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Group Unaudited Results For The Nine Months Ended 30 September 2013
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 2013
Chairman and CEO’s Review
- Headline loss R222 million (September YTD 2012: loss R800 million)
- Net loss R222 million (September YTD 2012: loss R721 million)
1. Safety
EVRAZ Highveld Lost Time Injuries (LTI) increased from 6 in Q2 2013 to 11 in Q3 2013. The
progressive Lost Time Injury Frequency Rate (LTIFR) increased to 4.60 in Q3 2013 as at 30
June 2013. The total number of injuries increased from 39 in Q2 2013 to 49 in Q3 2013.
2. Key financials
The operating loss for the period was R145 million, compared to a loss of R571 million for the
same period in 2012. The improved performance can be attributed to increased sales, higher
vanadium prices, reduction in costs and the effect of the 4-week industrial action by NUMSA
in 2012. The EBITDA for the period was a profit of R93 million, compared to a R485 million
loss for the same period last year. Revenue from sale of goods increased to R4 078 million
compared to R3 320 million for the previous period.
The Board believes that the Company is a going concern. However, there are matters that
may cast significant doubt about the ability of the Company to continue as a going concern.
Labour stability, health of the market and production stability remain a threat to the
operations of the Company. The Company continues to utilise credit lines that are not
committed and payable on demand.
Management has taken significant steps to address the cost structure of the Company and
the above mentioned risks.
3. Operations
Steel
Iron output increased by 8% to 477 709 tons for the nine-month period compared to the
previous year, when output suffered as result of a four week strike. Steel output increased by
18% from 406 072 tons for the nine-month period in 2012 to 478 707 tons for the same period
in 2013 as a result of increased iron availability and improved stability in the Steel plant.
Production of long products remained flat with 152 113 tons during the period compared to
152 000 tons for the previous period. Production of flat products increased by 36% from 171
682 tons to 233 082 tons for this period. These changes are mainly as a result of a change in
market demand.
Inventories of cast steel ahead of the rolling mills were worked down during the period June to
September 2013 when high peak period electricity tariffs impacted on iron production cost.
The project to improve kiln pre-reduction performance was completed on time at the end of
Q3 2013. This project has improved stable kiln operation and is resulting in a reduction of
electrical energy consumption in the Ironmaking furnaces.
Mining
Production of lump ore increased by 23% from 920 713 to 1 131 920 tons for the period when
compared to the same period in 2012, and fines ore increased by 15% from 441 342 to 506
333 tons for the period. Fine ore pricing has further deteriorated in Q3 due to decrease in the
LMB price of vanadium.
The pit mining trial that commenced in March 2013 will be running until November 2013. The
trial will provide data required to determine the future operational model for the Mapochs Mine
at increased ore reserves up to a depth of 50m.
Construction of the houses of the SLP housing programme has commenced in Q3 2013.
Vanadium
A total of 36 892 tons of vanadium slag was produced containing 5 012 tons V for the period,
compared to 32 923 tons slag containing 4 717 tons V for the same period last year.
4. Markets
Global and local markets
Global crude steel production was 1 186 Mt in the first nine months of 2013, which represents
an increase of 2.7% compared to the same period in 2012. Asia produced 795.1 Mt of crude
steel in the first three quarters of 2013, which is an increase of 5.9% compared to the same
period in 2012. All other major regions remained at decreased production for Q3 2013
compared to the same period in 2012.
South African crude steel production for the period Q1 to Q3 was 5 015 million tons versus
5 429 million tons produced during the same period in 2012. Consumption information is
published by SAISI on an annual basis, thus domestic consumption information is not
available.
Evraz Highveld sales
Steel sales volumes increased by 11% from 342 230 tons for the 2012 period to 381 075 tons
for the same period in 2013.
Domestic steel sales increased by 47% from 250 512 to 367 893 tons for reporting period,
while export steel sales volumes decreased to 13 182 tons for the reporting period against
91 670 tons for the previous reporting period.
