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EHS - Evraz Highveld Steel and Vanadium Limited - Group unaudited results for
the three months ended 31 March 2011
Evraz Highveld Steel and Vanadium Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1960/001900/06)
Share code: EHS
ISIN: ZAE000146171
("the Company" or "Evraz Highveld" or "the Group")
GROUP UNAUDITED RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2011
Chairman and CEO`s Review
- EBITDA profit of R53 million (Q1 2010: profit of R 71
million)
- Headline profit of R20 million (Q1 2010: loss of R 17
million )
- A positive cash flow of R75 million for the period
- Appointment of Michael Garcia as new Chief Executive
Officer and Director
1. Key Financials
The operating profit for the period was R8 million, compared to a loss of
R 24 million for Q1 2010. Sales revenue increased to R 1.5 billion from R
1.2 billion for the same period in 2010. The main reasons for the
reduction in EBITDA for the period compared to the same period in 2010,
was a movement in percentage export steel sales to total steel sales from
20% to 42%, which resulted in an overall lower steel price, as well as a
higher cost per ton of steel sold. An improvement of the average net
steel margin of 24% was made for the period as compared to Q4 2010.
An improvement of the following key indicators for the period from Q4
2010 was seen, as set out below:
Q1 2011 vs Q4 2010
- Revenue: R1.5 million vs R1.2 million
- EBITDA: R53 million vs negative R189 million
- Net profit: R20 million vs a loss of R377 million
- Cash in/ (out): R 75 million vs (R83 million)
- Earnings per share: 21.2 cents vs negative 380.2 cents
2. Health and Safety
It is with deep regret that we report the death of Mr Louis Mathibela, a
contractor employee, who was run over by a hot charge car in the
Ironmaking division on 4 April 2011. We extend our sincere condolences to
his family.
The Lost Time Injury Frequency Rate as at 31 March 2011 was 1.91, with 6
lost time injuries which occurred during the period. Extensive measures
have been put in place to further ensure a safer working environment for
all employees and contractors.
3. Operations
Steel
The casted steel output for the period decreased by 9 % to 195 793 tons
compared to the same period last year. Production of long products
increased by 12%, but the production of flat products decreased by
approximately 20%, mainly as a result of more focus on the domestic sales
of long products and production difficulties experienced for exports of
flat products.
In order to improve the plant stability, availability and the quality of
rolled products, shutdowns for the flat products mill and the structural
mill have been planned for June and July 2011 respectively, with
additional capital cost over and above budget of R16.6 million . During
this period significant maintenance will also be undertaken on idle
primary equipment in the iron and steel plant. Full improved production
will commence in September 2011. It is expected that the payback period
of the project should be within eight months.
At the end of March 2011 the conversion project of Furnace 7 of the
Ironmaking division commenced to convert the furnace to open slag bath
technology. This project will reduce the dependability on metallurgical
coal, reduce electrical energy consumption and improve vanadium recovery
in iron. The upgraded furnace will be brought back on line during
September 2011.
Vanadium
A total of 16 417 tons of vanadium slag was produced with 2 221 tons of V
in V2O5 for the period, compared to 13 691 tons, with 1 902 tons of V in
V2O5 produced for the same period last year. Adequate provision has also
been made to ensure sufficient vanadium stock is available during the
improvement and maintenance period mentioned above.
4. Markets
Global and South African markets
The year to date global crude steel production increased by 9.4%, to 373
million tonnes and by 8%, excluding China, compared to the same period in
2010. South African steel production decreased by 23.2% year to date as
compared to the same period in 2010. Imports of steel into South Africa
are continuing.
Evraz Highveld Sales
Domestic steel sales volumes, and export steel sales volumes for the
period decreased and increased by 10% and 155% respectively, compared to
the same period in 2010. The main reason for the increase in export steel
sales volumes was that export orders were accepted during Q4 2010 in
anticipation of a weaker domestic market for the first quarter in 2011.
The domestic market subsequently recovered better than expected.
Export vanadium slag sales increased by 31% for the period compared to
the same period in 2010. Domestic vanadium slag sales decreased by 86%,
due to the tolling of slag into MVO and Nitrovan at Vametco Alloys. A
total of 366 tons V MVO and Nitrovan were sold in the period.
