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Group Unaudited Results For The Nine Months Ended 30 September 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 NINE MONTHS ENDED 30 SEPTEMBER 2012
Chairman and CEO’s Review
- Headline loss R800 million (September YTD 2011: loss of R28 million)
- Net loss R721 million (September YTD 2011: loss of R31 million)
- Negative impact of 4 week industrial action
1. Safety
The Lost Time Injury Frequency Rate (LTIFR) was 2.19 as at 30 September 2012. This was higher than the
LTIFR for the same period last year, mainly due to reduced man hours worked during the strike. However,
year to date the LTIFR has reduced to 1.19, which is a positive improvement.
2. Key Financials
The operating loss for the period was R571 million, compared to a loss of R140 million for the same
period in 2011. The main reason for the decrease in profitability is lower production and sales volumes
during the four week strike by NUMSA members and the subsequent difficult ramp-up period thereafter.
The EBITDA for the period was a R485 million loss, compared to a R41 million profit for the same period
last year. Sales revenue decreased to R3 320 million compared to R4 234 million for the previous period.
3. Operations
Steel
The cast steel output for the period decreased by 16% to 406 072 tons, mainly due to the four week
strike.
Production of long products decreased by 8% to 152 000 tons for the period compared to the same
period in 2011. The production of flat products decreased by 22% to 171 682 tons due to the reduced
availability of cast steel.
Vanadium
A total of 32 923 tons of vanadium slag was produced with 4 717 Mt V for the period, compared to 46 623
tons, with 6 087 Mt V produced for the same period last year.
4. Markets
Global and local markets
Global crude steel production for the nine months of 2012 increased slightly by 1% to
123.6 million tons as compared to the same period in 2011, mainly driven by increased Chinese
production. South African production contracted by 9% during this period.
EVRAZ Highveld Sales
Domestic steel sales volumes for the period decreased by 28% to 250 512 tons, compared to the same
period in 2011. Export steel sales volumes decreased by 26% to 91 670 tons, and overall steel sales
volumes decreased by 27%. Sales decreased concomitantly to the reduced production during the period.
Domestic steel sales volumes in the third quarter of 2012 decreased by 35%, compared to the second
quarter of 2012. Export steel sales volumes decreased by 68% for the third quarter of 2012 compared to
the second quarter, resulting in a decrease of 48% in overall sales volumes.
Export vanadium slag sales decreased by 18% to 3 523 tons V for the period compared to the same period
in 2011. Domestic vanadium slag sales decreased by 73% to 80 tons V, due to low slag availability. A total
of 721 tons V MVO and Nitrovan were sold during the period. (YTD September 2011: 1 099 tons V). This
reduction is mainly due to maintenance work carried out at the beginning of 2012 and lower slag
availability.
5. Business Stabilisation Project and resultant Industrial Action
The business stabilisation project included changing from the outdated three-shift to a four-shift system
to address key business risks, and the restructuring of mainly the planned maintenance department,
which resulted in the industrial action by NUMSA commencing mid July. Following the strike and the
associated shut-down of the steelworks, agreement was reached and the revised work arrangement
implemented. Operations reached normal capacity during early October.
6. Outlook
The Company’s main focus is to continue with our initiatives to achieve profitable production in a
sustainable safe manner and to reduce its costs to return to a profitable position. However, it remains a
challenging goal under the current conditions of increasing input costs. The global over supply situation
has not changed significantly, with the local market remaining weak.
BJT Shongwe MD Garcia
(Chairman) (Chief Executive Officer)
16 November 2012
Directors: B J T Shongwe (Chairman), G C Baizini (Italian), M Bhabha, M D Garcia (Chief Executive Officer)
(American,), M F Mosololi, 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 FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2012
Basis of preparation
The Group's financial results for the nine months ended 30 September 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.
