Building Products Australia

1,699.8

1,429.5

20.4

(30.4)

New Zealand and Pacific Island Products

365.8

361.0

42.6

65.8

Coated and Building Products Asia

678.3

465.2

30.8

2.0

Hot Rolled Products North America

289.0

188.3

111.6

67.1

Coated and Building Products North America

660.1

612.0

36.5

1.7

Corporate and Group

230.5

191.1

(14.2)

(42.3)

Intersegment eliminations

(1,404.9)

(1,194.6)

(33.8)

(18.8)

Total continuing operations

4,519.4

3,868.5

632.2

455.5

Unallocated revenue less unallocated expenses

(68.4)

(33.2)

Profit before income tax

563.8

422.3

Income tax expense

(168.5)

(105.7)

Profit from continuing operations

395.3

316.6

Profit/(loss) from discontinued operations (net of tax)

2.4

(4.8)

Profit for the year

397.7

311.8

Profit/(loss) attributable to minority interest

(9.9)

0.2

Profit attributable to members of BlueScope Steel

Limited

387.8

312.0

Earnings per share for profit from continuing operations (cents per share):

Basic earnings per share

54.3

44.5

Diluted earnings per share

54.2

44.0

Earnings per share for profit (cents per share):


54.7

44.0


54.6

43.5

-2-


31 December 2006(continued)

Review of operations (continued)

The company’s half-year revenue from continuing operations of $4,519 million was 16% above the previous comparativeperiod primarily due to higher international steel prices, higher sales volumes and a favourable domestic/export productmix. Total revenue, including discontinued operations, of $4,528 million was a half-year record.

Net profit after tax increased by $76 million (24%) to $388 million. This increase was due primarily to the higher salesvolumes, a favourable domestic/export mix, higher international steel prices and higher margins from North StarBlueScope Steel. These were partly offset by the consumption of higher priced raw materials, mainly iron ore and zinc. Inaddition, the fire at Western Port (Coated and Building Products Australia) cost the group $40 million in additional costsand lost margins in the previous comparative period.


The earnings contribution from this segment increased as a result of higher export slab and hot rolled coil prices, togetherwith a favourable domestic/export mix primarily due to higher demand in the pipe and tube market and higher domesticdemand from Coated and Building Products Australia. These were partly offset by higher iron ore costs, mainly as a

result of consuming lower priced iron ore in stock at the start of the previous comparative period.


The earning contribution from this segment increased to a profit, compared to a loss in the previous comparative period.This improvement reflected higher domestic sales volumes, the negative effect of the Western Port fire in the previouscomparative period and lower steel feed costs from Hot Rolled Products Australia. These benefits were partly offset bysignificantly higher coating metal costs, particularly for zinc. The segment continues to be affected by the loss-makingtinplate manufacturing, which will cease operation in the second half of the financial year.


The earnings contribution from this segment decreased as a result of higher unit costs arising from an unplannedextended maintenance shut-down on the primary kiln and higher coating metal costs. These were partly offset by higherdomestic sales volumes.


The earnings contribution from this segment increased as a result of higher domestic sales volumes across all regions,together with higher prices and lower business development and pre-operating costs. These were partly offset by higherunit costs as a result of the commissioning and ramp-up of production volumes at the Vietnam and China coating lines.


The earnings contribution from this segment increased primarily as result of hot rolled coil prices increasing more thanthe price of scrap feed at North Star BlueScope Steel.


The earnings contribution from this segment increased as a result of improved sales volumes and margins from both theBuildings and Vistawall business units, together with start-up costs at the Jackson, Tennessee plant in the previouscomparative period.

-3-



Significant changes in the state of affairs

The following significant events occurred during the half-year:

The company is progressing a range of growth initiatives aimed at expanding the manufacture and distribution of metallic

coating and painted steel products. The status of these projects are:

Commenced production during the half-year:

• Australia: the expansion of the Hot Strip Mill (capacity increase: 2.4 to 2.8 million tones per annum) at the Port

Kembla Steelworks commenced operation in July 2006;

• China: the new metallic coating (capacity: 250,000 tonnes per annum) facility commenced operation in

September 2006); and

• India: the new Butler/Lysaght facilities at Bhiwadi and Chennai commenced operations in December 2006 and

January 2007 respectively (in addition to the third facility at Pune which commenced operations in April 2006).

