Wrap Text
Group Unaudited Results for the 6 Months ended 30 June 2014
Evraz Highveld Steel and Vanadium Limited
(Incorporated in the Republic of South Africa)
(Registration No: 1960/001900/06)
Share code: EHS ISIN: ZAE000146171
("the Company" or "the Group")
GROUP UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014
Chairman and CEO's Review
- Net loss R302 million (June YTD 2013: loss R10 million)
- EBITDA loss R134 million (June YTD 2013: profit R199 million)
- Appointment of the Chairman of the Board and change in directorate
1. Safety
EVRAZ Highveld Lost Time Injuries (LTI) increased by 22% to 11% in H1 2014 from 9% in H1 2013,
whilst its progressive Lost Time Injury Frequency Rate (LTIFR) increased 14% to 2.21 in H1 2014
from 1.94 in H1 2013. The LTIFR improved by 20% to 1.96 in Q2 2014 from 2.46 in Q1 2014.
Safety is a high priority for the Company and any safety concerns will continue to be addressed.
2. Key Financials
The operating loss for H1 2014 was R271 million, compared to a profit of R49 million for H1 2013,
mainly attributed to a lower equipment availability and poor steel plant and structural mill yields.
The Company increased its maintenance costs to R261 million in H1 2014 from R166 million in 2013 to
improve operational performance. The EBITDA for the period was a negative of R134 million, compared
to a R199 million profit for the same period in 2013. During the first half of 2014 sales revenue of
R3 199 million was up by 12% and reflected higher average market prices compared to the first half
of 2013. Revenue from sale of goods increased to R3 195 million, compared to R2 864 million
for H1 2013. This increase in revenue is as a result of favourable steel product pricing.
There is visible change in the market purchasing trends from imports to domestic supply, combined
with notable progress towards production improvement and labour stability. The Company continues
to utilise a credit line from shareholders that is committed to 31 December 2014. Significant
progress has, consequently, been made to secure commercial funding.
The financial statements are prepared on the basis of accounting policies applicable to a going
concern. The Board believes that the Company remains a going concern, taking cognisance of any
matters that may cast doubt about the ability of the Company to continue as a going concern and its
ability to realise its assets and discharge it's liabilities in the ordinary course of business.
3. Operations
Mining
Production of lump ore decreased by 7% to 700 011 tons for H1 2014 compared to 754 566 tons for
H1 2013, and fines ore decreased by 5% to 334 964 tons from 352 683 tons for the six month period.
Output suffered as a result of plant shut down for major repairs during the course of H1 2014.
In addition to the strip mining operations, commercial pit mining has also commenced in the second
quarter of 2014.
Steel
Iron output increased by 3% to 343 664 tons for the period compared to H1 2013, mainly due to
improved Ironmaking furnace and kiln availability. Steel output decreased by 5% to 319 197 tons in
H1 2014 from 334 560 tons in H1 2013, as a result of operational challenges incurred on the slab
caster and the basic oxygen furnaces.
Production of long products increased by 6% to 103 176 tons during H1 2014, compared to 96 880 for
H1 2013, mostly due to an improved order book and supply of cast steel to the mill. Production of flat
products increased by 4% to 168 514 tons from 161 518, mainly as a result of improved availability of
equipment and successful reduction of semi-finished cast steel stock.
Kiln operational stability was compromised in the first quarter due to unusually wet weather
conditions, resulting in higher kilowatt/hour per ton electricity consumption in the plant. This condition
improved in the second quarter.
Vanadium
A total of 26 296 tons of vanadium slag was produced containing 3 332 tons V for H1 2014, compared
to 26 283 tons slag containing 3 539 tons V for H1 2013.
4. Markets
Global and local markets
The global economy remained weak throughout H1 2014 and has not reached the required levels of
growth needed to support a strong overall recovery in steel demand. There are some positive data
received from the United States and Europe that predicts a likely global steel demand increase by
3.1% to 1 475 Mt in 2014.
Following the platinum industry strikes, South African GDP forecasts for 2014 have been revised to
1.7% from 2.4%. The trend of the weak Rand in H1 2014 has continued to drive the change in market
purchasing trends from imports to domestic supply during this period.
EVRAZ Highveld Sales
Steel sales volumes increased by 6% to 283 522 tons in H1 2014 from 266 896 tons in H1 2013.
The five month platinum industry strike had a marked effect on steel consumption in the South African
market and as such domestic steel sales decreased by 13% from 264 295 to 230 841 tons for the
period, while export steel sales volumes increased to 52 681 tons for the six months against 2 601
tons for H1 2013.
