Wrap Text
Preliminary summarised reviewed group financial results for the year ended 31 December 2013
ArcelorMittal South Africa Limited
(“ArcelorMittal South Africa”, “the company” or “the group”
Registration number: 1989/002164/06
Share code: ACL
ISIN: ZAE 000134961
Preliminary summarised reviewed group financial results for the year ended 31 December 2013
- Turnaround to positive operating profit
- New supply agreement with Kumba
- Excellent safety performance
Overview
Trading conditions continued to be challenging for steel producers globally as weak demand continued in the eurozone.
In China, the economy in general experienced a slower rate of growth and a degree of softening in steel demand which led
to a decline in international steel prices.
In South Africa, economic growth was below expectations amid weak fixed investment expenditure and subdued global
demand for locally produced goods. More pertinently for the steel industry, slow implementation of infrastructure
development projects and the low level of fixed investment in the mining sector, coupled with weak production activity within
the manufacturing sector, continued to hamper demand. Furthermore, a higher-than-usual level of imports added to increased
stocks in the market which gradually normalised towards the end of the year. On the positive side, the depreciation in
the rand exchange rate against other major currencies from the month of May onwards improved our competitive position,
especially with respect to our export sales.
Liquid steel production was flat year-on-year with production losses resulting from the fire in Vanderbijlpark at the
beginning of the year limited to 361 000 tonnes due to fast repairs. Aggregate capacity utilisation increased from 66%
to 76% reflecting the progress in consolidating our operational footprint and improved reliability. During the last four
months of the year we started to build stocks for the upcoming reline of our blast furnace in Newcastle to ensure that
the supply to domestic customers is not disrupted. Total steel sales were 392 000 tonnes lower, a decrease of 8% compared
to the prior year. In contrast, commercial coke sales rose 18% year-on-year as the ferrochrome industry resumed normal
operations at the end of the electricity buyback programme in June 2013.
Safety performance was pleasing with zero fatalities for the second year in a row. The lost-time injury frequency rate
improved to 0.56, a further reduction from the previous year’s record low of 0.61. The excellent result of 0.33 in the
last quarter of the year marks a new all-time record for the company.
EBITDA improved by R647 million against the previous year, turning the operating result from a loss of R477 million to
a positive of R47 million. The headline loss narrowed from R518 million to R224 million.
As part of the restructuring of our raw material supplies, we relinquished financial responsibility for the Thabazimbi
iron ore mine at the end of 2013 as part of the new supply agreement with Kumba concluded in November. Additionally,
Tshikondeni coal mine will close in accordance with the mine closure plan in late 2014. Operating profit includes a
provision of R158 million associated with the closure of the latter. A write-off of R1.9 billion was taken on the fixed assets
of Thabazimbi.
Net cash decreased to R285 million from the R874 million reported at the end of 2012, reflecting the build-up of
stocks for the upcoming reline in Newcastle.
Key statistics
Quarter ended (unaudited) Year ended
31 December 30 September 31 December 31 December 31 December
2013 2013 2012 2013 2012
Unaudited Unaudited Unaudited Reviewed Audited
7 739 8 792 6 885 Revenue (R million) 32 421 32 291
211 581 (158) EBITDA (R million) 1 768 1 121
217 512 (160) EBITDA/tonne (R/t) (unaudited) 418 243
2.7 6.6 (2.3) EBITDA margin (%) 5.5 3.5
(387) 201 (583) Profit/(loss) from operations (R million) 47 (477)
(2 256) 248 (462) Net (loss)/profit (R million) (2 147) (508)
(301) 199 (456) Headline (loss)/earnings (R million) (224) (518)
(75) 50 (114) Headline (loss)/earnings per share (cents) (56) (129)
285 575 874 Net cash 285 874
Unaudited information
1 254 1 361 1 043 Liquid steel production (‘000 tonnes) 5 096 5 090
973 1 134 988 Steel sales (‘000 tonnes) 4 230 4 622
643 777 696 - Local 3 126 3 336
330 357 292 - Export 1 104 1 286
182 154 117 Commercial coke sales (‘000 tonnes) 545 460
77 83 60 Capacity utilisation (%) 76 66
0.33 0.58 0.50 Lost-time injury frequency rate 0.56 0.61
Market review
International
Global steel demand remained relatively weak despite a slight recovery from the previous year. China’s steel use
improved slightly in 2013 despite a somewhat weaker economic performance. China’s government investment in rail and subway
construction, coupled with tax relief and other business incentives, helped boost economic activity, hence benefitting the
steel industry. China also experienced marginally improved passenger vehicles sales, especially in the first half of
2013, which boosted production activity in the segment. It is expected that China will continue with its reform programme
to rebalance the economy, with the process of infrastructure and urban housing development expected to continue to
sustain the relatively higher growth than the global average growth rate.
