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The Smorgon Steel Group (SSX) is expecting another strong year of
growth as industries continue to boom, producing increasing demand for
steel.
One of the few glitches has been the uncertainty in scrap steel
prices which traded erratically over the past year.
However, there has also been pickup in this sector and the price
is much more stable and heading towards a recovery at $US250 tonne.
Managing director Ray Horsburgh, in predicting the year ahead,
said the company has not seen any material weakness in demand for its
products.
"In particular, we expect activity levels in engineering and
non-residential construction and mining production, which together
accounted for 46 per cent of our revenues in 2004/5 to continue to be
healthy in 2005/6", he said.
"Imports of steel into Australia are higher than was the case
several years ago, but we believe this is a consequence of strong
domestic demand rather than excess supply.
"Nonetheless, we remain vigilant to the threat of dumped imports.
"The three Australian pipe and tube makers have successfully
appealed the early termination of our long-running anti-dumping case and
we will continue to do all that is necessary to ensure that our employees
and shareholders are not threatened by unfair competition and our
customers will continue to be able to choose between domestically
produced and fairly imported product", Mr Horsburgh said.
He said ferrous scrap prices continue to exhibit volatility but
are generally lower than in 2003/4, and hot rolled coil prices appear to
have ended their upwards spiral of recent years, providing greater margin
certainty for its tube making business.
"We currently see continuing healthy levels of demand and a
positive operating environment for 2005/6", Mr Horsburgh declared.

BIG PROFIT RISE FOR 2005
*************************

Last week Smorgon Steel Group announced a 76.9 per cent increase
in underlying net profit for the year ended June 30 to a record $77.3
million.
Underlying profit after tax before amortisation was also a record
at $137.5 million, up 35.3 per cent on the previous year.
Revenues from core businesses were 14.5 per cent higher at $2.982
billion.
"When we announced an underlying net profit after tax for the
first half of this year of $37.3 million, we said that we expected our
second-half result could be slightly better than that", said Mr
Horsburgh.
"We have achieved that expectation as a result of our adherence
to a firm price discipline and a strategy of pursuing value over volume
in a strong market environment", he added.
Mr Horsburgh continued, "The reward to shareholders from our
commitment to pursue value ahead of volume is best shown in better sales
margins (8.3 per cent in 2004/5, compared to 7.1 per cent last year) and
the considerable improvement in return of funds employed of 14.3 per cent
compared to 10.7 per cent in 2003/4".

SHARE PRICE MOVEMENTS
*********************

Shares of Smorgon Steel yesterday edged up 1c to $1.42. Rolling
high for the year has been $1.44 and low $1.10. Final ordinary dividend
is 4.5c per share, fully franked, which together with the interim is 8.5c
a share for the full year.
Yield is a handy 5.99 per cent. Earnings per share is 6.10c and
price/earnings ratio 23/28. The company has 884.9 million shares on
issue, producing a market cap of $1.24 billion.
Smorgon Steel has had a busy year in capital management, the
company reports.
Mr Horsburgh disclosed the company funded the acquisition of the
assets of American Grinding Systems Inc, the purchase of the 50 per cent
of the Smorgon Hartwell Recycling joint venture it did not previously own
and repurchased and cancelled half of the Reset Preference Shares (RPS)
still on issue.
As a result of these major initiatives, capital expenditure in
excess of depreciation and increases in working capital, Smorgon Steel's
net debt at June 30 was $669.1 million, $195.8 million higher than 12
months earlier.
Of this increase, $99.6 million of was the result of the RPS
repurchase, which effectively replaced expensive preference shares with
cheaper and more flexible debt.
The Company intends to seek approval at this year's Annual
General Meeting to repurchase all remaining RPS on March 31, 2006.
Mr Horsburgh noted that the company has financing facilities
available to fund the repurchase of the remaining RPS.
"Based on current capital market conditions, there is a clear
benefit to ordinary shareholders in the company by proceeding with the
repurchase", he added.

BACKGROUND
**********

The rapid rise of Smorgon Steel Group to become the nation's most
vertically integrated steel producer is one of the most impressive
achievements in Australian industry.
With interests in meat processing, glass, plastics and metal
recycling, the Smorgon family took the major decision in 1980 to
introduce electric arc furnace 'mini mill' steel production to Australia.
Construction of a new high technology mill at Laverton North on
Melbourne's western outskirts started in 1981 and it became operational
in 1983.
A rolling mill was commissioned the following year.
In 1987 the Smorgon family sold its steel interests to Humes Ltd,
which at the time owned the ARC steel fabrication and distribution
business, and was the largest customer of Smorgon Steel.
The acquisition of the steel interests resulted in the Smorgon
family becoming 46 per cent shareholders in Humes.
In 1988 a successful takeover offer was made for the remaining
shares in Humes, returning full ownership of the steel operations to the
Smorgon family.
The takeover followed completion of a major upgrade of the steel
mill, which increased production capacity and enabled greatly expanded
downstream activities of the business, including the ARC operations.
Smorgon Steel has been further expanded and strengthened over
ensuing years through a series of strategic acquisitions and capacity
upgrades.
On February 3, 1999, Smorgon Steel Group Ltd was listed on the
Australian Stock Exchange.
There was a strong response to the public share offer, resulting
in general public applications for shares being substantially scaled
back.
The company subsequently acquired ANI in 1999, Metalcorp Ltd in
2000 and Email Ltd - jointly with OneSteel - in 2001. These acquisitions
have been accompanied by a successful program of divesting non-core
businesses.
Today, Smorgon Steel stands as a major force in the steel
industry and a key contributor to the Australian economy.
Formed in 2001 from the merger of Smorgon Metal Recycling and
Metalcorp Ltd, the business now trades as Smorgon Steel Recycling.
Smorgon Steel Recycling operates from 39 locations throughout all
states of Australia, New Zealand and China, employing over 550 people and
is the fastest growing metal recycling business in Australia.
The business supplies more than one million tonnes per year of
ferrous and non-ferrous scrap to the domestic and export markets.
Smorgon Steel Recycling also operates aluminium smelters at
Gladstone in Queensland and Bell Bay, Tasmania.
The company exports steel scrap to Korea, Taiwan, Thailand and
Indonesia, among others, complementing sales to domestic steel mills in
Australia.
In July 2002 a new office was opened in Shanghai to facilitate
increased exports to China. In February 2003 a new trading office was
opened in Auckland, New Zealand.
Having installed high quality processing equipment and reduced
costs, Smorgon Steel Recycling is well placed to take advantage of any
improvement in world commodity prices.
ENDS