ferret's stock to watch: onesteel limited

Ferret's Stock to Watch: ONESTEEL LIMITED
08:20, Tuesday, 24 May 2005

Sydney - Tuesday - May 24: (RWE Australian Business News)

COMPANY RESTRUCTURE SHOULD PRODUCE MUCH BETTER RESULTS

OVERVIEW
********

OneSteel Ltd (OST) is rapidly expanding to boost revenue and
profit in the years ahead.

The company has strong potential with global demand still hot and
strong.

Shares of OneSteel have not always advanced in the past year but
new restructuring strategies have been put in place this year, aimed at
ensuring shareholder returns continue to improve.

Yesterday the company announced the final approval of the $325
million Project Magnet to commercialise OneSteel's magnetite iron ore
resource and upgrade the Whyalla Steelworks.

The project will generate in excess of $1.5 billion in additional
revenues over the life of the project.

The company says the project strongly positions it as it enters
its next phase of growth and development.

It currently represents OneSteel's "most attractive and
value-creating growth option".

The project now has a higher net present value than under the
proposal that was approved in principle last August, which allowed early
works to commence.

Project Magnet is a new source of cash and profit for OneSteel
and elevates the company's earnings to a higher base through the cycle.

OneSteel's managing director and chief executive officer, Geoff
Plummer, disclosed that the Board had given its final approval for the
project.

In announcing the project Geoff Plummer stated, "Project Magnet
strongly positions OneSteel as it enters its next phase of growth and
development.

"Project Magnet is a new source of cash and profit for OneSteel
and elevates the company's earnings to a higher base through the cycle,"
he said.

"We are extremely excited about the benefits of the project not
only in terms of the additional earnings it generates but also from the
point of view that it improves our cost competitiveness and underwrites
the operations of Whyalla from the current restraint of 2020 to at least
2027, bringing benefits to the Whyalla and South Australian communities."

Mr Plummer pointed out that with the cost of iron ore increasing
significantly, leveraging OneSteel's long-term raw material resource has
significant competitive benefits, while the move from hematite to
magnetite as feed for the Whyalla Steelworks provides OneSteel with a
lower cost of manufacturing and the ability to produce more steel.

Early work on the project had progressed since the Board's
in-principle approval in August and, following final approval, full
project implementation can now commence.

It is due for completion in the second half of the 2006/07
financial year.

As key milestones of the project are achieved, the current
hematite iron ore reserve becomes available for increased sales.

The company says it is intended to sell this ore over
approximately ten years at a rate of up to four million tonnes per annum.

"OneSteel is close to finalising contracts with a number of the
key contractors for the project and has secured an agreement with the
South Australian Government for a 10-year environmental licence agreement
to provide regulatory certainty for the investment," Mr Plummer said.

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

Shares of OneSteel yesterday rose 11c to $2.45. Rolling high for
the year has been $3.18 and low $2.15. Dividend is 13c a share to yield
5.31 per cent.

Last week Mr Plummer announced that certain company operations
would be restructured effective from July 1.

The OneSteel Reinforcing business, which is currently part of
OneSteel Distribution segment, will move to the manufacturing segment.

Conversely, the OneSteel Pipe and Tube business, currently part of
the manufacturing segment, will become part of OneSteel's
distribution segment.

In announcing the changes the managing director said, "This
restructuring reflects the first change in line with some of the
company's strategic themes which are currently being developed.

One of those key themes is extracting further value from
OneSteel's vertically integrated business or value chain.

Feed for OneSteel Reinforcing is supplied almost entirely from
steel manufactured by OneSteel, consuming well over half of the raw steel
produced in Sydney.

In the case of Pipe and Tube, OneSteel purchases the raw
materials for the manufacture of this product from external sources and
distributes the majority of finished product through a number of OneSteel
Distribution businesses including OneSteel Steel and Tube and
OneSteel Metaland.

"By bringing the manufacturing and channel management function
together under OneSteel Distribution, management can extract further
benefits in the areas of customer service, manufacturing costs,
logistics, marketing and related production scheduling," Mr Plummer said.

"It was decided to bring forward these changes to 1 July 2005 to
affect a full 12 months for next financial year."

BACKGROUND
**********

OneSteel was created by combining eight historically diverse yet
related businesses to form a vertically-integrated mining, steel
manufacturing, and steel and metal products distribution company.

OneSteel manufactures and distributes structural, rail, rod,
merchant bar, cold finished bar, chrome plated bar, reinforcing, wire,
tube, pipes, fittings, valves and actuation.

The majority of OneSteel's products are used in the construction,
manufacturing, housing, mining and agricultural industries.

Under former management, these businesses were essentially run as
independent operations.

The challenge for OneSteel's management is to bring these
businesses together to operate as a single entity, where all elements of
the operations are in alignment.

By achieving this, significant value can be created for
shareholders, customers and employees.

The OneSteel name was created to encapsulate the bringing
together of its various businesses.

ENDS

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I don't hold OST