In the US, stiff competition from cheaper imports and domestic producers with underutilised facilities contributed to
the significant oversupply of steel. However, steel demand in the US market was stimulated by a recovery in the economy,
with a pick-up in the housing market and improved market conditions in the automotive and energy sectors. The European
market continued to suffer from the twin challenges of overcapacity and shrinking markets, with demand dropping by
almost 30% on average compared to the precrisis period. This is mainly attributed to the decline in demand from two major
steel consumers, namely: construction and the auto industry. The commitment to a strict austerity policy in the eurozone
resulted in investment drying up in many regions.
Steel demand within sub-Saharan Africa continued to be stimulated by large infrastructure investments and improved
investment activity in the mining sector, especially in countries such as Mozambique.
Domestic
Poor economic conditions continued to exert downward pressure on the domestic steel market. Key steel consuming
sectors remained weak, and although the construction sector showed some improvement towards the latter part of the year, its
growth performance remains below historical norms. The mining sector made some gains but that was from a low base due to
strike disruptions in the sector in 2012. There are a few hopeful signs, albeit tentative at this stage. There was
modest growth in new vehicle sales, the number of building plans passed increased and sales of construction and building
materials rose to just below 10%. With respect to households, mortgage lending - though positive - is still growing below 3%
as disposable income remains depressed. On a positive note, despite domestic cost pressures, the purchasing managers’
index averaged around 50 in 2013, demonstrating some level of resilience in the economy. Moreover, the average rand
exchange rate for the year of 9.65 to the US dollar was favourable for exporters.
Financial review
Full year ended 31 December 2013 compared to full year ended 31 December 2012
There was a R524 million turnaround in the profit from operations to R47 million from a loss of R477 million the
previous year. The headline loss of R224 million, inclusive of a provision for the Tshikondeni mine closure of R158 million,
narrowed from an equivalent low of R518 million, a year ago.
Impairment charges of R1 950 million for the year are related to Thabazimbi mine R1 878 million and to the investments
in Coal of Africa Limited (“Coal of Africa”) and Microsteel (Pty) Limited (“Microsteel”) of R72 million.
Revenue was flat year-on-year at R32.4 billion underpinned by a 9% rise in average steel prices. Though the trend in
international prices was not favourable, the depreciation of the rand by 18% on average improved our competitive position
significantly. Domestic prices were up 7%, while export prices increased 13%. Prices for flat steel rose 11%, while
long steel increased 5%. This helped offset a 9% fall in steel shipments, mostly exports which were down 14%, while
domestic sales dropped 6%.
Revenue from the Coke and Chemicals business of R1 937 million was 4% higher following an 18% increase in commercial
coke sales volumes, partially offset by a 17% drop in net realised prices. Tar volumes remained flat with prices
increasing 13%.
Cash costs of hot rolled coil increased 4%, while those of billets were up 1%. Import coal prices decreased by 35% on
a dollar basis, while pellets decreased by 1%. In rand terms import coal fell 18% with pellets rising 14%. Sishen iron
ore prices were up 23% in rand terms, while ore from Thabazimbi increased further from R883/tonne to R1 317/tonne, a
49% rise. Electricity climbed 13%, natural gas and scrap prices were up 12% and 7% respectively.
Liquid steel production was marginally higher, up 6 000 tonnes. However, capacity utilisation improved for flat steel
to 74% compared to 65% the year before, reflecting the positive impact of the idling of the Electric Arc Furnace in
Vanderbijlpark. For long steel, the comparable ratios were 81% and 67% respectively.
Net financing costs of R260 million for the year were R14 million lower than the prior year. Our share of the loss
from equity-accounted investments after tax of R35 million compares with a profit of R59 million in the previous year. This
adverse development was due to lower results from Coal of Africa , Macsteel International Holdings BV and Polokwane
Iron Ore Company partly offset by income from the sale of assets from Microsteel.
Quarter ended 31 December 2013 compared with quarter ended 31 December 2012 (unaudited)
Revenue increased 12% to R7.7 billion following a 14% increase in average steel prices. Domestic prices were 15%
higher, while exports rose 13% with prices for flat and long steel rising 16% and 7% respectively. Steel shipments were down
2% with local shipments declining 8%, while exports increased 13%. Flat shipments dropped 7%, while longs were up 12%.
Revenue from Coke and Chemicals of R567 million was 18% higher following a 56% increase in commercial coke sales volumes
and 18% drop in average prices. Tar sales volumes decreased 10%, while prices increased 12%.
Cash costs of hot rolled coil and billets increased 2% and 5% respectively. Import coal prices declined 26% in US
dollars, while pellets increased 13%. In rand terms import coal dropped 10% and pellets rose 27%. Sishen iron ore prices are
fixed on a dollar basis but rose 28% in rand terms. Local coking coal, electricity and natural gas climbed 20%, 11% and
13% respectively. Liquid steel production was 211 000 tonnes higher or 20% resulting in improved capacity utilisation
for flat steel at 77% against the 2012 corresponding period of 61%. The equivalent figures for long steel were 76% and
56% respectively.
