Stelco Reports Results for 2006



    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.

    %SEDAR: 00001549E




For further information:

For further information: Rodney B. Mott, President and Chief Executive
Officer, (905) 528-2511, Extension 2020

Organization Profile

STELCO INC.

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