- Improvements to IFRS - issued May 2010 (effective from 1 January 2011);
- 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:
- Improvements to IFRS - Issued May 2012 (effective from 1 January 2013);
- 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
2014); 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 STATEMENT OF FINANCIAL POSITION
Unaudited as at Unaudited as Audited as at
at
30 Sept 2012 30 Sept 2011 31 Dec 2011
Notes Rm Rm Rm
ASSETS
Non-current assets 1 684 1 853 1 927
Property, plant and equipment 1 684 1 693 1 760
Deferred tax asset 5 - 160 167
Current assets 1 855 2 297 2 531
Inventories 740 713 831
Trade and other receivables and pre-payments 421 832 516
Cash and short-term deposits 694 752 1 184
TOTAL ASSETS 3 539 4 150 4 458
EQUITY AND LIABILITIES
Total equity 1 920 2 556 2 620
Non-current liabilities 661 583 624
Long-term borrowings 6 16 - -
Provisions 645 583 624
Current liabilities 958 1 011 1 214
Trade and other payables 620 749 1 016
Interest-bearing loans and borrowings 209 - -
Income tax payable - 40 45
Provisions 129 222 153
TOTAL EQUITY AND LIABILITIES 3 539 4 150 4 458
Net Cash 469 752 1,184
Net asset value - cents per share 1,936 2,578 2,642
CONDENSED CONSOLIDATED
INCOME STATEMENT
Unaudited Unaudited Unaudited
Unaudited for the for the for the Audited
for the three three nine nine for the
months months months months year
ended ended ended ended ended
30 Sept 30 Sept 31 Dec
30 Sept 2012 2011 2012 2011 2011
Notes
Rm Rm Rm Rm Rm
Sale of goods 757 1 249 3 320 4 234 5 587
Revenue 757 1 249 3 320 4 234 5 587
Cost of sales (988) (1 099) (3 570) (3 783) (4 750)
Gross (loss) / profit (231) 150 (250) 451 837
Other operating income 7 6 - 118 - 87
Selling and distribution costs (65) (64) (218) (237) (301)
Administrative expenses (81) (76) (221) (231) (306)
Other operating expenses 7 - (203) - (123) (366)
Operating loss (371) (193) (571) (140) (49)
Finance costs (12) (8) (32) (28) (50)
Finance income 1 6 5 20 26
Loss before tax (382) (195) (598) (148) (73)
Income tax credit /(expense) 8 37 78 (123) 117 118
(Loss)/profit for the period/year (345) (117) (721) (31) 45
Cents Cents Cents Cents Cents
(Loss)/profit per share - basic and
diluted (347.8) ( 118.0) (726.8) (31.3) 45.4
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
Unaudited for the for the Unaudited Audited
for the three three nine for the nine for the
months months months months year
ended ended ended ended ended
30 Sept 30 Sept 30 Sept 31 Dec
30 Sept 2012 2011 2012 2011 2011
Rm Rm Rm Rm Rm
(Loss)/profit for the period/year (345) (117) (721) (31) 45
Other comprehensive income:
Exchange differences on translation
of foreign operations 13 50 11 77 55
Total comprehensive (loss)/income
for the period/year (332) (67) (710) 46 100
HEADLINE EARNINGS PER SHARE
Unaudited Unaudited
for the for the Unaudited Unaudited Audited
three three for the nine for the nine for the
months months months months year
ended ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept 31 Dec
2012 2011 2012 2011 2011
Rm Rm Rm Rm Rm
Reconciliation of headline loss
(Loss)/profit for the period/year (345) (117) (721) (31) 45
(Deduct)/add after tax effect of:
Insurance claim proceeds on items of
property, plant and equipment - - - - (63)
Proceeds on successful litigation against
the Channel Induction Furnace supplier - - (79) - -
(Profit)/loss on disposal and scrapping of
property, plant and equipment (*) (1) (*) 3 3
Headline loss (345) (118) (800) (28) (15)
* Less than R1 million.
Cents Cents Cents Cents Cents
Loss per share - headline and diluted (348.0) (119.0) (806.5) (28.2) (15.1)
Million Million Million Million Million
Number of shares
Ordinary shares in issue as at end date *† 99.2 99.2 99.2 99.2 99.2
* Rounded to nearest hundred thousand.
