Wrap Text
Reviewed condensed consolidated financial statements for the six months period ended 30 June 2015
ArcelorMittal South Africa Limited
Registration number: 1989/002164/06
Share code: ACL
ISIN: ZAE 000134961
(“ArcelorMittal South Africa”, “the company” or “the group”)
Reviewed condensed consolidated financial statements
for the six months period ended 30 June 2015
- Focus on sustainability
Overview
The global demand for steel deteriorated further in 2015 due to the deceleration of the Chinese economy. China, the
world’s largest consumer of steel, continues to experience negative growth and with major structural adjustments in most
economies, the prospects for growth in the global steel market are likely to remain low. Commodity prices declined
significantly as a consequence of slower growth in developing countries. As a consequence, the steel industry is now focused
on increasing margins through operational efficiencies and demonstrating the value that steel products generate for the
customer and society. The weaker demand for steel also contributed to significantly lower iron ore prices.
Locally, the economy is nearly at a standstill due to electricity supply constraints, infrastructure development
delays and the low spending in the mining sector. The private consumer is also under pressure due to rising fuel and
electricity prices coupled with high unemployment rates. South African companies have now opted to focus on investments
that increase productivity to compensate for salary increases rather than invest in growth projects.
Our liquid steel production was 2.6 million tonnes, an increase of 177 000 tonnes compared to the comparative period.
The completion of the blast furnace reline at Newcastle contributed to this improvement. Capacity utilisation improved
from 74% to 80%.
Total sales volumes were down by 7% (163 000 tonnes) compared to the comparative period driven by a 29% decrease in
export sales due to unfavourable export prices. This was offset by an increase of 2% in domestic sales.
Safety is still our number one priority. Notwithstanding our quest to achieve zero fatalities and injuries, one fatal
incident occurred on 29 June 2015. We continue to emphasise and reinforce our efforts in ensuring the safety of our
employees and contractors.
Headline loss was R109 million compared to a headline loss of R6 million in the comparative period. EBITDA was
R715 million, a decrease of R95 million. The net loss of R111 million is R96 million more when compared to the prior
comparative period’s net loss of R15 million which was driven primarily by the lower sales volumes.
The increase in the net borrowing position to R2 522 million reflects the difficult trading conditions in the steel
industry.
Key statistics
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited Audited
16 443 17 927 16 925 Revenue (R million) 34 852
7 209 7 237 7 432 Average net realisable price (R/t)(unaudited) 7 332
7 740 7 798 8 057 EBITDA cost/tonne (R/t) (unaudited) 7 923
715 810 448 EBITDA (R million) 1 258
352 369 219 EBITDA/tonne (R/t) (unaudited) 297
4.3 4.5 2.6 EBITDA margin (%) 3.6
(111) (15) (143) Net loss (R million) (158)
(28) (4) (36) Loss per share (cents) (39)
(109) (6) (221) Headline loss (R million) (227)
(27) (2) (55) Headline loss per share (cents) (57)
(2 522) (594) (546) Net borrowings (546)
Unaudited information
2 563 2 386 2 132 Liquid steel production (‘000 tonnes) 4 518
2 032 2 195 2 045 Steel sales (‘000 tonnes) 4 240
1 561 1 534 1 468 - Local 3 002
471 661 577 - Export 1 238
252 208 258 Commercial coke sales (‘000 tonnes) 466
80 74 65 Capacity utilisation (%) 70
0.43 0.54 0.62 Lost time injury frequency rate 0.58
Market review
International
Overcapacity in the Chinese steel market and its continued influence on the global steel demand is negatively
affecting steel price trends globally. This is exacerbated by the continued slowdown in the overall Chinese economy, and its
new focus towards the consumer-driven economy rather than the highly infrastructure-oriented focus of the past. To this
end, the global steel market remains under pressure.
Although the African markets remain positive due to the drive towards infrastructure investments in specific regions
such as the West and East sub-Saharan regions, the impact on the global market is minimal.