Operating profit improved by R196 million to a loss of R387 million. Net financing costs of R41 million for the
quarter were R66 million higher due to the lower discount rate adjustment on non-current provisions of R76 million. Our share
of the profit from equity-accounted investments after tax of R22 million compares with a loss of R53 million in the
corresponding quarter the year before.
Quarter ended 31 December 2013 compared with quarter ended 30 September 2013 (unaudited)
Revenue decreased by 12% to R7.7 billion due to a 14% drop in steel shipments. Reflecting the seasonal trend, local
shipments fell more steeply - by 17% - while exports declined 8%, with flat and long steel dropping 13% and 16%
respectively. Newcastle further increased metal stocks during Q4 by 121 000 tonnes mainly from own production. Local prices rose
2%, while export prices remained flat, leading to an overall 1% increase in average steel prices for the quarter. Flat
steel prices rose 2%, while long steel prices were stable. Revenue from Coke and Chemicals of R567 million was 5% higher
on the back of an 18% increase in commercial coke sales volumes offset by a 5% drop in average prices. Tar sales volumes
decreased 19%, while prices increased 6%.
Cash costs of hot rolled coil rose marginally with billets increasing 5%. The average dollar price of import coal was
5% down, while pellets decreased 1%, translating to a 1% rise for both in rand terms. Sishen ore remained flat on a
dollar basis but rose slightly by 1% in rand terms. Local coking coal prices climbed 7%, while electricity was down 22%
quarter-on-quarter due to a change in tariff from the higher winter rates. Liquid steel production was 107 000 tonnes lower
or 8% resulting in capacity utilisation for flat steel of 77% against the preceding quarter’s 83%. The equivalent
figures for long steel were 76% and 83% respectively.
Operating profit declined by R588 million to a loss of R387 million. Net financing costs of R41 million for the
quarter were R19 million higher due to lower discount rate adjustment on non-current provisions of R27 million. Our share of
the profit from equity-accounted investments after tax of R22 million compares with a profit of R91 million in the
previous quarter. This relates to lower results from Coal of Africa partly offset by income from the sale of assets from
Microsteel.
Environment (unaudited)
Notwithstanding the tough economic conditions the company operates under, key environmental projects remain a focus
area in order to ensure environmental compliance. The most important project in this regard is the Newcastle zero effluent
discharge project which entails the improvement of effluent treatment and the recovery thereof with a planned
completion date of April 2014 at an estimated cost of R430 million.
The proposed implementation of a carbon tax by the National Treasury in 2015 remains a huge concern. It is difficult
to accurately assess the financial impact of the proposed tax due to a lack of clarity, but current estimations indicate
that it could amount to more than R600 million per annum. Very limited opportunities exist to reduce carbon emissions in
the steel production process and no feasible low carbon alternatives exist at this stage to produce steel from iron
ore. Therefore, the intention of the carbon tax to change behaviour cannot be realised within the iron and steel industry.
Further engagement with National Treasury is foreseen in this regard.
Contingent liabilities
The Competition Commission (“the Commission”) has thus far referred the five cases detailed below against
ArcelorMittal South Africa Limited (“ArcelorMittal”) to the Competition Tribunal (“the Tribunal”) for prosecution. ArcelorMittal
reject the allegations made in each of these cases and is, accordingly, defending itself.
1st wire rod matter - alleged price discrimination
In January 2007, the Commission referred a case to the Tribunal for prosecution in which the Commission alleges that
ArcelorMittal engaged in price discrimination on wire rod in contravention of section 9(1) of the Competition Act 89 of
1998 (the “Competition Act”). Pleadings on the matter are closed but it is yet to be set down for a hearing before the
Tribunal.
2nd wire rod matter - alleged price discrimination
In November 2012, the Commission referred another case relating to alleged price discrimination on wire rod to the
Tribunal for prosecution. This case is essentially the same as the case that was referred in January 2007. The parties and
the issues are identical save for the fact that the contravention alleged in this case is alleged to have taken place
during a later period being 2004 - 2006. Pleadings on this matter have also closed and it is also yet to be set down for a
hearing before the Tribunal. The Commission has in the meantime applied to the Tribunal to have this matter
consolidated with the 1st wire rod matter for purposes of the hearing. This application is yet to be heard before the Tribunal.
Long steel matter - alleged cartel conduct
In September 2009, the Commission referred a case against ArcelorMittal and other primary steel manufacturers to the
Tribunal for prosecution. In the referral papers, the Commission alleges that the respondents fixed prices and allocated
markets in respect of certain long steel products, in contravention of section 4(1) of the Competition Act. The
Commission requested the Tribunal to find ArcelorMittal guilty of the alleged contraventions and to impose an administrative
penalty of 10% of our 2008 turnover.
