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Published on Friday, 30 May 2008

Results of Operations

Results of Operations

A.C.N. 063 656 333
A.B.N. 64 063 656 333

30 May 2008
Company Announcements Office
ASX Limited
Exchange Plaza
2 The Esplanade
Dear Sirs
In the period to 30 April 2008, the unaudited Group operating profit was A$6.6 million on revenues of A$135 million (Year ended 31 December 2007: Operating profit A$1.4 million; Revenues A$250 million). The improved results are due to the performance of the Vinausteel and SSESTEEL rolling mill operations in Haiphong which have traded profitably as a result of rising steel prices during a period of high demand and an effective billet procurement strategy. This demand has softened considerably due to continued high steel prices and sales for April and May have dropped sharply. These operations contributed an operating profit of A$7.2 million on combined revenues of A$128.4 million which are higher than the results for the prior period (Unaudited results for the period to April 2007: Operating profit A$0.5 million; Revenues A$46.9 million).
The SSESTEEL operation has reduced its net current deficiency at 30 April 2008 to A$7.9 million from A$14.5 million as at 31 December 2007 and no longer has a net asset deficiency. SSESTEEL management have negotiated repayment terms with the supplier of the machinery and equipment and SSESTEEL has since made a repayment of Euro 1 million to reduce this debt (31 December 2007: Euro 2.5 million).
It is noted that, although the results for this period were higher than those of the prior year, there is significant uncertainty regarding the trading conditions and performance of the Vietnam operations for the remainder of 2008. Many construction projects, particularly government funded projects, are being delayed in order to curb inflation faced by the Vietnam economy. Trading conditions are also being affected by banking conditions in Vietnam. In an attempt to control inflation, the government has tightened money supply and as a result some banks do not have sufficient foreign currency to lend. Interest rates have increased, particularly for Vietnam Dong borrowings, at a time when the VII Group’s Vietnam operations require increased working capital facilities to fund higher input costs.
The Board wish to stress that the trading conditions for the period reported are not expected to continue for the reasons indicated above.
SSESTEEL is continuing discussions with equipment suppliers and considering financing options with local banking institutions and potential equity partners regarding the billet plant to be constructed in Haiphong, adjacent to the rolling mill operations.
Yours faithfully
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