HAMILTON, ON, March 7 /CNW/ - Stelco Inc. (TSX:STE) reported a fourth quarter loss before income taxes of $145 million compared with $103 million for the fourth quarter of 2005. For the nine month period since exiting from CCAA the company reported a loss before income taxes of $187 million, which includes unusual items relating to fresh start accounting and the operational restructuring totalling $110 million. Net sales for the nine month period ending December 31, 2006 were $1.83 billion on shipments of 2,562,000 tons.
During the fourth quarter, production facilities were closed for a period of time to enable the company to complete several strategic capital projects, including:
- The reline and upgrade of the blast furnace at the Hamilton plant to
increase throughput and to extend the interval for the next furnace
reline to 2018; and
- The phase two expansion of the Lake Erie hot strip mill, which is
expected to increase throughput by 20% over previous levels.
As a result of these upgrades and lower demand, production for the quarter fell to 611,000 tons, representing a decline of 33% over the third quarter.
With these two major projects now complete, Stelco does not anticipate any further significant mill outages in 2007.
Fourth quarter results were also negatively impacted by lower demand in the automotive and steel service centre sectors, which contributed to a reduction in spot prices for steel and lower shipments during the quarter. In addition, Stelco experienced higher input costs during the fourth quarter.
Since exiting from CCAA on March 31, 2006, Stelco has made significant progress in its operational restructuring program, which comprises four key components:
- The work force was reduced from 4,954 on March 31, 2006 to 4,051 in
January 2007 through voluntary programs and attrition. Based on this
reduction in the number of employees, labour costs are estimated to
be $65 million lower on an annualized basis.
- Production and administrative costs were reduced through workflow
improvement and a de-centralized approach to managing the business.
Compensation incentives were implemented or modified across the
organization.
- Capital expenditures have been optimized through increasing the
return on investment threshold and enhancing the project management
of major capital projects.
- Working capital requirements have been reduced through better
management of semi-finished and finished inventories, lower sales
levels and improved processes for the management and collection of
accounts receivable.
Mr. Rodney Mott, President and CEO, stated that, "Our goals upon exiting CCAA were to quickly implement change in the culture and direction of Stelco. I am pleased with the progress we have made and compliment our employees for their willingness to accept the ongoing changes. We have more work to do to optimize our performance but the biggest hurdles are behind us, and our long-term competitive position is substantially improved. We have a positive outlook for 2007 and have positioned our operations to respond quickly to increased demand for steel in first quarter."
Shipments and semi-finished steel production during the first two months of 2007 have improved significantly over the respective monthly averages for the fourth quarter. For January and February, average monthly shipments were 293,000 tons and average monthly semi-finished steel production was 354,000 tons, which compares to fourth quarter monthly averages of 225,000 tons and 204,000 tons respectively. Spot prices have continued to improve in January and February compared to the end of the fourth quarter and further increases are anticipated.
About Stelco
Stelco is one of Canada's largest 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.ca.
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.
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