Wrap Text
ACL - ArcelorMittal South Africa - Unaudited group earnings results and physical
information for the quarter ended 30 September 2009
ArcelorMittal South Africa Limited
(Incorporated in the Republic of South Africa)
Registration number: 1989/002164/06
Share code: ACL ISIN:ZAE 000134961
("ArcelorMittal South Africa", "the company" or "the Group")
Unaudited group earnings results and physical information for the quarter ended
30 September 2009
The lifeblood of a developing nation
Group income statement
Quarter ended Nine Year
months ended
ended 31
30 December
September 2008
2009 Audited
Rm Rm
30 30 30
September September June
2009 2008 2009
Rm Rm Rm
Revenue 6 903 13 349 5 783 18 863 39 914
Flat Carbon Steel Products 4 311 8 448 3 606 12 066 25 513
Long Carbon Steel Products 2 292 4 120 2 075 6 355 12 950
Coke and Chemicals 513 999 309 972 3 563
Inter group eliminations (213) (218) (207) (530) (2 112)
Profit/(loss) from operations 30 5 190 (177) (292) 12 159
Flat Carbon Steel Products (299) 3 257 (301) (876) 7 007
Long Carbon Steel Products 138 1 570 (4) 126 3 672
Coke and Chemicals 141 525 80 236 1 743
Corporate and Other 50 (162) 48 222 (263)
(Losses)/gains on changes in (147) 111 (681) (842) 637
foreign exchange rates and
financial instruments
Interest income 8 44 65 191 318
Finance costs (84) (160) (44) (225) (238)
Income from investments 1 1 2 3
Impairment reversal 36
Income from equity accounted 76 188 1 117 331
investments (net of tax)
(Loss)/profit before tax (116) 5 374 (836) (1 049) 13 246
Income tax expense 44 (1 620) 227 129 (3 865)
(Loss)/profit for the period (72) 3 754 (609) (920) 9 381
Attributable to: (72) 3 754 (609) (920) 9 381
- Owners of the company
ADDITIONAL INFORMATION
Attributable (loss)/earnings (18) 842 (137) (214) 2 105
per share (cents)
Reconciliation of headline
(loss)/earnings
(Loss)/profit for the period (72) 3 754 (609) (920) 9 381
Adjusted for:
- Loss on disposal or 10 25 2 15 39
scrapping of assets
- Impairment charge 121
- Impairment reversal (36)
- Tax effect (3) (7) (4) (21)
Headline (loss)/earnings (65) 3 772 (607) (909) 9 484
Headline (loss)/earnings per (16) 846 (136) (211) 2 128
share (cents)
Physical information (`000 tonnes)
Quarter ended Nine Year
months ended
ended 31
30 December
September 2008
2009
30 30 30 June
September September 2009
2009 2008
Flat Carbon Steel
Products
Liquid steel production 822 1 283 773 2 348 4 084
Sales 774 964 643 2 121 3 412
Long Carbon Steel
Products
Liquid steel production 543 558 446 1 394 1 690
Sales 475 480 405 1 196 1 677
Total
Liquid steel production 1 365 1 841 1 219 3 742 5 774
Sales 1 249 1 444 1 048 3 317 5 089
- Local 847 1 268 703 2 236 4 375
- Export 402 176 345 1 081 714
- Local sales as % of 68 88 67 67 86
total sales
Financial results
ArcelorMittal South Africa has posted a headline loss of R65 million for the
third quarter of 2009 which represents a substantial improvement on the R607
million loss of the previous quarter. However, the depressed market conditions
that continued to prevail are especially evident when compared to the record
headline profit of R3 772 million achieved during the third quarter last year.
The improvement from the previous quarter was driven by a 19% rise in sales
volumes, a moderate improvement in steel prices and lower raw material input
costs as expensive coal contracts started to run out by the middle of the third
quarter. Profit from our Coke and Chemicals business also showed a significant
improvement from the previous quarter as demand for market coke from the ferro-
alloy industry started to recover. The stronger Rand continued to have a
negative impact on our financial performance.
Cash costs per ton of hot rolled coil for the quarter decreased by 8.7% compared
to the previous quarter and by 10.9% compared to the corresponding period last
year. The cash costs of billets decreased by 12.3% and 17.8% respectively. The
reduced costs were mostly the result of lower coal prices and higher production
volumes.
The cash flow for the quarter was a positive R684 million and increased the
company`s cash balance to R3 697 million.
Market review
International market
International demand for steel in almost all regions improved during the third
quarter of 2009 but the price of steel products - although showing modest gains
over the past few months - remained subdued as steel producers started to bring
production capacity back on stream. It is also apparent that inventory de-
stocking is essentially completed. ArcelorMittal South Africa`s exports
increased by 17% from the second quarter to 402 000 tonnes in the third quarter.
Domestic market
Output growth in the South African economy remained weak in the third quarter of
2009. Real gross domestic product contracted at a rate of 6.4% in the first
quarter of 2009 and by 3% in the second quarter. Early indications are that
economic growth in the third quarter will still be negative, though at a reduced
rate.
The uncertain economic outlook, tight credit conditions and the negative impact
of the strong Rand on the ability of export orientated industries to compete
internationally, continue to depress domestic sales. Notwithstanding the
relatively low inventory levels in the domestic market and the slow pace at
which buyers are replenishing their inventories in light of the uncertain
economic outlook, quarter three sales increased by 20% to 847 000 tonnes
compared to the previous quarter. Sales though are still 33% below the levels
achieved a year ago.
