Wrap Text
Group Reviewed Preliminary Results for the Year Ended 31 December 2013
EVRAZ Highveld Steel and Vanadium Limited
(Incorporated in the Republic of South Africa)
(Registration number 1960/001900/06)
Share code: EHS ISIN: ZAE000146171
("the Company" or "the Group")
GROUP REVIEWED PRELIMINARY RESULTS
for the year ended 31 December 2013
- Net loss R379 million (December YTD 2012: loss R943 million)
- EBITDA profit R22 million (December YTD 2012: loss R697 million)
Chairman and CEO's Review
1. Safety
EVRAZ Highveld Lost Time Injuries (LTI) for Q4 2013 remained at 11 against 11 in
Q3 2013. The progressive Lost Time Injury Frequency Rate (LTIFR) increased to
4.79 in Q4 2013 from Q3 at 4.60. The total number of injuries decreased from
49 in Q3 2013 to 42 in Q4 2013.
EVRAZ Highveld annual Lost Time Injuries (LTI) for 2013 was 31 against 16 in
2012. The annual Lost Time Injury Frequency Rate (LTIFR) increased to 3.32 in
2013 from 1.74 in 2012. The total number of injuries increased from 153 in 2012
to 175 in 2013.
2. Key financials
The operating loss for the year was R293 million, compared to a loss of R854
million for 2012, mainly attributed to lower production due to the effect of the
2012 strike. The EBITDA for the year was a profit of R22 million, compared to a
R697 million loss for the prior year. Revenue from sale of goods increased to R5
190 million compared to R4 346 million for the previous year.
Labour stability, health of the market and production stability continue to pose
a threat to the operations of the Company and the ability to generate profits.
The Company continues to utilise credit lines that are committed only to
31 December 2014, but are already fully drawn and may not be sufficient to
support the Company if the Company cannot achieve its production and sales
and cost targets.
Management has taken significant steps to address the cost structure of the
Company and the abovementioned risks.
The financial statements are prepared on the basis of accounting policies
applicable to a going concern. 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 and therefore it may be
unable to realise its assets and discharge its liabilities in the ordinary course
of business.
3. Operations
Steel
Iron output increased by 3% to 638 912 tons for the year compared to the
previous year, when output suffered as result of a four week strike. Steel output
increased by 12% from 571 787 tons in the 2012 year to 642 405 tons in the
2013 year as a result of increased iron availability and improved stability in the
Steel plant.
Production of long products decreased by 4% to 196 858 tons during the year
compared to 204 701 for the previous year. Production of flat products increased
by 26% from 242 836 to 304 827 tons for the year. 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 to less
than desired levels during the period June to September 2013 when a five-week
shutdown was held on the slab caster and high peak period electricity tariffs
impacted on iron production cost. Inventory levels have recovered by the end
of Q4 2013.
The project to improve kiln pre-reduction performance was completed on time
at the end of Q3 2013 and has improved stable kiln operation resulting in a
reduction of electrical energy consumption in the Ironmaking furnaces.
Mining
Production of lump ore increased by 22% from 1 174 022 to 1 430 346 tons for
the year when compared to the 2012 year, and fines ore increased by 7% from
607 473 to 651 209 tons for the year. Fines ore pricing improved in 2013 due to
higher LMB price of vanadium and weakening of the Rand.
The pit mining trial that commenced in March 2013 has been completed and
first commercial pit mining was due to commence within the first half of 2014.
Construction of the houses of the SLP housing programme has commenced in
Q3 2013 and 13 houses has been completed in Q4 2013.
Vanadium
A total of 49 299 tons of vanadium slag was produced containing 6 675 tons V
for the year, compared to 43 132 tons slag containing 6 205 tons V for 2012.
4. Markets
Global and local markets
Global crude steel production was 1 607 Mt in 2013, which represents an
increase of 3.5% compared to 2012. Asia produced 1 080.6 Mt of crude steel
during 2013, which is an increase of 6.0% compared to 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 7% from 453 836 tons for the 2012 year to
486 706 tons for the 2013 year.