Approved projects under construction:

• Australia: a new painting facility (capacity: 120,000 tonnes per annum) in western Sydney. The facility will cost

approximately $120 million and is expected to commence operation mid-calendar year 2007; and

• India: the project schedule for the new metallic coating and paint line is under review and start-up could

potentially extend into calendar year 2009.

Projects approved during the half-year:

• There were no new growth projects approved.

In August the company acquired a 19.9% interest in Smorgon Steel for $319 million.

Auditors' independence declaration

The auditors' independence declaration for the half-year ended 31 December 2006 has been received from Ernst &

Young. This can be referred to on page 5 of the directors' report.

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 the directors' report and half-year financial report. Amounts in

the directors' and financial report have been rounded off in accordance with that Class Order to the nearest hundred

thousand dollars.

This report is made in accordance with a resolution of directors.

G J Kraehe AO

Chairman

K C Adams

Managing Director & CEO

Melbourne

23 February 2007

-4-



Auditor's Independence Declaration to the Directors of BlueScope Steel Limited

We have obtained the following independence declaration from our auditors, Ernst & Young.

In relation to our review of the financial report of BlueScope Steel Limited for the half-year ended 31 December 2006, to

the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of

the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

Bruce Meehan

Partner

Melbourne

23 February 2007

-5-

BlueScope Steel LimitedConsolidated income statement

For the half-year ended 31 December 2006

Half-year

2006

2005

$M

$M

Revenue from continuing operations

4,519.4

3,868.5

Other income

8.2

14.9

Changes in inventories of finished goods and work in progress

101.4

203.2

Raw materials and consumables used

(2,177.2)

(1,876.6)

Employee benefits expense

(729.1)

(707.9)

Depreciation and amortisation expense

(159.4)

(143.8)

Diminution in value of non-current assets

(0.6)

(0.6)

Freight on external despatches

(299.2)

(256.4)

External services

(502.8)

(475.2)

Finance costs

(71.4)

(34.7)

Other expenses

(228.6)

(234.1)

Share of net profits of associates and joint venture partnerships accounted for using the

equity method

103.1

65.0

Profit before income tax

563.8

422.3

Income tax expense

(168.5)

(105.7)

Profit from continuing operations

395.3

316.6

Profit/(loss) from discontinued operations (net of tax)

2.4

(4.8)

Profit for the half-year

397.7

311.8

(Profit)/loss attributable to minority interest

(9.9)

0.2

Profit attributable to members of BlueScope Steel Limited

387.8

312.0

Cents

Cents

Earnings per share for profit from continuing operations attributable to the

ordinary equity holders of the company:


54.3

44.5


54.2

44.0

Cents

Cents

Earnings per share for profit attributable to the ordinary equity holders of the

company:


54.7

44.0


54.6

43.5

The above consolidated income statement should be read in conjunction with the accompanying notes.

-6-

BlueScope Steel LimitedConsolidated balance sheet

As at 31 December 2006

31 December

30 June

2006

2006

$M

$M

ASSETS

Current assets

Cash and cash equivalents

58.0

61.9

Receivables

1,157.3

1,319.2

Inventories

1,351.1

1,270.2

Derivative financial instruments

0.4

0.2

Available-for-sale financial assets

333.2

-

Other

79.3

55.9

Total current assets

2,979.3

2,707.4

Non-current assets classified as held for sale

-

34.1

Total current assets

2,979.3

2,741.5

Non-current assets

Receivables

49.5

24.5

Retirement benefit assets

33.0

24.8

Inventories

58.4

59.2

Investments accounted for using the equity method

345.3

302.8

Property, plant and equipment

3,736.2

3,743.2

Deferred tax assets

109.5

121.1

Intangible assets

227.9

226.8

Other

14.2

16.7

Total non-current assets

4,574.0

4,519.1

Total assets

7,553.3

7,260.6

LIABILITIES

Current liabilities

Payables

832.5

957.6

Interest bearing liabilities

798.0

689.7

Current tax liabilities

65.8

31.2

Provisions

474.6

504.1

Deferred income

64.6

76.8


2.2

0.6

Total current liabilities

2,237.7

2,260.0

Non-current liabilities

Payables

0.5

-


1,185.4

1,262.3

Deferred tax liabilities

243.0

284.2

Provisions

185.6

178.7

Retirement benefit obligations

209.9

189.3


2.8

1.2

Total non-current liabilities

1,827.2

1,915.7

Total liabilities

4,064.9

4,175.7

Net assets

3,488.4

3,084.9

EQUITY

Contributed equity

1,830.2

1,653.9

Reserves

(71.9)

