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EHS - Evraz Highveld Steel and Vanadium Limited - Group Unaudited Results for
the three months ended 31 March 2012
Evraz Highveld Steel and Vanadium Limited
(Incorporated in the Republic of South Africa)
(Registration No: 1960/001900/06)
Share code: EHS ISIN: ZAE000146171
("the Company" or "the Group")
GROUP UNAUDITED RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2012
Chairman and CEO`s Review
- Headline loss R94 million ( Q1 2011: profit R21 million)
- Net loss R94 million ( Q1 2011: profit R21 million)
- Challenging market conditions remain
- Competition Commission Referral received
- Change in directorate
1. Safety
The Lost Time Injury Frequency Rate (LTIFR) as at 31 March 2012 was 0.92,
which is a 41,4% improvement from the LTIFR as at 31 December 2011 of
1.57. The number of reportable injuries during the quarter was 3 which
was a 50% improvement compared to the same period in 2011.
2. Key Financials
The operating loss for the period was R154 million, compared to a profit
of R8 million for the same period in 2011. The main reason for the
decrease is lower sales volumes. The EBITDA for the period was a R82
million loss, compared to a R53 million profit for the same period last
year. Sales revenue decreased to R1 331 million compared to R1 501
million for the same period last year as a result of lower sales volumes.
The total steel margins decreased from a positive 4.7% in the fourth
quarter of 2011 to a negative 2.6% in the first quarter of 2012.
3. Operations
Steel
The cast steel output for the first quarter of 2012 decreased by 10% to
175 747 tons, mainly due to problems with the availability of Steel Plant
production equipment. Liquid iron output increased by 2%, to 196 486 tons
compared to the first quarter in 2011.
Production of long products increased by 6% to 65 823 tons for the period
compared to the same period in 2011 mainly due to improved demand. The
production of flat products decreased by 10%, to 70 472 tons due to the
reduced availability of casted steel.
Projects relating to kiln efficiencies are in progress to be completed
during quarter 3 of 2012, with the main focus of improved pre-reductions
and reduced emissions.
Vanadium
A total of 14 435 tons of vanadium slag was produced with 2 147 Mt V for
the period, compared to 16 417 tons, with 2 220 Mt V produced for the
same period last year.
4. Markets
Global and local markets
Global crude steel production for the first quarter of 2012 increased by
1.1% to 376.8 million tons, compared to the same period in 2011. However,
as previously anticipated, the global steel production growth rate for
2012 has decreased to 3.6%, from the initial anticipated growth rate of
5.6%. The South African crude steel production for the first quarter of
2012 decreased by 16.6% compared to the same period in 2011.
EVRAZ Highveld Sales
Domestic steel sales volumes for the quarter increased by 3%, compared to
quarter 1 of 2011 and export steel sales volumes decreased by 68%.
Overall steel sales volumes decreased by 27%, mainly as a result of
weaker market demand, some problems experienced regarding the
availability of Steel plant production equipment and the timing of some
export sales, whereby order sales booked in the first quarter, will only
be realised in the following quarter. Total semi product sales for the
period decreased by 26%, compared to the same period in 2011, as a result
of changing market demand.
Export vanadium slag sales increased by 1% to 1 872 tons V for the period
compared to the same period in 2011. No domestic vanadium slag sales were
made during quarter 1 of 2012 as a result of no orders received. A total
of 134 tons V MVO and Nitrovan were sold during the period. (Q1 2011: 366
tons V).
5. Competition Commission Referral
The Company received the Competition Commission`s Referral on 2 April
2012 whereby the Commission is alleging that the Company has participated
in concerted practices, direct or indirect price fixing and dividing
markets. The Company is currently evaluating the allegations contained in
the Referral and will continue to co-operate with the Commission.
6. Change in Directorate
We are pleased to announce that Mr Thabo Mosololi has been appointed as
independent non-executive director and member of the Audit and Risk
committee effective 21 May 2012. Thabo is a qualified Chartered
Accountant and is the Operations Director of Tsogo Sun Gaming. He has
extensive experience in inter alia financial management and reporting,
operations management, including risk management as well as internal and
external assurance. Thabo will add invaluable depth to both the Audit and
Risk committee and the Board of Directors. We welcome Thabo and look
forward to his contributions.
7. Outlook
The global economic situation seems to have worsened, with Spain
officially in recession, the negative impact hereof is becoming more
evident in the local market. There is a marked increase in steel imports,
further aggravating the local market situation.
The company continues with its programme to drive down fixed costs in
order to improve margins. This may include a contraction of production
volumes with a possible exit from non-profitable export sales while
placing more emphasis on supporting our customers needs in the local
market. Further to the fixed costs reduction, the Company has already
issued a Section 189 Notice in terms of the Labour Relations Act notice
to the unions and employee representatives and is continuing with the
consultation process.
