Wrap Text
REVIEWED GROUP INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012
ArcelorMittal South Africa Limited
Registration number: 1989/002164/06
Share code: ACL
ISIN: ZAE 000134961
(“ArcelorMittal South Africa”, “the company” or “the group”)
Reviewed group interim financial results for the six months
ended 30 June 2012
Condensed group statement of comprehensive income
Year
Quarter ended Six months ended ended
30 June 31 March 30 June
2012 2012 2011 30 June 30 June 31 Dec
Un- Un- Un- In millions 2012 2011 2011
audited audited audited of rands Reviewed Reviewed Audited
8 650 9 142 8 799 Revenue 17 792 16 576 31 453
Raw materials and
consumables
(5 163) (5 112) (5 387) used (10 275) (9 761) (19 886)
(920) (802) (811) Employee costs (1 722) (1 592) (3 164)
(809) (732) (1 036) Energy (1 541) (1 668) (3 177)
Movement in
inventories of
finished goods and
(38) (459) 901 work in progress (497) 886 1 733
(418) (355) (352) Depreciation (773) (699) (1 409)
Amortisation of
(4) (4) (4) intangible assets (8) (7) (14)
Other operating
(1 496) (1 220) (1 479) expenses (2 716) (2 806) (5 239)
Profit/(loss) from
(198) 458 631 operations 260 929 297
Finance and
2 5 13 investment income 7 19 31
Finance costs
(110) (91) (24) (Note 4) (201) 13 (168)
(Loss)/income from
equity accounted
investments (net of
42 9 52 tax) 51 (10) (34)
Profit/(loss)
(264) 381 672 before tax 117 951 126
Income tax
(expense)/credit
87 (102) (202) (Note 5) (15) (297) (118)
Profit/(loss) for
(177) 279 470 the period 102 654 8
Other comprehensive
income
Exchange
differences on
translation of
121 (94) (18) foreign operations 27 27 315
Losses on
available-for-sale
investment taken to
(3) (21) (4) equity (24) (12)
Share of other
comprehensive
(loss)/income of
equity accounted
5 (7) 8 investments (2) (141) 7
Total comprehensive
income/(loss) for
(54) 157 456 the period 103 540 318
Profit/(loss)
attributable to:
Owners of the
(177) 279 470 company 102 654 8
Total comprehensive
income/(loss)
attributable to:
Owners of the
(54) 157 456 company 103 540 318
Attributable
earnings/(loss)
per share (cents)
(44) 70 117 - basic 25 163 199
(44) 70 117 - diluted 25 163 199
Condensed group statement of financial position
As at As at As at As at
30 June 31 March 30 June 31 Dec
2012 2012 2011 2011
In millions of rands Reviewed Unaudited Reviewed Audited
Assets
Non-current assets 19 335 19 211 18 574 19 573
Property, plant and equipment 16 126 16 364 16 159 16 618
Intangible assets 118 123 83 126
Equity accounted investments 3 056 2 687 2 262 2 772
Other financial assets 35 37 70 57
Current assets 12 660 13 339 13 865 12 849
Inventories 8 762 9 301 8 175 9 935
Trade and other receivables 3 327 3 409 3 065 2 374
Taxation 18 100
Other financial assets 3 1 2 1
Cash and cash equivalents 550 628 2 623 439
Total assets 31 995 32 550 32 439 32 422
Equity and Liabilities
Shareholders’ equity 22 782 22 831 23 101 22 669
Stated capital 37 37 37 37
Non-distributable reserves (2 169) (2 339) (2 601) (2 231)
Retained income 24 914 25 133 25 665 24 863
Non-current liabilities 4 466 4 443 4 484 4 474
Borrowings and other payables
(Note 6) 254 231 222 241
Finance lease obligations 450 438 483 451
Deferred income tax liability 2 223 2 289 2 287 2 310
Provision for post-retirement
medical costs 7 8 7 7
Non-current provisions 1 532 1 477 1 485 1 465
Current liabilities 4 747 5 276 4 854 5 279
Trade and other payables 4 293 4 127 4 127 4 644
Borrowings and other payables
