2001 Annual Report - OneSteel

“The underlying strategic intentbehind the establishment ofOneSteel was to create anindependent, competitive longproducts steel producer as adomestic niche player.”chairman’s reviewI would like to welcome you to OneSteel’s firstAnnual Review.OneSteel was created through a decision by BHPto split its flat and long product steel divisions,and “spin-out” the long products division on theAustralian Stock Exchange to operate as a totallyindependent company.The “spin-out” was announced by BHP on25 February 2000. The “de-merger” was thenimplemented by BHP including the allocation ofvalue to assets, and passed by a BHP shareholdervote on 17 October. OneSteel listed with its newBoard and shareholder base on 23 October 2000.The underlying strategic intent behind theestablishment of OneSteel was to create anindependent, competitive long products steelproducer as a domestic niche player. As adomestic niche player, OneSteel has the potentialto carve out a unique position, establish acompetitive advantage and build a sustainableand growing business.My appointment as Chairman elect of OneSteelwas announced on 5 June 2000 with the first taskbeing the appointment of a new Board withappropriate experience and expertise. Your Board,which assumed responsibility from 23 October2000, comprises people from industry (includingsteel and construction), finance, public sector,legal and information technology backgrounds.The management team now blends previous BHPexecutives with new management expertise andprovides a balance between technical, financial,marketing, operational, strategic management,and significant experience in all aspects of thesteel industry.THE FIRST EIGHT MONTHSThe task faced by management for the firsteight months as a public company waschallenging. Trading conditions deteriorated onthe back of the post-GST and Sydney Olympiceconomic slowdown, and this was exacerbatedby the need for clear focus on the “spin-out”process and the acquisition of Email.Activity in the construction market, which accountsfor approximately 50% of OneSteel revenues,declined sharply over the year, with demand insome of OneSteel’s products markets as much as30% below that in the prior year.Trading results on a Pro-forma basis for OneSteelover the year reflected the lower underlyingdemand. Sales revenues decreased by 10.9% to$2,637.7 million when compared to the prioryear, delivering a 24.4% decrease in earningsbefore interest, tax, depreciation and amortisationto $202.6 million.The net profit after tax result was $23.6 millionbefore restructuring provisions are taken intoaccount. The company announced in May 2001,that a restructuring provision of $51.5 million wastaken to protect future earnings which whenbrought to account delivered a bottom-line loss of$27.9 million.In response to declining market conditionsimpacting OneSteel’s profit outcome, attentionwas applied to ensuring OneSteel met itscash targets. This was achieved throughcost reductions in the order of $50 million,revenue enhancements of $15 million, tightcapital expenditure and a significant decreasein inventories.6