Domestic
The South African economy, in particular the manufacturing sector, continues to decline as the domestic market has
been hit from all sides due to the rising cheap imports and high operational costs. The difficult operating environment can
be attributed to extremely weak local demand, poor rail infrastructure, and the rising labour and energy costs, coupled
with electricity supply disruption. SA’s second largest steel maker, Evraz Highveld, has applied for business rescue
and this reflects the difficult operating environment faced by the steel industry. There is an urgent need for government
policy to support South African steel producers.
As stakeholders are aware, management has been working very closely with government to ensure that the South African
steel industry is sustainable in the medium and long term. The company’s view is that excess global steel capacity, low
global iron ore prices and low steel prices are the new reality and the company needs to change the way it operates in
that environment.
Import tariffs and designation of primary steel for localisation are key elements that need to be addressed by
government in the short term to ensure the sustainability of the domestic steel industry.
On the company’s side, it is critical that it continues to focus on low- cost, efficient production. It has made
strides in this regard in the first six months of 2015, but is not there yet.
The company currently operates in an environment where it does not benefit from low seaborne/global iron ore prices
due to its current agreement with Kumba, this needs to be addressed urgently. Transnet’s performance has improved
significantly in the six months, but continual, virtual daily load shedding by Eskom continues to hamper the company’s
performance.
Financial review
Six months ended 30 June 2015 compared to six months ended 30 June 2014 (reviewed)
Revenue decreased 8% to R16.4 billion following a 7% decrease in sales volumes. Export shipments were down 29% with
local shipments up 2%. Flat steel shipments were down 10% and long steel by 2%. In rand terms, total net realised prices
remained flat with domestic prices down 3% while exports were up 2%. Revenue from the Coke and Chemicals business
decreased by 3% to R990 million. The decrease was driven by lower prices despite an overall increase in volumes. Sales
volumes for commercial coke increased by 21% while prices decreased by 3%. Tar sales volumes decreased by 11% offset by
price increases of 5%.
Cash costs per ton of liquid steel produced decreased by 2% from R6 586 to R6 431. Raw materials, consisting of iron
ore, coal and scrap, which together account for approximately 48% of costs, decreased 8%. Consumables and auxiliaries,
which accounted for approximately 28% of costs, increased by 6%, while fixed costs per ton decreased by 1% despite having
benefited from a volume increase of 7% on liquid steel produced.
EBITDA costs per ton decreased 1% (R7 740 compared to R7 798) with Newcastle now weighing heavier in the mix following
increased utilisation and less externally sourced steel being utilised. EBITDA margin remained the same.
Liquid steel production was 177 000 tonnes higher or 7% of which long steel production was up 28% while flat steel was
at the same level. Capacity utilisation for long steel improved from 58% to 75% after the reline of the blast furnace
in Newcastle.
Headline loss increased to R109 million compared to a headline loss of R6 million and is comprised of the following
items:
- EBITDA was R715 million compared to R810 million in the previous year due to the impact of lower sales volumes;
- Net financing costs increased to R352 million compared to R207 million. This was due to the increased borrowings and
higher foreign exchange losses following the deterioration of the rand; and
- Share of profit from equity-accounted investments after taxation increased by R58 million to R160 million. The
increase relates to better results from Macsteel International Holding BV and the weakening of the exchange rate.
Six months ended 30 June 2015 compared to six months ended 31 December 2014 (unaudited)
Revenue decreased 3% to R16.4 billion following a 3% decrease in average net realised prices. Domestic and export
prices were down 5% and 1% respectively. Prices for flat steel remained the same while long steel was down by 10%. Total
steel shipments were down 1% with local shipments up 6% while exports were down 18%. Shipments for flat products decreased
8% while long products increased 18%. Revenue from the Coke and Chemicals business of R990 million was 3% lower
following a 22% decrease in commercial coke sales volumes and a 3% increase in net realised prices. Tar sales volumes were
down 18% while prices increased 6%.