Domestic steel sales increased by 23% from 359 162 to 440 044 tons for the
year, while export steel sales volumes decreased to 46 661 tons for the year
against 94 674 tons for the previous year.
Ferrovanadium sales for the 2013 period increased by 1% to 4 827 tons V
compared to 4 766 tons V for the 2012 year. Nitrovan and Modified Vanadium
Oxide sales decreased from 914 tons V to 541 tons V for the 2013 year. Domestic
vanadium slag sales were 386 tons V for the year compared to 180 tons V for
the 2012 year.
5. Sale of the majority shareholding in the Company
The Company remains under cautionary with the pending sale of the majority
shareholding.
In addition to Nemascore Proprietary Limited, EVRAZ plc was also engaging
with other potential bidders with a view to disposing of its 85.11% stake in the
Company. The Independent Board of the Company has agreed to allow these
potential bidders to conduct a due diligence investigation into the affairs of the
Company.
EVRAZ plc has also advised the Independent Board of the Company that at
this stage the negotiations with potential bidders are incomplete, confidential
and non-binding, hence there is no certainty that a transaction will take place.
6. Outlook
The global economy remained weak during Q4 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 2014 following growth of only 2.0% in 2013.
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%.
Sustainability of high-cost steel producers continues to be challenged by
excess global steelmaking capacity, volatility in raw material prices and slow
global steel demand.
The sub-Saharan African region remains a key growing market for the steel
industry, driven mainly 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. However global producers
who target this market aggressively with competitive pricing keep this market
under pressure.
GDP was expected to grow by only 2.3% in 2013 and the forecast is for 2%
in 2014. The weakening Rand in Q4 2013 has provided some increase in
demand for steel from local producers, driven purely by customers diverting
procurement from imported goods to local supply. The maintained absence
of large infrastructure development and slow pace of project implementation
continued to hinder overall recovery in domestic steel demand. 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.
A volatile labour market remains a major risk to the South African economic
stability. The domestic economy remains under pressure of 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)
11 March 2014
Basis of preparation
The Group's (Group includes all consolidated entities) financial results for the year
ended 31 December 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, except for IAS 19 discussed below, 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 reviewed financial statements were prepared under the going concern basis.
The Group incurred a net loss for the year ended 31 December 2013 of R379 million,
(2012: R943 million).
Labour stability, health of the market and production stability continue to pose a threat
to the operations of the Company and the ability to generate profits. The Company
continues to utilise credit lines that are committed only to 31 December 2014, but are
already fully drawn and may not be sufficient to support the Company if the Company
cannot achieve its production, sales and cost targets.
Management has taken significant steps to address the cost structure of the Company
and the abovementioned risks.
The financial statements are prepared on the basis of accounting policies applicable
to a going concern. 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 and therefore it may be unable to realise its
assets and discharge its liabilities in the ordinary course of business.
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 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 1January 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 31 December 2013:
Net gain recognised on other comprehensive income: R12 million.
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, amendments to the Standards and Interpretations,
effective in future accounting periods have not been adopted in these financial
statements:
- IAS 32, Amended – Offsetting Financial Assets and Financial Liabilities
(effective from 1 January 2014);
- IFRS 9, Financial Instruments – Classification and Measurement (1 January
2015 effective date has been deferred until the issue date of the completed
version of IFRS 9 is known);
- IFRS 9 and IFRS 7, Amended – Mandatory Effective Date and Transition
Disclosures (IFRS 9 effective date deferred, IFRS 7 depends on when IFRS 9
is adopted);
- IFRS 10, IFRS 12 and IAS 27, Amended – Investment Entities (effective from
1 January 2014);
- IFRIC 21, Levies (effective from 1 January 2014);
- IAS 36, Amended – Recoverable Amount Disclosures for Non-financial Assets
(effective from 1 January 2014);
- IAS 39, Amended – Novation of Derivatives and Continuation of Hedge
Accounting (effective from 1 January 2014); and
- Improvements to IFRS – issued December 2013 (effective from 1 July 2014).
