Ferret's Stock to Watch: SMORGON STEEL GROUP LIMITED08:53,...

Ferret's Stock to Watch: SMORGON STEEL GROUP LIMITED
08:53, Monday, 10 April 2006

REVISED EARNINGS UPWARDS ALWAYS MUSIC TO SHAREHOLDERS' EARS

Sydney - Monday - April 10: (RWE Aust Business News)
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OVERVIEW
********

Shareholders in Smorgon Steel Group Ltd (SSX) should be happy the
way things are going for the company.

Directors believe they did well in 2005 considering some of
the company's clients found business pretty tough.

Despite that, it wasn't a bad year and should be even better by
June 30, after the company last week reported a revised earnings
guidance.

When releasing its first-half results in February, Smorgon Steel
indicated that, because of weakness in sales to the Australian
manufacturing sector and lower than expected selling prices for scrap
metal, it expected that net profit for the second half would be similar
to the $60.5 million announced for the first half.

Since then, selling prices for scrap metal have rebounded more
strongly than expected.

HMS-1 grade ferrous scrap, which was trading at approximately
$US210 per tonne in January, is now trading in excess of $US250 per
tonne.

While some increase in scrap prices in the second half was
expected, the trajectory of prices means that the average realised price
for ferrous scrap will be greater than expected.

Smorgon Steel directors have now told the ASX that it currently
expects reported net profit in the second half of 2005/6 to be between
10-15 per cent greater than that reported for the first half.

Looking back on the December half statement the company reported
that net profit was up only 0.7 per cent at $60.5 million.

Revenues were $1.53 billion, 4 per cent higher than in the first
half of 2004/5 with the figures calculated under the Australian
equivalents of International Financial Reporting Standards.

Directors declared an interim dividend of 4c per share with the
payout to be made on April 28.

At that time managing director Ray Horsburgh said, "We are
pleased with this result because it has been achieved in a period in
which different parts of our customer base experienced very different
trading conditions.

"We have seen strong demand for our products from the
construction and mining industries but, as we foreshadowed at last
year's annual general meeting, sales to Australian manufacturers have
been below expectations."

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

Shares of Smorgon Steel sold 2.5c higher at $1.485 on Friday.
Rolling high for the year was $1.70 and low $1.12. Dividend is 8.5c to
yield a reasonable 5.72 per cent. Earnings per share is 10.8c while p/e
ratio is a fair 13.75. The company has 888.8 million shares on issue
with a market cap of $1.297 billion.

Reading Smorgon's history shows the company never stops
expanding.

In March Smorgon Steel Group acquired the operating assets of
Australian Colour Coaters for an undisclosed sum.

The deal was completed on March 31 and the acquired company is
now called Smorgon Steel Coil Coaters.

In announcing the acquisition, Mr Horsburgh commented,
"Acquisition of these assets is consistent with our strategy of expanding
in high-value specialty steel products, particularly where
synergies exist with our current products and markets," he said.

ACC presently coats about 20,000 tonnes of imported steel coil,
mostly for use in fencing, shed and coolroom panel applications.

These segments of the coated steel market are serviced primarily
either by ACC or by imported pre-painted flat steel.

Mark Vassella, chief executive of Smorgon Steel Distribution
said, "The formation of SSCC is a natural extension of our Sheet Metal
Supplies business and it provides us with an opportunity to package
solutions for the building industry with our reinforcing mesh, tubular
and LiteSteel beam products.

"ACC previously imported all their coil feedstock requirements.
Smorgon Steel purchases substantial volumes of coil each year, and its
major supplier is Australia's BlueScope Steel.

"It is our intention to integrate SSCC's needs for coil into our
normal procurement program", Mr Vassella added.

"SSCC will be valuable addition to the Smorgon Steel Distribution
division and fits the strategic direction of growth in
specialty steel products."

Its financial performance will be incorporated into the company's
accounts during F06.

SSCC will require no immediate capital investment and is expected
to contribute to earnings immediately.

BACKGROUND
**********

Smorgon Steel joined the Australian Stock Exchange list on
February 3, 1999.

The rapid rise of the company to become the nation's most
vertically integrated steel producer is an impressive achievement 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.

After joining the ASX, 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 believes it stands as a major force in the
steel industry and a key contributor to the Australian economy.

ENDS