Cash costs per ton of liquid steel produced increased by 3% period-on-period from R6 252 to R6 431. Raw materials,
consisting of iron ore, coal and scrap, which together account for approximately 48% of costs, increased by 4%. Consumables
and auxiliaries, which accounted for 28% of costs, decreased by 3%, while fixed costs increased by 8% on a rand per ton
basis. EBITDA costs per ton decreased 4% from R8 057 to R7 740 with Newcastle now weighing heavier in the mix following
increased utilisation and less externally sourced steel being utilised. Our EBITDA margin improved from 2.6% to 4.3%.
Liquid steel production was 431 000 tonnes better of which long steel production was up 591 000 tonnes due to the
completion of the Newcastle furnace reline at the end of 2014, while flat steel was down 160 000 tonnes. Capacity
utilisation for long steel was higher at 75% compared to 23% in the prior period while for flat steel it remained the same.
The above contributed to an overall EBITDA increase of R267 million to R715 million.
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. This project, which was
completed in 2014 at a cost of R430 million, is currently in its final stages of commissioning. The effluent recovery
and treatment systems at our Vanderbijlpark Works are currently being improved at a cost of R88 million to ensure
sustained compliance levels regarding certain conditions in its Water Use Licence. This project should be completed towards
the end of 2015.
The proposed implementation of a carbon tax by the National Treasury remains a concern as the company’s
competitiveness may be affected. Very limited opportunities exist to reduce carbon emissions in the iron and steel production
process and no feasible low carbon alternatives exist to produce steel from iron ore. Therefore we still maintain that the
intention of the carbon tax to change behaviour cannot be realised within the iron and steel industry. We will actively
participate in the Department of Environmental Affairs’ Carbon Budget setting process during the second half of 2015 to seek
alignment.
Contingent liabilities
As reported in prior periods, and dating back to 2007, the Competition Commission (the Commission) has referred five
cases against ArcelorMittal South Africa Limited (ArcelorMittal South Africa) to the Competition Tribunal (the Tribunal)
for prosecution.
In addition, 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 cooperating fully with the Commission in this investigation and
continues to deliver all information and documentation as and when called upon to do so.
Dividends
No dividends were declared for the six months ended 30 June 2015.
Changes to the board of directors
Matthias Wellhausen resigned as chief financial officer and executive director of the company and Gerhard van Zyl was
appointed as acting chief financial officer with effect from 15 March 2015. Dean Subramanian was appointed as
chief financial officer and executive director of the company with effect from 1 August 2015.
Sudhir Maheshwari resigned as non-executive director with effect from 31 March 2015.
Gonzalo Urquijo resigned as non-executive director with effect from 8 June 2015.
Marc Vereecke and Ramesh Kothari were appointed as non-executive directors with effect from 11 June 2015.
Fran du Plessis resigned as non-executive director with effect from 22 July 2015.
Outlook for the second half of 2015 (unaudited)
We expect international prices for steel to remain low and, with the slowdown in the economy, trading conditions are likely
to remain depressed.
On behalf of the board of directors
PS O’Flaherty
Chief executive officer
22 July 2015
Independent auditor’s review report on interim financial statements
TO THE SHAREHOLDERS OF ARCELORMITTAL SOUTH AFRICA LIMITED
We have reviewed the condensed consolidated financial statements of ArcelorMittal South Africa Limited, contained in
the accompanying interim report, which comprise the condensed consolidated statement of financial position as at 30 June 2015
and the condensed consolidated statements of comprehensive income, changes in equity and cash flows for the six months then ended,
and selected explanatory notes.