This preliminary report was prepared under supervision of the Chief Financial
Officer, Mr Jan Valenta (Chartered Accountant).
These condensed consolidated financial statements for the year ended 31
December 2013 have been reviewed by Ernst & Young Inc., who expressed
an unmodified review conclusion. The auditor's report contained the following
Emphasis of Matter paragraph:
Emphasis of matter on Going Concern
Without qualifying our opinion, we draw attention to the Going Concern
disclosure under the "Basis of Preparation" section of the Group Preliminary
Financial Results, which indicates that the Company is utilising committed
loan facilities that are payable on 31 December 2014 and is trading in an
environment where there are threats to production stability and market
demand for the Company's products.
This going concern paragraph also indicates that these conditions, along with
other matters, indicate the existence of a material uncertainty which may cast
significant doubt on the Company's ability to continue as a going concern.
A copy of the auditor's review report is available for inspection at the Company's
registered office together with the financial statements identified in the
auditor's report.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
Reviewed as at Reviewed# as at Reviewed# as at
31 Dec 2013 31 Dec 2012 1 Jan 2012
Notes Rm Rm Rm
ASSETS
Non-current assets 1 723 1 801 1 927
Property, plant and equipment 1 621 1 722 1 760
Restricted cash 14 40 – –
Deferred tax asset 5 62 79 167
Current assets 1 865 1 866 2 531
Inventories 1 059 858 831
Trade and other receivables and prepayments 6 522 480 516
Income tax receivable 2 1 –
Cash and short-term deposits 282 527 1 184
TOTAL ASSETS 3 588 3 667 4 458
EQUITY AND LIABILITIES
Total equity 1 461 1 709 2 594
Non-current liabilities 757 789 650
Interest-bearing loans and borrowings 7 11 16 –
Provisions 746 773 650
Current liabilities 1 370 1 169 1 214
Trade and other payables 935 924 1 016
Interest-bearing loans and borrowings 7 304 102 –
Income tax payable – – 45
Provisions 131 143 153
TOTAL EQUITY AND LIABILITIES 3 588 3 667 4 458
#Restated
Net cash 7 409 1 184
Net asset value – cents per share 1 474 1 724 2 616
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited
Unaudited for the Reviewed Reviewed#
for the three three months for the for the
months ended ended year ended year ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Notes Rm Rm Rm Rm
Revenue 1 112 1 029 5 192 4 354
Sale of goods 1 112 1 026 5 190 4 346
Cost of sales (1 135) (1 176) (4 990) (4 746)
Gross (loss)/profit 8 (23) (150) 200 (400)
Other operating income 9 49 20 77 138
Selling and distribution costs (83) (30) (273) (248)
Administrative expenses (62) (68) (242) (289)
Other operating expenses 9 (30) (55) (55) (55)
Operating loss (149) (283) (293) (854)
Finance costs (14) ( 20) (69) ( 52)
Finance income – 3 2 8
Loss before tax (163) (300) (360) (898)
Income tax credit/(expense) 10 6 78 (19) ( 45)
Loss for the period/year (157) (222) (379) (943)
#Restated
Cents Cents Cents Cents
Loss per share – basic and diluted (158.7) (224.0) (382.2) (951.1)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Reviewed Reviewed#
for the for the for the for the
three months three months year year
ended ended ended ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Rm Rm Rm Rm
Loss for the period/year (157) (222) (379) (943)
Other comprehensive (loss)/income:
Other comprehensive (loss)/income to be reclassified to profit or loss in subsequent
periods:
Exchange differences on translation of foreign operations (1) 13 104 49
Other comprehensive income/(loss) not to be reclassified to profit or loss in
subsequent periods:
Actuarial gain/(loss) on defined benefit plan, net of tax 12 (3) 12 (3)
Total comprehensive loss for the period/year (146) (212) (263) (897)
#Restated
Cents Cents Cents Cents
Comprehensive loss per share – basic and diluted (147.6) (214.0) (265.3) (904.7)
HEADLINE EARNINGS PER SHARE
Unaudited Unaudited
for the for the Reviewed Reviewed#
three months three months for the for the
ended ended year ended year ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Rm Rm Rm Rm
Reconciliation of headline loss
Loss for the period/year (157) (222) (379) (943)
(Deduct)/add after tax effect of:
Proceeds on successful litigation against the channel induction
furnace supplier – – – (79)
Loss/(profit) on disposal and scrapping of property,
plant and equipment 5 (*) 5 (*)
Headline loss (152) (222) (374) (1 022)
*Less than R1 million.
