Wrap Text
Reviewed group interim financial results for the six months ended 30 June 2014
ArcelorMittal South Africa Limited
Registration number: 1989/002164/06
Share code: ACL ISIN: ZAE 000134961
(“ArcelorMittal South Africa”, “the company” or “the group”)
Reviewed group interim financial results for the six months ended 30 June 2014
- Balanced headline earnings in H1
- Rebuild of Blast Furnace in Newcastle progressing
Overview
Overall the trading conditions remained challenging. The economy in the United States gained strength, and the
Eurozone is now slowly showing signs of recovery. However, with the slowdown of growth in China, excess capacity remains the
biggest obstacle for the sector worldwide to achieve sustainable profit margins. New capacities for iron ore supply came
on stream which has unfavourably impacted international ore and steel prices. In South Africa, the implementation of the
large infrastructure development projects remains slow, and the low levels of production and investment in the mining
sector continued which was also driven by the protracted labour disputes. Consequently GDP growth and domestic steel
demand were negatively affected, while other countries in the sub-Saharan region showed robust growth.
Our liquid steel production was 2 386 000 tonnes, a decrease of 95 000 tonnes compared to the same period last year.
This is due to the planned shutdown for the reline of the blast furnace in Newcastle which commenced in May 2014. The
effect of the reline was partly countered by higher production volumes at Vanderbijlpark (which was negatively affected in
the first six months of the prior year by the fire incident). Sales volumes increased 3% due to a rise in exports of
59%, while local sales volumes were down 10%. Though the production of crude steel at Newcastle is stopped due to the blast
furnace reline, the rolling of products continues using the billet stocks built up prior to the project. The project
which was planned for a duration of 125 days is currently subject to a delay of approximately a month due to the
unsatisfactory performance of a contractor on the critical path. We have initiated additional imports to mitigate any impact on
our customers.
Notwithstanding our quest to achieve zero fatalities and injuries, two fatal incidents occurred at Vanderbijlpark
works during the second quarter of this year. These regrettable incidents have strengthened management’s resolve and
commitment to improve safety performance.
ArcelorMittal South Africa recorded a headline loss of R6 million for the period, compared to a headline loss of R123
million in the corresponding period last year. EBITDA was R167 million lower at R810 million compared to the same period
last year.
A net current borrowing position reflects the cash outflow required for the stocks and capital expenditures of the
reline project in Newcastle.
Key statistics
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited Reviewed Reviewed Audited
8 769 9 158 8 124 Revenue (R million) 17 927 15 890 32 421
56 754 808 EBITDA (R million) 810 977 1 768
53 665 778 EBITDA/tonne (R/t) 369 460 418
0.6 8.2 9.9 EBITDA margin (%) 4.5 6.1 5.5
(236) 395 441 Loss/(profit) from operations (R million) 159 233 47
(337) 322 135 Net (loss)/profit (R million) (15) (140) (2 147)
(329) 323 147 Headline (loss)/earnings (R million) (6) (123) (224)
(82) 81 37 Headline (loss)/earnings per share (cents) (2) (31) (56)
(594) (191) 1 106 Net (borrowings)/cash (594) 1 106 285
Unaudited information
1 145 1 241 1 453 Liquid steel production (’000 tonnes) 2 386 2 481 5 096
1 061 1 134 1 038 Steel sales (’000 tonnes) 2 195 2 123 4 230
762 772 834 - Local 1 534 1 706 3 126
299 362 204 - Export 661 417 1 104
117 91 125 Commercial coke sales (’000 tonnes) 208 210 545
71 77 81 Capacity utilisation (%) 74 73 76
0.63 0.44 0.95 Lost time injury frequency rate 0.54 0.66 0.56
Market review
International
The global economy, which experienced a setback in the first quarter of 2014 due to tough weather conditions in the
USA picked up in the second quarter of 2014 amid improvements in the USA economy. Consumer demand in durable goods showed
tremendous growth with vehicle sales in May 2014 recording the highest sales since February 2007. The growth follows an
improvement in the level of employment coupled with improved household finances. This growth is boosting production in
the sector and partly driving demand for steel products. Manufacturing performance is at a four year high and recovery in
the housing market continues to gain momentum.
