Onesteel cuts 1,240 jobs

Despite managing to avoid its first ever half-year loss and restarting some idled steel production, Onesteel has revealed it will slash its Australian workforce by an extra 1240 jobs as it strives to keep costs under control.

In an expectation-beating full-year profit report released yesterday, Onesteel, which had previously been silent on how much of its 11,000-strong workforce would be slashed under a plan announced in April, revealed the extent of the cuts.

The company said 840 directly employed staff had already been axed and that there were 400 more to go by the end of the calendar year.

They add to more than 1000 job losses announced earlier in the year.

Chief executive Geoff Plummer said the cuts, which were expected to save $160 million a year, were across all the company's operations.

If conditions improve and Onesteel's still-reduced operating output is ramped up, some staff will be brought back, but savings would be still be $100m a year, he said.

The Sydney-based steelmaker yesterday reported underlying full-year profit of $215m, which was down 32 per cent from last year but beat guidance of $200m.

Reported full-year profit, which included $24m from the sale of land and a trademark, fell 6 per cent to $230m.

Second-half profit came in at $2m, saving the company from an expected loss which would have been the first half-year loss since Onesteel was spun out of BHP in 2000.

"It has been if not the hardest year ever for international and Australian steel industry, then awfully close to it," Mr Plummer said yesterday.

He said the company was encouraged by recent improvements to the outlook but warned domestic market conditions in key segments continued to be challenging, with only modest improvements in activity levels expected in the near term.

Internationally, there were clear indications steel prices had bottomed and started to recover.

"Domestic steel prices fell significantly in the fourth quarter, but we believe prices have bottomed and will increase from here," Onesteel said.

Yesterday, Onesteel shares rose 12c to $3.10 on the better-than-expected profit. Onesteel said it had started to boost production at its steel mills, although they were still well below capacity.

Steelmaking at Whyalla in South Australia had been increased from a rate of 460,000 tonnes a year to 1.1 million tonnes, Onesteel said.

Production from electric arc furnaces in Sydney and at Laverton in Victoria was 240,000 tonnes in the second half, or about 35 per cent of capacity.

Onesteel said it would boost production to about 65 per cent of capacity in the first half of 2009-10.

Iron ore sales were on track for 6 million tonnes this year, most of which was expected to go to China, Onesteel said. About two-thirds of Onesteel's iron ore is currently being sold at spot prices, giving it access to higher-than-contracted prices.

Mr Plummer said Onesteel also planned to explore for copper, gold and uranium, as well as iron ore, on its South Australian exploration ground.

Source: The Australian News