(Note 6) 148 132 156 151
Finance lease obligations 55 55 55 57
Taxation 3 180
Current provisions 251 329 336 427
Cash and bank overdraft 630
Total equity and liabilities 31 995 32 550 32 439 32 422
Group statement of changes in equity
Treasury Total
share share-
Stated equity Other Retained holders’
In millions of rands capital reserve reserves income equity
Balance at 1 January
2011 37 (3 918) 1 443 24 994 22 556
Total comprehensive
income for the period
(net of income tax) (114) 654 540
Management share
trust: net treasury
share purchases (6) (6)
Share-based payment
expense 11 11
Transfer of equity
accounted earnings (17) 17
Balance at 30 June
2011 (Reviewed) 37 (3 918) 1 317 25 665 23 101
Total comprehensive
income for the period
(net of income tax) 424 (646) (222)
Management share
trust: net treasury
share purchases (6) (6)
Share-based payment
expense 17 17
Dividend (221) (221)
Transfer of equity
accounted earnings (65) 65
Balance at 31 December
2011 (Audited) 37 (3 918) 1 687 24 863 22 669
Total comprehensive
income for the period
(net of income tax) (122) 279 157
Share-based payment
expense 5 5
Transfer of equity
accounted earnings 9 (9)
Balance at 31 March
2012 (Unaudited) 37 (3 918) 1 579 25 133 22 831
Total comprehensive
income for the period
(net of income tax) 123 (177) (54)
Share-based payment
expense 5 5
Transfer of equity
accounted earnings 42 (42)
Balance at 30 June
2012 (Reviewed) 37 (3 918) 1 749 24 914 22 782
Condensed group statement of cash flows
Year
Quarter ended Six months ended ended
30 June 31 March 30 June
2012 2012 2011 30 June 30 June 31 Dec
Un- Un- Un- In millions 2012 2011 2011
audited audited audited of rands Reviewed Reviewed Audited
Cash
inflows/(outflow)
from operating
933 (308) 454 activities 627 (407) (1 412)
Cash generated
from/(utilised in)
978 (221) 612 from operations 759 (290) (879)
2 4 12 Interest income 6 18 29
(41) (50) (20) Finance cost (91) (39) (103)
Dividend paid (221)
(20) (161) Income tax paid (20) (161) (243)
Realised foreign
(6) (21) 11 exchange movement (27) 65 5
Cash outflows from
investing
(331) (99) (200) activities (430) (349) (1 212)
Investment to
(117) (79) (120) maintain operations (196) (229) (924)
Investment to
(16) (15) (61) expand operations (31) (107) (266)
Shares acquired in
associate and
equity accounted
(202) (5) (20) investment (207) (22) (180)
Proceeds on
3 disposal of assets 3 106
Investment income -
1 interest 1 1 2
Dividend from
equity accounted
1 investments 8 50
Net cash
602 (407) 254 inflow/(outflow) 197 (756) (2 624)
Cash outflows from
financing
(53) (38) (137) activities (93) (195) (616)
Repayment of
borrowings, finance
lease obligations
(53) (38) (137) and other payables (93) (195) (616)
Increase/(decrease)
in cash and cash
549 (445) 117 equivalents 104 (951) (3 240)
Effect of foreign
exchange rate
3 4 3 changes 7 68 173
Cash and cash
equivalents
at beginning of
(2) 439 2 503 period 439 3 506 3 506
Cash and cash
equivalents
550 (2) 2 623 at end of period 550 2 623 439
Notes to the reviewed condensed consolidated financial information
1. Basis of preparation
The condensed reviewed consolidated interim financial statements have
been prepared in compliance with the Listings Requirements of the JSE
Limited, International Accounting Standard (IAS) 34, Interim Financial
Reporting and the South African Companies Act, No 71 of 2008, as well
as the AC500 Standards as issued by the Accounting Practices Board.