In the Eurozone, there is a gradual recovery of the economy backed by an accommodating monetary policy and low
inflation. Improving consumer and business sentiment is being reflected by improved economic growth rates data, with the
manufacturing sector registering some improved performance amid a flourishing automobile sector and recovery in the
construction sector. This is influencing steel demand positively in the region.
In the emerging economies, some pressure remains and the slowdown in economic growth rates is clearly illustrated by
falling manufacturing PMI data from emerging markets where a slight contraction is particularly evident from May 2013
onwards. The governments of emerging economies are implementing structural reforms to rebalance their economies. The
Chinese government, for example, is shifting to a consumption-based economy, whereas the Brazilian and the Indian governments
are removing barriers to investment. Under these conditions, China is experiencing a weak real estate market and a dip
in infrastructure investment that is putting a strain in steel demand patterns. Despite these structural issues and
volatile financial markets in emerging markets, the majority of demand was still propelled by these economies.
The sub-Saharan African region continues to offer market opportunities for steel as large infrastructure investments
are being implemented, with a wider range of projects in roads, rail, housing development and energy projects, and more
investments in the mining sector. Prospects for further growth remains high as new investments in the oil and gas sectors
are also stimulating steel demand.
Domestic
The South African economic performance has been somewhat disappointing as evidenced recently by a contraction in the
first quarter of 2014. Although some improvements have emerged based on recent data, it is still worrying times. The key
PMI data shows a contraction in the manufacturing sector as the index is below the 50 point mark. Although the patterns
in the construction sector have registered improvements in building plans, the completion or implementation of this
remains low. Some of the key steel market demand segments were negatively affected by the strikes in the platinum mining
sector. Despite a favourable currency environment, the overall high transformation costs in the manufacturing sector are
limiting the export potential for domestic steel producers. Cheap imports continue to flood the domestic market regardless
of the current currency position. The much anticipated positive story for the steel market will depend on the
government’s infrastructure investment implementation, which as of now is moving at a slow pace.
Financial review
Six months ended 30 June 2014 compared with six months ended 30 June 2013 (reviewed)
Revenue increased 13% to R17.9 billion primarily due to an 8% increase in average net realised prices. Domestic prices
were 12% higher while exports rose 2%, reflecting a less favourable regional mix of exports. Prices for flat and long
steel rose 7% and 8% respectively. Steel shipments were up 3% with export shipments increasing 59% while local shipments
decreased 10% on the back of subdued domestic demand. Long shipments dropped 9% while flats were up 11%, reflecting the
low base of the previous year due to the fire incident. Revenue from the Coke and Chemicals business of R1 019 million
was 23% higher following an 8% increase in commercial coke sales prices offset by a 1% drop in sales volumes. Tar sales
volumes remained flat while prices increased 18%.
Cash costs of hot rolled coil and billets increased 15% and 14% respectively. Sishen iron ore prices rose 18% while
Beeshoek increased 13%. Tshikondeni coal, pulverized coal and scrap climbed 18%, 6% and 11% respectively while zinc and
tin prices climbed 18% and 15%. Import coal prices declined 20% in US dollars while pellets increased 3%. In rand terms
import coal prices decreased 3% while pellets increased 14%.
Liquid steel production was 4% lower, a decrease of 95 000 tonnes. Capacity utilisation for flat steel improved from
68% to 83% with the BOF fire incident impacting the 2013 results negatively. Long steel capacity utilisation decreased
from 82% to 58% following the start of the blast furnace reline in Newcastle.
Operating profit was down R74 million to a profit of R159 million. Net financing costs of R207 million were R11
million higher due to the lower net cash position partly offset by higher foreign exchange profit. Our share of the profit
from equity accounted investments after taxation of R102 million compares with a loss of R148 million in the corresponding
period last year. This relates mainly to better export results from Macsteel International Holding BV.
Quarter ended 30 June 2014 compared with quarter ended 31 March 2014 (unaudited)
Revenue decreased 4% to R8.8 billion following a 6% decrease in steel shipments. Local shipments remained subdued and
decreased 1% while exports decreased 17%. Shipments for flat and long steel decreased 6% and 8% respectively. Overall
steel prices rose 2% with local and export prices rising 2%. Flat steel prices rose 3% and long steel 2%. Revenue from the
Coke and Chemicals business of R540 million was 13% higher following a 29% increase in commercial coke sales volumes
and a 15% increase in net realised prices. Tar sales volumes increased 2% while prices decreased 3%.