Ferrovanadium sales for H1 2014 increased by 10% to 2 608 tons V compared to 2 375 tons V for H1
2013. Total vanadium slag sales were 375 tons V for H1 2014, compared to 192 tons V for H1 2013.
5. Sale of the Majority Shareholding in the Company
The cautionary announcement regarding the pending sale of the majority shareholding was withdrawn
on 13 August 2014 with the SENS announcement that declared the signing of an agreement to sell
34% of the issued share capital in the Company held by EVRAZ to Macrovest 147 Proprietary Limited
("Macrovest") for ZAR 289 million (equivalent of USD 27 million as of 12 August 2014). As a result of
the transaction, EVRAZ will remain a 51% shareholder of the Company.
6. Changes in directorate
The Company has announced the appointment of Mr Barend Petersen as non-executive director and
Chairman of the Board, with effect from 19 August 2014. He replaces Mr Bheki Shongwe who
resigned as independent non-executive director and Chairman from the Board with effect from 19
August 2014. Mr Mohammed Bhabha was elected lead independent director of the Board with effect
from 25 September 2014.
Mr Johan Burger was appointed as executive director of the Board with effect from 19 August 2014
and as Chief Executive Officer of the Company with effect from 1 October 2014, following on the
resignation of Mr Jan Valenta as executive director from the Board and Chief Executive Officer, with
effect from 30 September 2014; and the appointment of Mr Valery Borisov as executive director of the
Board and Chief Financial Officer of the Company with effect from 1 October 2014, following on the
resignation of Ms Olga Luzik as executive director from the Board and Chief Financial Officer, with
effect from 1 October 2014.
Mr Andrew Maralack was appointed as non-executive director of the Board, with effect from 19
August 2014.
Mrs Babalwa Ngonyama resigned as independent non-executive director from the Board and
Chairman of the Audit and Risk Committee and Messrs Giacomo Baizini and Vusi Nkosi resigned as
non-executive directors from the Board with effect from 19 August 2014.
On 25 September 2014 Mr Barend Petersen was elected Chairman of the Social and Ethics
Committee, whilst Mr Thabo Mosololi was appointed as member of this committee.
Mr Petersen was also appointed as member of the Remuneration and Nominations Committee with
effect from 25 September 2014.
Mr Dimitrij Šcuka was appointed as member of the Audit and Risk Committee and Mr Thabo Mosololi
was elected as Chairman of this committee with effect from 25 September 2014.
7. Outlook
The industrial action in the platinum and more recently the engineering and metals industries will
negatively affect sales to the domestic market in the short term and revenue will be under pressure in
H2 2014 as a result. Given the low GDP growth forecast for the local economy and the slow pace of
implementation of the government infrastructure spending program, the domestic steel industry is not
expected to expand significantly in the near future. The industry will be further pressurised by a
volatile labour market, notable energy tariff increases and electricity supply concerns.
Global steel markets will remain under pressure for the remainder of 2014 as the market struggles
with overcapacity and supply, prices are predicted to remain static and a market recovery in global
steel demand is not expected during the remainder of 2014.
The Department of Trade and Industry's declaration of steel as a designated commodity for local
procurement may provide some relief to the pressure in the market and may give rise to favourable
market opportunities for the Company.
B Petersen J Valenta
(Chairman) (Chief Executive Officer)
29 September 2014
DIRECTORS: B Petersen (Chairman), J Valenta (Chief Executive Officer) (Czech), M Bhabha, I J Burger,
Ms O Luzik (Russian), A P Maralack, T Mosololi, D Šcuka (Czech), P S Tatyanin (Russian), T I Yanbukhtin
(Russian).
Company Secretary: Ms A Weststrate
Registered office: Transfer secretaries:
Portion 93 of the farm Computershare Investor Services
Schoongezicht No. 308 JS Proprietary Limited
District eMalahleni 70 Marshall Street
Mpumalanga Johannesburg
PO Box 111 PO Box 61051
Witbank 1035 Marshalltown 2107
Tel: (013) 690 9911 Tel: (011) 370 5000
Fax: (013) 690 9293 Fax: (011) 688 5200
Sponsor
J.P. Morgan Equities South Africa (Pty) Ltd.
GROUP UNAUDITED FINANCIAL RESULTS
Basis of preparation
The Group's (Group includes all consolidated entities) financial results for the half year ended 30 June 2014 set out below have been prepared in
accordance with the principal accounting policies of the Group which comply with International Financial Reporting Standards (IFRS) and in the manner
required by the Companies Act in South Africa and are consistent with those applied in the Group's most recent annual financial statements including the
Standards and Interpretations as listed below.