Ferrovanadium sales for the 2013 period decreased to 3 603 tons V compared to 3 897 tons
V for the same period in 2012. Nitrovan and Modified Vanadium Oxide sales decreased from
721 tons V to 504 tons V for the 2013 period. Domestic vanadium slag sales were 285 tons
V for the period compared to 80 tons V for the same period in 2012.
5. Wage negotiations
The Company has managed to conclude its wage negotiations successfully and agreed with
the representative trade unions on a wage increase of 8.5% and 9% for the respective
bargaining unit wage levels. Several other benefits have also been agreed on.
6. Outlook
The global economy remained weak during Q3 2013 and has not reached the required levels
of growth needed to support a strong recovery in steel demand. It is predicted that global steel
demand is likely to increase by 3.1% to 1 475 Mt in 2013 following growth of only 2.0% in
2012.
Major emerging economies, particularly India and Brazil, did not perform as predicted, mainly
due to key structural issues, which also led to lower global steel demand, with the exception of
China. Recent economy expansion in China saw levels of about 7.8% year-on-year from the
slowdown of 7.5% in Q2 2013, as key growth drivers lost momentum. Steel demand in China
for the remainder of 2013 was expected to grow by only 6%.
Sluggish steel demand combined with excess global steelmaking capacity and ongoing
volatility in raw material prices are presenting some of the most significant challenges for the
sustainability of high-cost steel producers.
The sub-Saharan African region remains a growing market for the steel industry, mainly
driven by opportunities from the widely published infrastructure related projects in countries
such as Nigeria, Kenya, Tanzania and Zambia, as well as mining related investments in
Mozambique.
The South African economy has come under severe pressure, partially due to the global
economic slowdown. GDP was expected to grow by only 2% compared to the initial 3%
forecast in Q1 2013. The increasing trade deficit mainly caused by weak demand for
manufactured goods in Europe, and the declining levels of production and investment in the
mining sector remained a challenge to the steel industry. Whilst there were only small scale
activities in the building sector, the maintained absence of large infrastructure development
and slow pace of project implementation continued to hinder recovery in domestic steel
demand.
Sustained labour market disputes remained a major risk to the South African economic
stability. The domestic economy is further confronted with electricity supply concerns
and notable energy tariff increases, which adversely affects the competitiveness of the
domestic steel industry.
BJT Shongwe MD Garcia
(Chairman) (Chief Executive Officer)
4 December 2013
Directors: B J T Shongwe (Chairman), M D Garcia (Chief Executive Officer) (American), G C Baizini (Italian),
M Bhabha, Mrs B Ngonyama, T Mosololi, V M Nkosi, D Scuka (Czech), P S Tatyanin (Russian), J Valenta (Czech) and
T I Yanbukhtin (Russian)
Company Secretary: Ms A Weststrate
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
GROUP UNAUDITED FINANCIAL RESULTS
Basis of preparation
The Group's (Group includes all consolidated entities) financial results for the nine months ended
30 September 2013 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.
The unaudited financial statements were prepared under the going concern basis.
There are matters that may cast significant doubt about the ability of the Company to continue as
a going concern.
Labour stability, health of the market and production stability remain a threat to the operations
of the Company. The Company continues to utilise credit lines that are not committed and payable on demand.
Management has taken significant steps to address the cost structure of the Company and the above mentioned risks.
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 2013.
These Standards had no impact on the results or disclosures of the Group.
- IAS 1, Amended - Presentation of items of other comprehensive income (effective from 1 July 2012);
- IAS 12, Amended - Deferred taxes: Recovery of underlying assets (effective from 1 January 2012);
- IAS 27, Separate financial statements (consequential revision due to the issue of IFRS 10) (effective from 1 January 2013);
- IAS 28, Investments in associates and joint ventures (consequential revision due to the issue of IFRS 10 and 11)
(effective from 1 January 2013);
- IFRS 7, Amended - Disclosures: Offsetting financial assets and financial liabilities (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 interest in 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); and
- Improvements to IFRS - Issued May 2012 (effective from 1 January 2013).
ii) The Group implemented IAS 19 Employee Benefits from 1 January 2013. The Group previously only recognised the net
cumulative unrecognised actuarial gains and losses, which exceeded 10% of the greater of the defined benefit obligation
and the fair value of the plan assets. As a consequence, the Group's statement of financial position did not reflect a
significant part of the unrecognised net actuarial gains and losses. In 2013 the Group changed its accounting policy to
recognise actuarial gains and losses in the period in which they occur in total in other comprehensive income. Changes
have been applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors,
resulting in the adjustment of prior year financial information.