These statements were compiled under the supervision of Mr RH Torlage,
the Chief Financial Officer.
2. Significant accounting policies
The condensed consolidated interim financial statements have been
prepared using accounting policies that comply with International
Financial Reporting Standards. The accounting policies and methods of
computation applied in the presentation of the interim financial
statements are consistent with those applied for the year ended 31
December 2011.
3. Independent review by the auditors
The condensed consolidated interim results have been reviewed by the
company’s auditors, Deloitte & Touche, in accordance with
International Standards on Review Engagements 2410. They expressed an
unqualified conclusion on the interim financial information. However,
their report included an emphasis of matter relating to the
significant uncertain outcome of the dispute resolution process with
SIOC regarding the supply of iron ore at cost plus 3%. A copy of their
report is available for inspection at the company’s registered office.
Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the company’s
auditors.
Year
Quarter ended Six months ended ended
30 June 31 March 30 June
2012 2012 2011 30 June 30 June 31 Dec
Un- Un- Un- In millions 2012 2011 2011
audited audited audited of rands Reviewed Reviewed Audited
4. Finance
110 91 24 costs 201 (13) 168
Interest
expense on
bank
overdrafts
24 34 1 and loans 58 3 32
Interest
expense on
finance
lease
17 16 18 obligations 33 36 71
Discounting
rate
adjustment
of the non-
current
24 (14) (34) provision 10 (35) 22
Net foreign
exchange
losses/
(gains) on
financing
8 17 (4) activities 25 (100) (124)
Unwinding of
the
discounting
effect in
the present
valued
carrying
amount of
non-
current
37 38 43 provisions 75 83 167
(87) 102 202 5. Income tax 15 297 118
Current
normal and
deferred
tax credit/
(87) 102 207 (expense) 15 302 101
Normal and
deferred tax
expense
recognised
in
relation to
tax of prior
(5) years (5) (5)
Secondary
tax on
companies 22
6. Borrowings
and other
358 949 324 payables 402 378 392
332 299 304 Leave pay 376 358 372
16 Retention 16
10 650 20 Loan 10 20 20
Disclosed
as:
– non-
254 231 222 current 254 222 241
104 718 102 – current 148 156 151
7. Capital
expenditure
133 94 181 Incurred 227 336 1 190
769 720 722 Contracted 769 772 887
Authorised
but not
1 250 843 892 contracted 1 250 892 728
8. Contingent
liabilities
1 1 1 Guarantees 1 1 1
9. Operating
lease
368 324 243 commitments 368 243 278
Less than
140 112 87 one year 140 87 83
More than
one year and
less than
217 204 135 five years 217 135 190
More than
11 8 21 11
five years 21 5
10. Related party transactions
The group is controlled by ArcelorMittal Holdings A.G. which
effectively owns 52.02% of the company’s shares. During the period the
company and its subsidiaries, in the ordinary course of business,
entered into various sale and purchase transactions with associates
and joint ventures. These transactions occurred under terms that are
no less favourable than those arranged with third parties.
11. Corporate governance
The group aims to fully comply with the Code on Corporate Practices
and Conduct as contained in the third King Report on Corporate
Governance.