These results are presented in terms of International Accounting Standards (IAS) 34 applicable to Interim Financial Reporting.
The unaudited financial statements were prepared under the going concern basis.
The Group incurred a net loss for H1 2014 of R302 million, (H1 2013: loss R10 million).
There is visible change in the market purchasing trends from imports to domestic supply, combined with notable progress towards production improvement
and labour stability. The Company continues to utilise a credit line from shareholders that is committed to 31 December 2014. Significant progress has,
consequently, been made to secure commercial funding.
The financial statements are prepared on the basis of accounting policies applicable to a going concern. The Board believes that the Company remains a
going concern, taking cognisance of any matters that may cast doubt about the ability of the Company to continue as a going concern and its ability 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 2014. These Standards had no impact on the results or disclosures of the Group.
- IAS 32, Amended - Offsetting financial assets and financial liabilities (effective from 1 January 2014);
- 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); and
- IAS 39, Amended - Novation of derivatives and continuation of hedge accounting (effective from 1 January 2014).
ii) The following Standards, amendments to the Standards and Interpretations, effective in future accounting periods have not been adopted in these
financial statements:
- 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 14, Regulatory deferral accounts (effective from 1 January 2016);
- IAS 19, Amended - Defined benefit plans: employee contributions (effective from 1 July 2014); and
- Improvements to IFRS – issued December 2013 (effective from 1 July 2014).
This abridged report was prepared under supervision of the Chief Financial Officer, Ms Olga Luzik (Chartered Accountant).
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited as at Reviewed as at
30 Jun 2014 31 Dec 2013
Notes Rm Rm
ASSETS
Non-current assets 1 666 1 723
Property, plant and equipment 1 563 1 621
Restricted cash 14 41 40
Deferred tax asset 5 62 62
Current assets 2 072 1 865
Inventories 841 1 059
Trade and other receivables and prepayments 6 896 522
Income tax receivable - 2
Cash and short-term deposits 335 282
TOTAL ASSETS 3 738 3 588
EQUITY AND LIABILITIES
Total equity 1 169 1 461
Non-current liabilities 773 757
Interest-bearing loans and borrowings 7 11 11
Provisions 762 746
Current liabilities 1 796 1 370
Trade and other payables 1 354 935
Interest-bearing loans and borrowings 7 311 304
Income tax payable 4 -
Provisions 127 131
TOTAL EQUITY AND LIABILITIES 3 738 3 588
Net cash 54 7
Net asset value - cents per share 1 179 1 474
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited for Unaudited for the
the three three months Unaudited for the Unaudited for the Reviewed for the
months ended ended six months ended six months ended year ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Notes Rm Rm Rm Rm Rm
Revenue 1 645 1 452 3 199 2 866 5 192
Sale of goods 1 643 1 451 3 195 2 864 5 190
Cost of sales (1 694) (1 337) (3 172) (2 581) (4 990)
Gross (loss)/profit 8 (51) 114 23 283 200
Other operating income 9 11 15 24 26 77
Selling and distribution costs (85) (63) (164) (127) (273)
Administrative expenses (57) (61) (132) (122) (242)
Other operating expenses - (6) (22) (11) (55)
Operating (loss)/profit (182) (1) (271) 49 (293)
Finance costs (14) (18) (28) (37) (69)
Finance income 2 1 4 2 2
(Loss)/profit before tax (194) (18) (295) 14 (360)
Income tax expense 10 (3) (22) (7) (24) (19)
Loss for the period/year (197) (40) (302) (10) (379)
Cents Cents Cents Cents Cents
Loss per share - basic and diluted (198.3) (40.2) (305.0) (10.0) (382.2)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited for Unaudited for the
the three three months Unaudited for the Unaudited for the Reviewed for the
months ended ended six months ended six months ended year ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Rm Rm Rm Rm Rm
Loss for the period/year (197) (40) (302) (10) (379)
Other comprehensive income:
Other comprehensive (loss)/income to be reclassified to profit or
loss in subsequent periods:
Exchange differences on translation of foreign operations (6) 41 2 88 104
Other comprehensive income not to be reclassified to profit or loss
in subsequent periods:
Actuarial gain on defined benefit plan, net of tax - - - - 12
Total comprehensive (loss)/income for the period/year (203) 1 (300) 78 (263)
Cents Cents Cents Cents Cents
Comprehensive (loss)/income per share - basic and diluted (204.7) 1.1 (302.6) 78.8 (265.3)
HEADLINE LOSS PER SHARE
Unaudited for Unaudited for the
the three three months Unaudited for the Unaudited for the Reviewed for the
months ended ended six months ended six months ended year ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Rm Rm Rm Rm Rm
Reconciliation of headline loss
Loss for the period/year (197) (40) (302) (10) (379)
(Deduct)/add after tax effect of:
(Profit)/loss on disposal and scrapping of property, plant and
equipment (*) * * * 5
Headline loss (197) (40) (302) (10) (374)
* Less than R1 million.