(87.0)

Retained profits

1,668.8

1,467.1

Parent entity interest

3,427.1

3,034.0

Minority interest

61.3

50.9

Total equity

3,488.4

3,084.9

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

-7-

BlueScope Steel LimitedConsolidated statement of recognised income and expense


Half-year

2006

2005

$M

$M

Gain/(loss) on cash flow hedges taken to equity

(2.7)

0.7

Gain/(loss) on available-for-sale financial assets

13.9

-

Net gain/(loss) on hedge of net investments

(73.3)

(18.7)

Exchange differences on translation of foreign operations

62.2

67.2

Actuarial gain/(loss) on defined benefit superannuation plans

(24.8)

41.0

Income tax on items taken directly to or transferred from equity

26.0

2.1

Net income/(expense) recognised directly in equity

1.3

92.3

Profit for the half-year

397.7

311.8

Total recognised income and expense for the half-year

399.0

404.1

Total recognised income and expense for the half-year is attributable to:

Members of BlueScope Steel Limited

389.4

402.7

Minority interest

9.6

1.4

399.0

404.1

The above consolidated statement of recognised income and expense should be read in conjunction with the

accompanying notes.

-8-

BlueScope Steel LimitedConsolidated cash flow statement


Half-year

2006

2005

$M

$M

Cash flows from operating activities

Receipts from customers

4,864.4

4,037.3

Payments to suppliers and employees

(4,252.7)

(3,873.0)

611.7

164.3

Dividends received

10.7

2.9

Joint venture partnership distributions received

65.1

34.0

Interest received

3.6

1.3

Other revenue

9.8

8.5

Financing costs paid

(80.0)

(31.1)

Income taxes paid

(125.7)

(239.5)

Net cash inflow (outflow) from operating activities

495.2

(59.6)

Cash flows from investing activities

Payment for purchase of subsidiary, net of cash acquired

-

(2.7)

Payments for property, plant and equipment

(216.9)

(353.4)

Payments for intangibles

(3.6)

(12.7)

Payments for investment in joint venture partnerships

(27.0)

(0.6)

Payments for investment in business assets

(5.3)

(11.3)

Payments for available-for-sale financial assets

(319.3)

-

Loans to related parties

(29.4)

-

Proceeds from sale of property, plant and equipment

33.8

13.0

Repayment of loans by related parties

3.8

2.3

Net cash (outflow) from investing activities

(563.9)

(365.4)

Cash flows from financing activities

Proceeds from issues of shares

119.3

1.0

Payments for shares bought back

-

(74.4)

Proceeds from shares issued to minority interests

2.2

-

Proceeds from borrowings

5,927.0

3,826.8

Repayment of borrowings

(5,873.7)

(3,019.5)

Dividends paid to company’s shareholders

(119.3)

(313.4)

Dividends paid to minority interests in subsidiaries

(1.3)

(2.5)

Capital return to minority interests in subsidiaries

-

(0.3)

Net cash inflows from financing activities

54.2

417.7

Net increase (decrease) in cash and cash equivalents

(14.5)

(7.3)

Cash and cash equivalents at the beginning of the half-year

59.0

82.9

Effects of exchange rate changes on cash and cash equivalents

(0.8)

1.9

Cash and cash equivalents at end of the half-year

43.7

77.5

The above consolidated cash flow statement should be read in conjunction with the accompanying notes.

-9-

BlueScope Steel LimitedNotes to the financial statements

31 December 2006

Contents of the notes to the financial statements

Page

1

Summary of significant accounting policies

11

2

Critical accounting estimates

11

3

Segment information

12

4

Equity securities issued

14

5

Unusual items

15

6

Discontinued operation

15

7

Dividends

17

8

Contingencies

17

-10-



1

Summary of significant accounting policies

This general purpose financial report for the interim half-year reporting period ended 31 December 2006 has been prepared in

accordance with Accounting Standard AASB 134 Interim Financial Reporting, the Corporations Act 2001 and other mandatory

professional reporting requirements.

This interim financial report does not include all the notes of the type normally included in an annual financial report.

Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2006 and any public

announcements made by BlueScope Steel Ltd during the interim reporting period in accordance with the continuous

disclosure requirements of the Corporations Act 2001.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting

period.

2

Critical accounting estimates

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including

expectations of future events that are believed to be reasonable under the circumstances.