Segment information
Flat Steel Products
Year
Quarter ended Six months ended ended
30 June 31 March
2012 2012 30 June 30 June 30 June 31 Dec
Un- Un- 2011 2012 2011 2011
audited audited Unaudited Reviewed Reviewed Audited
Revenue
5 617 5 670 5 403 (R million) 11 287 10 965 21 793
5 408 5 595 5 290 – External 11 003 10 776 21 092
209 75 113 - Internal 284 189 701
(51) 81 548 EBITDA (R million) 30 1 007 597
Depreciation and
amortisation
(347) (285) (283) (R million) (632) (565) (1 133)
(Loss)/profit
from operations
(398) (204) 265 (R million) (602) 442 (536)
Unaudited
information
Liquid steel
production
894 981 1 102 (‘000 tonnes) 1 875 2 154 4 060
Steel sales
837 866 830 (‘000 tonnes) 1 703 1 821 3 424
553 645 643 – Local 1 198 1 326 2 468
284 221 187 – Export 505 495 956
Capacity
63 69 77 utilisation (%) 66 76 71
20 966 21 400 20 681 Assets (R million) 20 966 20 681 21 322
Long Steel Products
Year
Quarter ended Six months ended ended
30 June 31 March 30 June
2012 2012 2011 30 June 30 June 31 Dec
Un- Un- Un- 2012 2011 2011
audited audited audited Reviewed Reviewed Audited
Revenue (R
3 116 3 274 3 031 million) 6 390 4 976 9 514
2 870 2 993 2 836 - External 5 863 4 461 8 044
246 281 195 - Internal 527 515 1 470
203 521 384 EBITDA (R million) 724 369 500
Depreciation and
amortisation
(74) (72) (71) (R million) (146) (137) (269)
Profit from
operations
129 449 313 (R million) 578 232 231
Unaudited
information
Liquid steel
production
450 402 537 (‘000 tonnes) 852 922 1 393
Steel sales (‘000
412 422 459 tonnes) 834 761 1 284
291 349 381 - Local 640 594 1 039
121 73 78 - Export 194 167 245
Capacity
78 70 94 utilisation (%) 75 81 61
6 580 6 964 5 894 Assets (R million) 6 580 5 894 6 965
Coke and Chemicals
Year
Quarter ended Six months ended ended
30 June 31 March 30 June
2012 2012 2011 30 June 30 June 31 Dec
Un- Un- Un- 2012 2011 2011
audited audited audited Reviewed Reviewed Audited
Revenue (R
372 576 686 million) 948 1 373 2 378
372 554 673 - External 926 1 339 2 317
22 13 - Internal 22 34 61
45 205 264 EBITDA (R million) 250 486 870
Depreciation and
amortisation
(9) (9) (12) (R million) (18) (22) (52)
Profit from
operations
36 196 252 (R million) 232 464 818
Unaudited
information
Commercial coke
produced
134 134 140 (‘000 tonnes) 268 317 633
Commercial coke
sales
89 143 180 (‘000 tonnes) 232 376 631
Tar sales (‘000
26 30 27 tonnes) 56 60 117
1 082 1 046 967 Assets (R million) 1 082 967 1 082
Corporate and other
Year
Quarter ended Six months ended ended
30 June 31 March 30 June
2012 2012 2011 30 June 30 June 31 Dec
Un- Un- Un- 2012 2011 2011
audited audited audited Reviewed Reviewed Audited
Operating
profit/(loss)
before
depreciation and
amortisation
27 10 (209) (R million) 37 (227) (247)
Depreciation and
amortisation
8 7 10 credit (R million) 15 18 31
Profit/(loss) from
operations
35 17 (199) (R million) 52 (209) (216)
3 367 3 140 4 897 Assets (R million) 3 367 4 897 3 053
Salient features
Year
Quarter ended Six months ended ended
30 June 31 March 30 June
2012 2012 2011 30 June 30 June 31 Dec
Un- Un- Un- In millions 2012 2011 2011
audited audited audited of rands Reviewed Reviewed Audited
Reconciliation of
earnings before
interest,
taxation,
depreciation and
amortisation
(EBITDA)
Profit from
(198) 458 631 operations 260 929 297
Adjusted for:
418 355 352 – Depreciation 773 699 1 409
– Amortisation of
4 4 4 intangible assets 8 7 14
224 817 987 EBITDA 1 041 1 635 1 720
Reconciliation of
headline
earnings/(loss)
Profit for the
(177) 279 470 period 102 654 8
Adjusted for:
– Loss on disposal
5 4 of assets 5 19 (82)
(1) (1) – Tax effect (1) (5) 22
Headline
(177) 283 473 earnings/(loss) 106 668 (52)