Cash costs of hot rolled coil and billets increased by 3% and 6% respectively. Local coking coal, scrap and
electricity climbed 7%, 6% and 12% respectively. Sishen iron ore price decreased following a quarterly adjustment received in
quarter two relating to quarter one, however, without which the price increased 18%. Import coal and pellets decreased by 4%
and 7% on a US dollar FOB basis. In rand terms import coal decreased by 5% and pellets 8%.
Liquid steel production was 8% lower, a decrease of 96 000 tonnes. Capacity utilisation for flat steel was higher at
86% compared to 79% in the previous quarter. Long steel capacity utilisation was at 43% against the previous quarter of
75% following the start of the blast furnace reline in Newcastle.
Operating profit was down R631 million to a loss of R236 million. Net financing costs of R140 million for the quarter
are R73 million higher due to a lower net cash position and a higher discount rate used to unwind long-term provisions
such as environmental obligations and onerous contracts. Our share of the profit from equity accounted investments after
taxation of R42 million compares with a profit of R60 million in the previous quarter. This relates mainly to lower
results from Macsteel International Holding BV.
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 at an estimated cost of
R430 million. The project is in progress and should be completed by end of July 2014.
The proposed implementation of a carbon tax by the National Treasury remains a concern as the company’s
competitiveness may be affected. The Minister of Finance indicated that the design of the proposed tax may be revisited in order for
it to be aligned with the Desired Emission Reduction Outcomes (“DEROs”) which will be defined by the Department of
Environmental Affairs within the near future. This proposed tax remains a significant concern as the financial impact could be
very significant. 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.
Contingent liabilities
The Competition Commission (“the Commission”) has thus far referred five cases, detailed below, against ArcelorMittal
South Africa to the Competition Tribunal (“the Tribunal”) for prosecution. ArcelorMittal South Africa disputes the
allegations made in each of these cases and is defending itself accordingly. There has been no concrete progress regarding
these matters since last reported at 31 March 2014.
1st wire rod matter - alleged price discrimination
In January 2007, the Commission referred a case to the Tribunal for prosecution. In the referral papers, the
Commission alleges that ArcelorMittal South Africa engaged in price discrimination on wire rod in contravention of section 9(1)
of the Competition Act. The Commission requests the Tribunal to find ArcelorMittal South Africa guilty of engaging in
this alleged conduct.
Pleadings on the matter are now closed and it will now be set down for 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. 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 South Africa 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)(b) of the Competition
Act.
The Commission requests the Tribunal to find ArcelorMittal South Africa guilty of the alleged contraventions and to
impose an administrative penalty of up to 10% of its total/group turnover for the year preceding the Tribunal’s decision
on the matter.
Subsequent to the referral, ArcelorMittal South Africa 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 South Africa 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 ArcelorMittal South Africa access to the bulk of the requested documents for reasons of privilege and
confidentiality. ArcelorMittal South Africa 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 South Africa’s legal costs for the appeal.
Before the matter could be set down for the hearing before the Tribunal, ArcelorMittal South Africa wrote to the
Commission inquiring if the Commission would be amenable to availing the documents in question without there being a need to
convene a Tribunal hearing. The Commission agreed, subject to confidentiality undertakings being made by ArcelorMittal
South Africa regarding the documents claimed to be confidential. ArcelorMittal South Africa made these undertakings and
the Commission duly provided the documents. These are currently being reviewed by ArcelorMittal South Africa.
Flat steel matter - alleged conscious parallelism
On 30 March 2012, the Commission referred a case against ArcelorMittal South Africa 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 South Africa fixed prices and other trading conditions in respect of certain flat steel
products in contravention of section 4(1)(b) 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 South Africa increased its prices. The Commission requests the Tribunal to find
ArcelorMittal South Africa guilty of the alleged contraventions and to impose an administrative penalty of up to 10% of its
total/group turnover for the year preceding the Tribunal’s decision on the matter.