#Restated
Cents Cents Cents Cents
Loss per share – headline and diluted (153.0) (224.0) (377.2) (1 030.4)
Million Million Million Million
Number of shares
Ordinary shares in issue as at reporting date *† 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
2012
Balance at 1 January 2012 – Reviewed# 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 – Unaudited 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 – Unaudited 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 – Unaudited 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 – Reviewed# 585 264 860 1 709
2013
Balance at 1 January 2013 – Reviewed# 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
Loss for the period (157) (157)
Other comprehensive loss for the quarter (1) (1)
Actuarial gain on defined benefit plan 12 12
Share-based payment reserve 11 6 6
Balance at 31 December 2013 – Reviewed 585 383 493 1 461
Unaudited Unaudited Reviewed#
for the for the Reviewed for the
three months three months for the year
ended ended year ended ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Cents Cents Cents Cents
Dividends per share
Dividends declared and paid – – – –
#Restated
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Reviewed#
for the for the Reviewed for the
three months three months for the year
ended ended year ended ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Rm Rm Rm Rm
Cash flows from operating activities
Loss before tax (163) (301) (360) (899)
Non-cash items 192 120 419 342
Net movement in working capital (75) 154 (385) (47)
Net interest paid (6) (2) ( 28) ( 4)
Income tax paid (1) (2) (4) (2)
Net cash used in operating activities (53) (31) (358) (610)
Cash flows from investing activities
Proceeds from sale and scrapping of property, plant and equipment 2 3 3 4
Additions to property, plant and equipment (35) (61) (140) (203)
Net cash used in investing operating activities (33) (58) (137) (199)
Cash flows from financing activities
(Decrease)/increase in long-term interest-bearing loans and borrowings (6) – (6) 15
Increase/(decrease) in short-term interest-bearing loans and borrowings 18 (107) 204 102
Net cash generated by/(used in) financing activities 12 (107) 198 117
Net decrease in cash and cash equivalents (74) (196) (297) (692)
Cash and cash equivalents at the beginning of the period/year 379 694 527 1 184
Cash transferred to restricted cash (9) – (40) –
Effects of exchange rate changes on cash held in foreign currencies (14) 29 92 35
Cash and cash equivalents at the end of the period/year 282 527 282 527
# Restated
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 R256 million (December 2012 YTD: R454 million) for the
12 months ended 31 December 2013. This constitutes 5% of total revenue for the period, compared to 10% for the
period ended 31 December 2012. During 2013 a loan was received from East Metals A.G., a related party, amounting to
R304 million which is repayable by 31 December 2014 and interest is charged at market rate. Technical services (slag
tolling agreement) and other services with EVRAZ Vametco Alloys Proprietary Limited (a fellow subsidiary) amounted to
R51 million for the 12 months ended December 2013 (December 2012 YTD: R71 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 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 Unaudited
for the for the Reviewed Reviewed#
three months three months for the for the
ended ended year ended year ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Rm Rm Rm Rm
Revenue from customers
Steelworks 861 822 4 022 3 173
Vanadium 336 210 1 487 1 199
Elimination in intersegmental revenue (85) (6) (319) (26)
Total 1 112 1 026 5 190 4 346
# Restated
Unaudited Unaudited
for the for the Reviewed Reviewed#
three months three months for the for the
ended ended year ended year ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Rm Rm Rm Rm
Operating loss
Steelworks (217) (320) (545) (1 153)
Vanadium 68 37 252 299
Total (148) (283) 293 (854)
# Restated
Reviewed as at Reviewed as at
31 Dec 2013 31 Dec 2012
Rm Rm
Total assets
Steelworks 3 143 2 935
Vanadium 445 732
Total 3 588 3 667
4. Supplementary revenue information – Unaudited
For the For the