Directors’ responsibility for the interim financial statements
The directors are responsible for the preparation and presentation of these interim financial statements in accordance
with International Financial Reporting Standard (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting
Guides, as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and the requirements of the Companies Act of South Africa, and for such internal control as the
directors determine is necessary to enable the preparation of interim financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express a conclusion on these interim financial statements. We conducted our review in
accordance with International Standard on Review Engagements (ISRE) 2410 Review of Interim Financial Information Performed by
the Independent Auditor of the Entity. ISRE 2410 requires us to conclude whether anything has come to our attention that
causes us to believe that the interim financial statements are not prepared in all material respects in accordance with
the applicable financial reporting framework. This standard also requires us to comply with relevant ethical
requirements.
A review of interim financial statements in accordance with ISRE 2410 is a limited assurance engagement. We perform
procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and
applying analytical procedures, and evaluate the evidence obtained. The procedures performed in a review are substantially
less than and differ in nature from those performed in an audit conducted in accordance with International Standards on
Auditing. Accordingly, we do not express an audit opinion on these financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed
consolidated financial statements of ArcelorMittal South Africa Limited for the six months ended 30 June 2015 are not
prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting, the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and the requirements of the Companies Act of South Africa.
Emphasis of matter
Without qualifying our conclusion, we draw attention to notes 2 and 13 to the condensed consolidated financial
statements which set out management’s plans and initiatives which, should they not materialise, along with other matters,
may cast significant doubt on the company’s and the group’s ability to continue as a going concern in its current structure
and/or the ability to recover the carrying values of its property, plant and equipment.
Deloitte & Touche
Registered Auditor
Per: M Mantyi
Partner
28 July 2015
Buildings 1 and 2, Deloitte Place, The Woodlands, Woodlands Drive, Woodmead, Sandton, South Africa
National Executive: LL Bam (Chief Executive)*, AE Swiegers (Chief Operating Officer)*, GM Pinnock (Audit)*, DL Kennedy
(Risk Advisory), NB Kader (Tax)*, TP Pillay (Consulting), K Black (Clients & Industries)*, JK Mazzocco (Talent and Transformation)*,
MJ Jarvis (Finance)*, M Jordan (Strategy)*, S Gwala (Managed Services), TJ Brown (Chairman of the Board)*,
MJ Comber (Deputy Chairman of the Board)*.
A full list of partners and directors is available on request. *Partner and registered auditor
B-BBEE rating: Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code.
Member of Deloitte Touche Tohmatsu Limited
Condensed consolidated statement of comprehensive income
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited In millions of rand Audited
16 443 17 927 16 925 Revenue 34 852
(10 954) (10 772) (10 567) Raw materials and consumables used (21 339)
(1 826) (1 873) (1 891) Employee costs (3 764)
(1 855) (1 661) (1 805) Energy (3 466)
1 597 (63) 355 Movement in inventories of finished goods and work in progress 292
(676) (639) (747) Depreciation (1 386)
(12) (12) (12) Amortisation of intangible assets (24)
(2 690) (2 748) (2 718) Other operating expenses (5 466)
27 159 (460) Profit/(loss) from operations (301)
66 45 (28) Finance and investment income 17
(418) (252) (353) Finance costs (605)
- - 80 Gain recognised on loss of interest over former associate 80
160 102 89 Income from equity-accounted investments (net of tax) 191
(165) 54 (672) (Loss)/profit before tax (618)
54 (69) 529 Income tax credit/(expense) 460
(111) (15) (143) Loss for the period (158)
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss:
209 43 402 Exchange differences on translation of foreign operations 445
60 (3) (26) Gains/(losses) on available-for-sale investment taken to equity (29)