As a result of the accounting policy change, the following changes were made to the financial statements
As of 1 January 2012:
Increase in employee benefit liability: R26 million
Decrease in opening retained earnings: R26 million
As of 31 December 2012:
Increase in employee benefit liability: R29 million
Net expense recognised on other comprehensive income: R3 million
Decrease in retained earnings: R26 million.
For the period ended 30 September 2013
No increase in employee benefit liability - will be calculated end 2013.
No deferred tax impact as the Company is in an assessed loss position and the deferred tax asset has been impaired.
iii) The following Standards, amendment to the Standards and Interpretations, effective in future accounting periods have not
been adopted in these financia statements:
- IAS 32, Amended - Offsetting financial assets and financial liabilities (effective from 1 January 2014);
- IFRS 9, Financial instruments - classification and measurement (effective from 1 January 2015);
- 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);
- IFRS 10, IFRS 12 and IAS 27, Investment entities (effective from 1 January 2014); and
- IFRIC 21, Levies (effective from 1 January 2014).
This abridged report was prepared under supervision of the Chief Financial Officer, Mr Jan Valenta (Chartered Accountant).
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Restated Restated
as at as at as at
30 Sep 2013 31 Dec 2012 1 Jan 2012
Notes Rm Rm Rm
ASSETS
Non-current assets 1 716 1 801 1 927
Property, plant and equipment 1 620 1 722 1 760
Restricted cash 14 31 - -
Deferred tax asset 5 65 79 167
Current assets 1 919 1 866 2 531
Inventories 930 858 831
Trade and other receivables and prepayments 6 610 480 516
Taxation - 1 -
Cash and short-term deposits 379 527 1 184
TOTAL ASSETS 3 635 3 667 4 458
EQUITY AND LIABILITIES
Total equity 1 601 1 709 2 594
Non-current liabilities 814 789 650
Interest-bearing loans and borrowings 7 17 16 -
Provisions 797 773 650
Current liabilities 1 220 1 169 1 214
Trade and other payables 793 924 1 016
Interest-bearing loans and borrowings 7 288 102 -
Income tax payable 9 - 45
Provisions 130 143 153
TOTAL EQUITY AND LIABILITIES 3 635 3 667 4 458
Net Cash 74 409 1 184
Net asset value - cents per share 1 615 1 724 2 616
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited for Restated for the Unaudited for the Restated for the
the three three months nine months nine months Restated for the
months ended ended ended ended year ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Notes Rm Rm Rm Rm Rm
Revenue 1 215 758 4 081 3 325 4 354
Sale of goods 1 214 757 4 078 3 320 4 346
Cost of sales (1 274) (988) (3 855) (3 570) (4 746)
Gross (loss)/profit 8 (60) (231) 223 (250) (400)
Other operating income 9 2 6 28 118 138
Selling and distribution costs (63) (65) (190) (218) (248)
Administrative expenses (59) (81) (181) (221) (289)
Other operating expenses 9 (14) - (25) - (55)
Operating loss (194) (371) (145) (571) (854)
Finance costs (18) (12) (55) (32) (52)
Finance income 1 1 3 5 8
Loss before tax (211) (382) (197) (598) (898)
Income tax (expense)/credit 10 (1) 37 (25) (123) (45)
Loss for the period/year (212) (345) (222) (721) (943)
Cents Cents Cents Cents Cents
Loss per share - basic and diluted (213.9) (347.8) (224.0) (726.8) (951.1)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited for Restated for the Unaudited for the Restated for the
the three three months nine months nine months Restated for the
months ended ended ended ended year ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Rm Rm Rm Rm Rm
Loss for the period/year (212) (345) (222) (721) (943)
Other comprehensive income/(loss):
Exchange differences on translation of foreign operations 17 13 105 11 49
Actuarial loss on defined benefit plan, net of tax (3)
Total comprehensive loss for the period/year (195) (332) (117) (710) (897)
Cents Cents Cents Cents Cents
Comprehensive loss per share - basic and diluted (196.8) (334.8) (118.1) (716.1) (904.7)
HEADLINE EARNINGS PER SHARE
Unaudited for Restated for the Unaudited for the Restated for the
the three three months nine months nine months Restated for the
months ended ended ended ended year ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Rm Rm Rm Rm Rm