BJT Shongwe MD Garcia
(Chairman) (Chief Executive Officer)
18 May 2012
Directors:
B J T Shongwe (Chairman), G C Baizini (Italian), M Bhabha, M D Garcia (Chief
Executive Officer) (American,) Mrs B Ngonyama, V M Nkosi,
D Scuka (Czech), P M Surgey, P S Tatyanin (Russian), J Valenta (Czech) 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 Marshall Street
Mpumalanga Johannesburg
PO Box 111 PO 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
GROUP UNAUDITED FINANCIAL RESULTS
Basis of preparation
The Group`s financial results for the quarter ended 31 March 2012 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
i) The Group has adopted the following new and revised Standards and
Interpretations issued by the International Accounting Standards Board
("the IASB") and the International Financial Reporting Interpretation
Committee ("IFRIC") of the IASB, that are relevant to its operations and
effective for accounting periods beginning on 1 January 2012. These
Standards had no impact on the results or disclosures of the Group.
- IAS 12, Amended - Deferred tax: Recovery of underlying assets (effective
from 1 January 2012);
- IFRS 7, Amended - Financial instruments: Disclosures - transfers of
financial assets (effective from 1 July 2011); and
- IFRS 1, Amended - Severe hyperinflation and removal of fixed dates for
first-time adopters (effective from 1 July 2011).
ii) The following Standards, amendment to the Standards and Interpretations,
effective in future accounting periods have not been adopted in these
financial statements:
- IAS 1, Amended - Financial statement presentation: Presentation of items
of other comprehensive income (effective from 1 July 2012);
- IAS 19, Amended - Employee benefits (effective from 1 January 2013);
- IAS 27, Separate financial statements (as revised in 2011) (effective
from 1 January 2013);
- IAS 28, Investments in associates and joint ventures (as revised in 2011)
(effective from 1 January 2013);
- IFRS 9, Financial instruments classification and measurement (effective
from 1 January 2013);
- IFRS 10, Consolidated financial statements (effective from 1 January
2013);
- IFRS 11, Joint arrangements (effective from 1 January 2013);
- IFRS 12, Disclosure of involvement with other entities (effective from 1
January 2013);
- IFRS 13, Fair value measurement (effective from 1 January 2013);
- IFRIC 20, Stripping costs in the production phase of a surface mine
(effective from 1 January 2013);
- IFRS 7, Amended - Disclosures: Offsetting financial assets and financial
liabilities (effective from 1 January 2013);
- IAS 32, Amended - Offsetting financial assets and financial liabilities
(effective from 1 January 2013); and
- IFRS 9 and IFRS 7, Amended - Mandatory effective date and transition
disclosures (IFRS 9 effective from 1 January 2015, IFRS 7 depends on when
IFRS 9 is adopted).
This abridged report was prepared under supervision of the Chief Financial
Officer, Mr Jan Valenta (Chartered Accountant).
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Audited
as at Unaudited as at
as at
31 Mar 31 Mar 31 Dec
2012 2011 2011
Note Rm Rm Rm
ASSETS
Non-current assets 1 976 1 656 1 927
Property, plant and 1 741 1 578 1 760
equipment
Deferred tax asset 235 78 167
Current assets 2 333 2 443 2 531
Inventories 800 927 831
Trade and other receivables 693 949 516
and pre-payments
Cash and short-term 840 567 1 184
deposits
TOTAL ASSETS 4 309 4 099 4 458
EQUITY AND LIABILITIES
Total equity 2 513 2 551 2 620
Non-current liabilities 649 550 624
Long-term borrowings 5 15 - -
Provisions 634 550 624
Current liabilities 1 147 998 1 214
Trade and other payables 941 696 1 016
Income tax payable 45 63 45
Provisions 161 239 153
TOTAL EQUITY AND 4 309 4 099 4 458
LIABILITIES
Net asset value - cents per 2534. 5 2572. 9 2642. 5
share
CONDENSED CONSOLIDATED INCOME STATEMENTS
Unaudited Unaudited Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Note Rm Rm Rm
Sale of goods 1 331 1 501 5 587
Revenue 1 331 1 501 5 587
Cost of sales (1 327) (1 449) (4 750)
Gross profit 4 52 837
Other operating income 6 - 128 87
Selling and distribution (73) (97) (301)
costs
Administrative expenses (82) (75) (306)
Other operating expenses (3) - (366)
Operating (loss)/profit (154) 8 (49)
Finance costs (11) (11) (50)
Finance income 3 4 26
(Loss)/profit before tax (162) 1 (73)
Income tax credit 7 68 20 118
(Loss)/profit for the (94) 21 45
period/year
Cents Cents Cents
(Loss)/profit per share - (94.8) 21.2 45.4
basic and diluted
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Rm Rm Rm
(Loss)/profit for the (94) 21 45
period/year
Other comprehensive
(loss)/income:
Exchange differences on (13) 20 55
translation of foreign
operations
Total comprehensive (107) 41 100
(loss)/income for the
period/year
HEADLINE EARNINGS PER SHARE
Unaudited Unaudited Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Rm Rm Rm
Reconciliation of headline
(loss)/earnings
(Loss)/profit for the (94) 21 45
period/year
(Deduct)/add after tax
effect of:
Insurance claim proceeds on - - (63)
items of property, plant
and equipment scrapped
Loss/(profit) on disposal * (*) 3
and scrapping of property,
plant and equipment
Headline (loss)/profit (94) 21 (15)
* Less than R1 million.
