OREANDA-NEWS. March 27, 2012. Baosteel Co., Ltd held the temporary shareholders' meeting, reviewed and passed The Bill On Selling The Relevant Assets Of The Stainless Steel And The Special Steel Division. This will help to optimize the assets structure of Baosteel, improve the assets operation efficiency, enhance the product profitability and reduce the risk of the future returns. It is the strategic measure in accordance with the long-term interests of all the shareholders of Baosteel, reported the press-centre of Baosteel.

To keep the competitive advantage of the enterprise, maintain and improve profitability, realize the sustainable development in the severe market environment, Baosteel intends to seize the opportunity of the structure optimization and the layout adjustment of China iron and steel industry, give full play to the advantage accumulated by Baosteel over 30 years in the aspects of technology, management, service, brand etc, perfect the operation management and control system with the users as the center, carry out the differentiation high quality strategy in which variety, quality, technology and service take the lead, further enhance the assets operation efficiency and the market position, and do a better job. Through the research comparison of the competitiveness with the same iron and steel industry at home and abroad, Baosteel thinks they should focus on the carbon steel plates business with the differentiation advantage and enhance the core competitiveness.

Due to many defects in the aspects such as the energy source and process layout etc, the overall profitability of the stainless steel and the special steel business is not good for a long time. Although the administration and supervision authorities of the company have tried to enhance the profitability of the short plate products through a lot of ways such as the collaborative management, product structure adjustment and benchmarking for difference etc. and have achieved some results but can not change fundamentally the situation that the cost competitiveness is relatively weak. In the long-run, restricted by the factors such as the energy-saving and environmental protection and Shanghai city planning and positioning, the above cost disadvantage is difficult to solve fundamentally on the spot.

In order to safeguard the interests of the shareholders, optimize the assets structure of the company, improve the assets operation efficiency and enhance the product profitability, Baosteel intends to sell the stainless steel and the special steel business to focus on the most competitive carbon steel business, consolidate and strengthen the the leading position of the carbon steel plates in the domestic market, devote itself to becoming the world's most competitive carbon steel plate supplier, improve the company performance and realize the sustainable development. 

The general book value of the selling target through audit is 37.346 billion yuan, the total assessment value is 46.926 billion yuan, which increases 9.58 billion yuan compared with the book value and the evaluation increment rate is 25.65%. The transaction price this time is 45.192 billion yuan, the group company should make a one-time payment and bear the liabilities, Baosteel can get the cash 22.692 billion yuan and the group company takes the installment payment to pay 22.5 billion yuan with equal pay in 5 years .

After the business deal, the stainless steel and the special steel business will be stripped from Baosteel and according to the preliminary estimate, the annual steel output of the company will reduce from about 26 million tons to 22 million tons. Without considering the relevant taxes, the total assets of the consolidated financial statements of Baosteel increases 2.76 billion yuan, the total liabilities reduces 5.39 billion yuan and the owners' equity increases 8.155 billion yuan. It is expected that the consolidated financial statements returns of the company decreases 3.127 billion yuan.

In 2011, it is planned that the corresponding loss of the selling target assets is 1.54 billion yuan and the assets sale will benefit the improvement of the overall profitability level. At the same time, the assets sale returns this time is 9.58 billion yuan (without considering the relevant taxes)and the financial cost of the company this year is reduced about 1.4 billion yuan.

After the group corporation purchases the stainless steel and the special steel business, according to the adjustment requirements of Shanghai city planing and positioning, Baosteel will combine with the overall planning of Baosteel, make the adjustment plan of the stainless steel and the special steel business, apply the whole resource advantages and synergy effect and continuously develop the stainless steel and the special steel business.