Reconciliation of headline loss
Loss for the period/year (212) (345) (222) (721) (943)
(Deduct)/add after tax effect of:
Proceeds on successful litigation against the channel
induction furnace supplier - - - (79) (79)
Loss/(profit) on disposal and scrapping of property,
plant and equipment * (*) * (*) (*)
Headline loss (212) (345) (222) (800) (1 022)
* Less than R1 million.
Cents Cents Cents Cents Cents
Loss per share - headline and diluted (213.9) (348.0) (224.0) (806.5) (1 030.4)
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 premium Other reserves Retained earnings Total
Notes Rm Rm Rm Rm
2012
Balance at 1 January 2012 - Restated 585 203 1 806 2 594
Loss for the period (94) (94)
Other comprehensive loss for the quarter (13) (13)
Balance at 31 March 2012 - Restated 585 190 1 712 2 487
Loss for the period (282) (282)
Other comprehensive income for the quarter 11 11
Share-based payment reserve 8 8
Balance at 30 June 2012 - Restated 585 209 1 430 2 224
Loss for the period (345) (345)
Other comprehensive income for the quarter 13 13
Share-based payment reserve 2 2
Balance at 30 September 2012 - Restated 585 224 1 085 1 894
Loss for the period (222) (222)
Other comprehensive income for the quarter 38 38
Actuarial loss on defined benefit plan (3) (3)
Share-based payment reserve 2 2
Balance at 31 December 2012 - Restated 585 264 860 1 709
2013
Balance at 1 January 2013 - Restated 585 264 860 1 709
Profit for the period 30 30
Other comprehensive income for the quarter 47 47
Share-based payment reserve 11 3 3
Balance at 31 March 2013 - Unaudited 585 314 890 1 789
Loss for the period (40) (40)
Other comprehensive income for the quarter 41 41
Share-based payment reserve 11 3 3
Balance at 30 June 2013 - Unaudited 585 358 850 1 793
Loss for the period (212) (212)
Other comprehensive income for the quarter 17 17
Share-based payment reserve 11 3 3
Balance at 30 September 2013 - Unaudited 585 378 638 1 601
Unaudited for the
three months Restated for the Unaudited for the Restated for the nine Restated for the
ended three months ended nine months ended months ended year ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Cents Cents Cents Cents Cents
Dividends per share
Dividends declared and paid - - - - -
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited for Restated for the Unaudited for Restated for the
the three three months the nine nine months Restated for the
months ended ended months ended ended year ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Rm Rm Rm Rm Rm
Cash flows from operating activities
Loss before tax (211) (382) (197) (598) (899)
Non-cash items 67 88 207 219 342
Net movement in working capital 19 (73) (310) (201) (47)
Net interest (paid)/received (7) (2) (22) 1 (4)
Income tax paid (1) (*) (3) (*) (2)
Net cash used in operating activities (113) (369) (305) (579) (610)
Cash flows from investing activities
Proceeds from sale and scrapping of property, plant and
equipment * - 1 1 4
Additions to property, plant and equipment (37) (45) (105) (142) (203)
Net cash used in investing activities (37) (45) (104) (141) (199)
Cash flows from financing activities
Increase in long-term interest-bearing loans and borrowings - - - 15 15
(Decrease)/increase in short-term interest-bearing loans
and borrowings (97) 209 186 209 102
Net cash (repaid)/generated by financing activities (97) 209 186 224 117
Net decrease in cash and cash equivalents (247) (205) (223) (496) (692)
Cash and cash equivalents at the beginning of the
period/year 630 890 527 1 184 1 184
Cash transferred to restricted cash (31) - (31) - -
Effects of exchange rate changes on cash held in foreign
currencies 27 9 106 6 35
Cash and cash equivalents at the end of the period/year 379 694 379 694 527
* 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 R168 million (September 2012 YTD: R414 million) for the
9 months ended 30 September 2013. This constitutes 4% of total revenue for the period, compared to 12% for the period
ended 30 September 2012. Technical services (slag tolling agreement) and other services with EVRAZ Vametco
Alloys Proprietary Limited (a fellow subsidiary) amounted to R50 million for the 9 months ended September 2013
(September 2012 YTD: R57 million).