Soon after the referral, ArcelorMittal wrote to the Commission requesting copies of the documents that make up the
Commission’s investigation record to enable it to draft and file its answering affidavit. This request was declined by the
Commission, prompting ArcelorMittal to file an application with the Tribunal in December 2009 for an order compelling
the Commission to provide these documents. In September 2010, the Tribunal handed down judgment refusing us access to the
bulk of the requested documents for reasons of privilege and confidentiality. ArcelorMittal subsequently appealed this
judgment to the Competition Appeal Court (“CAC”). In April 2012, the CAC ruled essentially that the matter be referred
back to the Tribunal for a hearing to properly determine the validity of the privilege and confidentiality claims. The
Commission appealed this ruling to the Supreme Court of Appeal (“SCA”). On 31 May 2013, the SCA handed down judgment
effectively concurring with the CAC and further ordering the Commission to pay ArcelorMittal’s legal costs for the appeal.
In July 2011, ArcelorMittal filed an application before the Competition Tribunal to set aside the above referral
based on procedural irregularities. The application is yet to be heard before the Tribunal.
Flat steel matter - alleged conscious parallelism
On 30 March 2012, the Commission referred a case against ArcelorMittal and Evraz Highveld Steel and Vanadium Limited
(“Highveld Steel”) to the Tribunal for prosecution. In the referral papers, the Commission alleges that Highveld Steel
and ArcelorMittal fixed prices and other trading conditions in respect of certain flat steel products in contravention of
section 4(1) of the Competition Act. 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 increased its prices. The Commission requested the Tribunal to find ArcelorMittal guilty of the alleged
contravention and to impose on us an administrative penalty of 10% of our 2008 turnover.
ArcelorMittal has requested further documents from the Commission to enable it to draft and file its answering
affidavit. A process to make some of these documents available to both companies’ legal representatives, as initially suggested
by the Commission, is currently the subject of an ongoing dispute between the Commission and Highveld Steel’s legal
representatives.
Scrap purchase - alleged cartel conduct
On 8 August 2013, the Commission referred a case against ArcelorMittal and other primary steel manufacturers to the
Tribunal for prosecution. In the referral papers, the Commission alleges that the respondents fixed the purchase price and
other trading conditions for scrap metal, a secondary input product in steel making, in contravention of section 4(1)
of the Competition Act. The Commission requested the Tribunal to find ArcelorMittal guilty of the alleged contravention
and to impose an administrative penalty of 10% of our 2008 turnover. ArcelorMittal is currently preparing its answering
affidavit which should be filed during the first half of 2014.
Competition Commission investigations
The Commission is formally investigating one further complaint against ArcelorMittal relating to alleged excessive
pricing of tinplate and flat steel in general. Joined to this investigation is an investigation into alleged excessive
pricing arising from the iron ore surcharge introduced by ArcelorMittal for the period May 2010 to July 2010. ArcelorMittal
is fully operating with the Commission in this investigation and continues to deliver all information and documentation
as and when called upon to do so.
Dispute with Sishen Iron Ore Company Proprietary Limited (“SIOC”)
Pursuant to the dispute between ArcelorMittal and SIOC relating to the validity of the iron ore supply agreement on a
cost plus 3% basis, the parties entered into a series of interim pricing agreements between 2010 and 2013 pending the
resolution of the SIOC arbitration proceedings. On 5 November 2013, ArcelorMittal and SIOC entered into an agreement (the
“2014 Agreement”) establishing long-term pricing arrangements for the supply of iron ore by SIOC to ArcelorMittal. In
terms of the 2014 Agreement, which became effective on 1 January 2014, ArcelorMittal may purchase from SIOC up to 6.25
million tonnes iron ore per year, complying with agreed specifications and lump-fine ratios. The price of iron ore sold to
ArcelorMittal is at cost plus a margin of 20%. While all prices are referenced to Sishen mine costs (plus 20%), the
parties agreed to a price for predetermined quantities of iron ore for the first two years of the 2014 Agreement. This
volume of 6.25 million tonnes a year of iron ore includes any volumes delivered by SIOC to ArcelorMittal from the Thabazimbi
mine, the financial risks of which will pass from ArcelorMittal to SIOC under the terms of the 2014 Agreement. The 2014
Agreement also settles various disputes between the parties, including the SIOC arbitration. The 2014 Agreement is
subject to a number of conditions, including that SIOC retains the entire Sishen mining right and is not required to account
to any third party (excluding ArcelorMittal) in respect thereof. The 2014 Agreement is not affected by the
Constitutional Court’s decision of 12 December 2013 (the decision is discussed below).
