Focus on workforce, volumes and cost expected to increase profitability
and productivity
HAMILTON, ON, June 22 /CNW/ - Immediately following its Annual and
Special Meeting of Shareholders being held at 10:30 a.m. Eastern Time today,
Rodney B. Mott, President and Chief Executive Officer of Stelco Inc. (TSX:STE)
will be speaking to shareholders about the Company's current state of
business, current priorities, and outlook for the business. In Mr. Mott's
presentation, he will be providing new material information regarding a number
of items, including estimated financial and production targets, cost cutting
initiatives and EBITDA targets. Please be advised that these targets represent
objectives being set by the Company, which it believes are achievable over
time. Further updates will be provided as required. Following is a review of
the items Mr. Mott will cover.
USW Local 1005 labour agreement: Stelco is pleased to announce today that
on June 21, members of the United Steelworkers Local 1005 ratified a four-year
labour agreement. The agreement was reached in advance of the July 31, 2006
expiry date of the existing labour contract.
Revenue growth: Through a combination of an increased volume target of
4.8 million tons per year, optimum product mix, and pricing, Stelco expects
that the Company can achieve revenue exceeding $3 billion per year, an
increase of 33% over 2005 actuals.
Workforce reduction plan: A workforce reduction plan has a target
reduction of approximately 15% of the current employee base. This will be
achieved through retirements, attrition, a salaried and hourly employee buyout
plan and severance packages. Depending on participation, the estimated cost of
this program is $25 million. The resulting annual savings are anticipated to
be $45 million.
Productivity gains: The Company has set a productivity objective of 1,220
tons per employee, a 40% increase over current levels.
Other cost-reduction initiatives: Through a number of other initiatives,
including production volumes, changes to salaried employees benefits plans,
procurement strategies, energy management and elimination of contractors,
Stelco has identified an estimated $65 million in cost savings per year.
Capital investment: The forecast for 2006 capital spending is
$160 million, of which $54 million is expected to be spent in the second half
of 2006. On a sustainable basis, the Company's annual capital investment
program is expected to be $100 million.
EBITDA growth: Through a combination of increased volumes, savings from
headcount reductions and other initiatives, assuming current market conditions
going forward, the Company believes that EBITDA exceeding $400 million per
year is achievable.
The targets announced today are expected to be achieved through a
productive and engaged workforce, increased energy self-sufficiency, a reduced
cost base, and reduced working capital.
Cogeneration: The Company also announces that it has been advised by the
Government of Canada that it has cancelled its previously announced commitment
to contribute $30 million to the cost of the Company's proposed near-term
electricity cogeneration projects through the Partnership Fund.
While the Company expressed its disappointment with the Government's
decision, it looks forward to continued dialogue to determine possible future
funding mechanisms. Stelco remains committed to the use of cogeneration as a
means of utilizing waste heat streams, enhancing competitiveness and improving
environmental performance.
Resignation of Colin Osborne: Stelco announced today that Colin Osborne,
Vice President, Strategy and Business Development and former Chief Operating
Officer of Stelco, has elected to resign as an officer of Stelco effective
July 1, 2006.
Colin has been a key part of the Stelco executive team. He joined the
Company in 1987 and has held a number of executive positions in the areas of
operations and strategy.
Webcast: The Annual and Special Meeting of Shareholders, and Rodney B.
Mott's presentation to shareholders are accessible through a live webcast
available through the Company's web site, www.stelco.com. Please choose
'Investor Centre' and select 'Webcasts.' The webcast will also be archived on
the Company's Web site.
About Stelco
Stelco is one of Canada's largest publicly traded steel companies. It is
focused on its two Ontario-based integrated steel businesses located in
Hamilton and in Nanticoke. These operations produce high quality value-added
hot rolled, cold rolled, coated sheet and bar products. To learn more about
Stelco and its businesses, please refer to our Web site at www.stelco.com.
Caution Regarding Forward-Looking Information
This press release contains "forward-looking information" that is based
on Stelco's expectations, estimates and projections as of the date of this
press release or as of the date which such information is identified to be
given. This forward-looking information includes, among other things, factors
relating to the business, financial position, operations and prospects of
Stelco, including: Stelco's strategies and plans to reduce costs and the
anticipated outcome of such strategies and plans; anticipated productivity
levels and profitability; labour matters related to Stelco's predominantly
unionized workforce; pension matters; consolidation in the steel industry;
Stelco's energy and raw material costs and the availability of such materials;
the volatility of selling prices for steel; international trade matters,
including increases in steel imports into Canada; employee matters, including
staffing levels, the retention of the skills and knowledge of Stelco's
employees and the ability to attract and retain new employees; changes to
environmental laws and regulations concerned with, among other things,
emissions into the air, discharges to water or land, noise control and the
generation, handling, storage, transportation and disposal of toxic
substances; new technological developments and Stelco's ability to make
capital expenditures to maintain and enhance its technological ability;
development of new products; planned capital expenditures; and currency
fluctuations in the US dollar and its impact on steel pricing, and costs.
Often, but not always, forward-looking information can be identified by the
use of words and phrases such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or variations of such
words and phrases or states that certain actions, events or results "may",
"could", "would", "might" or "will" be taken, occur or be achieved.
Forward-looking information involves known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Stelco to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking information. Actual results, performance and achievements are
likely to differ, and may differ materially, from those expressed or implied
by the forward-looking information contained herein. Such forward-looking
information is based on a number of assumptions which may prove to be
incorrect, including, but not limited to: exchange rates, energy and other
anticipated and unanticipated costs; pension contributions and expenses; the
supply and demand for, deliveries of, and the level and volatility of prices
of, steel and raw materials; the continued availability of financing on
appropriate terms; market competition; the impact on Stelco of various
environmental regulations and initiatives; and Stelco's ongoing relations with
its employees and staffing levels. While Stelco anticipates that subsequent
events and developments may cause Stelco's views to change, Stelco
specifically disclaims any obligation to update this forward-looking
information. This forward-looking information should not be relied upon as
representing Stelco's views as of any date subsequent to the date of this
press release.
Note Regarding Non-GAAP Financial Measures
EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA is not a recognized measure for financial statement
presentation under Canadian generally accepted accounting principles ("GAAP").
Non-GAAP earnings measures (such as EBITDA) do not have any standardized
meaning and therefore may not be comparable to similar measures presented by
other companies. EBITDA is not intended to represent cash flow from
operations, as defined by Canadian GAAP, and it should not be considered as an
alternative to net earnings, cash flow from operations, earnings before income
taxes or any other measure of performance prescribed by GAAP. Stelco's EBITDA
may also not be comparable to EBITDA used by other companies which may be
calculated differently. Stelco considers forecast EBITDA to be a meaningful
indicator for forecasted operating results and uses it as a measure to assess
its forecasted operating performance. It is included because Stelco believes
it can be useful in forecasting Stelco's ability to service debt, fund capital
expenditures and expand its business.
The following table shows the reconciliation of "baseline" and "target"
EBITDA in as used in this presentation to earnings before income taxes, which
is a GAAP financial measure.
<<
($ Millions) Baseline Target
-------- ------
EBITDA 210 410
Amortization (187) (195)
Interest Expense (48) (35)
Earnings Before Income Taxes (25) 180
>>
%SEDAR: 00001549E