Cents Cents Cents Cents Cents
Loss per share - headline and diluted (198.7) (40.2) (304.6) (10.0) (377.2)
Million Million Million Million Million
Number of shares
Ordinary shares in issue as at reporting date *† 99.2 99.2 99.2 99.2 99.2
* Rounded to nearest hundred thousand.
† Agree to weighted average and diluted number of ordinary shares.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued capital and
share premium Other reserves Retained earnings Total
Note Rm Rm Rm Rm
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
2014
Balance at 1 January 2014 - Reviewed 585 383 493 1 461
Loss for the period (105) (105)
Other comprehensive income for the quarter 8 8
Share-based payment reserve 11 4 4
Balance at 31 March 2014 - Unaudited 585 395 388 1 368
Loss for the period (197) (197)
Other comprehensive loss for the quarter (6) (6)
Share-based payment reserve 11 4 4
Balance at 30 June 2014 - Unaudited 585 393 191 1 169
#Restated.
Unaudited for the
three months Unaudited for the Unaudited for the Unaudited for the six Reviewed for the
ended three months ended six months ended months ended year ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Cents Cents Cents Cents Cents
Dividends per share
Dividends declared and paid - - - - -
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited for Unaudited for Unaudited for Unaudited for the
the three the three months the six months six months Reviewed for the
months ended ended ended ended year ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Rm Rm Rm Rm Rm
Cash flows from operating activities
(Loss)/profit before tax (194) (18) (295) 14 (360)
Non-cash items 158 55 275 140 419
Net movement in working capital 255 8 168 (329) (385)
Net interest received/(paid) 1 (2) 3 (15) (28)
Income tax paid - (1) (1) (2) (4)
Net cash generated by/(used in) operating activities 220 42 150 (192) (358)
Cash flows from investing activities
Proceeds from sale and scrapping of property, plant and
equipment * 1 1 1 3
Additions to property, plant and equipment (26) (30) (97) (68) (140)
Net cash used in investing activities (26) (29) (96) (67) (137)
Cash flows from financing activities
(Decrease)/increase in long-term interest-bearing loans and
borrowings - - - - (6)
(Decrease)/increase in short-term interest-bearing loans and
borrowings - (17) - 283 204
Net cash (repaid)/generated by financing activities - (17) - 283 198
Net increase/(decrease) in cash and cash equivalents 194 (4) 54 24 (297)
Cash and cash equivalents at the beginning of the
period/year 143 583 282 527 527
Cash transferred to restricted cash (1) - (1) - (40)
Effects of exchange rate changes on cash held in foreign
currencies (1) 51 * 79 92
Cash and cash equivalents at the end of the period/year 335 630 335 630 282
*Less than R1 million.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 Companies Act and JSE Limited Listings Requirements
Compliance with the Companies Act, No. 71 of 2008, as well as the Listings Requirements of the JSE Limited has been maintained throughout the reporting periods.
2 Related party transactions
Sales to East Metals A.G. (a fellow subsidiary) amounted to R238 million (June 2013 YTD: R111 million) for the six months ended 30 June 2014. This constitutes 7% of total revenue for
the period, compared to 4% for the period ended 30 June 2013. During 2013 a loan was received from East Metals A.G., a related party, amounting to R 311 million (December 2013:
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 R31 million for the six months ended June 2014 (June 2013 YTD: R48 million).
3 Segment information
The Group is organized into business units based on their products and has two reportable segments as follows:
Steelworks
The major products of the steel segment are magnetite iron ore, structural steel, plate and coil.
Vanadium
The major products of the vanadium segment are vanadium slag and ferrovanadium. Vanadium slag is a by-product from the steelmaking process, and this slag is transferred from the
steelworks to the vanadium plant, which then forms the input into the business of the vanadium business.
No operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the
purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit.
