Stemcor announces record half year results for 2008

Financial highlights

• Record financial results
• Turnover from continuing operations up from £2,097m to £2,807m (+34%)
• Operating profit from continuing operations up from £41m to £75m (+83%)
• Pre-tax profit up from £26m to £48m (+85%)
• Steel tonnage invoiced relatively flat at 4.7m tonnes (-3%)
• Raw materials tonnage invoiced from continuing operations up to 3.6m tonnes (+21%).

Operational highlights

• Robust performance from all businesses within the Group, particularly stockholding
• Acquired Barclay & Mathieson in the UK, a general steel stockholder with 12 depots
  • Stemcor’s global stockholding operations now include; Steel Plate & Sections and Barclay & Mathieson in the UK; WSK, OKS, S+B Flachstahl and S & W RohrTech in Germany; and Kenilworth Steel in the USA.
• Acquired Ferrosource in the USA, a business engaged in pig iron distribution and ferrous scrap brokerage
• Strong position for H2, with $700m revolving credit facility and solid forward order book.

Chairman's Statement

Trading conditions were favourable in the first half of this year, although our invoiced tonnage fell by 3% for steel to 4.7 million tonnes and by 11% for raw materials to 3.6 million tonnes. Adjusting for the absence of a contribution from Savage River, the Tasmanian iron ore mine and pellet producer which we sold in August last year, our raw materials tonnage increased by 21%. Turnover grew by 32% as a result of the increase in prices, despite the fall in tonnes invoiced, and profits benefited from an increase in margin. These were record results for Stemcor.

In March of this year we completed the acquisition of Barclay & Mathieson, a steel stockholding group with 12 depots in the UK and we are currently assessing a number of further acquisition possibilities in stockholding in other parts of the world. Our stockholding businesses made a strong contribution to the Group’s overall results, aided of course by stock appreciation, but all our businesses performed well.

We had predicted a fall in prices in the second half of this year, and this has now started. It is difficult to forecast how much further this correction will go, but with the decline in expenditure on consumer durables and the fall in construction that is now expected in the industrialised world, it is likely that we will face a less favourable environment in the second half of this year.

I am pleased to say that we are as well placed as possible to face a possible downturn. In May we completed a $700 million revolving credit facility and our liquidity situation is comfortable. We have reduced our unsold tonnage, though some exposure is inevitable in any distribution or stockholding business. We had a record forward order book to deliver as at the end of June and this promises us a very strong third quarter. We therefore anticipate an excellent year overall, despite a deteriorating market. We also expect a continued high return on shareholders funds for the year, despite having increased our equity through retained profits.

Though it will be a challenge to maintain such good performance in 2009, we are confident in the continued strength of our business.

Ralph Oppenheimer
5 August 2008

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