71 (6) (247) Share of other comprehensive income/(loss) of equity-accounted investments (253)
229 19 (14) Total comprehensive income/(loss) for the period 5
Loss attributable to:
(111) (15) (143) Owners of the company (158)
Total comprehensive income/(loss) attributable to:
229 19 (14) Owners of the company 5
Attributable loss per share (cents)
(28) (4) (36) - basic (39)
(28) (4) (36) - diluted (39)
Condensed consolidated statement of financial position
As at As at
30 June 30 June 31 December
2015 2014 2014
Reviewed Reviewed In millions of rand Audited
Assets
20 755 18 923 Non-current assets 20 225
15 719 14 936 Property, plant and equipment 16 001
122 143 Intangible assets 135
4 037 3 830 Equity-accounted investments 4 031
458 - Payments made in advance (note 5) -
419 14 Other financial assets 58
14 508 13 668 Current assets 12 801
11 493 10 396 Inventories 10 684
2 232 2 791 Trade and other receivables 1 562
73 72 Taxation 64
20 3 Other financial assets 37
14 - Payments made in advance (note 5) -
378 406 Cash and bank balances 454
14 210 13 668 12 801
298 - Non-current asset held for sale (note 6) -
35 263 32 591 Total assets 33 026
Equity and liabilities
20 966 20 723 Shareholders’ equity 20 722
37 37 Stated capital 37
(899) (1 521) Non-distributable reserves (1 294)
21 828 22 207 Retained income 21 979
3 288 4 036 Non-current liabilities 3 441
223 258 Other payables 261
225 289 Finance lease obligations 256
1 142 1 754 Deferred income tax liability 1 204
1 698 1 735 Non-current provisions 1 720
11 009 7 832 Current liabilities 8 863
6 558 5 589 Trade payables 6 400
2 900 1 000 Borrowings 1 000
71 96 Finance lease obligations 92
- 59 Taxation 18
282 355 Current provisions 573
1 192 732 Other payables 769
6 1 Other financial liabilities 11
35 263 32 591 Total equity and liabilities 33 026
Condensed consolidated statement of cash flows
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited In millions of rand Audited
(1 086) (101) 1 845 Cash (outflow)/inflows from operating activities 1 744
(727) 109 2 096 Cash (utilised)/generated from operations 2 205
4 7 5 Interest income 12
(242) (161) (211) Finance cost (372)
(35) (31) (53) Income tax paid (84)
(86) (25) 8 Realised foreign exchange movement (17)
(835) (815) (1 793) Cash outflows from investing activities (2 608)
(630) (846) (1 794) Investment to maintain operations (2 640)
(26) (20) (53) Investment to expand operations (73)
(306) (5) 42 (Increase)/decrease in equity-accounted and other investments 37
4 - 1 Proceeds from disposal of assets 1
3 3 3 Investment income - interest 6
120 53 8 Dividend from equity-accounted investments 61
1 848 91 (14) Cash inflows/(outflows) from financing activities 77
1 848 91 (14) Increase/(decrease) in borrowings and finance lease obligations 77
(73) (825) 38 (Decrease)/increase in cash and cash equivalents (787)
(3) 40 10 Effect of foreign exchange rate changes 50
454 1 191 406 Cash and cash equivalents at beginning of period 1 191
378 406 454 Cash and cash equivalents at end of period 454
Notes to the reviewed condensed consolidated financial statements for the period ended 30 June 2015
1. Basis of preparation
The condensed consolidated financial statements were prepared in accordance with the International Financial Reporting 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 GJ van Zyl, the acting chief financial officer.
2. Going concern
The company’s funding plan for the next 12 months takes into account continued efforts in cost reduction, matching production to meet
demand through capacity reduction, the cut-back of non-essential capital expenditure, liquidation of excessive stocks, the sale of
redundant assets, continued support from ArcelorMittal Group and the continuation of the current borrowing facilities in place.
In the current plan the company is also intending to convert its short-term borrowing facilities to medium-term debt and will be going
to the market to roll out this programme in the next 12 months with the full support of the ArcelorMittal Group.
Based on the above plans and initiatives, the Board believes that the company is a going concern over the next 12 months as its expected
working capital resources, by way of cash generated from operations together with current undrawn secured facilities as well as specific
cash initiatives outlined above, are sufficient to meet the company’s present working capital and capital expenditure needs during that
period.
