Corporates: Metcash Cuts Jobs, Restructures/OneSteel’s New Name

The weak retail sales data from the ABS helps explain why Metcash (ASX: MTS), the big grocery retailer and hardware and liquor distributor and retailer announced a big restructuring yesterday of its basic grocery distribution businesses and the write down of an investment in retailing in Queensland.

The cost will be nearly 480 jobs and around $133 million in impairment write-downs and actual financial charges.

The owner of Franklins, IGA and Mitre 10 chains said it would close 15 regional Campbells Cash and Carry branches, with 315 jobs to be cut.

A further 183 jobs would go from the corporate side of the group.

The company, which supplies groceries to over 1,400 IGA supermarket stores, said the restructure would cost between $34 and $43 million.

Metcash said it had also sold its specialist food business Foodlink to Bidvest Australia.

It said Bidvest would offer employment to 90 Foodlink employees.

All up 515 people will go, including Foodlink.

The Campbells Cash and Carry operation, which has serviced corner stores, will disappear into a combination distribution business called Metcash Food and Grocery, combining IGA Distribution, Merchandising, Fresh and Campbells.

In Queensland the company said the write-downs the Cornetts and Walters joint ventures at a cost of $75 to $90 million.

"The two joint ventures have been hit hard not only by deflation but also by the environmental and economic difficulties specific to the Queensland market," Metcash CEO Andrew Reitzer said in a statement.

"The series of natural disasters experienced over the last 12 months together with the fact that many of the stores are in tourist areas and tourism numbers have fallen dramatically has particularly hurt these businesses.

"Both companies have taken on many new stores in recent years and the current trading environment has stifled their ability to develop these stores to acceptable levels of profitability," Mr Reitzer said.

That's yet another company hit by tough trading conditions in Queensland.

So far we have had the likes of QR National (ASX: QRN), the Bank of Queensland (ASX: BAQ) and Stockland (ASX: SGP) revealing tough times in their Queensland businesses because of the floods and heavy rains of the past 18 months and the slow trading conditions.

BHP Billiton (ASX: BHP)'s latest force majeure for its Queensland coal exports was blamed on the recent heavy rain and union activity.

Metcash shares opened 16c down at $4.14 after the trading halt on Monday.

They closed at $4.08, down 22c or 5%.

OneSteel Ltd (ASX: OST) is to become Arrium Mining and Materials Ltd as the company tries to soften its image and move away from the struggling steel industry.

The new name was launched at a function in Melbourne yesterday hosted by CEO Geoff Plummer.

At the same time the company launched its new website.

OneSteel will be holding an Extraordinary General meeting to change its name to Arrium Limited.

The meeting will be held in Sydney on May 8 and should shareholders approve the change it will be effective from 2 July 2012.

In addition to the corporate listing, the Arrium brand would be adopted by the company's Mining and Mining Materials businesses.

The company's steel and recycling business, which includes Manufacturing, Distribution and Recycling will operate at it does now under the OneSteel brand.

Mr Plummer said the name 'OneSteel' had served the company well over the years, but had become an impediment to attracting investors - particularly those from overseas - in recent times.

He said the entire rebranding process would cost the company less than one million dollars.

The new name had been under consideration for several months, and was designed to better reflect OneSteel's exposure to iron ore and mining services sectors.

"The name Arrium provides a better association with the company's current mining and materials businesses, as well as better accommodating its strategic growth focus on mining and mining consumables," the company said yesterday.

Last year OneSteel spent more than $300 million acquiring the iron ore assets of WPG Resources, and the company hopes to be exporting up to 11 million tonnes of iron ore within a year.

The Whyalla port is being expanded to an annual capacity of 12 million tonnes as part of this growth.

OneSteel decided in 2005 to move into iron ore exports through Project Magnet, which involves exporting the hematite iron ore near Whyalla and using the lower grade magnetite reserves in steel making.

The company produced charts in yesterday's release which showed the change in OneSteel as a result of the success of Project Magnet and its two phases.

As recently as 2007, 92% of the company's assets were classed as Australasian steel.

At December 31 last year, steel was down to 47% of the company's assets.

Mining has moved from 7% in 2007 to 16% and mining consumables has jumped from 1% to 28% after the purchase of Moly-Cop and AltaSteel businesses from Anglo American in late 2010.

OneSteel shares rose half a cent to $1.27 yesterday.