5. Change in Directorate
On behalf of the Board we are pleased to announce the appointment of
Michael Garcia as the new Chief Executive Officer and Director of the
company with effect from today. Mike was previously Senior Vice
President: Manufacturing and Supply Chain of Evraz Inc. North America and
brings a wealth of experience and expertise. We are confident that the
Company will benefit greatly from his leadership.
6. Outlook
The steel market seems to have stabilised with demand in balance and a
slight increase in global production as compared to last year. Prices
have increased slightly during the period with some likelihood that they
could further increase. We are certain that the extensive investments for
the Steelworks planned for the third quarter will result in quick
positive payback.
BTJ Shongwe D Scuka
(Chairman) (Acting Chief Executive Officer)
13 May 2011
GROUP UNAUDITED FINANCIAL RESULTS
Basis of preparation
The Group`s financial results for the quarter ended 31 March 2011 set out
below have been prepared in accordance with the principal accounting policies
of the Group, which comply with International Financial Reporting Standards
("IFRS") and in the manner required by the Companies Act in South Africa and
are consistent with those applied in the Group`s most recent annual financial
statements, including the Standards and Interpretations as listed below.
These results are presented in terms of International Accounting Standards
("IAS") 34 applicable to Interim Financial Reporting.
Significant accounting policies
The accounting policies adopted and methods of computation are consistent with
those of the previous financial year, except for the adoption of the following
new and amended IFRS standards and IFRIC interpretations during the current
year:
- IAS 32, Classification of rights issues (Amended)
- IAS 24, Related party disclosures (Amended)
- IFRIC 14, Prepayments of a minimum funding requirement
(Amended)
- IFRIC 19, Extinguishing financial liabilities with equity
instruments
- May 2010 Improvements to IFRS (improvements effective for
the current financial year)
Where necessary, disclosures have been updated in accordance with these
standards, amendments or interpretations. The adoption thereof did not have
an impact on the results, cash flows or financial position of the group in the
current period.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Reviewed as Audited as
as at at at
31 Mar 2011 31 Mar 2010 31 Dec 2010
Rm Rm Rm
ASSETS
Non-current assets 1 656 1 868 1 661
Property, plant and 1 578 1 868 1 607
equipment
Deferred tax asset 78 - 54
Current assets 2 443 3 041 2 402
Inventories 927 1 285 1 084
Trade and other receivables 949 884 826
and prepayments
Cash and short-term 567 872 492
deposits
TOTAL ASSETS 4 099 4 909 4 063
EQUITY AND LIABILITIES
Total equity 2 551 3 059 2 510
Non-current liabilities 550 721 536
Provisions 550 478 536
Deferred tax liability - 243 -
Current liabilities 998 1 129 1 017
Trade and other payables 696 818 745
Income tax payable 63 142 54
Provisions 239 169 218
TOTAL EQUITY AND 4 099 4 909 4 063
LIABILITIES
Net asset value - cents per 2 573 3 085 2 532
share
CONDENSED CONSOLIDATED INCOME STATEMENTS
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
Note
s
Sale of goods 1 501 1 223 5 125
Revenue 1 501 1 223 5 125
Cost of sales (1 449) (1 073) (5 031)
Gross profit 52 150 94
Selling and distribution
costs ( 97) ( 60) ( 301)
Administrative expenses ( 75) ( 115) ( 353)
Other operating 5
income/(expense) 128 1 ( 263)
Operating profit/(loss) 8 ( 24) ( 823)
Finance costs ( 11) ( 12) ( 49)
Finance income 4 11 36
Profit/(Loss) before tax 1 ( 25) ( 836)
Income tax credit 6 20 8 287
Profit/(Loss) for the
period/year 21 ( 17) ( 549)
Cents Cents Cents
Earnings/(Loss) per share - 21.2 ( 17.1) ( 553.7)
basic and diluted
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
Profit/(Loss) for the
period/year 21 ( 17) ( 549)
Other comprehensive
income/(loss):
Exchange differences on
translation of foreign
operations 20 2 ( 15)
Total comprehensive
income/(loss) for the
period/year 41 ( 15) ( 564)
HEADLINE EARNINGS PER SHARE
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
Reconciliation of headline
earnings/(loss):
Profit/(Loss) for the 21 ( 17) ( 549)
period/year
Add after tax effect of:
Net (profit)/loss on (*) - 166
disposal and scrapping of
property, plant and
equipment
Headline earnings/(loss) 21 ( 17) ( 383)
* Less than R1 million
Cents Cents Cents
Earnings/(Loss) per share -
headline and diluted 21.2 ( 17.1) ( 386.3)
Headline earnings/(loss) per share is calculated in terms of
Circular 3/2009 Headline Earnings issued by the South African
Institute of Chartered Accountants.
