OneSteel Ltd., an Australian company changing its name to reflect its focus on iron ore, said there are no plans to abandon its loss-making steel business.
“The people in the steel space have got a clear set of objectives and that’s turning the business around, making sure they generate cash,” Chief Executive Geoff Plummer said in an interview on the Australian Broadcasting Corp. today. “It can be a good contributor to our portfolio and create value for our shareholders.”
Crude-steel production in China, which accounts for 45 percent of global steel output, may advance 7 percent to 731 million tons in 2012 compared with an 8.9 percent gain last year, Australia’s Bureau of Resources and Energy Economics said last month.
Shares in OneSteel, which will change its name to Arrium Ltd. from July 2, gained the most in more than two years in February when it said it was switching focus to iron ore, the main ingredient in steel making.
“We’re still, I guess, exposed to the China story in a positive way and I’m still pretty confident in terms of the mining consumables business and commodities generally,” Palmer said, adding he’s “confident” OneSteel’s steel business will return to profitability this fiscal half.
OneSteel, Australia’s second-largest steelmaker, is aiming to almost double production from its iron-ore unit that accounts for about 40 percent of sales together with its mining consumables business.
Mining will account for more than half its assets when iron-ore production reaches 11 million metric tons a year at full capacity after June 2013. It plans to produce 6 million tons of iron ore this fiscal year.
OneSteel swung to a net loss of A$74 million ($77 million) in the six months ended Dec. 31, from profit of A$116 million a year earlier. Its steel unit narrowed its loss with earnings before interest and tax of A$75 million in the period amid weak domestic demand, high raw-material prices and the stronger Australian dollar.