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BlueScope to Restructure, Exit Export Business
08/24/2011 - BlueScope Steel has announced a major restructuring of its Australian operations, including a shutdown of No. 6 Blast Furnace at Port Kembla and closure of the Western Port Hot Strip Mill.
BlueScope Steel has announced a major restructuring of its Australian operations, including a shutdown of No. 6 Blast Furnace at Port Kembla and closure of the Western Port Hot Strip Mill.
The changes, which the company says will position it for improved profit and growth, were recently approved by the BlueScope’s Board.
“We are experiencing significant economic challenges and structural change in the global steel industry,” said BlueScope Steel Chairman Graham Kraehe. “The restructure, which includes shutting down the No. 6 Blast Furnace at Port Kembla and closing the Western Port Hot Strip Mill, will better align Australian steelmaking production with Australian domestic demand and see BlueScope exit the Australian export business.”
Kraehe noted that the restructure also would help to lower fixed costs at the company’s major facilities at Port Kembla and Western Port.
When fully implemented, BlueScope’s restructuring plan will result in:
· Shut-down of No. 6 Blast Furnace at Port Kembla, with annual production reduced to 2.6 million tonnes. Shut down will be carried out in a manner that facilitates a future restart of the furnace in the future
· Closure of the No. 4 Cokemaking Battery, No. 3 BOS Steelmaking Furnace, and No. 1 Slab Caster. The Port Kembla Hot Strip and Cold Rolling Mills, Metal Coating, and Paint Lines will continue to operate.
· Closure of the Western Port Hot Strip Mill of a metal coating line (MCL5)
“There is a compelling business case underpinning this decision,” commented BlueScope Managing Director and CEO Paul O’Malley. “It will deliver a material improvement in future earnings and cash flow. It materially reduces export losses, reduces earning volatility through the economic cycle and reduces long-term capital investment requirements at Port Kembla.
“For the Coated and Industrial Products Australia (CIPA) reporting segment, if the restructure had been in place for the full year, the Earnings Before Interest and Tax (EBIT) improvement would have been around $225 million (management estimate on a pro forma FY2011 basis).”
O’Malley noted that the restructuring was driven by an unprecedented combination of economic challenges the company has been experiencing, including a record-high Australian dollar, low steel prices, high raw material costs and low domestic steel demand. He also said that the company has the full support of its lenders to undertake the restructure.
The company plans to enter a consultation process with employees and affected stakeholders. “In managing the transition out of exports, we will take a careful and considered approach,” said O’Malley. “Regrettably, these changes will see a workforce reduction of around 100 people, with approximately 800 at Port Kembla and 200 at Western Port.”
He added there would also be impacts for contractors and suppliers.
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