Million Million Million
Number of shares
Ordinary shares in issue as
at end date *+ 99.2 99.2 99.2
* Rounded to nearest
hundred thousand.
+ Agree to weighted average
and diluted number of
ordinary shares.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE PERIOD/YEAR ENDED
Issued Other Retained Total
capital capital earnings
and reserves
share
premium
Rm Rm Rm Rm
2010
Balance at 1 January 2010 585 153 2 336 3 074
Loss for the period ( 17) ( 17)
Other comprehensive income 2 2
for the quarter
Balance at 31 March 2010 -
Reviewed 585 155 2 319 3 059
Loss for the period ( 127) ( 127)
Other comprehensive loss
for the quarter ( 2) ( 2)
Balance at 30 June 2010 -
Reviewed 585 153 2 192 2 930
Loss for the period ( 28) ( 28)
Other comprehensive income
for the quarter 2 2
Balance at 30 September
2010 - Unaudited 585 155 2 164 2 904
Loss for the period ( 377) ( 377)
Other comprehensive loss
for the quarter ( 17) ( 17)
Balance at 31 December 2010
- Audited 585 138 1 787 2 510
2011
Profit for the period 21 21
Other comprehensive income
for the quarter 20 20
Balance at 31 March 2011 -
Unaudited 585 158 1 808 2 551
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2011 2010 2010
Cents Cents Cents
Dividends per share
Dividends declared and paid - - -
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
Cash flows from operating
activities
Cash from/(used in)
operations before tax paid 114 ( 131) ( 179)
Income tax paid (*) - ( 109)
Net cash from/(used in)
operating activities 114 ( 131) ( 288)
Cash flows from investing
activities
Net additions to property, ( 50) ( 51) ( 250)
plant and equipment
Net cash (used in) ( 50) ( 51) ( 250)
investing activities
Net increase/(decrease) in
cash and cash equivalents 64 ( 182) ( 538)
Cash and cash equivalents
at the beginning of the
period/year 492 1 072 1 072
Effects of exchange rate
changes on cash held in
foreign currencies 11 ( 18) ( 42)
Cash and cash equivalents 567 872 492
at the end of the
period/year
* Less than R1 million
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Companies Act and JSE Limited Listings Requirements
Compliance with the Companies Act as well as the Listings
Requirements of the JSE Limited has been maintained
throughout the reporting periods.
2. Related party transactions
Sales to East Metals S.A. (a fellow subsidiary of
Mastercroft Limited) amounted to R377 million (2010: R104
million) for the three months ended 31 March 2011. This
constitutes 25% of total revenue for the quarter, compared
to 17% for the year ended 31 December 2010.
3. Segment information
The Group is organised into business units based on their
products and has two reportable segments, as follows:
Steelworks
The major products of the steel segment are magnetite iron
ore, structural steel, plate and coil.
Vanadium
The major products of the vanadium segment are vanadium
slag and ferrovanadium. Vanadium slag is a waste product
from the steelmaking process, and this slag is transferred
from the Steelworks to the Vanadium plant at zero cost,
which then forms the input into the business of the
Vanadium business.
No operating segments have been aggregated to form the
above reportable operating segments. Management monitors
the operating results of its business units separately for
the purposes of making decisions about resource allocation
and performance assessment. Segment performance is
evaluated based on operating profit.