On 28 March 2013, the Supreme Court of Appeal delivered judgment in terms of which the court effectively agreed with
the trial court that SIOC was awarded 100% of the mining rights in the Sishen mine and therefore the award to Imperial
Crown Trading 289 Propriety Limited (“ICT”) was invalid. The Department of Mineral Resources and ICT subsequently lodged
an application for leave to appeal this decision with the Constitutional Court. The appeal was heard by the
Constitutional Court on 3 September 2013 and its judgment was delivered on 12 December 2013. The Constitutional Court ruled that:
(a) ArcelorMittal’s old-order mining right in respect of 21.4% of the Sishen mine expired upon ArcelorMittal’s failure to
convert that share; (b) SIOC applied for and was granted conversion of its own old-order mining right which equated to
78.6% of the Sishen mine; (c) SIOC is the only party competent to apply for and be granted the remainder of the mining
right (i.e. 21.4%) by the Department of Mineral Resources (“DMR”) and has been afforded a period of time from date hereof
to make such application to the DMR. ICT’s court application was dismissed.
Dividends
No dividends were declared for the year ended 31 December 2013.
Changes to the board of directors
Nonkululeko Nyembezi-Heita resigned as Chief Executive Officer with effect from 18 February 2014. Thandi Orleyn
resigned as independent non-executive director with effect from 1 October 2013. Jacob Modise and Nomavuso Patience Mnxasana
were appointed as independent non-executive directors with effect from 1 October 2013.
Outlook for quarter one of 2014 (unaudited)
We expect higher sales volumes after the seasonal slow-down in the fourth quarter. International prices are expected
to improve modestly resulting in a significant improvement in the first quarter headline earnings.
On behalf of the board
N Nyembezi-Heita (Chief Executive Officer) MJ Wellhausen (Chief Financial Officer)
28 January 2014
Condensed group statement of comprehensive income
Quarter ended (unaudited) Year ended
31 December 31 December
31 December 30 September 31 December 2013 2012
2013 2013 2012 In millions of rand Reviewed Audited
7 739 8 792 6 885 Revenue 32 421 32 291
(4 805) (5 342) (3 754) Raw materials and consumables used (19 652) (18 760)
(842) (872) (814) Employee costs (3 408) (3 356)
(732) (962) (684) Energy (3 288) (3 156)
Movement in inventories of finished goods
267 260 (335) and work in progress 1 196 (467)
(433) (376) (420) Depreciation (1 544) (1 582)
(7) (4) (5) Amortisation of intangible assets (19) (16)
(1 574) (1 295) (1 456) Other operating expenses (5 659) (5 431)
(387) 201 (583) Profit/(loss) from operations 47 (477)
(1 950) Impairment charges (1 950)
33 59 108 Finance and investment income (note 4) 108 60
(74) (81) (83) Finance costs (note 5) (368) (334)
(Loss)/income from equity-accounted
22 91 (53) investments (net of tax) (35) 59
(2 356) 270 (611) (Loss)/profit before tax (2 198) (692)
100 (22) 149 Income tax credit/(expense) (note 6) 51 184
(2 256) 248 (462) (Loss)/profit for the period (2 147) (508)
Other comprehensive income/(loss)
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of
83 199 50 foreign operations 561 62
Losses on available-for-sale investment
(1) (13) taken to equity (9) (32)
Share of other comprehensive income/(loss)
30 (64) 44 of equity-accounted investments 28 34
Total comprehensive (loss)/income
(2 144) 370 (368) for the period (1 567) (444)
(Loss)/profit attributable to:
(2 256) 248 (462) Owners of the company (2 147) (508)
Total comprehensive (loss)/income
attributable to:
(2 144) 370 (368) Owners of the company (1 567) (444)
(562) 62 (115) - diluted (535) (127)
Attributable (loss)/earnings per share (cents)
(562) 62 (115) - basic (535) (127)
Condensed group statement of financial position
As at As at As at
31 December 30 September 31 December
2013 2013 2012
In millions of rand Reviewed Unaudited Audited
Assets
Non-current assets 18 602 19 832 19 419
Property, plant and equipment 14 702 16 021 16 068
Intangible assets 146 122 121
Equity-accounted investments 3 737 3 665 3 204
Other financial assets 17 24 26
Current assets 14 113 13 524 11 479
Inventories 10 553 9 807 8 761
Trade and other receivables 2 194 3 026 1 669
Taxation 51 104 154
Other financial assets 17 12 11
Cash and bank balances 1 298 575 884
Total assets 32 715 33 356 30 898
Equity and liabilities
Shareholders’ equity 20 694 22 833 22 242
Stated capital 37 37 37
Non-distributable reserves (1 614) (1 752) (2 178)
Retained income 22 271 24 548 24 383
Non-current liabilities 4 099 4 056 4 091
Other payables (note 7) 267 274 270
Finance lease obligations 757 536 426
Deferred income tax liability 1 747 1 898 2 031
Non-current provisions 1 328 1 348 1 364
Current liabilities 7 922 6 467 4 565
Trade payables 5 683 5 147 3 420
Borrowings 906 10
Bank overdraft 107
