2001 Annual Report - OneSteel

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“OneSteel has pursued a highlyfocused strategy to put the companyon the path of meeting its vision tobecome the safest and mostprofitable Australian steel company,providing value to shareholders,customers and employees.”managing director’sI am delighted to provide the first ManagingDirector’s review for OneSteel’s inaugural yearof operations.OneSteel’s first eight months of operations as apublicly listed company have been challengingwith trading conditions declining on the back ofthe pre-GST introduction building boom and theSydney Olympics. It became evident in the monthsrunning up to December 2000 that marketconditions were going to be difficult over calendaryear 2001.On top of a major restructuring of OneSteelto move it towards an integrated business,deteriorating market conditions meant the newmanagement team had to make some harddecisions and manage significant change inthe business.At the same time, we became involved in asuccessful joint bid for Email. This was ofgreat strategic importance to OneSteel andrepresents approximately 10% revenue growthfor the company.Given the very difficult market conditions and allthe challenges occurring as a result of the “spinout”from BHP and the acquisition of Email, I amvery proud of the commitment and applicationfrom everyone in OneSteel that delivered:• Cash generation of $170 million; and• A 41% improvement in safety performance.STRATEGIES FOR IMPROVING PROFIT AND GROWTHA number of key strategies were developed totransform OneSteel’s business. Some of thosestrategies are longer term in nature and deal withindustry structural issues while others are moreshort-term organisational strategies which havealready begun to yield some benefit.A summary of key strategies and some of theoutcomes over the last 12 months are as follows.Integration of OneSteel businesses. WhenOneSteel was originally conceived it was a looseamalgamation of eight related operational units(refer Figure Two). In line with the underlyingphilosophy of the business and embodied in thename OneSteel, the objective was to create oneintegrated business focused from the customerback through distribution, and manufacturing toraw material management. By creating a tightvertically integrated business, OneSteel could takeout duplication and maximise value at each pointin the production and distribution chain.As demonstrated in Figure Two, the eight businessunits have been merged into four which hasallowed duplication to be taken out of thebusiness in areas such as finance, administration,sales, marketing and information technology.With the reorganisation of the operational units,the next phase is to develop supportinginformation and technology systems that willprovide the impetus for further integration at theday-to-day operational level of the businesses.Restructuring of sales and marketing. Thisinitiative is aimed at providing customers with asingle contact point within the company for allproduct requirements. Market Mills significantlyrestructured its sales and marketing area with thetransition from product-based sales and marketingteams to customer-based teams. More recently, asales and operational review team across bothmanufacturing and distribution businesses hasbeen established to coordinate production andsales planning to more closely align with marketdemand for each product line.8
Figure Two – OneSteel IntegrationWHYALLASTEELWORKSSYDNEYSTEEL MILLPIPEAND TUBERODAND BARWIRE REINFORCING DISTRIBUTIONSTEELAND TUBEHOLDINGS (NZ)ONESTEEL LIMITEDWHYALLA STEELWORKS• Mining• Integrated Steelworks• Structural Rolling Mills• Rail Products FacilitiesMARKET MILLS• Sydney Steel Mill• Rod Mill• Bar Mills• Wire Mills• Wire Ropery• Pipe and Tube Mills• Oil and GasAUSTRALIAN DISTRIBUTION• 83 OneSteelDistribution Sites• 39 Reinforcing Mesh Sites• 89 METALAND FranchisesINTERNATIONAL DISTRIBUTIONSteel and Tube Holdings (NZ)• 50.32% shareholding• 74.66% effectiveshareholding in AJ Forsythin British Columbia(Canada)reviewCost reduction program. One of the keys toimproving performance is ensuring the companyhas the right cost structure moving forward. Adetailed cost reduction program was initiated inDecember 2000, which identified a number ofareas where costs could be