†
Agree to weighted average and diluted
number of ordinary shares.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued
capital
and
share Other Retained
premium reserves earnings Total
Note Rm Rm Rm Rm
2011
Balance at 1 January 2011 - Audited 585 138 1 787 2 510
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
Profit for the period 65 65
Other comprehensive income for the quarter 7 7
Balance at 30 June 2011 - Reviewed 585 165 1 873 2 623
Loss for the period (117) (117)
Other comprehensive income for the quarter 50 50
Balance at 30 September 2011 - Unaudited 585 215 1 756 2 556
Profit for the period 76 76
Other comprehensive loss for the quarter (22) (22)
Share-based payment reserve 9 10 10
Balance at 31 December 2011 - Audited 585 203 1 832 2 620
2012
Balance at 1 January 2012 - Audited 585 203 1 832 2 620
Loss for the period (94) (94)
Other comprehensive loss for the quarter (13) (13)
Balance at 31 March 2012 - Unaudited 585 190 1 738 2 513
Loss for the period (282) (282)
Other comprehensive income for the quarter 11 11
Share-based payment reserve 9 8 8
Balance at 30 June 2012 - Reviewed 585 209 1 456 2 250
Loss for the period (345) (345)
Other comprehensive income for the quarter 13 13
Share-based payment reserve 9 2 2
Balance at 30 September 2012 - Unaudited 585 224 1 111 1 920
Unaudited Unaudited Unaudited Unaudited
for the three for the three for the nine for the nine Audited for
months months months months the year
ended ended ended ended ended
30 Sept 2012 30 Sept 2011 30 Sept 2012 30 Sept 2011 31 Dec 2011
Cents Cents Cents Cents Cents
Dividends per share
Dividends declared and paid - - - - -
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
Unaudited Unaudited Unaudited Unaudited
for the for the for the for the Audited
three three nine nine for the
months months months months year
ended ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept 31 Dec
2012 2011 2012 2011 2011
Rm Rm Rm Rm Rm
Cash flows from operating activities
Cash (used in) / generated by operations
before tax paid (369) (190) (579) 568 1 070
Income tax paid (*) (5) (*) (5) (6)
Net cash (used in) / generated by operating
activities (369) (195) (579) 563 1 064
Cash flows from investing activities
Proceeds from sale and scrapping of property,
plant and equipment - - 1 - 90
Net additions to property, plant and
equipment (45) (161) (142) (331) (485)
Net cash used in investing activities (45) (161) (141) (331) (395)
Cash flows from financing activities
Increase in long-term loans - - 15 - -
Increase in interest-bearing loans and
borrowings 209 - 209 - -
Net cash generated by financing activities 209 - 224 - -
Net (decrease)/increase in cash and cash
equivalents (205) (356) (496) 232 669
Cash and cash equivalents at the beginning of
the period/year 890 1 090 1 184 492 492
Effects of exchange rate changes on cash held
in foreign currencies 9 18 6 28 23
Cash and cash equivalents at the end of the
period/year 694 752 694 752 1 184
*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 R414 million (September 2011 YTD: R564
million) for the nine months ended 30 September 2012. This constitutes 12% of total revenue for the
period, compared to 13% for the period ended 30 September 2011. Technical services (slag tolling
agreement) and other services with EVRAZ Vametco Alloys Proprietary Limited (a fellow subsidiary)
amounted to R57 million for the nine months ended 30 September 2012 (September 2011 YTD: R83
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
Unaudited for the for the
Unaudited for the three nine nine Audited for
for the three months months months the year
months ended ended ended ended ended
30 Sept 30 Sept 30 Sept
30 Sept 2012 2011 2012 2011 31 Dec 2011
Rm Rm Rm Rm Rm
Revenue from the sale of goods
Steelworks 484 874 2 362 3 005 3 957
Vanadium 273 375 958 1 229 1 630
Total 757 1 249 3 320 4 234 5 587
Intersegment revenue is eliminated on consolidation.