Subsequent to the referral, ArcelorMittal South Africa 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. The Commission
reverted with a proposal on the disclosure to both ArcelorMittal South Africa and Highveld Steel of those documents which,
while constituting the investigation record, are confidential documents of both companies made available to the
Commission during the investigation stage.
This proposal 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 South Africa 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)(b) of the Competition Act.
The Commission requests the Tribunal to find ArcelorMittal South Africa guilty of the alleged contraventions and to
impose an administrative penalty of up to 10% of its total/group turnover for the year preceding the Tribunal’s decision
on the matter.
ArcelorMittal South Africa is currently drafting its answering affidavit in this matter; this will be filed with the
Tribunal sometime during the second quarter of 2014.
The Commission is formally investigating one further complaint against ArcelorMittal South Africa 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 South Africa for the period May 2010 to
July 2010. ArcelorMittal South Africa is fully cooperating with the Commission in this investigation and continues to
deliver all information and documentation as and when called upon to do so.
Corporate governance (unaudited)
The group complies with all significant requirements of the Code on Corporate Practices and Conduct as contained in
the third King Report on Corporate Governance.
Changes to the Board of Directors
Mr Paul O’Flaherty was appointed as Chief Executive Officer and an executive Board member effective from 1 July 2014.
Dr Hans Rosenstock has reverted back to his role as Chief Operations Officer and Ex-Officio member of the Board.
Outlook for quarter three 2014 (unaudited)
ArcelorMittal South Africa’s results are expected to remain under pressure. The reline of the blast furnace in
Newcastle, high electricity tariffs during winter months, the weak local economy and the effects of the metal and engineering
strike will have short-term negative effects on our cost and on our customers. From mid-October 2014 our full production
capacity will be available as the reline will have been completed.
On behalf of the Board of Directors
PS O’Flaherty MJ Wellhausen
Chief Executive Officer Chief Financial Officer
23 July 2014
Condensed group statement of comprehensive income
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited Reviewed Reviewed Audited
8 769 9 158 8 124 Revenue 17 927 15 890 32 421
(5 394) (5 378) (5 183) Raw materials and consumables used (10 772) (9 507) (19 652)
(1 009) (864) (892) Employee costs (1 873) (1 694) (3 408)
(855) (806) (931) Energy (1 661) (1 594) (3 288)
Movement in inventories of finished goods
(50) (13) 1 167 and work in progress (63) 670 1 196
(286) (353) (363) Depreciation (639) (736) (1 544)
(6) (6) (4) Amortisation of intangible assets (12) (8) (19)
(1 405) (1 343) (1 477) Other operating expenses (2 748) (2 788) (5 659)
(236) 395 441 (Loss)/profit from operations 159 233 47
Impairment charges (1 950)
4 41 Finance and investment income 45 16 108
(144) (108) (142) Finance costs (252) (212) (368)
Income/(loss) from equity accounted investments
42 60 (66) (net of tax) 102 (148) (35)
(334) 388 233 (Loss)/profit before tax 54 (111) (2 198)
(3) (66) (98) Income tax (expense)/credit (69) (29) 51
(337) 322 135 (Loss)/profit for the period (15) (140) (2 147)
Other comprehensive income
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translation of
(1) 44 128 foreign operations 43 279 561
Gains/(losses) on available-for-sale investments
2 (5) 11 taken to equity (3) 5 (9)
Share of other comprehensive (loss)/income of
(6) 25 equity accounted investments (6) 63 28
(336) 355 299 Total comprehensive (loss)/income for the period 19 207 (1 567)
(Loss)/profit attributable to:
(337) 322 135 Owners of the company (15) (140) (2 147)
Total comprehensive (loss)/income attributable to:
(336) 355 299 Owners of the company 19 207 (1 567)
Attributable (loss)/earnings per share (cents)
(84) 80 34 - basic (4) (35) (535)
(84) 80 34 - diluted (4) (35) (535)
Condensed group statement of financial position
As at As at As at As at
30 June 31 March 30 June 31 December
2014 2014 2013 2013