Headline
earnings/(loss)
per share (cents)
(44) 71 118 – basic 26 166 (13)
(44) 71 118 – diluted 26 166 (13)
Selected ratios
(%)
Return on ordinary
shareholders’
equity per annum
– attributable
(1.6) 4.9 8.2 earnings 0.9 5.7 1.0
– headline
(1.6) 5.0 8.3 earnings/(loss) 0.9 5.9 (0.2)
Net cash/(debt) to
0.6 (1.4) 10.0 equity 0.6 10.0 0.4
Share statistics
Ordinary shares
(thousands)
401 202 401 202 401 202 – in issue 401 202 401 202 401 202
– weighted average
401 202 401 202 401 202 number of shares 401 202 401 202 401 202
– diluted weighted
average number of
401 211 401 274 401 419 shares 401 240 401 441 401 444
Share price
52.40 55.96 78.99 (closing) (Rand) 52.40 78.99 68.58
Market
capitalisation
21 023 22 451 31 691 (R million) 21 023 31 691 27 514
Net asset value
56.78 56.91 57.58 per share (Rand) 56.78 57.58 56.50
Dividend per share
(cents) 55
Overview
Domestic steel demand was weaker than anticipated during the second
quarter and together with higher input costs, resulted in a decline in
headline earnings to R106 million for the six months ended 30 June 2012
from R668 million for the corresponding period last year. Compared to
the previous six months, headline earnings improved by R826 million from
a headline loss of R720 million following various production
interruptions during the second half of last year. The first half of
2012 saw improved operational stability in all our operations with no
major incidents.
EBITDA for the first half of R1.04 billion represents a drop of R0.6
billion compared to the corresponding six months due to lower sales and
higher input costs, offset by higher domestic prices. Liquid steel
production was down 11% compared to prior year and up 15% compared to
the previous six months following significant production losses during
the second half of last year, most notably as a result of the dust
catcher failure at Newcastle. Sales dropped marginally compared to the
corresponding period but rose 19% against the previous six months.
Safety remains our key priority. We are pleased to report an all-time
record for lost time injury frequency rate for the period of 0.6. During
the reporting period, our Saldanha operations achieved a new record of
370 days without a lost time injury. Most importantly, we completed the
half-year with zero fatalities.
Key statistics
Year
Quarter ended Six months ended ended
30 June 31 March 30 June 30 June 30 June 31 Dec
2012 2012 2011 2012 2011 2011
8 650 9 142 8 799 Revenue (R million) 17 792 16 576 31 453
224 817 987 EBITDA (R million) 1 041 1 635 1 720
179 634 766 EBITDA/tonne (R/t) 410 633 365
2.6 8.9 11.2 EBITDA margin (%) 5.9 9.9 5.5
Profit/(loss) from
operations
(198) 458 631 (R million) 260 929 297
Net profit/(loss)
(177) 279 470 (R million) 102 654 8
Headline
earnings/(loss)
(177) 283 473 (R million) 106 668 (52)
Headline
earnings/(loss)
(44) 71 118 per share (cents) 26 166 (13)
Liquid steel
production
1 344 1 383 1 639 (‘000 tonnes) 2 727 3 076 5 453
Steel sales (‘000
1 249 1 288 1 289 tonnes) 2 537 2 582 4 708
844 994 1 024 – Local 1 838 1 920 3 507
405 294 265 – Export 699 662 1 201
Lost time injury
0.6 0.81 1.1 frequency rate 0.6 1.1 1.24
Market review
International
Global steel consumption remains subdued with demand in Europe still
sluggish, whilst a slowdown in economic growth in China contributed to a
decline in steel consumption growth. China entered a less steel-
intensive growth phase at a time when uncertainty in the eurozone
resulting from the debt crisis persists, depressing steel demand in most
markets. It is remarkable that China is still expanding its production
despite the slack market demand.