Unaudited Unaudited
Unaudited for the for the
Unaudited for the three nine nine Audited for
for the three months months months the year
months ended ended ended ended ended
30 Sept 30 Sept 30 Sept
30 Sept 2012 2011 2012 2011 31 Dec 2011
Rm Rm Rm Rm Rm
Operating loss
Steelworks (446) (307) (833) (500) (542)
Vanadium 75 114 262 360 493
Total (371) (193) (571) (140) (49)
Unaudited as Unaudited Audited as
at as at at
30 Sept 31 Dec
30 Sept 2012 2011 2011
Rm Rm Rm
Total assets
Steelworks 2 626 3 374 3 664
Vanadium 913 776 794
Total 3 539 4 150 4 458
4 Supplementary revenue information - Unaudited
For the For the For the For the
three three nine nine For the
months months months months year
ended ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept 31 Dec
2012 2011 2012 2011 2011
Sales volumes of major products
Total steel Tons 71 872 127 121 342 249 470 614 603 094
Ferrovanadium Tons V 1 042 1 601 3 897 4 541 6 031
Modified Vanadium
Oxide Tons V 16 - 244 304 398
Nitrovan Tons V 164 225 477 795 1 105
Tons
Vanadium slag V(2)O5 71 182 142 537 664
Fines ore Tons 172 617 152 363 550 399 494 794 662 395
Vanadium slag sales reduced from 537 tons V(2)O5 for the nine months ended 30 September 2011 to 142
tons V(2)O5 for the nine months ended 30 September 2012 due to lack of orders received and
unavailability of slag.
Weighted average selling prices achieved for major products
Total steel US$/t 754 880 778 834 825
Ferrovanadium US$/kg V 24 27 24 28 27
Modified Vanadium
Oxide US$/kg V 18 - 18 22 21
Nitrovan US$/kg V 22 28 23 28 27
Vanadium slag US$/kg V2O5 1 5 3 6 5
Fines ore US$/t 18 32 20 37 33
Average R/$
exchange
rate 8.26 7.13 8.05 6.98 7.26
5 Impairment of deferred tax assets
Deferred tax assets are tested for impairment bi-annually and when circumstances indicate the carrying
value may be impaired. The Group’s impairment test for deferred tax assets is based on clear projections
that the deferred tax assets will be utilised in the foreseeable future. Due to the current assessed loss and
no specific indication as to when the assets will be utilised, the Group decided to impair the assets. When
more definite indications exist on the future utilisation of the assets, the assets will be recognised to the
value of the expected utilisation.
The amount derecognised during the nine months amounted to R163 million.
6 Long-term borrowings
The long-term borrowings of R16 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.
7 Other operating income and expense
The R118 million other operating income for the nine months ended 30 September 2012 relates mainly to a
R109 million settlement received, relating to the claim against the Channel Induction Furnace supplier. For
the same period last year, other operating expense of R123 million relates mainly to the adjustment of the
Net Realisable Value provision of R147 million (income), net stock write down of R22 million (expense),
profit related bonus adjustment of R33 million (income) and idle plant costs of R277 million (expense).
8 Income tax
Unaudited Unaudited Unaudited
Unaudited for the for the for the Audited
for the three three nine nine for the
months months months months year
ended ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept 31 Dec
2012 2011 2012 2011 2011
Rm Rm Rm Rm Rm
South African
Normal
Prior year over
provision (44) - (44) - -
Deferred
Current 7 (75) 167 105 (112)
Prior year over
provision - - - (1)
Non-South African
Normal
Current * - * - 3
Prior year over
provision - (3) - (12) (8)
Income tax
expense/(credit) (37) (78) 123 (117) (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.
9 Share-based payment reserve
Certain key management personnel participate in a Long Term Incentive Plan (LTIP) over shares in EVRAZ
Group plc. The shares are traded on the London Stock Exchange. The vesting of the shares occurs 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 R10 million
(2011: R10 million).
10 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 Department of Mineral Resources for the
unscheduled closure of Mapochs Mine.
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.
11 Contingent liabilities
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).
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. The Company is confident that it
has a good prospect of success in the matter. Should the matter not be settled, it is unlikely that it would be
finalised 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. The matter is continuing.
12 Subsequent events
There are no events to be reported on since 30 September 2012.
Date: 16/11/2012 04:53:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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