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,

seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i)

Income taxes

The group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is

required in determining the worldwide provision for income taxes. There are many jurisdictions and calculations for which the

ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated

tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is

different from the amounts that were actually reported, such differences will impact the current and deferred tax provisions in

the period in which such determination is made.

(ii)

Defined benefit superannuation plans and workers compensation

Calculations for the group's defined benefit superannuation plans and self-insured workers compensation are determined by

external actuaries. These calculations require assumptions in relation to the expectation of future events.

(iii)

Product claims

Provision for claims is based on sales volume and past experience of the level of repairs and replacement. The provision

requires the use of assumptions in relation to the level of future claims made.

(iv)

Share based payment transactions

The group measures the cost of equity settled transactions with employees by reference to the fair value of equity

instruments at grant date. The fair value is determined by an external valuer using a binomial model. These calculations

require assumptions to be made.

(v)

Restructuring and redundancy provisions

Provisions for restructuring and redundancy are based on the group's best estimate of the outflow of resources required to

settle commitments made by the group. Where the outcome of these matters is different from the amounts that were initially

recorded, such differences will impact the income statement in the period in which such determination is made.

-11-



3

Segment information

(a)

Description of segments

Business segments

The consolidated entity has six business reporting segments: Hot Rolled Products Australia, Coated and Building Products

Australia, New Zealand and Pacific Island Products, Coated and Building Products Asia, Hot Rolled Products North America

and Coated and Building Products North America.


Hot Rolled Products Australia includes the Port Kembla Steelworks, a steel making operation with an annual production

capacity of approximately 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 and Coated and

Building Products Asia for further processing, as well as to other domestic and export customers.


Coated and Building 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, packaging industry, 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 Australia

business comprises two main metallic coating 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 New Zealand Steel operation 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 approximately 0.6 million tonnes. The segment also includes

facilities in New Caledonia, Fiji and Vanuatu which manufacture and distribute the Lysaght range of products.


Coated and Building Products Asia manufactures and distributes a range of metallic coated, painted steel products and pre-

engineered steel building systems primarily to the building and construction industry and to some sections of the

manufacturing industry across Asia.


Hot Rolled Products North America 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 and North American export trading activities.


Coated and Building Products North America includes two main 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.

Corporate and Group

Corporate and Group relates primarily to logistics and corporate activities.

-12-


31 December 2006

3

Segment information (continued)

(b)

Primary reporting format - business segments

Half-year

2006

Hot Rolled

Products

Australia

Coated and

Building

Products

Australia

New Zealand

and Pacific

Island

Products

Coated and

Building

Products

Asia

Hot Rolled

Products

North

America

Coated and

Building

Products

North

America Corporate

and Group

Inter-

segment

eliminations/

unallocated

Total

continuing

operations

Discontinued

Operations

(note 6)

Consolidated

$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

Segment revenue

2,000.8

1,699.8

365.8

678.3

289.0 660.1

230.5

(1,404.9)

4,519.4

9.1

4,528.5

Segment result

438.3

20.4

41.3

32.9

9.9 34.3

(14.2)

(33.8)

529.1

2.8

531.9Share of net profits of associates and joint venture

partnerships

-

-

1.3

(2.1)

101.7 2.2

-

-

103.1

-

103.1Segment EBIT

438.3

20.4

42.6

30.8

111.6 36.5

(14.2)

(33.8)

632.2

2.8

635.0


(68.6)Profit before income tax

566.4

Half-year

2005

Hot Rolled

Products

Australia

Coated and

Building

Products

Australia

New Zealand

and Pacific

Island

Products

Coated and

Building

Products

Asia

Hot Rolled

Products

North

America

Coated and

Building

Products

North

America Corporate

and Group

Inter-

segment

eliminations/

unallocated

Total

continuing

operations

Discontinued

Operations

(note 6)

Consolidated

$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

$M

Segment revenue

1,816.0

1,429.5

361.0

465.2

188.3 612.0

191.1

(1,194.6)

3,868.5

23.2

3,891.7

Segment result

410.4

(30.4)

64.2

2.0

5.1 0.3

(42.3)

(18.8)

390.5

(6.4)

384.1Share of net profits of associates and joint venture

partnerships

-

-

1.6

-

62.0 1.4

-

-

65.0

-

65.0Segment EBIT

410.4

(30.4)

65.8

2.0

67.1 1.7

(42.3)

(18.8)

455.5

(6.4)