On the continent, the sub-Saharan region continues to enjoy a relatively
favourable growth in steel consumption. The region is projected to grow
at an average of 5% over the next three years, with infrastructure
investments in energy generation, improved mining investments and
housing related developments being the key drivers of steel demand.
However, the increased influx of steel imports and participation of
construction companies from other regions that use material from their
country of origin will serve to heighten competition.
Domestic
The annualised GDP growth rate for the South African economy for the
second quarter of 2012 of around 2.6% is down from the already low 2.7%
registered during the first quarter. Building and construction - the
main driver of steel consumption has shown no signs of improvement while
only moderate growth was evident from the manufacturing sector despite
the weaker rand improving business sentiment for the export sector. The
mining sector continued to register a slowdown in production levels and
investment. The exception to the overall negative trend in the domestic
market was the automotive sector, which continued to enjoy some
buoyancy. Nevertheless, overall steel demand was down on the previous
year.
Financial review
Six months ended 30 June 2012 compared with six months ended 30 June
2011
Total revenue of R17.8 billion was 7% higher driven by a 13% increase in
average net realised prices, of which local prices increased by 12% and
exports by 19%. This was primarily due to a weakening in the average
rand/US dollar exchange rate from R6.90 to R7,94. Steel shipments were
down 2%, with flat products dropping 6% while long products were up 10%.
Local shipments decreased by 4% as a result of poor domestic market
conditions and exports increased by 6%. Revenue from Coke and Chemicals
of R0.9 billion was 31% lower due to a 38% decline in commercial coke
sales to total 232 000 tonnes. Average net realised prices were slightly
lower.
The increase in revenue was offset by higher operating costs, with the
production cash cost of hot rolled coil increasing by 11% and billets by
13%. This resulted from a 20% rise in the price of iron ore, 19% for
electricity, 12% for local coking coal and 2% for imported hard coking
coal on a US dollar FOB basis and 15% on a Rand delivered basis,
resulting in an operating profit of R260 million, a decrease of 72%
compared to prior year.
Included in the results is a second payment on the insurance recovery of
R245 million received during the first quarter relating to the
industrial accident at Newcastle. This brings the total amount received
to date to R734 million.
Liquid steel production was 349 000 tonnes lower or 11%. Capacity
utilisation for flat steel was 66% compared to 76% for the corresponding
period following the temporary closure of the electric arc furnace
production route in Vanderbijlpark due to weak demand and high
electricity tariffs during the winter months. Capacity utilisation for
long steel was 75% compared to 81% in first half last year following
high levels of import steel stocks after the Newcastle industrial
accident during second half 2011.
Financing costs of R201 million for the six months are significantly
higher than the income of R13 million reported for the corresponding
period. Included in finance costs are net foreign exchange losses of R25
million for the period compared to the net foreign exchange gains of
R100 million in the previous period.
The income from equity accounted investments of R51 million was due to
our share of equity income from Macsteel International Holdings BV
partly offset by losses incurred in Coal of Africa Limited.
Quarter ended 30 June 2012 compared with quarter ended 31 March 2012
Total revenue of R8.7 billion was 5% down driven by 3% lower shipments,
of which domestic shipments were 15% down and exports 38% up. Flat and
long product shipments were down 3% and 2% respectively. Domestic
prices were relatively stable but export prices rose 9%. Coke and
Chemicals revenue was 35% lower at R372 million with sales down 38% and
average net realised prices 5% lower.
Production costs were little changed, with hot rolled coil cash costs up
1% and billets down 2%. The prices of iron ore, electricity and local
non coking coal increased by 4%, 39% and 2% respectively, whereas the
price of imported coking coal dropped 15% on a US Dollar FOB basis and
13% on a Rand delivered basis.
Liquid steel production was 39 000 tonnes lower or 3%. Capacity
utilisation for flat steel was 63% compared to 69% for the previous
period following the temporary shut-down of the electric arc furnaces in
Vanderbijlpark in April. 78% capacity utilisation for long steel
compared favourably to the 70% achieved in first quarter as elevated
stocks due to imports early in the year started to come down.