Finance lease obligations 95 83 77
Taxation 6 107 97
Current provisions 408 322 312
Other payables (note 7) 717 808 649
Total equity and liabilities 32 715 33 356 30 898
Condensed group statement of changes in equity
Treasury
share
Stated equity Other Retained
In millions of rand capital reserve reserves earnings Total
Nine months ended 30 September 2012 (unaudited)
Balance as at 1 January 2012 37 (3 918) 1 687 24 863 22 669
Total comprehensive loss (30) (46) (76)
Share-based payment reserve 12 12
Transfer of equity-accounted earnings 112 (112)
Balance as at 30 September 2012 (unaudited) 37 (3 918) 1 781 24 705 22 605
Quarter ended 31 December 2012 (unaudited)
Balance as at 30 September 2012 37 (3 918) 1 781 24 705 22 605
Total comprehensive income/(loss) 94 (462) (368)
Share-based payment reserve 5 5
Transfer of equity-accounted earnings (140) 140
Balance as at 31 December 2012 (audited) 37 (3 918) 1 740 24 383 22 242
Six months ended 30 June 2013 (reviewed)
Balance as at 31 December 2012 37 (3 918) 1 740 24 838 22 242
Total comprehensive income/(loss) 347 (140) 207
Share-based payment reserve 9 9
Transfer of equity-accounted earnings (148) 148
Balance as at 30 June 2013 (reviewed) 37 (3 918) 1 948 24 391 22 458
Quarter ended 30 September 2013 (unaudited)
Balance as at 30 June 2013 (reviewed) 37 (3 918) 1 948 24 391 22 458
Total comprehensive income 122 248 370
Share-based payment reserve 5 5
Transfer of equity-accounted earnings 91 (91)
Balance as at 30 September 2013 (unaudited) 37 (3 918) 2 166 24 548 22 833
Quarter ended 31 December 2013 (reviewed)
Balance as at 30 September 2013 37 (3 918) 2 166 24 548 22 833
Total comprehensive income/(loss) 111 (2 255) (2 144)
Share-based payment reserve 5 5
Transfer of equity-accounted earnings 22 (22)
Balance as at 31 December 2013 (reviewed) 37 (3 918) 2 304 22 271 20 694
Condensed group statement of cash flows
Quarter ended (unaudited) Year ended
31 December 31 December
31 December 30 September 31 December 2013 2012
2013 2013 2012 In millions of rand Reviewed Audited
Cash inflows/(outflows) from
435 (310) 1 313 operating activities 1 153 1 776
589 (211) 1 379 Cash generated from/(utilised in) operations 1 663 2 022
2 1 1 Interest income 7 10
(56) (50) (44) Finance cost (169) (170)
(98) 26 (32) Income tax (paid)/received (220) (52)
(2) (76) 9 Realised foreign exchange movement (128) (34)
(731) (248) (432) Cash outflows from investing activities (1 616) (1 125)
(693) (234) (419) Investment to maintain operations (1 501) (809)
(31) (10) (14) Investment to expand operations (69) (66)
Shares acquired in associate and equity-
(9) (6) (88) accounted investment (53) (369)
1 1 Proceeds from disposal of assets 2 29
1 2 1 Investment income - interest 5 3
87 Dividend from equity-accounted investments 87
Cash inflows/(outflows) from financing
886 (748) (58) activities 674 (231)
Increase/(repayment) of borrowings, finance
886 (748) (58) lease obligations and other payables 674 (231)
Increase/(decrease) in cash and
590 (1 306) 823 cash equivalents 211 420
26 16 Effect of foreign exchange rate changes 96 25
Cash and cash equivalents at beginning
575 1 865 61 of period 884 439
1 191 575 884 Cash and cash equivalents at end of period 1 191 884
Notes to the reviewed condensed consolidated financial statements
1. Basis of preparation
The preliminary summarised reviewed group financial statements are prepared in accordance with the requirements of the JSE
Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council
and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies
applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are consistent with
those applied in the previous consolidated annual financial statements.
2. Significant accounting policies
These preliminary summarised reviewed group financial statements for the year ended 31 December 2013 have been prepared on the
historical cost basis, except for the revaluation of financial instruments. The accounting policies and methods of computation
applied in the presentation of the financial results of the group are consistent with those applied for the year ended
31 December 2012, except for the following new or revised standards, amendments thereto and interpertations as issued by the
International Accountng Standards Board, which are effective for the current reporting period that were adopted:
- IAS 1 (amendment) Presentation of Financial statements: Presentation of Items of Other Comprehensive Income
- IFRS 10 Consolidated Financial Statements
- IFRS 11 Joint Arrangements
- IFRS 13 Fair Value Measurement
- IAS 28 Investments in Associates and Joint Ventures (2011)
- IAS 34 Interim Financial Reporting
The adoption of these new and revised accounting standards did not have a material impact on the group results and as such
there is no change to comparative information resulting from the adoption of these standards.