449.1


(33.2)Profit before income tax

415.9

-13-


31 December 2006

4

Equity securities issued

2006

2005

2006

2005

Shares

Shares

$M

$M

Issues of ordinary shares during the half-year

Opening balance

698,856,440

707,941,710

1,653.9

1,747.5

Dividend reinvestment plan - shareholders

7,494,951

-

48.9

-

Dividend reinvestment plan - underwritten

17,856,029

-

119.3

-

Exercise of share rights issued under the Long Term

Incentive Plan - market price

-

214,300

-

0.6

Share buyback

-

(10,649,578)

-

(74.4)

Issued for no consideration:

Exercise of share rights under the Long Term

Incentive Plan

2,101,057

4,243,608

6.8

-

Exercise of share rights under the Special Share

Rights Plan

40,000

-

0.3

-

General Employee Share Plan issues

204,400

-

1.0

-

Forfeited shares from employee share plans

-

-

-

0.4

726,552,877

701,750,040

1,830.2

1,674.1

Dividend reinvestment plan

The dividend reinvestment plan was established during the period to enable shareholders to receive some or all of their

future dividends as ordinary BlueScope Steel Limited shares instead of cash. The dividend reinvestment plan was fully

underwritten in respect of the financial year 2006 final ordinary dividend.

Share buyback

On 11 November 2005, the company announced an on market share buyback program of up to 25 million shares. A total

of 13,543,178 shares were bought back at an average cost of $7.01 (transaction costs $0.1M) before the program ceased

in January 2006.

Long Term Incentive Plan

The Long Term Incentive Plan is an award of share rights to eligible senior managers. The September 2003 award

partially vested (71%) in the current period with the September 2002 award fully vesting in the previous period. The full

details of the operation of the plan are detailed in the June 2006 Remuneration Report.

Special Share Rights Plan

Special share rights are awarded from time to time to meet specific or exceptional demands. Special share rights which

were awarded in 2004 to Mr Lance Hockridge, to facilitate the effective integration and turn around of the North American

Coated and Building Products business, vested and were exercised during the period.

General Employee Share Plan

In New Zealand, shares were granted under the September 2003 General Employee Share Plan which vested during the

period.

The aim of this plan is, in recognition of company performance, to assist employees to build a stake in the company by

enabling each eligible employee to acquire a parcel of shares. Employees who become shareholders have the potential to

benefit from dividends paid on the shares, growth in the market value of their shares and any bonus shares or rights

issues the Board of Directors may approve from time to time.

-14-


31 December 2006

5

Unusual items

No unusual items occurred in the current year.

In the comparative period, a fire occurred in the electrical control room of the Hot Strip Mill at BlueScope Steel's Western

Port operations in Victoria on 23 August 2005. As a result, the Hot Strip Mill stopped operating until 11 November 2005.

The Hot Strip Mill provides feedstock for Western Port's cold rolling, metallic coating and painting operations. No other

plant or equipment outside of the electrical control room sustained any damage.

The total impact on the income statement during the half-year ended 31 December 2005 was $40M ($28M after tax).

6

Discontinued operation

(a)

Description

Following a series of construction contract losses in the financial year 2006, the company closed down and sold the

assets of its Lysaght Taiwan business during the half-year.

Financial information relating to the discontinued operation for the period is set out below.

(b)

Financial performance and cash flow information

Half-year

2006

2005

$M

$M

Revenue

9.1

23.2

Expenses

(6.5)

(29.6)

Profit/(loss) before income tax

2.6

(6.4)

Income tax (expense)credit

(0.2)

1.6

Profit/(loss) after income tax of discontinued operation

2.4

(4.8)

Net cash inflow (outflow) from operating activities

(0.4)

(2.3)

Net cash inflow (outflow) from investing activities (2006 includes an inflow of $5M from

the sale of property, plant and equipment)

5.0

(1.3)

Net cash inflow (outflow) from financing activities

(4.8)

2.3

Net increase (decrease) in cash generated by the operation

(0.2)

(1.3)

-15-


31 December 2006

6

Discontinued operation (continued)

(c)

Carrying amounts of assets and liabilities

Half-year

2006

2005

$M

$M

Cash

0.7

1.2

Property, plant and equipment

-

2.1

Receivables external

1.7

9.5

Receivables intercompany

0.2

0.4

Inventories

1.0

3.2

Deferred tax asset

-

1.7

Other

0.1

0.6

Total assets

3.7

18.7

Creditors external

(1.9)