Cents Cents Cents
Earnings/(loss) per share - (94.8) 21.2 (15.1)
headline and diluted
Million Million Million
Number of shares
Ordinary shares in issue as 99.2 99.2 99.2
at end date *+
* Rounded to nearest
hundred thousand.
+ Agree to weighted average
and diluted number of
ordinary shares.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Issued Other Retained Total
capital reserves earnings
and share
premium
Note Rm Rm Rm Rm
2011
Balance at 1 January 585 138 1 787 2 510
2011 - Audited
Profit for the period 21 21
Other comprehensive 20 20
income for the quarter
Balance at 31 March 585 158 1 808 2 551
2011 - Unaudited
Profit for the period 65 65
Other comprehensive 7 7
income for the quarter
Balance at 30 June 585 165 1 873 2 623
2011 - Reviewed
Loss for the period (117) (117)
Other comprehensive 50 50
income for the quarter
Balance at 30 585 215 1 756 2 556
September 2011 -
Unaudited
Profit for the period 76 76
Other comprehensive (22) (22)
loss for the quarter
Share-based payment 8 10 10
reserve
Balance at 31 December 585 203 1 832 2 620
2011 - Audited
2012
Balance at 1 January 585 203 1 832 2 620
2012 - Audited
Loss for the period (94) (94)
Other comprehensive (13) (13)
loss for the quarter
Balance at 31 March 585 190 1 738 2 513
2012 - Unaudited
Unaudited Unaudited Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Cents Cents Cents
Dividends per share
Dividends declared and - - -
paid
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Rm Rm Rm
Cash flows from operating
activities
Cash (used in)/generated by (286) 114 1 070
operations before tax paid
Income tax paid (*) (*) (6)
Net cash (used in)/generated (286) 114 1 064
by operating activities
Cash flows from investing
activities
Proceeds from sale and 1 - 90
scrapping of property, plant
and equipment
Net additions to property, (61) (50) (485)
plant and equipment
Net cash used in investing (60) (50) (395)
activities
Cash flows from financing
activities
Increase in long-term loans 15 - -
Net cash generated by 15 - -
financing activities
Net (decrease)/increase in cash (331) 64 669
and cash equivalents
Cash and cash equivalents at 1 184 492 492
the beginning of the
period/year
Effects of exchange rate (13) 11 23
changes on cash held in
foreign currencies
Cash and cash equivalents at 840 567 1 184
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, No 71 of 2008, 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 A.G. (a fellow subsidiary) amounted to R74 million
(March 2011 YTD: R377 million) for the three months ended 31 March 2012.
This constitutes 6% of total revenue for the quarter, compared to 25% for
the quarter ended 31 March 2011. Technical services (slag tolling
agreement) and other services with EVRAZ Vametco Alloys Proprietary
Limited (a fellow subsidiary) amounted to R17 million for the three
months ended 31 March 2012 (March 2011 YTD: R29 million).
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, 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 Unaudited Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Rm Rm Rm
Revenue from the sale
of goods
Steelworks 996 1 048 3 957
Vanadium 335 453 1 630
Total 1 331 1 501 5 587
Intersegment revenue is eliminated on consolidation.
Unaudited Unaudited Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Rm Rm Rm
Operating (loss)/profit
Steelworks (234) (118) (542)
Vanadium 80 126 493
Total (154) 8 (49)
- ( 0) -
Unaudited Unaudited Audited
as at as at as at
31 Mar 31 Mar 31 Dec
2012 2011 2011
Rm Rm Rm
Total assets
Steelworks 3 438 3 480 3 664
Vanadium 871 619 794
Total 4 309 4 099 4 458
4 Supplementary revenue information - Unaudited
For the For the For
three three the
months months year
ended ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Sales volumes of
major products
Total steel Tons 133 241 182 119 603
094
Ferrovanadium Tons V 1 554 1 501 6 031
Modified Vanadium Tons V 16 248 398
Oxide
Nitrovan Tons V 119 118 1 105
Vanadium slag Tons - 194 664
V(2)O(5)
Fines ore Tons 165 765 176 242 662
395
Vanadium slag sales reduced from 194 tons V2O5 for the three months ended 31
March 2011 to nil tons V2O5 for the three months ended 31 March 2012 due to
lack of orders received.