reduced. Over theyear a total of approximately $50 million in costswere taken out of the business. These costreductions more than offset the underlyinginflationary increase in the cost base resultingfrom factors such as wage, energy and transportcost increases (refer Figure Three).Figure Three – OneSteel 2000/01 Cost Reduction Impact50.137.0Cost UnderlyingReduction IncreaseCostOneSteel will be continuing its cost reductioninitiatives in the year ahead to offset theinflationary effect of its input costs.Furthermore, as was announced in May 2001,some major cost reduction initiatives have beenidentified to be implemented in 2001/02 andwere provided for in the 2000/01 financialstatements. These initiatives include the closure ofOneSteel’s Bar Mill in Brisbane, the outsourcing ofthe Whyalla Steelworks Laboratory, which wascompleted in June, and acceleration of otherareas of restructuring.While an after-tax provision of $51.5 millionwas provided for in the 2000/01 result, thefull-year benefit of these initiatives will be anearnings before tax and interest contribution of$13.7 million in financial year 2002/03.Improving logistics management. A key area forreform for OneSteel is improving logisticsmanagement. One of the major elements is thecompany’s inventory levels and the amount of stockrequired at each point in the production process.A significant amount of work was undertaken todetermine appropriate inventory levels for the newintegrated business. This coupled with a decline inmarket activity led to a major program to reduceOneSteel’s inventory levels (refer to Figure Four).Figure Four – Inventory Reduction Outcome640620600580560540520500Jun 00 Dec 00 Jun 01Inclusionof EmailInventoryThe result over the second 6 months of the yearwas an underlying inventory reduction (excludingMAJOR BUSINESS: DuraGal ® Bound for The United States – 22 June 2001Photo (left to right) – Joseph Anderson and Geoff PlummerOneSteel has entered into an agreement to supply its world recognised DuraGal ® to the United States. Theagreement, which was confirmed between Geoff Plummer, President, OneSteel Market Mills and JosephAnderson, Vice President, PDM Sales and Marketing, will see around 10,000 tonnes per annum ofDuraGal ® structurals exported to California for distribution through PDM Steel Service Centres.Representatives from PDM made the journey to Australia to learn first hand about the OneSteel process ofmaking DuraGal ® products.9
Page 1 and 2: 2001 ANNUAL REVIEW
Page 3 and 4: CONTENTSOne Business 2Year One High
Page 5 and 6: ssVertically-Integrated OperationsO
Page 7 and 8: FINANCIAL HIGHLIGHTS - PRO-FORMA*Fi
Page 9: Inventories were managed down $106.
Page 13 and 14: Management StructureONESTEEL LIMITE
Page 15 and 16: Figure Ten - Other Manufacturing ($
Page 17 and 18: Map of OperationsCANADAYukonWhiteho
Page 19 and 20: Australian DistributionTHE BUSINESS
Page 21 and 22: OneSteel structural steel used for
Page 23 and 24: Human ResourcesSTANDING ALONEMuch o
Page 25 and 26: EnvironmentOneSteel Duragal product
Page 27 and 28: CommunityOneSteel recognises the im
Page 30 and 31: Corporate Governance (continued)Com
Page 32 and 33: Directors’ ReportDIRECTORSThe fol
Page 34 and 35: Directors’ Report (continued)Deta
Page 36 and 37: Discussion of Pro-forma ResultsPRO-
Page 38 and 39: Pro-forma Results12 months to 30 Ju
Page 40 and 41: Discussion and Analysis ofStatutory
Page 42 and 43: Statement of Financial PerformanceF
Page 44 and 45: Notes to the Concise Financial Repo
Page 46 and 47: Notes to the Concise Financial Repo
Page 48 and 49: Directors’ DeclarationThe directo
Page 50 and 51: Shareholder Information (continued)
Page 53 and 54: 2001 FULL FINANCIAL REPORT
Page 55 and 56: Directors’ ReportDIRECTORSThe fol
Page 57 and 58: Directors’ Report (continued)Deta
Page 59 and 60: Statement of Financial PositionAT 3
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Statement of Cash FlowsFOR THE PERI
Page 63 and 64:
Notes to the Financial StatementsNO
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Independent Audit ReportTo the Memb
Page 89 and 90:
Shareholder Information (continued)
Page 91:
Company DirectoryDIRECTORSPeter Sme
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2001 Annual Report - OneSteel

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