The operating loss of R198 million is a decrease of R656 million on the
back of significantly lower domestic demand for steel and commercial
coke.
The net income on equity accounted investments of R42 million was due to
our share of income incurred at Coal of Africa Limited and by equity
income from Macsteel International Holdings BV.
Quarter ended 30 June 2012 compared with quarter ended 30 June 2011
Total revenue of R8.7 billion was 2% down driven by an 18% decline in
domestic dispatches offset by a 53% increase in exports, resulting in a
3% overall drop in shipments. Flat product shipments were relatively
stable whilst long products fell 10%. Average net realised prices were
5% higher, with local and export prices up 7% and 11% respectively,
primarily due to a weakening in the average rand/dollar exchange rate
from a level of R6.79 to R8.12. Revenue at Coke and Chemicals dropped by
a substantial 46% to R372 million as a consequence of the closure of
half the production facilities in the ferrochrome industry during the
second quarter. Commercial coke sales were down 49% to a total of 89 000
tonnes with a 9% drop in average net realised prices.
The production cash cost of hot rolled coil rose 6% and billets 12%. The
prices of iron ore, electricity and local non-coking coal increased by
23%, 17% and 2% respectively, whereas the price of imported hard coking
coal decreased by 16% on a US Dollar FOB basis and 1% on a Rand
delivered basis.
Liquid steel production fell in line with declining market demand,
dropping by 295 000 tonnes or 18%. Accordingly, capacity utilisation for
flat steel reduced to 63% compared to the 77% achieved in the
corresponding period last year. 78% capacity utilisation for long steel
compared unfavourably to 94% in second quarter last year reflecting the
much weaker market conditions in 2012.
Finance costs increased by R86 million to R110 million due to the lower
net cash position of R2.1 billion which increased the need for the
utilisation of overdraft facilities.
The income on equity accounted investments of R42 million was
attributable to our share of equity income from Macsteel International
Holdings BV partly offset by losses incurred in Coal of Africa Limited.
Environment
Plans are on track to have the new emission abatement system for
Vanderbijlpark’s sinter plant fully operational in the second half of
2012. At a total cost of R250 million, the project can be regarded as a
milestone for the site with an expected reduction in particulate
releases from this emission source of approximately 70%. Another
important project that is in progress is the Newcastle zero effluent
discharge (“ZED”) project entailing the improvement of effluent
treatment and the recovery thereof with a planned completion date of
early 2014 at an estimated cost of R300 million.
The proposed carbon tax remains a major concern. The release of the
reviewed Carbon Tax Discussion Paper as announced by the Minister of
Finance is awaited in order to serve as a basis for further engagement
with National Treasury.
Contingent liabilities
Wire rod matter alleged price discrimination
On 15 January 2007, the Competition Commission (“the Commission”)
referred a case against the company to the Competition Tribunal (“the
Tribunal”). The case relates to alleged price discrimination in wire
rod. The matter is yet to be set down for a hearing before the
Tribunal.
Long steel matter alleged cartel conduct
On 1 September 2009, the Commission referred a case against the company
and three other primary steel producers in South Africa to the Tribunal
for alleged price fixing and market division in respect of certain long
steel products. The Commission has recommended the imposition of a
penalty of 10% of the company’s 2008 annual turnover. On 3 September
2010, the Tribunal refused access to the bulk of documentation requested
by the company to file its answering affidavit, largely because of
confidentiality claims placed by Scaw South Africa Proprietary Limited
in respect of these documents. The company appealed this matter to the
Competition Appeal Court (“the CAC”). On 2 April 2012, the CAC ruled
essentially that the matter be referred back to the Tribunal for a
hearing to determine the validity of these confidentiality claims. The
Commission has since filed an appeal against this ruling of the CAC with
the Supreme Court of Appeal. The company is opposing the basis for the
appeal and has applied for leave to cross appeal.
