New Zealand Steel is a unique steel business, and in 2004/05 it showed its true performance capabilities. Many people have worked hard to improve this operation, and their efforts have proved fruitful, with the business taking full advantage of high demand in the domestic construction market. Export prices also rose, overcoming the effects of a strong New Zealand dollar and higher maintenance costs.

Our Steelworks, located at Glenbrook, south of Auckland, is a unique, fully integrated operation covering the entire steel supply chain. It uses our iron-rich sands and locally sourced coal to produce around 600,000 tonnes of steel slab each year. Slabs are processed into hot and cold rolled products, which are then on-sold, or further processed into products such as hollow sections, galvanised steel, and ZINCALUME® steel and COLORSTEEL®.

THIS BUSINESS TOOK FULL ADVANTAGE OF STRONG MARKET DEMAND, REWARDING THE EFFORTS OF THOSE WHO HAVE WORKED HARD TO IMPROVE IT.

The business operates an extensive customer service network, selling to domestic and international markets.

In 2004/05, New Zealand Steel, including our Pacific Islands business, achieved EBIT of $183 million, an increase of 195% over last year, showing the benefit of higher domestic and export prices. Strong prices for the steelmaking by-product vanadium slag also contributed.

In 2004/05, New Zealand Steel achieved record domestic despatches of 315,000 tonnes, compared with 272,000 tonnes the previous year.

Slab production was 610,400 tonnes, slightly down on last year's figure of 611,300 tonnes, due to scheduled maintenance work. Major scheduled shutdowns in the iron plant, steel plant and hot strip mill occurred during the second half-year.

The metallic coating line achieved an annual production record of 217,000 tonnes, up from the previous record of 197,000 tonnes set in 2003/04, and despite a scheduled shutdown. An induction oven was successfully commissioned in February, and capacity is now 230,000 tonnes per annum. Paint line production was 52,000 tonnes, consistent with the previous year. An oven upgrade, completed in February, has lifted capacity to 60,000 tonnes per year.

In May, we reached agreement on a three-year Employment Contract. Procurement initiatives provided cost savings of around NZ$2.5 million, and will continue to deliver savings in 2005/06. During the year, we made improvements to management systems, and also replaced ageing finance, maintenance and supply systems at a cost of $NZ13.5 million. We expect these changes to further enhance productivity in 2005/06.