The results for the year ended 31 December 2013 included the results from Coal of Africa for the period 1 October 2012 to
30 September 2013.
3. Review by the auditors
The preliminary summarised reviewed group financial statements for the year ended 31 December 2013 have been reviewed by the
company’s auditors, Deloitte & Touche, in accordance with International Standards on Review Engagements 2410. They expressed an
unmodified review conclusion on the final financial information. A copy of their report is available for inspection at the
company’s registered office. Any reference to future financial performance and expectations included in this announcement, has
not been reviewed or reported on by the company’s auditors.
Quarter ended (unaudited) Year ended
31 December 31 December
31 December 30 September 31 December 2013 2012
2013 2013 2012 In millions of rand Reviewed Audited
33 59 108 4. Finance and investment income 108 60
2 1 2 Interest received from banks 7 10
1 1 1 Interest received from joint ventures 5 3
Discounting rate adjustment of
30 57 105 the non-current provisions 96 47
(74) (81) (83) 5. Finance costs (368) (334)
Interest expense on bank
(41) (35) (27) overdrafts and loans (109) (103)
Interest expense on finance lease
(15) (15) (17) obligations (60) (67)
Net foreign exchange (gains)/losses
25 7 (1) on financing activities (44) (9)
Unwinding of the discounting
effect in the present valued
carrying amount of the
(43) (38) (38) non-current provisions (155) (155)
100 (22) 149 6. Income tax credit/(expense) 51 184
Current normal and deferred
108 (36) 149 tax credit/(expense) 61 184
Withholding tax (6)
(8) 14 Interest and penalties (4)
7. Other payables
372 369 356 Leave pay 372 356
529 613 469 Accruals 529 469
83 100 94 Sundry 83 94
984 1 082 919 Total 984 919
Disclosed as:
267 274 270 - non-current 267 270
717 808 649 - current 717 649
8. Capital expenditure
724 244 433 Incurred 1 570 875
1 170 1 088 687 Contracted 1 170 687
1 258 1 590 1 027 Authorised but not contracted 1 258 1 027
9. Contingent liabilities
1 1 1 Guarantees 1 1
10. Related party transactions
The group is controlled by ArcelorMittal Holdings AG which effectively owns 52.02% of the company’s shares. During the year 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 (unaudited)
The group subscribes to and substantially complies with the King Code on Corporate Governance for South Africa.
12. Reclassification
Certain balances in the comparative financial period were reclassified within the statement of financial position in order to
conform to current financial year’s presentation. The line items reclassified on the statement of financial position are
borrowings and other payables and trade and other payables. The items previously disclosed were separated out into the following
line items, borrowings, trade payables and other payables. There has been no impact to the net liabilities of the group.
13. Fair value measurements
Some of the group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period.
The following table gives information about how the fair values of these financial assets and financial liabilities are determined
particularly the valuation techniques and inputs used.
Fair value
Financial assets Fair values as at period ended hierarchy Valuation techniques and key inputs
In millions of rand 31 December 2013 30 September 2013 31 December 2012
Reviewed Unaudited Audited
Available-for-sale 17 18 25 Level 1 Quoted prices in an active market
Held for trading assets 17 18 12 Level 1 Quoted prices in an active market
Level 1: Fair value measurement are those derived from unadjusted quoted prices in active markets for identical assets or liabilities.