The following tables present the revenue, operating profit
and total assets information regarding the Group`s
operating segments:
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
Revenue from the sale
of goods
Steelworks 1 048 839 3 612
Vanadium 453 384 1 513
Total 1 501 1 223 5 125
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
Operating profit/(loss)
Steelworks ( 118) ( 162) (1 220)
Vanadium 126 138 397
Total 8 ( 24) ( 823)
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
Total assets
Steelworks 3 480 4 399 3 340
Vanadium 619 510 723
Total 4 099 4 909 4 063
4. Supplementary revenue information - Unaudited
For the For the For the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
Sales volumes of major
products
Total steel Tons 182 119 147 119 610 602
Ferrovanadium Tons 1 501 1 750 5 488
V
Modified Vanadium Oxide Tons 248 - 468
V
Nitrovan Tons 118 - -
V
Vanadium slag Tons
V2O5 3 498 1 382 2 102
Fines ore Tons 176 242 138 302 623 928
Weighted average selling
prices achieved for major
products
Total steel US$/ 740 700 715
t
Ferrovanadium US$/ 29 24 27
kg V
Modified Vanadium Oxide US$/ 22 - 20
kg V
Nitrovan US$/ 29 - -
Kg V
Vanadium slag US$/ 6 6 6
kg
V2O5
Fines ore US$/ 41 34 38
t
Average R/$ exchange rate 7.00 7.52 7.32
5. Other operating income
The R128 million other operating income relates to the
adjustment of the Net Realisable Value provision of R116
million and foreign exchange profits.
6. Income tax
Unaudited Reviewed Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
Rm Rm 2010
Rm
South African
Normal
Current - 27 -
Prior year under provision - - 1
Deferred
Current 23 - (318)
Prior year under provision - - 21
Non-South African
Normal
Current (3) (19) 9
Income tax 20 8 (287)
(credit)/expense
The period/annual income tax expense is accrued using the
estimated average annual effective income tax rate applied to the pre-tax
income of the interim report.
7. Financial ratios - Unaudited
For the For the For the
three three year
months months ended
ended ended
31 Mar 31 Mar
2011 2010 31 Dec
2010
Current ratio 2.45 2.69 2.36
Market capitalisation - Rm 6 937 7 916 8 279
8. Contingent liabilities and guarantees
As required by the Mineral and Petroleum Resources
Development Act, a guarantee amounting to R264 million
before tax and R190 million after tax (2010: R264 million
before tax and R190 million after tax) was issued in favour
of the DMR for the unscheduled closure of Mapochs Mine.
In terms of the Company`s employment policies, certain
employees could become eligible for post-retirement medical
aid benefits at any time in the future prior to their
retirement, subject to certain conditions. The potential
liability, should they become medical scheme members in the
future, is R32 million before tax and R23 million after tax
(2010: R32 million before tax and R23 million after tax).
As required by certain suppliers of the Company, guarantees
were issued in favour of these suppliers to the value of R9
million (2010: R9 million) in the event that the Company
will not be able to meet its obligations to the suppliers.
9. Status of previously reported possible litigation
A new summons was received on 13 May 2010 from the
Competition Commission relating to a complaint referring to
price fixing allegations of flat products. A comprehensive
response with requested documentation was compiled and
submitted to the Commission on 5 July 2010. No further
response has been received from the Commission.
A summons was received on 3 March 2010 from Xai-Xai Slag
Distributors (Proprietary) Limited and Rothinvest 30
(Proprietary) Limited t/a Xai-Xai Slag Management (in
liquidation) ("Xai-Xai"). The Company brought an
application for exception, which was heard on 14 February
2011. An adverse judgement in the exception hearing was
received and the Company`s plea was filed and served.
Further action is awaited from Xai-Xai.
Directors: B J T Shongwe (Chairman), G C Baizini (Italian), M Bhabha, C B
Brayshaw, Mrs B E de Beer, A V Frolov (Russian), Mrs B Ngonyama, D Scuka
(Acting Chief Executive Officer) (Czech), P M Surgey, P S Tatyanin (Russian)
and T I Yanbukhtin (Russian)
COMPANY SECRETARY: Mrs C I Lewis
Registered office: Transfer secretaries:
Portion 93 of the farm Computershare Investor Services
Schoongezicht No. 308 JS (Proprietary) Limited
District eMalahleni 70 Marshal Street
Mpumalanga Johannesburg
P O Box 111 P O Box 61051
Witbank 1035 Marshalltown 2107
Tel: (013) 690 9911 Tel: (011) 370 5000
Fax: (013) 690 9293 Fax: (011) 688 5200
Sponsor: J.P. Morgan Equities Limited
Date: 13/05/2011 15:24:06 Supplied by www.sharenet.co.za
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