Similarly, these initiatives inform the Board’s long term forecasts for business sustainability and obviate the need for any impairment
of business assets at this time.
H2 2015 will see a fundamental change in South Africa and without import tariffs and steel localisation, the steel industry and the
company will need to undertake significant structural change.
3. Significant accounting policies The condensed consolidated financial statements were prepared using accounting policies that comply with International Financial Reporting
Standards. The accounting policies and methods of computation applied in the presentation of these condensed financial statements are
consistent with those applied for the year ended 31 December 2014. There were no new or revised accounting standards adopted that could
have a material impact on the condensed consolidated financial statements.
4. Raw materials and consumables used
Included in raw materials and consumables used in the statement of comprehensive income for the six months ended 30 June 2015, is an
amount of R220 million in respect of anticipated contractual iron ore price adjustments (rebates). These rebates are anticipated as the
purchase price for iron ore is capped at the export price parity (EPP). For the 2015 financial year, EPP is expected to remain on average
lower than the actual price at which iron ore is purchased.
5. Payments made in advance
Payments made in advance comprises contributions for capital costs incurred by a supplier in the production process of iron ore sold to
the company. These contributions are non-refundable and are amortised to the cost of inventory over the life of the assets capitalised by
the supplier.
6. Non-current asset held for sale
In May 2015, management committed to a plan to sell its investment in Northern Cape Iron Ore Mining Project, an associate of the company.
The company is actively looking for potential buyers and the directors of the company expect that the fair value of the investment less
costs to sell will be higher than the carrying amount. Therefore, no impairment loss was recognised on the reclassification of the
equity-accounted investment as held for sale on 30 June 2015.
7. Independent review by the auditors
Any reference to future financial performance and expectations included in this announcement has not been reviewed or reported on by the
company’s auditors.
8. Capital expenditure commitments
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited In millions of rand Audited
607 1 077 377 Contracted 377
530 761 798 Authorised but not contracted 798
9. Related party transactions
The group is controlled by ArcelorMittal Holdings AG (AM group) which effectively owns 52.02% of the company’s shares. During the year
the company and its subsidiaries, in the ordinary course of business, entered into various sale and purchase transactions with associates
and joint ventures. These transactions are conducted at arm’s length. At period end the AM group loan, which is repayable at the end of
July 2016 but subject to renegotiation, amounted to R2.9 billion. Interest is payable at three-month Jibar plus 2.125% and an amount of
R126 million (2014: R42 million) was charged for the six months period ended 30 June 2015.
10. Corporate governance (unaudited)
The group subscribes to and substantially complies with the King Code on Corporate Governance for South Africa.
11. 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 values as at period ended
30 June 30 June 31 December
2015 2014 2014 Fair value Valuation techniques
In millions of rand Reviewed Reviewed Audited hierarchy and key inputs
Available for sale 119 14 58 Level 1 Quoted prices in an active market
Held-for-trading assets 20 3 37 Level 1 Quoted prices in an active market
Held-for-trading liabilities 6 1 11 Level 1 Quoted prices is an active market
Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities.
12. Subsequent events
On 16 July 2015, Kumba Iron Ore Limited announced that it intends to ramp down activities at the Thabazimbi mine forthwith with the
objective of ceasing production and all production-related activities. Kumba has an agreement to supply the company with iron ore for up to
6.25 million tonnes from either the Thabazimbi mine or any alternative source and there is therefore no security of iron ore supply risk
for the company.
At this stage and given the company’s initiatives to pursue whether there is a possibility of extending the closure date of the mine, no
adjustments are required to the Thabazimbi specific assets and liabilities carried in the company’s books and records.
On 23 July 2015, the company announced the potential closure of its Vereeniging Works. As this is still under investigation no adjustments
are required to the carrying values of the assets and liabilities of Vereeniging Works.