Operational review
Liquid steel production for the third quarter of 2009 totalled 1 365 000 tonnes,
an increase of 12% compared to the previous quarter, but still 26% below the
corresponding period last year. Production levels in the first six months of
2009 were at about 60% of total capacity and increased to over 70% in quarter
three. We have prepared Blast Furnace C at Vanderbijlpark Works for a restart
and will resume production as soon as market conditions justify an increase in
volumes. Both Newcastle Works and Saldanha Works are currently running at full
production.
Contingent liabilities
The case brought before the Competition Tribunal (the "Tribunal") by gold miners
Harmony Gold Mining Company Limited and DRDGold Limited, which was appealed to
and subsequently remitted back by the Competition Appeal Court to the Tribunal,
has been settled. A formal notice of withdrawal was submitted to the Tribunal.
Another case brought by Barnes Fencing Industries Limited relating to alleged
price and payment discrimination on the sale of low carbon wire rod products
continues in accordance with Tribunal procedures. A date for the hearing has not
been set.
The Competition Commission investigated ArcelorMittal South Africa, together
with four other primary steel producers in South Africa in respect of alleged
market collusion and price fixing relating to certain long steel products. The
Competition Commission has referred the matter to the Tribunal for adjudication
and recommended a financial penalty of 10% of the company`s 2008 turnover.
ArcelorMittal South Africa is in the process of preparing its response to the
Competition Commission`s complaint referral.
Safety, health and environment
Notwithstanding actions taken to improve safety performance, the third quarter
saw a deterioration in the lost time injury frequency rate from 1.8 injuries per
1 million man-hours worked reported in the second quarter to 3.3 injuries per 1
million man-hours worked. A fatal incident occurred at Vanderbijlpark Works
which is regrettable given our quest to achieve zero fatalities and injuries.
This strengthens management`s commitment to improve safety performance.
Environmental matters feature prominently in the company`s priority list, though
the severe impact of the global economic crisis has necessitated the
postponement of capital spending on some environmental projects.
Nevertheless, we are nearing completion on two crucial projects that will
significantly mitigate the company`s environmental impact:
- The installation of a dust extraction system at the steelmaking facilities of
Vereeniging Works is progressing well and is scheduled for completion by the end
of this year.
- The Coke Oven Gas and Water Cleaning project at Vanderbijlpark Works should be
operational during the fourth quarter of 2009. The project will achieve an
approximate 40% reduction in SO2 emissions at the plant.
Capital projects
As a result of the adverse economic climate a number of projects that were
suspended in the first half of the year have been re-activated. After more than
30 years of continuous operation, the Tinning Line at Vanderbijlpark Works is
undergoing structural repairs and is scheduled for completion in the fourth
quarter.
Resignation of directors
Dr LGJJ Bonte will resign as President and as Executive Director of the company
with effect from 30 November 2009. Dr KDK Mokhele has informed the board of
directors of ArcelorMittal South Africa ("the Board") that he will resign as
Independent Non-executive Director and Chairman of the Board with effect from 4
December 2009.
Outlook for fourth quarter
Results in the fourth quarter of 2009 are expected to improve further, driven by
higher sales and lower costs, with lower coal prices making the largest
contribution. The Rand`s performance is a critical variable in our outlook for
the quarter.
Domestic demand is set to recover further during the fourth quarter on the back
of a stronger international economy and a slight easing of credit requirements
by the banking sector. However, the seasonal slowdown in domestic activities
during the December holiday season will have an influence on the sales volumes.
The recovery in the global economy should continue to boost demand for steel
globally. Steel price improvements will depend on the discipline steel producers
exercise in aligning production with demand.
On behalf of the board
NMC Nyembezi-Heita (Chief Executive Officer)
HJ Verster (Chief Financial Officer)
27 October 2009
Forward looking statements
Certain statements in this release that are neither reported financial results
nor other historical information, are forward-looking statements, including but
not limited to statements that are predictions of or indicate future earnings,
savings, synergies, events, trends, plans or objectives. Undue reliance should
not be placed on such statements because, by their nature, they are subject to
known and unknown risks and uncertainties and can be affected by other factors,
that could cause actual results and company plans and objectives to differ
materially from those expressed or implied in the forward-looking statements (or
from past results).
Registered Office:
ArcelorMittal South Africa Limited, Room N3-5, Main Building, Delfos Boulevard,
Vanderbijlpark, 1911
Directors:
Non-executive: Dr KDK Mokhele (Chairman)*, DK Chugh#, CPD Cornier, EKDiack*, S
Maheshwari#, LP Mondi, DCG Murray*, MJN Njeke*, ND Orleyn*, AMHO Poupart-Lafarge
Executive: NMC Nyembezi-Heita (Chief Executive Officer), Dr LGJJ Bonte-
(President), HJ Verster (Chief Financial Officer)
Previously known as Executive Director Finance. No change in responsibilities,
only a change in title. *Independent non-executive #Citizen of India Citizen of
France -Citizen of Belgium
Company Secretary:
Premium Corporate Consulting Services (Proprietary) Limited
Sponsor:
Deutsche Securities (South Africa) (Proprietary) Limited, 87 Maude Street,
Sandton, 2146
Private Bag X9933, Sandton, 2146
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg, 2001
P.O. Box 61051, Marshalltown, Johannesburg, 2107
Vanderbijlpark
28 October 2009
Sponsor to ArcelorMittal South Africa:
Deutsche Securities (SA) (Proprietary) Limited
Date: 28/10/2009 08:00:01 Supplied by www.sharenet.co.za
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