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CNH Profit Guidance and Outlook

China Steel Australia Limited (CNH) today announced it expects to record a profit after tax of between $25.7 million to $26.2 million for the 2009-10 financial year and an operating profit after tax of between breakeven and $0.5 million for the 2009- 10 financial year. As the first half loss was $0.98 million, this means that the second half operating result has improved to a range between a profit of $1.0 million and $1.5 million. During the financial year, shareholders approved the conversion of loans totalling A$51.8 million from three lenders into 172,820,046 fully paid ordinary shares at an issue price of $0.30 per share and 21,602,506 options, with an exercise price of $0.36. “The closing share price at the general meeting date was $0.14 which is much lower than its conversion price of $0.30. That deal showed that all lenders have strong support and confidence in the Company,” Mr Chen, China Steel CEO said. “We expect to make a small operating profit of up to $0.5 million, excluding any gains or losses arising from foreign exchange movements and the early adoption of AASB Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments. The early adoption of AASB Interpretation 19 will result in a one off $25.7 million gain,” Mr Chen said. He said another factor in the result included interest expenses arising from the fair value adjustment of an interest free loan amounting to $A2.7 million. “At the shareholder’s EGM on 23 February 2010, our shareholders approved the conversion of loans from Jadefield Group Ltd and Zhang Guangxia into shares,” Mr Chen said. “As a result, the remaining balance of the fair value adjustment of the interest free loan was charged as interest expense.” Mr Chen said the Company’s EBITA for the 2009-10 financial year would be in the range of $5.0 million to $5.5 million. Mr Chen said the Company expected to be profitable in the coming months. He is proud of a number of key achievements during the financial year. “Our plant has been running at near full capacity since January” he said. “And following the capital restructuring undertaken during the financial year, we have extinguished long term debt of $51.8 million.” The Brisbane-based company produces both nickel pig iron (NPI) and merchant pig iron (MPI) at its plant near the city of Linyi in China’s Shandong Province.