Weighted average selling prices achieved for major products
Total steel US$/t 849 740 825
Ferrovanadium US$/kg V 23 29 27
Modified Vanadium Oxide US$/kg V 17 22 21
Nitrovan US$/kg V 24 29 27
Vanadium slag US$/kg - 6 5
V(2)O(5)
Fines ore US$/t 19 41 33
Average R/$ exchange 7.76 7.00 7.26
rate
5 Long-term borrowings
The long-term borrowings of R15 million (2011 Rnil million) consist of
the loan due by Umnotho Iron and Vanadium Proprietary Limited payable to
Umnotho weSizwe Group. This loan has no fixed repayment terms and
interest is charged at prime rate. In terms of IFRS, Umnotho Iron and
Vanadium Proprietary Limited is consolidated in EVRAZ Highveld Group.
6 Other operating income
For March 2012 YTD other operating income is Rnil million. For March 2011
YTD the R128 million other operating income relates to the adjustment of
the Net Realisable Value provision of R116 million and foreign exchange
profits.
7 Income tax
Unaudited Unaudited Audited
for the for the for the
three three year
months months ended
ended ended
31 Mar 31 Mar 31 Dec
2012 2011 2011
Rm Rm Rm
South African
Normal
Current - - -
Prior year under - - -
provision
Deferred
Current (68) (23) (112)
Prior year (over)/under - - (1)
provision
Non-South African
Normal
Current * 3 3
Prior year (over)/under - - (8)
provision
Income tax credit (68) (20) (118)
* Less than R1 million.
The period income tax expense is accrued using the estimated average annual
effective income tax rate applied to the pre-tax income of the interim report.
8 Share-based payment reserve
Certain key management personnel participate in a Long Term Incentive
Plan (LTIP) over Global Depositary Receipts (GDR`s) in EVRAZ Group plc.
The GDR`s are traded on the London Stock Exchange. The vesting of the
GDR`s occur on the 90th day following the announcement of EVRAZ Group plc
financial results. The cost of the LTIP award will be settled in equity
by EVRAZ Group plc. The amount recognised according to IFRS 2 in 2012 is
Rnil million (2011: R10 million).
9 Financial ratios - Unaudited
Current ratio 2.03 2.45 2.08
Market capitalisation - 2 666 6 937 3 618
Rm
10 Steel margins - Unaudited
Total steel margins improved from negative 17% for the three months ended
31 March 2011, to negative 2.6% for the three months ended 31 March 2012.
11 Contingent liabilities and guarantees
As required by the Mineral and Petroleum Resources Development Act, a
guarantee amounting to R264 million (2011: R264 million) 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 R31 million before tax and R22 million after tax (2011: R31
million before tax and R22 million after tax).
As required by certain suppliers to the Company, guarantees were issued
in favour of these suppliers to the value of R9 million (2011: R9
million) in the event that the Company will not be able to meet its
obligations to the suppliers.
A supplier company has claimed against the Company in respect of
structural damage to assets sold in the past. The claim is in the amount
of R42 million. Arbitration has commenced and will continue in 2012, with
a view of conclusion. The Company has been advised by its legal counsel
that there is not a reasonable probability that the claim will succeed.
Accordingly, no provision for any liability has been made in these
financial statements.
A supplier company has claimed against the Company in respect of
allegedly money owed for services rendered to the former subdivision
Transalloys (R277 000) and for consequential damages due to the
cancellation of the service contract (R1 million). The Company has been
advised by its legal counsel that there is not a reasonable probability
that the claim will succeed. Accordingly, no provision for any liability
has been made in these financial statements.
On 30 March 2012 the Competition Commission issued a Referral of
Complaint to the Competition Tribunal against EVRAZ Highveld and two
others. The Commission is seeking orders from the Tribunal, amongst other
things, declaring that i) the parties have divided certain markets; ii)
the parties directly or indirectly fixed the purchase prices of flat
products; and iii) the parties committed a concerted practice which
substantially prevented or lessened competition in the relevant market.
EVRAZ Highveld is currently evaluating the Referral. Should the matter
not be settled, it is unlikely that it would be finalized in the 2012
financial year. The maximum administrative penalty which the Tribunal
could impose in respect of the allegations contained in the Referral is
10% of the annual turnover in South Africa of the Group (including
exports from South Africa) for the preceding financial year.
12 Subsequent events
There are no events to be reported on since 31 March 2012.
Date: 18/05/2012 14:30:02 Supplied by www.sharenet.co.za
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