3 Segment information
The Group is organized 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 by-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 for the Restated for the
three months Restated for the three Unaudited for the nine nine months Restated for
ended months ended months ended ended the year ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Rm Rm Rm Rm Rm
Revenue from customers
Steelworks 942 488 3 162 2 382 3 173
Vanadium 348 273 1 151 958 1 199
Elimination in intersegmental
revenue (76) (4) (235) (20) (26)
Total 1 214 757 4 078 3 320 4 346
Unaudited for the Restated for the
three months Restated for the three Unaudited for the nine nine months Restated for
ended months ended months ended ended the year ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Rm Rm Rm Rm Rm
Operating loss
Steelworks (237) (446) (328) (833) (1 153)
Vanadium 43 75 183 262 299
Total (194) (371) (145) (571) (854)
Unaudited as at Audited as at
30 Sep 2013 31 Dec 2012
Rm Rm
Total assets
Steelworks 2 998 2 935
Vanadium 637 732
Total 3 635 3 667
4 Supplementary revenue information - Unaudited
For the three months For the three months For the nine For the nine For the year
ended ended months ended months ended ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Sales volumes of major products
Total steel Tons 113 976 71 872 380 872 342 249 453 836
Ferrovanadium Tons V 1 228 1 042 3 603 3 897 4 766
Modified vanadium oxide Tons V 48 16 133 244 244
Nitrovan Tons V 20 164 371 477 669
Vanadium slag Tons V 93 40 285 80 181
Ore fines Tons 149 981 172 617 502 303 550 399 687 380
Weighted average selling prices achieved for major products
Total steel US$/t 708 754 738 778 764
Ferrovanadium US$/kg V 25 24 27 24 23
Modified vanadium oxide US$/kg V 19 18 20 18 18
Nitrovan US$/kg V 24 22 28 23 23
Vanadium slag US$/kg V 8 2 9 5 7
Ore fines US$/t 23 18 33 20 20
Average R/$ exchange rate 9.99 8.26 9.48 8.05 8.21
5 Deferred tax asset
In light of the Company's own financial performance and the uncertainty of future taxable profits to account against its deferred tax
asset, management concluded, following due assessment, that it was prudent to impair its deferred tax asset as at 31 December 2012
(R297 million) to the extent that it exceeded the deferred taxation liability. No reversal of the impairment was considered necessary
as at 30 September 2013. The deferred taxation asset of the Group comprises the deferred taxation asset attributable to Mapochs Mine.
A management assessment concluded that no impaiment is necessary.
6 Trade and other receivables and prepayments
The increase in comparison to 31 December 2012 can mainly be attributed to increased sales volumes and prices in 2013. December months
are also historically low sales months due to the holiday periods.
7 Interest-bearing loans and borrowings
The long-term borrowings of R17 million (2012: R16 million) consist of the loan due by Umnotho Iron and Vanadium Proprietary Limited
payable to Umnotho weSizwe Group Proprietary Limited. This loan has no fixed repayment terms and interest is charged at prime rate.