13. Property, plant and equipment
The company performed a review for indications of impairment of its property, plant and equipment at 30 June 2015. Following this review,
there were indications of impairment for Saldanha Works and it was necessary to perform an impairment test. The results of this impairment test
supported a conclusion that there is no impairment. The key assumption in the impairment test is that our plant in Saldanha will be able to
produce and sell at full capacity in the long term. To achieve this capacity, numerous process improvements will be introduced during the
corex reline in 2017.
Basis of the impairment model
An explicit forecast over a five-year period and terminal value based on a normalised five-year steel cycle; and Gordon growth model.
Key assumptions 30 June 31 December
2015 2014
Weighted average cost of capital/discount rate: USD (%) 9.8 9.8
Growth: USD (%) 2.0 2.0
Iron ore prices (average - USD/t) 74 115
Steel sales price range (average - USD/t) 447 to 508 579 to 645
Sales volume range (kt) 986 to 1 322 1 066 to 1 322
Capex accumulated (2015 - 2019) (USDm) 181 173
Carrying value of Saldanha property, plant and equipment (Rm) 4 166 4 304
Sensitivity analysis
The sensitivity of the recoverable amount and carrying value in response to a 10% reduction in local sales volumes is a negative R1 043 million.
Condensed consolidated statement of changes in equity
Treasury
share
Stated equity Other Retained
In millions of rand capital reserve reserves earnings Total
Six months ended 30 June 2014 (Reviewed)
Balance as at 31 December 2013 37 (3 918) 2 304 22 271 20 694
Total comprehensive income/(loss) - - 34 (15) 19
Share-based payment reserve - - 10 - 10
Transfer of equity-accounted earnings - - 49 (49) -
Balance as at 30 June 2014 (Reviewed) 37 (3 918) 2 397 22 207 20 723
Six months ended 31 December 2014
Balance as at 30 June 2014 37 (3 918) 2 397 22 207 20 723
Total comprehensive income/(loss) - - 129 (143) (14)
Share-based payment reserve - - 13 - 13
Transfer of equity-accounted earnings - - 85 (85) -
Balance as at 31 December 2014 (Audited) 37 (3 918) 2 624 21 979 20 722
Six months ended 30 June 2015 (Reviewed)
Balance as at 31 December 2014 37 (3 918) 2 624 21 979 20 722
Total comprehensive income/(loss) - - 340 (111) 229
Share-based payment reserve - - 15 - 15
Transfer of equity-accounted earnings - - 40 (40) -
Balance as at 30 June 2015 (Reviewed) 37 (3 918) 3 019 21 828 20 966
Segment information
Flat steel products
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited Audited
10 678 12 180 12 261 Revenue (R million) 24 441
10 466 11 572 11 385 - External 22 957
212 608 876 - Internal 1 484
7 289 7 170 7 281 Average net realisable price (R/t) (unaudited) 7 226
7 593 7 567 7 476 EBITDA cost/tonne (R/t) (unaudited) 7 522
155 184 351 EBITDA (R million) 535
1.5 1.5 2.9 EBITDA margin (%) 2.2
(488) (510) (554) Depreciation and amortisation (R million) (1 064)
(333) (326) (203) (Loss)/profit from operations (R million) (529)
Unaudited information
1 707 1 719 1 867 Liquid steel production (‘000 tonnes) 3 586
1 358 1 505 1 476 Steel sales (‘000 tonnes) 2 981
983 969 982 - Local 1 951
375 536 494 - Export 1 030
82 83 88 Capacity utilisation (%) 85
Long steel products
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited Audited
5 719 6 556 5 855 Revenue (R million) 12 411
5 020 5 364 4 547 - External 9 911
699 1 192 1 308 - Internal 2 500
7 048 7 382 7 825 Average net realisable price (R/t) (unaudited) 7 585
7 422 7 516 8 276 EBITDA cost/tonne (R/t) (unaudited) 7 859
18 178 (162) EBITDA (R million) 16
0.3 2.7 (2.8) EBITDA margin (%) 0.1
