Stemcor remains positive after posting a loss for H1 2009

Financial highlights

• Turnover down from £2,807m to £1,862 (-34%)
• Operating profit down from £75m to -£17m (-123%)
• Pre-tax profit down from £48m to -£35m (-173%)
• Tonnage invoiced down from 8.3m tonnes to 5.5m tonnes (-34%)

Operational highlights

• Resilient performance from international trading operations outside Europe
• International trading in both steel and raw materials remained profitable
• Distribution and stockholding activities lost money due to a 49% decline in volumes and heavy provisions
• Expanded stockholding network for engineering steels in Australia, France, Germany and Spain through acquisitions and start-ups
• In India, iron ore mine increased operating volumes and pellet plant on track for Q2 2010
• Positive outlook for H2, with signs of recovery in steel consuming markets
• $480m revolving credit facility renewed and liquidity strengthening.

Chairman's Statement

The first half of 2009 saw a continued deterioration in markets following on from the credit crisis and the depressed fourth quarter of 2008. Our invoiced tonnage for steel fell 32% to 3.2 million tonnes. Our distribution and stockholding activities lost money due to a 49% fall in volumes and further provisions against stocks and debtors. Our international steel trading operations outside Europe and North America saw only a 20% decline in volume, reflecting the more robust performance of developing economies, and remain profitable. We have, however, made substantial provision in the half year accounts to cover the possibility of failure to supply against contracts by one counterparty.

Our mining and raw materials activities reported a 24% reduction in the volume of material traded to 2.3 million tonnes but were again profitable. We are pleased with the progress of our investments in Orissa, India. BRPL, our pellet plant, is on schedule and on budget for commissioning in the second quarter of 2010. AMTC, our iron ore mine, substantially increased its operating volumes. An exploration programme has been undertaken at the mine using a combination of geophysical analysis as well as traditional diamond core drilling. The analysis work is well advanced and the results to date have been extremely encouraging. We are confident of being able to define an inferred resource in excess of 100 million tonnes in accordance with internationally recognised JORC standards. This would represent an asset of substantially greater value than currently reflected in our balance sheet.

It is very disappointing to have to report a £35 million loss for the first half of the year. The profits made in our raw materials and international trading activities were not sufficient to cover both the losses in the European steel activities and the loss from the provision against possible non supply. We have restructured and reduced costs where appropriate. At the same time we continue to strengthen our financial position by reducing stocks and building liquidity, a process which will continue during the rest of the year.

I do expect a significantly improved performance in the second half. Steel prices are going through a sharp upturn at present. Our distribution and stockholding interests reduced their losses in the second quarter and our provisioning may now prove to have been too conservative, which would give a further boost to profits as stock is sold. Despite the very poor results in the first half of the year, the full year should turn out much more positively.

Ralph Oppenheimer
Executive Chairman
12 August 2009

Click here for the corresponding consolidated profit and loss account and consolidated balance sheet.