OneSteel slashes profit forecast

The new guidance implies a loss of $28 million for the second half of the fiscal year, and came before the company’s announcement of plans for a $559 million capital raising.“The earnings downgrade is disappointing and what we have seen is a rapid and significant deterioration in the market environment,” OneSteel chief executive officer Geoff Plummer said.“Since February, operating performance in our domestic markets has been affected by deeper than expected customer destocking and lower underlying demand, as well as margin pressure due to fixed costs being spread over lower production volumes.“The key factor in the downgrade was the significant reduction in iron ore prices that has occurred since our half-year results, that followed a period of steady improvement we saw from the lows of last year.”Plummer said that in order for the company to maintain its iron ore sales plan, it had increased the proportion of ore sold at spot as opposed to contract prices.The company’s plans to raise the $559 million – which it sees as being a minimum – will see its stock offered at $1.80 a share. OneSteel said the raising would remove its debt refinancing risk until 2011 and strengthen its balance sheet overall.

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