In millions of rands Reviewed Unaudited Reviewed Audited
Assets
Non-current assets 18 923 18 504 19 765 18 602
Property, plant and equipment 14 936 14 514 16 177 14 702
Intangible assets 143 145 125 146
Equity accounted investments 3 830 3 834 3 432 3 737
Other financial assets 14 11 31 17
Current assets 13 668 14 826 14 922 14 113
Inventories 10 396 10 724 9 583 10 553
Trade and other receivables 2 791 2 907 3 311 2 194
Taxation 72 51 139 51
Other financial assets 3 5 24 17
Cash and bank balances 406 1 139 1 865 1 298
Total assets 32 591 33 330 34 687 32 715
Equity and liabilities
Shareholders’ equity 20 723 21 053 22 458 20 694
Stated capital 37 37 37 37
Non-distributable reserves (1 521) (1 517) (1 970) (1 614)
Retained income 22 207 22 533 24 391 22 271
Non-current liabilities 4 036 4 029 4 037 4 099
Other payables 258 234 255 267
Finance lease obligations 289 313 539 757
Deferred income tax liability 1 754 1 782 1 848 1 747
Non-current provisions 1 735 1 700 1 395 1 328
Current liabilities 7 832 8 248 8 192 7 922
Trade payables 5 589 5 627 5 972 5 720
Borrowings 1 000 1 330 759 906
Bank overdraft 107
Other financial liabilities 1 9 27
Finance lease obligations 96 94 90 95
Taxation 59 19 144 6
Current provisions 355 394 322 408
Other payables 732 775 878 680
Total equity and liabilities 32 591 33 330 34 687 32 715
Condensed group statement of cash flows
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited Reviewed Reviewed Audited
158 (259) 436 Cash inflows/(outflows) from operating activities (101) 1 028 1 084
275 (166) 690 Cash generated/(utilised in) from operations 109 1 285 1 595
3 4 2 Interest income 7 4 7
(88) (73) (33) Finance cost (161) (63) (169)
(14) (17) (147) Income tax paid (31) (148) (221)
(18) (7) (76) Realised foreign exchange movement (25) (50) (128)
(622) (193) (366) Cash outflows from investing activities (815) (637) (1 545)
(659) (187) (353) Investment to maintain operations (846) (574) (1 500)
(14) (6) (10) Investment to expand operations (20) (28) (69)
Shares acquired in associate and equity
(4) (1) (4) accounted investment (5) (38) (53)
Proceeds on disposal of assets 1 72
2 1 1 Investment income - interest 3 2 5
53 Dividend from equity accounted investments 53
(272) 363 639 Cash (outflows)/inflows from financing activities 91 536 674
(Repayment)/increase of borrowings, finance lease
(272) 363 639 obligations and other payables 91 536 674
(736) (89) 709 (Decrease)/increase in cash and cash equivalents (825) 927 213
3 37 42 Effect of foreign exchange rate changes 40 54 94
1 139 1 191 1 114 Cash and cash equivalents at beginning of period 1 191 884 884
406 1 139 1 865 Cash and cash equivalents at end of period 406 1 865 1 191
Notes to the reviewed condensed group financial information
1. Basis of preparation
The reviewed consolidated condensed interim financial statements have been prepared in compliance with the Listings
Requirements of the JSE Limited, International Accounting Standard (IAS) 34 Interim Financial Reporting and the South
African Companies Act, No. 71 of 2008, as well as the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council. These statements were
compiled under the supervision of Mr MJ Wellhausen, the Chief Financial Officer.
2. Significant accounting policies
The condensed consolidated interim results have been prepared using accounting policies that comply with
International Financial Reporting Standards. The accounting policies and methods of computation applied in the presentation of the
condensed interim financial statements are consistent with those applied for the year ended 31 December 2013, except for
the following new or revised standards, amendments thereto and interpretations as issued by the International Accounting
Standards Board, which are effective for the current reporting period that were adopted:
- IFRIC 21 Levies
- IAS 36 Impairment of assets
3. Change in accounting estimates
- The useful lives of certain items of property, plant and equipment were reassessed and revised to reflect the
current estimated life over which the group has the ability and intention to use such assets. The effect of these changes on
the actual depreciation expense for the six months ended 30 June 2014 is a reduction of approximately R53 million, of
which R26 million relates to the three months ending 31 March 2014.
