BlueScope Steel Moves on Costs ahead of Raw Material Price Hikes

BlueScope Steel today announced a restructuring program and the closure of the loss-making tin mill at Port Kembla in advance of higher iron ore pricing which takes effect 1 July.

The Company will close its manufacturing operations in Taiwan and eliminate approximately 250 management and staff jobs across all operations. The Company also plans a range of other restructuring and outsourcing initiatives aimed at reducing costs throughout the year.

Due to the significantly higher zinc prices, lower tinplate volumes and prices, and the lower earnings from Asia operations, BlueScope Steel now expects to be at the bottom end of its FY2006 after tax earnings outlook of $0.65 - $0.75 EPS. The one-off restructuring costs announced today are forecast to be approximately $150 - $200 million pre-tax or $0.15 to $0.20 per share and are a reduction to the previous guidance.

The Company will provide detailed financial information at its annual results presentation on 21 August.

CEO Statement

Announcing the cost cutting program at a presentation to analysts in Sydney today, Kirby Adams, Managing Director and CEO said: "BlueScope Steel is making tough decisions for volatile times - we are acting swiftly in response to the massive price hike in raw material costs (another 19% for iron ore following last year's 71% price rise) and the dramatically reduced demand for Australian tinplate.

"We expect to meet our EPS as forecast before these one-time restructuring costs. Difficult decisions have to be made to ensure the Company meets its longer term corporate and financial targets. We can no longer carry loss-making businesses.

"Raw material prices continue to rise and BlueScope Steel has been unable to recover these costs in the tinplate marketplace. This fact, and a range of other negative market forces, has brought about the closure of Australia's only tin mill. This is a necessary decision for BlueScope Steel to maintain its commitment to its shareholders to create, not destroy, value," the CEO said.

Tinplate Operation

The Company's decision to cease production of tinplate followed a thorough review of the operation which confirmed the business was no longer viable. The timing of the closure will be confirmed following discussion with the Company's customers.

This decision will result in the loss of approximately 250 positions in the tinplating operation. The Company will immediately enter into discussions with employees and unions regarding the effect and implementation of this decision.

Brian Kruger, President of Australian Manufacturing Markets said: "This business has been under attack on many fronts. Steel-making raw material costs have risen significantly making tinplate less competitive versus other packaging materials. We are also seeing a shift where consumers are purchasing more fresh foods at the expense of canned foods.

"At the same time, large retail grocers have increased their imports of low-cost canned food which has been pre-packaged offshore. Australian manufacturers just can't compete against grocers who import own-brand tinned foodstuffs in preference to Australian tinned produce," said Mr Kruger.

"After a lot of hard work and genuine team effort by our tin mill employees to make the business a success, unfortunately it is now no longer viable."

Mr Kruger said the tinplating and finishing operations would continue operating, until a closing date is determined following discussions with customers and suppliers.

Taiwan Operation

Following significant losses on a number of construction contracts, and a thorough review of the business, the Company has also decided to close manufacturing facilities and exit the construction market in Taiwan by October 2006.

BlueScope Steel Asia President, Kathryn Fagg said the Taiwan business was a stand-alone operation and had become unviable because it could not profitably leverage other BlueScope Steel operations.

Further Efficiencies

BlueScope Steel also announced it would reduce management and staff positions by approximately 250 positions across the Company's businesses, and would pursue productivity improvements within its operations.

Said Mr Adams: "The past year has been one of the most dynamic and volatile periods ever experienced by the global steel industry. We believe that taking tough decisions today provides the best assurance for continued business success next year and beyond.

"The announcements today are the flip-side of Australia's exciting resources boom - where the negative effect of higher raw material prices really hits home. Any sustainable company regularly prunes its non-performing businesses, optimises its core operations and invests in more promising ventures. This is precisely what is underway at BlueScope Steel. As Australia's premier multi-national steel company, we continue to focus on rewarding our shareholders as we grow," Mr Adams said.

 

About BlueScope Steel Limited (ASX: BSL)

BlueScope Steel is an international flat steel solutions company, with a manufacturing and marketing footprint spanning Australia, New Zealand, Asia and North America. The Company is the global leader in the provision of high quality metallic coated and painted steel products for the building and construction sector, and also supplies customers in the general manufacturing and automotive sectors.

BlueScope Steel's strategy is to grow the proportion of its revenue and earnings generated from downstream value-added steel products, by capitalising on high growth markets in Asia, providing leading product and service offers, and through successful inter-material competition based on the superior properties of steel products.

BlueScope Steel's strengths include its unrivalled network of manufacturing facilities in Asia, proprietary coating and painting technologies and strong brands, including COLORBOND® steel, ZINCALUME® steel, the LYSAGHT® range of steel building products and the BUTLER® brand of pre-engineered steel buildings.

BlueScope Steel operates a 5.1 million tonnes per annum integrated steelworks at Port Kembla, Australia, a 650,000 tonnes per annum integrated steelworks in New Zealand, and has a 50 per cent interest in a 1.8 million tonne steel mini-mill in Delta, Ohio. Steel rolling, coating and painting plants are located in Australia, New Zealand, Thailand, Malaysia and Indonesia, and under construction in China, Vietnam and India. BlueScope Steel has a network of more than 50 rollforming facilities in 13 countries that is unmatched by any other steel company, and is the market leader in steel pre-engineered buildings in China and North America.

For further information about BlueScope Steel Limited: www.bluescopesteel.com

CONTACTS

Media	Investor
Sandi Harwood Manager External Affairs BlueScope Steel Limited Tel: +61 3 9666 4039 Mobile: +61 (0)411 027 006 E-mail: Sandi.Harwood@bluescopesteel.com	John Knowles Vice President Investor Relations BlueScope Steel Limited Tel: +61 3 9666 4150 Mobile: +61 (0)419 893 491 E-mail: John.Knowles@bluescopesteel.com