Feb 9 2007
Stelco Inc. today announced that it has completed the major components of the operational restructuring that it commenced upon exiting from the CCAA process. This operational restructuring had three key components:
- Productivity improvement initiatives and reduction in the labour
force.
- Reducing production costs through workflow improvement.
- Optimizing capital projects.
In order to complete this program, it was necessary to close certain production facilities for a period of time during the fourth quarter. These shutdowns coincided with a softening in demand for steel. The net result of these initiatives is that Stelco expects to report a loss before income taxes in the range of $120 million to $140 million for the fourth quarter ending December 31, 2006.
The closure of production facilities enabled the company to successfully complete several strategic capital projects, including:
- the reline and upgrade of the blast furnace at the Hamilton plant to significantly increase throughput and to extend the interval for the next furnace reline to 2018; and
- the Phase II expansion of the Lake Erie hot strip mill, which is expected to increase throughput by 20% over previous levels.
With these two major projects now complete, Stelco does not anticipate any further significant mill outages in 2007.
As mentioned above, fourth quarter results were also adversely impacted by lower demand in the automotive and steel service centre sectors, which contributed to a reduction in spot prices for steel and shipments during the quarter. In addition, higher costs were incurred due to increases in the cost of energy and certain raw materials.
Mr. Rodney Mott, President and CEO stated that, "The economic outlook for 2007 appears positive and the demand for steel has improved markedly." Shipment and semi-finished steel production in January improved significantly over the respective monthly averages for the fourth quarter. January shipments were 309,000 tons and semi-finished steel production was 380,000 tons, which compares to fourth quarter monthly averages of 225,000 tons and 204,000 tons respectively. Spot prices have also improved for January as compared to the fourth quarter. Mr. Mott added that, "With these steps of our operational restructuring program now complete we have significantly enhanced our efficiency, reduced operating costs, and are poised to compete effectively in this improving economic environment."