Segment information
Quarter ended (unaudited) Year ended
31 December 31 December
31 December 30 September 31 December 2013 2012
2013 2013 2012 Reviewed Audited
Flat Steel Products
5 036 5 617 4 708 Revenue (R million) 20 697 20 991
4 856 5 483 4 456 - External 19 922 20 192
180 134 252 - Internal 775 799
(156) 316 (306) EBITDA (R million) 135 (266)
(354) (303) (346) Depreciation and amortisation (R million) (1 255) (1 294)
(510) 13 (652) (Loss)/profit from operations (R million) (1 120) (1 560)
19 698 20 902 19 173 Assets (R million) 19 698 19 713
(8 280) (8 586) (7 662) Liabilities (R million) (8 280) (7 662)
Unaudited information
815 879 720 Liquid steel production (‘000 tonnes) 3 229 3 554
654 756 702 Steel sales (‘000 tonnes) 2 771 3 138
409 499 475 - Local 2 003 2 223
245 257 227 - Export 768 915
77 83 61 Capacity utilisation (%) 74 65
Long Steel Products
2 545 3 104 2 343 Revenue (R million) 11 618 11 474
2 332 2 781 1 968 - External 10 616 10 289
213 323 375 - Internal 1 002 1 185
193 311 (8) EBITDA (R million) 1 198 770
(84) (75) (79) Depreciation and amortisation (R million) (301) (299)
109 236 (87) (Profit)/loss from operations (R million) 897 471
7 555 7 518 6 142 Assets (R million) 7 555 6 142
(5 136) (5 191) (4 390) Liabilities (R million) (5 136) (4 390)
Unaudited information
439 482 323 Liquid steel production (‘000 tonnes) 1 867 1 536
319 378 286 Steel sales (‘000 tonnes) 1 459 1 484
234 278 221 - Local 1 123 1 113
85 100 65 - Export 336 371
76 83 56 Capacity utilisation (%) 81 67
Coke and Chemicals
567 542 479 Revenue (R million) 1 937 1 856
551 528 461 - External 1 883 1 810
16 14 18 - Internal 54 46
132 115 143 EBITDA (R million) 514 503
(9) (9) (4) Depreciation and amortisation (R million) (35) (32)
123 106 139 Profit from operations (R million) 479 471
903 1 023 1 003 Assets (R million) 903 1 003
(1 710) (1 720) (1 580) Liabilities (R million) (1 710) (1 580)
Unaudited information
72 109 125 Commercial coke produced (‘000 tonnes) 391 446
182 154 117 Commercial coke sales (‘000 tonnes) 545 460
25 32 29 Tar sales (‘000 tonnes) 109 109
Corporate and other
42 (161) 13 EBITDA (R million) (79) 114
(158) Tshikondeni mine closure costs (158)
7 7 4 Depreciation and amortisation credit (R million) 28 27
(109) (154) 17 (Loss)/profit from operations (R million) (209) 141
4 559 3 913 4 040 Assets (R million) 4 559 4 040
3 105 4 974 4 976 Liabilities (R million) 3 105 4 976
Salient features
Quarter ended (unaudited) Year ended
31 December 31 December
31 December 30 September 31 December 2013 2012
2013 2013 2012 In millions of rand Reviewed Audited
Reconciliation of earnings before interest,
taxation, depreciation and amortisation
(EBITDA)
(387) 201 (583) (Profit)/loss from operations 47 (477)
Adjusted for:
433 376 420 - Depreciation 1 544 1 582
7 4 5 - Amortisation of intangible assets 19 16
158 - Tshikondeni mine closure costs 158
211 581 (158) EBITDA for the period 1 768 1 121
Reconciliation of headline (loss)/earnings
(2 256) 248 (462) (Loss)/profit for the period (2 147)
Adjusted for:
1 950 - Impairment charges 1 950
7 (68) 9 - (Profit)/loss on disposal or scrapping of assets (37) (4)
(2) 19 (3) - Tax effect 10 (6)
(301) 199 (456) Headline (loss)/earnings for the period (224) (518)
Headline (loss)/earnings per share (cents)
(75) 50 (114) - basic (56) (129)
(75) 50 (114) - diluted (56) (129)
Return on ordinary shareholders’ equity
per annum
(41.5) 4.4 (8.2) - Attributable earnings (%) (10.0) (2.3)
(5.5) 3.5 (8.1) - Headline earnings (%) (1.0) (2.3)
1.4 2.5 3.9 - Net cash to equity (%) 1.4 3.9
Share statistics
Ordinary shares (‘000)
401 202 401 202 401 202 - in issue 401 202 401 202
401 202 401 202 401 202 - weighted average number of shares 401 202 401 202
401 202 401 202 401 202 - diluted weighted average number of shares 401 202 401 202
37.30 35.35 36.00 Share price (closing) (rand) 37.30 36.00
14 965 14 182 14 443 Market capitalisation (R million) 14 965 14 443
51.58 56.91 55.44 Net asset value per share (rand) 51.58 55.44
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’s plans and
objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results).
Any reference to future financial performance included in this announcement, has not been reviewed or reported on by the
company’s auditors.
Registered office: ArcelorMittal South Africa Limited, Room N3-5, Main Building Delfos Boulevard, Vanderbijlpark, 1911
Directors: Non-executive: PM Makwana* (Chairman), DK Chugh†, FA du Plessis*, S Maheshwari†, J Modise*, LP Mondi, NP Mnxasana*,
DCG Murray*, G Urquijoº
†Citizen of India º Citizen of Spain * Independent non-executive
Executive: N Nyembezi-Heita (Chief Executive Officer), MJ Wellhausen# (Chief Financial Officer)
#Citizen of Germany
Company Secretary: Premium Corporate Consulting Services Proprietary Limited
Sponsor: JP Morgan Equities South Africa Proprietary Limited, 1 Fricker Road, Illovo, 2196, Private Bag X9936,
Sandton, 2146
Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001,
PO Box 61051, Marshalltown, 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
7 February 2014
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
Date: 07/02/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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