The short-term borrowings are with Citibank and Investec Bank. The loans are uncommitted and carry interest at market related interest rates.
8 Gross (loss)/profit
The improvement in gross loss is as a result of improved steel selling prices, increased vanadium- and ore fines selling prices and
reduction in costs. For the first 9 months of 2012 the results were also negatively impacted by the four week industrial action by NUMSA.
9 Other operating income and expenses
The 2012 amount consist mainly of the R109 million received relating to the claim against the channel induction furnace supplier.
The R2 million other operating income in Q3 2013 includes inventory stock count and inventory net realisable value adjustments of R2 million.
The R14 million other operating expense in Q3 2013 includes foreign exchange losses of R12 million.
10 Income tax
Unaudited for Restated for the
Unaudited for the Restated for the three the nine nine months Restated for
three months ended months ended months ended ended the year ended
30 Sep 2013 30 Sep 2012 30 Sep 2013 30 Sep 2012 31 Dec 2012
Rm Rm Rm Rm Rm
South African
Normal
Prior year - (44) - (44) (44)
Deferred
Current - 7 14 167 86
Non-South African
Normal
Current 1 * 11 * 3
Income tax expense 1 (37) 25 123 45
* 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.
11 Share-based payment reserve
Certain key management personnel participate in a Long-Term Incentive Plan (LTIP) over shares in EVRAZ plc. The shares are traded
on the London Stock Exchange. The vesting of the shares occur on the 90th day following the announcement of EVRAZ plc financial results.
The cost of the LTIP award will be settled in equity by EVRAZ plc. The amount recognized according to IFRS 2 in 2013 is R9 million
(2012: R12 million).
12 Guarantees
As required by the Mineral and Petroleum Resources Development Act, a guarantee amounting to R264 million (2012: R264 million)
was issued on 1 September 2013 in favour of the Department of Mineral Resources for the unscheduled closure of Mapochs Mine.
As required by certain suppliers of the Group, guarantees were issued in favour of these suppliers to the value of
R9 million (2012: R9 million) in the event the Group will not be able to meet its obligations to the supplier.
13 Contingent liabilities
In terms of the Group'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 for the Group should
they become medical scheme members in the future is R32 million before tax and R23 million after tax (2012: R32 million before tax
and R23 million after tax).
On 5 June 2008, the Commission initiated a complaint against the Company for an alleged contravention of section 4(1)(b)(i) of
the Competition Act, No. 89 of 1998 (the Competition Act). The allegations against the Company are that it fixed prices and trading
conditions for flat and long steel products. In a letter from the Commission dated 18 September 2009, the Commission confirmed that
it would not be pursuing a case of collusion in the long steel market against the Company. On 30 March 2012 the Commission referred
the complaints relating to the flat steel market to the Competition Tribunal for prosecution. The allegations against the Company
contained in the Commission’s complaint referral are that the Company fixed prices and trading conditions for flat steel products,
and divided markets in respect of flat steel products, which are contraventions of sections 4(1)(b)(i) and 4(1)(b)(ii) of the Competition
Act, respectively. It is further alleged in the Commission’s complaint referral that the Company has contravened sections 4(1)(b)(i)
and 4(1)(b)(ii), alternatively section 4(1)(a), of the Competition Act by engaging in the exchange of information with a competitor
through information exchanges and meetings of the SAISI or its committees. Should the Competition Commission be successful, it could impose
a maximum penalty of R554 million against the Company.
14 Restricted cash
The restricted cash disclosed as a non-current asset consist of R22.5 million paid to an insurance company as guarantee to the Department
of Mineral Resources (DMR) for the Mapochs environmental rehabilitation obligation. An amount of R8.5 million is deposited with a commercial
bank as security for guarantees issued to two supplier companies. Interest on both amounts are earned at money market rates.
15 Subsequent events
There are no events to be reported on since 30 September 2013.
Date: 04/12/2013 03:36:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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