- The group performed a review of the tax base of some of its assets to ensure that these reflect the tax
consequences that will currently arise from the consumption of the assets. As a result of this review, the estimated deferred tax
liability was increased by R82 million at 30 June 2014.
4. Independent review by the auditors
The condensed consolidated interim results have been reviewed by the company’s auditors, Deloitte & Touche, in
accordance with International Standards on Review Engagements 2410. They expressed an unqualified conclusion on the interim
financial information. The auditors’ report does not necessarily report on all of the information contained in this
announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditors’
engagement they should obtain a copy of that report together with the accompanying financial information from the
company’s registered office.
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited In millions of rands Reviewed Reviewed Audited
5. Capital expenditure
1 077 1 491 565 Contracted 1 077 565 1 170
761 960 776 Authorised but not contracted 761 776 1 258
6. Related party transactions
The group is controlled by ArcelorMittal Holdings A.G. which effectively owns 52.02% of the company’s shares. During
the period the company and its subsidiaries, in the ordinary course of business, entered into various sale and purchase
transactions with associates and joint ventures. These transactions occurred under terms that are no less favourable to
the company than those arranged with third parties.
7. 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.
Financial assets/ Fair value Valuation techniques
financial liabilities Fair values as at hierarchy and key inputs
30 June 31 March 30 June 31 December
2014 2014 2013 2013
In millions of rands Reviewed Unaudited Reviewed Audited
Available for sale assets 14 11 31 17 Level 1* Quoted prices in an
active market
Held for trading assets/
(liabilities) 2 (4) (3) 17 Level 1* Quoted prices in an
active market
*Level 1: fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities.
8. Cash and cash equivalents
For the purposes of the statements of cash flows, cash and cash equivalents include cash on hand and in the bank, net
of bank overdraft.
9. Subsequent events
The directors are not aware of any matter or circumstances arising since the end of June 2014 to the date of this
report that would significantly affect the operations, the results and the financial position of the group.
Condensed group statement of changes in equity
Treasury
share Total
Stated equity Other Retained shareholders’
In millions of rands capital reserve reserves income equity
Balance at 1 January 2013 37 (3 918) 1 740 24 383 22 242
Total comprehensive income/(loss) for the
period (net of income tax) 347 (140) 207
Share-based payment expense 9 9
Transfer of equity accounted earnings (148) 148
Balance at 30 June 2013 (Reviewed) 37 (3 918) 1 948 24 391 22 458
Total comprehensive income/(loss) for
the period (net of income tax) 233 (2 007) (1 774)
Share-based payment expense 10 10
Transfer of equity accounted earnings 113 (113)
Balance at 31 December 2013 (Audited) 37 (3 918) 2 304 22 271 20 694
Total comprehensive income for the
period (net of income tax) 33 322 355
Share-based payment expense 4 4
Transfer of equity accounted earnings 60 (60)
Balance at 31 March 2014 (Unaudited) 37 (3 918) 2 401 22 533 21 053
Total comprehensive income/(loss) for the
period (net of income tax) 1 (337) (336)
Share-based payment expense 6 6
Transfer of equity accounted earnings (11) 11
Balance at 30 June 2014 (Reviewed) 37 (3 918) 2 397 22 207 20 723
Segment information
Flat steel products
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited Reviewed Reviewed Audited
6 023 6 157 5 115 Revenue (R million) 12 180 10 044 20 697
5 648 5 924 4 848 - External 11 572 9 583 19 922
375 233 267 - Internal 608 461 775
(30) 214 290 EBITDA (R million) 184 (25) 135
(226) (284) (292) Depreciation and amortisation (R million) (510) (598) (1 255)