Flat steel matter alleged conscious parallelism
On 30 March 2012, the Commission referred a restrictive horizontal
practice case against the company and Evraz Highveld Steel and Vanadium
Limited (“Highveld Steel”) to the Tribunal for adjudication. This
relates to alleged price fixing and market allocation in respect of flat
steel products. The form of price fixing alleged by the Commission in
this instance is one based on the “conscious parallelism” phenomenon.
This mainly relates to Highveld Steel increasing its prices each time
ArcelorMittal South Africa increases its prices. ArcelorMittal South
Africa strongly rejects all allegations by the Commission and will
defend itself. The Commission has recommended to the Tribunal to impose
a penalty of 10% of the company’s 2008 annual turnover.
Competition Commission investigations
The Commission is formally investigating three (previously five)
complaints against the company. The first involves alleged prohibited
vertical practices in respect of purchases of scrap steel. The second
appears to involve an extension of the wire rod matter described above
under contingent liabilities and includes another alleged contravention
as well as a later period, both of which were not covered in the initial
wire rod referral. The third relates to alleged excessive pricing in
tinplate (which was investigated separately initially) as well as flat
steel in general and sishen surcharge. The company is cooperating fully
with the Commission in all these investigations and continues to deliver
all information and documentation to the competition authorities as and
when called upon to do so.
Dispute with Sishen Iron Ore Company Proprietary Limited (“SIOC”)
Judgment in the High Court application to review the award of mineral
rights to Imperial Crown Trading 289 Proprietary Limited (“ICT”) by the
Department of Mineral Resources (“DMR”) was delivered in December 2011.
The judge found, as argued by the company, that SIOC was awarded 100% of
the mining rights in the Sishen mine and therefore the award of ICT was
invalid. ICT and the DMR subsequently lodged an application for leave to
appeal the decision. SIOC also submitted a conditional cross appeal. The
application for leave to appeal to the Supreme Court of Appeal was heard
on 11 May 2012 and granted. The appeal is expected to be heard in
November 2012.
The dispute between SIOC and the company relating to the validity of the
iron ore supply agreement has been referred for arbitration. The
existing Interim Pricing Agreement between the company and SIOC will
expire on 31 July 2012. Negotiations are under way to extend or renew
the agreement.
Dividend
No dividends were declared for the six months ended 30 June 2012.
Outlook for quarter three 2012
Due to a further deterioration in market conditions, third quarter
financial results are expected to extend the headline loss incurred in
second quarter on the back of lower steel prices and a further decline
in domestic demand, partly offset by improved commercial coke sales.
Mitigating the expected loss is a potential insurance pay-out resulting
from claims currently in the process of finalisation. Movements in the
exchange rate will also have an important impact.
On behalf of the Board of Directors
N Nyembezi-Heita RH Torlage
Chief Executive Officer Chief Financial Officer
24 July 2012
Forward-looking statements
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 risks and uncertainties
whose impact 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
MJN Njeke* (Chairman), DK Chughn‡, FA du Plessis*, M Macdonald*,
S Maheshwarin‡, LP Mondi, DCG Murray*, ND Orleyn*, G Urquijo‡
‡Citizen of India ‡Citizen of Spain *Independent non-executive
Executive
N Nyembezi-Heita (Chief Executive Officer), RH Torlage (Chief Financial
Officer)
Company Secretary
Premium Corporate Consulting Services Proprietary Limited
Sponsor
Deutsche Securities (SA) Proprietary Limited, 87 Maude Street, Sandton,
2146. Private Bag X9933, Sandton, 2146
Transfer secretaries
Computershare Investor Services Proprietary Limited, 70 Marshall Street,
Johannesburg, 2001
PO Box 61051, Marshalltown, Johannesburg, 2107
This report is available on ArcelorMittal South Africa’s website at:
http://www.arcelormittal.com/southafrica/
Share queries: Please call the ArcelorMittal South Africa share care
toll free on 0800 006 960 or +27 11 370 7850
Date: 25/07/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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