(197) (137) (205) Depreciation and amortisation (R million) (342)
(179) 41 (367) (Loss)/profit from operations (R million) (326)
Unaudited information
856 667 265 Liquid steel production (‘000 tonnes) 932
674 690 569 Steel sales (‘000 tonnes) 1 259
578 565 486 - Local 1 051
96 125 83 - Export 208
75 58 23 Capacity utilisation (%) 41
Coke and chemicals
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited Audited
990 1 019 1 025 Revenue (R million) 2 044
957 991 993 - External 1 984
33 28 32 - Internal 60
229 205 223 EBITDA (R million) 428
23.1 20.1 21.8 EBITDA margin (%) 20.9
(18) (17) (18) Depreciation and amortisation (R million) (35)
211 188 205 Profit from operations (R million) 393
Unaudited information
228 229 293 Commercial coke produced (‘000 tonnes) 522
252 208 258 Commercial coke sales (‘000 tonnes) 466
47 53 57 Tar sales (‘000 tonnes) 110
Corporate and other
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited Audited
313 243 36 EBITDA (R million) 279
- - (149) Once off restructuring provisions (149)
15 13 18 Depreciation and amortisation credit (R millio 31
328 256 (95) Profit/(loss) from operations (R million) 161
Additional information
Six months ended Year ended
30 June 30 June 31 December 31 December
2015 2014 2014 2014
Reviewed Reviewed Unaudited In millions of rand Audited
Reconciliation of earnings before interest, taxation, depreciation
and amortisation (EBITDA)
27 159 (460) Profit/(loss) from operations (301)
Adjusted for:
676 639 747 - Depreciation 1 386
12 12 12 - Amortisation of intangible assets 24
- - 50 - Tshikondeni mine closure costs 50
- - 90 - Restructuring cost 90
- - 9 - Onerous contracts 9
715 810 448 EBITDA for the period 1 258
Reconciliation of headline (loss)/earnings
(111) (15) (143) Loss for the period (158)
Adjusted for:
- - (80) - Gain recognised on loss of interest over former associate (80)
2 13 16 - Loss/(profit) on disposal or scrapping of assets 29
- - (16) - Profit on disposal of assets of an associate (16)
- (4) 2 - Tax effect (2)
(109) (6) (221) Headline loss for the period (227)
Headline loss per share (cents)
(27) (2) (55) - basic (57)
(27) (2) (55) - diluted (57)
Return on ordinary shareholders’ equity per annum
(1.1) (0.1) (1.4) - Attributable earnings (%) (0.8)
(1.0) (0.1) (2.1) - Headline earnings (%) (1.1)
(12.0) (2.9) (2.6) - Net cash to equity (%) (2.6)
Share statistics
Ordinary shares (thousands)
401 202 401 202 401 202 - in issue 401 202
401 202 401 202 401 202 - weighted average number of shares 401 202
401 202 401 202 401 202 - diluted weighted average number of shares 401 202
12.15 31.06 26.41 Share price (closing) (Rand) 26.41
4 875 12 461 10 596 Market capitalisation (R million) 10 596
52.26 51.65 51.65 Net asset value per share (Rand) 51.65
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*, RK Kothari#, NP Mnxasana*, J Modise*,
LP Mondi, DCG Murray*, MAM Vereeckeº
†Citizen of the United Kingdom ºCitizen of Belgium #Citizen of India *Independent non-executive
Executive: PS O’Flaherty (Chief executive officer)
Acting company secretary: Mr Mohamed Adam
Sponsor: J.P. Morgan Equities South Africa Proprietary Limited, 1 Fricker Road, Illovo, 2196, Private Bag X9936, Sandton, 2146
Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Release date: 31 July 2015
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.
This report is available on ArcelorMittal South Africa’s website at: http://www.arcelormittal.com/southafrica/
Share queries:
Please call the ArcelorMittal South Africa share care toll free on 0800 006 960 or +27 11 370 7850
Date: 31/07/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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