(256) (70) (2) Loss from operations (R million) (326) (623) (1 120)
Unaudited information
901 818 970 Liquid steel production (‘000 tonnes) 1 719 1 535 3 229
730 775 659 Steel sales (‘000 tonnes) 1 505 1 361 2 771
494 475 538 - Local 969 1 095 2 003
236 300 121 - Export 536 266 768
86 79 79 Capacity utilisation (%) 83 68 74
Long steel products
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited Reviewed Reviewed Audited
3 442 3 114 3 084 Revenue (R million) 6 556 5 969 11 618
2 595 2 769 2 838 - External 5 364 5 503 10 616
847 345 246 - Internal 1 192 466 1 002
(142) 320 379 EBITDA (R million) 178 694 1 198
(64) (73) (72) Depreciation and amortisation (R million) (137) (142) (301)
(206) 247 307 (Loss)/profit from operations (R million) 41 552 897
Unaudited information
244 423 483 Liquid steel production (‘000 tonnes) 667 946 1 867
331 359 379 Steel sales (‘000 tonnes) 690 762 1 459
268 297 296 - Local 565 611 1 123
63 62 83 - Export 125 151 336
43 75 84 Capacity utilisation (%) 58 82 81
Coke and chemicals
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited Reviewed Reviewed Audited
540 479 448 Revenue (R million) 1 019 828 1 937
526 465 438 - External 991 804 1 883
14 14 10 - Internal 28 24 54
96 109 120 EBITDA (R million) 205 267 514
(8) (9) (8) Depreciation and amortisation (R million) (17) (17) (35)
88 100 112 Profit from operations (R million) 188 250 479
Unaudited information
144 85 119 Commercial coke produced (‘000 tonnes) 229 210 391
117 91 125 Commercial coke sales (‘000 tonnes) 208 210 545
27 26 24 Tar sales (‘000 tonnes) 53 52 109
Corporate and other
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited Reviewed Reviewed Audited
132 111 19 EBITDA 243 41 (79)
Tshikondeni mine closure cost (158)
6 7 5 Depreciation and amortisation credit 13 13 28
138 118 24 Profit/(loss) from operations 256 54 (209)
Salient features
Quarter ended Six months ended Year ended
30 June 31 March 30 June 30 June 30 June 31 December
2014 2014 2013 2014 2013 2013
Unaudited Unaudited Unaudited In millions of rands Reviewed Reviewed Audited
Reconciliation of earnings before interest, taxation,
depreciation and amortisation (EBITDA)
(236) 395 441 (Loss)/profit from operations 159 233 47
Adjusted for:
286 353 363 - Depreciation 639 736 1 544
6 6 4 - Amortisation of intangible assets 12 8 19
Tshikondeni mine closure cost 158
56 754 808 EBITDA 810 977 1 768
Reconciliation of headline (loss)/earnings
(337) 322 135 (Loss)/profit for the period (15) (140) (2 147)
Adjusted for:
Impairment charges 1 950
11 2 17 - Loss/(profit) on disposal of assets 13 24 (37)
(3) (1) (5) - Tax effect (4) (7) 10
(329) 323 147 Headline (loss)/earnings (6) (123) (224)
Headline (loss)/earnings per share (cents)
(82) 81 37 - basic (2) (31) (56)
(82) 81 37 - diluted (2) (31) (56)
Selected ratios (%)
Return on ordinary shareholders’ equity per annum
(6.5) 6.2 2.4 - attributable (loss)/earnings (0.1) (1.3) (10.0)
(6.3) 6.2 2.6 - headline (loss)/earnings (0.1) (1.1) (1.0)
(2.9) (0.9) 3.2 Net (borrowings)/cash to equity (2.9) 3.2 1.4
Share statistics
Ordinary shares (thousands)
401 202 401 202 401 202 - in issue 401 202 401 202 401 202
401 202 401 202 401 202 - weighted average number of shares 401 202 401 202 401 202
401 202 401 202 401 202 - diluted weighted average number of shares 401 202 401 202 401 202
31.06 33.51 32.35 Share price (closing) (Rand) 31.06 32.35 37.30
12 461 13 444 12 979 Market capitalisation (R million) 12 461 12 979 14 965
51.65 52.47 55.98 Net asset value per share (Rand) 51.65 55.98 51.58
Other information
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^, JRD Modise*, NP Mnxasana*, LP Mondi,
DCG Murray*, G Urquijoº
^Citizen of India º Citizen of Spain *Independent non-executive
Executive
PS O’Flaherty (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, Johannesburg, 2107
Release date
1 August 2014
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.
http://www.arcelormittal.com/southafrica
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