The following tables present the revenue, operating (loss)/profit and total assets information regarding the Group's operating segments:
Unaudited for the
three months Unaudited for the three Unaudited for the six Unaudited for the Reviewed for
ended months ended months ended six months ended the year ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Rm Rm Rm Rm Rm
Revenue from customers
Steelworks 1 314 1 104 2 484 2 220 4 022
Vanadium 430 431 896 803 1 487
Elimination in intersegmental
revenue (101) (84) (185) (159) (319)
Total 1 643 1 451 3 195 2 864 5 190
Unaudited for the
three months Unaudited for the three Unaudited for the six Unaudited for the Reviewed for
ended months ended months ended six months ended the year ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Rm Rm Rm Rm Rm
Operating (loss)/profit
Steelworks (242) (54) (395) (91) (545)
Vanadium 60 53 124 140 252
Total (182) (1) (271) 49 (293)
Unaudited as at Reviewed as at
30 Jun 2014 31 Dec 2013
Rm Rm
Total assets
Steelworks 3 327 3 143
Vanadium 411 445
Total 3 738 3 588
4 Supplementary revenue information - Unaudited
For the three months For the three months For the six months For the six For the year
ended ended ended months ended ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Sales volumes of major products
Total steel Tons 145 315 131 384 283 522 266 896 486 706
Ferrovanadium Tons V 1 238 1 291 2 608 2 375 4 827
Modified vanadium oxide Tons V 32 85 52 85 143
Nitrovan Tons V 136 127 331 351 398
Vanadium slag Tons V 285 88 375 192 386
Ore fines Tons 201 584 168 352 336 856 352 322 650 418
Weighted average selling prices achieved for major products
Total steel US$/t 680 752 663 757 718
Ferrovanadium US$/kg V 25 27 25 28 27
Modified vanadium oxide US$/kg V 19 20 25 21 19
Nitrovan US$/kg V 25 29 25 29 28
Vanadium slag US$/kg V 8 10 8 10 9
Ore fines US$/t 25 32 23 38 30
Average R/$ exchange rate 10.54 9.49 10.70 9.22 9.65
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 tax asset position remained the same at 30 June 2014 as at 31 December 2013.
6 Trade and other receivables and pre-payments
The increase in comparison to 31 December 2013 can mainly be attributed to increased sales volumes on local steel, improved production and
an increase in MVO/Nitrovan sales.
7 Interest-bearing loans and borrowings
The long-term borrowings of R11 million (2013: R11 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 decline in gross profit is mainly attributable to higher production costs in H1 2014, driven largely by an increase in maintenance spend.
A significant increase in export sales volumes
in H1 2014 compared to H1 2013 also contributed to the lower gross profit, as export sales attract a lower margin compared to local sales.
9 Other operating income and expenses
The R11 million other operating income for the three months ended 30 June 2014 includes mainly sundry income of R4 million and reversal of bad debts
provision of R1 million. The Q2 013 other operating income of R15 million includes sundry sales of R3 million and inventory stock count and inventory
net realisable value adjustments of R12 million.
10 Income tax
Unaudited for Reviewed for
Unaudited for the Unaudited for the three Unaudited for the the six months the year
three months ended months ended six months ended ended ended
30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 31 Dec 2013
Rm Rm Rm Rm Rm
South African
Deferred
Current - 14 - 14 18
Non-South African
Normal
Current 3 8 7 10 1
Income tax expense 3 22 7 24 19
The period income tax expense is accrued using the estimated average annual effective income tax rate applied to the pre-tax income
of the interim report.
11 Share-based payment reserve
Certain key management personnel participate in a Long Term Incentive Plan (LTIP) over shares in EVRAZ plc.
The shares are traded on the London Stock Exchange. The vesting of the shares occur on the 90th day following the
announcement of EVRAZ plc financial results. The cost of the LTIP award will be settled in equity by EVRAZ plc.
The amount recognized according to IFRS 2 in H1 2014 is R8 million (2013: R15 million).
12 Guarantees
As required by the Mineral and Petroleum Resources Development Act, a guarantee amounting to R370 million (2013: R370 million)
was issued on 1 September 2013 in favour of the Department of Mineral Resources (DMR) 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 (2013: R8 million) in the event the Group will not be able to meet its obligations to the suppliers.
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,
as at 31 December 2013, should they become medical scheme members in the future is R14 million before tax and R10 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 R33 million paid to an insurance company as guarantee
to the 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 30 June 2014.
Date: 29/09/2014 04:00:00 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.
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