(8.7)

Creditors intercompany

(2.4)

(0.2)

Provisions

(5.2)

-


-

(3.1)

Total liabilities

(9.5)

(12.0)

Net assets (liabilities)

(5.8)

6.7

(d)

Details of sale

Half-year

2006

2005

$M

$M

Consideration received:

Cash

5.0

-

Total disposal consideration

5.0

-

Carrying amount of property, plant and equipment sold

(1.8)

-

Gain on sale before income tax

3.2

-

Income tax expense

-

-

Gain on sale after income tax

3.2

-

-16-


31 December 2006

7

Dividends

Half-year ended

2006

2005

$M

$M

Ordinary shares

Dividends provided for or paid during the half-year

168.3

313.4

A dividend reinvestment plan was established during the period to enable shareholders

to receive some or all of their future dividends as ordinary BlueScope Steel Limited

shares instead of cash, with 29% of shareholders choosing this option. The dividend

reinvestment plan was fully underwritten in respect of the financial year 2006 final

ordinary dividend (71%).

Dividends not recognised at the end of the half-year

In addition to the above dividends, since the end of the half-year the directors have

recommended the payment of an interim dividend of 21 cents per fully paid ordinary

share (2005 - 20 cents), fully franked based on tax paid at 30%. The aggregate amount

of the proposed dividend expected to be paid on 2 April 2007 out of retained profits at 31 December 2007, but not recognised as a liability at the end of the half-year, is

152.6

139.8

8

Contingencies

Since the last annual reporting date, there have been no material changes of any contingent liabilities or contingent

assets.

-17-

BlueScope Steel LimitedDirectors' declaration

31 December 2006

Directors' declaration

In the directors’ opinion:

(a)

the financial statements and notes set out on pages 6 to 17 are in accordance with the Corporations Act 2001,

including:

(i)

complying with AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other

mandatory professional reporting requirements; and

(ii)

giving a true and fair view of the consolidated entity's financial position as at 31 December 2006 and of

their performance, as represented by the results of their operations and their cash flows, for the half-

year ended on that date; and

(b)

there are reasonable grounds to believe that the company will be able to pay its debts as and when they become

due and payable.

This declaration is made in accordance with a resolution of the directors.

G J Kraehe AO

Chairman

K C Adams

Managing Director & CEO

Melbourne

23 February 2007

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BlueScope Steel LimitedIndependant review report to the members

31 December 2006To the members of BlueScope Steel Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying financial report of BlueScope Steel Limited and the entities it controlled duringthe half-year ended 31 December 2006, which comprises the balance sheet as at 31 December 2006, and the incomestatement, statement of recognised income and expense and cash flow statement for the half-year ended on that date,a summary of significant accounting policies, other explanatory notes and the directors’ declaration.

Directors’ responsibility for the half-year ended 31 December 2006 Financial Report

The directors of the company are responsible for the preparation and fair presentation of the half-year ended31 December 2006 financial report in accordance with Australian Accounting Standards (including the AustralianAccounting Interpretations) and the Corporations Act 2001. This responsibility includes designing, implementing andmaintaining internal controls relevant to the preparation and fair presentation of the half-year ended 31 December 2006financial report that is free from material misstatement, whether due to fraud or error; selecting and applyingappropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express a conclusion on the half-year ended 31 December 2006 financial report based on ourreview. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Reviewof an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on thebasis of the procedures described, we have become aware of any matter that makes us believe that the financial reportis not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’sfinancial position as at 31 December 2006 and its performance for the half-year ended on that date; and complyingwith Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 and othermandatory financial reporting requirements in Australia. As the auditor of BlueScope Steel Limited and the entities itcontrolled during the half-year ended 31 December 2006, ASRE 2410 requires that we comply with the ethicalrequirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review is substantially less in scope thanan audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtainassurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. Wehave given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included inthe Directors’ Report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that theinterim financial report of BlueScope Steel Limited and the entities it controlled during the half-year ended31 December 2006 is not in accordance with:

(a)

the Corporations Act 2001, including:

(i)

giving a true and fair view of the consolidated entity’s financial position as at 31 December 2006

and of its performance for the half-year ended on that date; and

(ii)

complying with Accounting Standard AASB 134 Interim Financial Reporting and the

Corporations Regulations 2001; and

(b)

other mandatory financial reporting requirements in Australia.

Ernst & Young

Bruce Meehan

Partner

Melbourne

23 February 2007

-19-

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