three months three months For the For the
ended ended year ended year ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Sales volumes of major products
Total steel Tons 105 834 111 587 486 706 453 836
Ferrovanadium Tons V 1 224 869 4 827 4 766
Modified vanadium oxide Tons V 10 0 143 244
Nitrovan Tons V 27 192 398 669
Vanadium slag Tons V 100 101 386 181
Ore fines Tons 148 115 136 981 650 418 687 380
Weighted average selling prices
achieved for major products
Total steel US$/t 660 727 718 764
Ferrovanadium US$/kg V 25 23 27 23
Modified vanadium oxide US$/kg V 17 – 19 18
Nitrovan US$/kg V 24 24 28 23
Vanadium slag US$/kg V 8 8 9 7
Ore fines US$/t 20 22 30 20
Average R/$ exchange rate 10.16 8.69 9.65 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 2013 (R195 million) to the extent that it exceeded the deferred taxation liability. Whilst the taxable
income forecast for the Company is based on its most favourable outlook scenario, the current assessed tax loss implies
that it will take many years before the Company is in a position to utilise the tax assets as at 31 December 2013. Following
the impairment, a zero balance for deferred taxation is disclosed for the Company. No reversal of the 2012 impairment was
considered necessary as at 31 December 2013. The deferred taxation asset of the Group comprises the deferred taxation
asset attributable to Mapochs Mine Proprietary Limited. A management assessment concluded that no impairment is
necessary at Group level.
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.
7. Interest-bearing loans and borrowings
The long-term borrowings of R11 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 consists of a Dollar-denominated loan from East Metals A.G.
(a related party) which is payable by 31 December 2014, and carries interest at market rate.
8. Gross (loss)/profit
The improvement in gross profit is as a result of improved steel selling prices, increased vanadium-and ore fines selling
prices and reduction in costs.
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 R77 million other operating income for the year ended 31 December 2013 includes inventory stock count
adjustments of R35 million, adjustments to the environmental provisions of R25 million and utilities recoveries (sundry
income) of R6 million. The R55 million other operating expense for the year includes insurance of R20 million, loss on sale/
scrapping of fixed assets R7 million and bad debts provided for of R6 million.
10. Income tax
Unaudited Unaudited Reviewed Reviewed#
for the three for the three for the for the
months ended months ended year ended year ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012
Rm Rm Rm Rm
South African
Normal
Prior year – – – (44)
Deferred
Current 4 (81) 18 86
Non-South African
Normal
Current (10) 3 1 3
Income tax expense (6) (78) 19 45
#Restated
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 recognised
according to IFRS 2 in 2013 is R15 million (2012 year: R12 million).
12. Guarantees
As required by the Mineral and Petroleum Resources Development Act, a guarantee amounting to R370 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
R8 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 R14 million before tax and R10 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 R32 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 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 31 December 2013.
Directors: BJT Shongwe (Chairman), MD Garcia (Chief Executive Officer) (American),
GC Baizini (Italian), M Bhabha, Mrs B Ngonyama, T Mosololi, VM Nkosi, D Šcuka (Czech),
PS Tatyanin (Russian), J Valenta (Czech) and TI Yanbukhtin (Russian)
Company Secretary: Ms A Weststrate
Registered office
Portion 93 of the farm Schoongezicht 308 JS
District eMalahleni, Mpumalanga,
PO Box 111, Witbank, 1035
Tel: (013) 690 9911 Fax: (013) 690 9293
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg
PO Box 61051, Marshalltown, 2107
Tel: (011) 370 5000 Fax: (011) 688 5200
email: general@evrazhighveld.co.za
www.evrazhighveld.co.za
Sponsor
J.P.Morgan
Date: 12/03/2014 10:57:00 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
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.
Sharenet Sites 
