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Operating update, Trading Statement and Renewal of Cautionary
ArcelorMittal South Africa Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1989/002164/06)
Share code: ACL ISIN: ZAE 000134961
(“ArcelorMittal South Africa “, “the Company” or “Group”)
OPERATING UPDATE, TRADING STATEMENT AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT
Operating Update - Key Initiatives
As of the date of this SENS announcement, the Company has made good progress in its key initiatives
highlighted previously, aimed at protecting the Company’s future:
- With regard to the consideration of the increase of custom duties on imported primary steel that is also
locally produced from 0% to the bound rate of 10%, 3 of the 10 applications for a duty on the Company’s
steel products have been gazetted; 5 of the applications have been approved by the International Trade
Administration Commission (“ITAC”) and the Minister of Trade and Industry and are currently going through
the gazetting process with National Treasury and the South African Revenue Services (“SARS”). The
International Trade Administration Commission (ITAC) will decide on the remaining 2 applications following
their meeting planned for 9 February 2016 (these include hot rolled coil, other bars and rods);
- As previously indicated 5 safeguard duty applications have been submitted to ITAC and are under review;
- The Department of Trade and Industry (“dti”) has committed to work with National Treasury to ensure that
the designation of local steel for state procurement and Government infrastructure spend is implemented ;
- Significant progress has been made with dti and the Economic Development Department (EDD”) regarding
a pricing mechanism for local flat steel going forward;
- Significant progress has been made in settling the Company’s outstanding matters with the Competition
Commission as highlighted below;
- A new iron ore contract was negotiated with Kumba, as announced on 6 November 2015, ensuring that that
the Company pays market related prices for iron ore; and
- A successful Rights Offer for R4 500 million was concluded on 15 January 2016. ArcelorMittal Group has
underwritten the rights issue in its entirety, through repayment of an outstanding intragroup loan of R3.2
billion and made an additional cash injection of approximately R 460 million. The intragroup loan is being
repaid in two tranches; the first has been repaid and the second will be paid in quarter two of 2016.
Trading Statement
In terms of paragraph 3.4(b)(i) of the Listings Requirements of the Johannesburg Stock Exchange, listed
companies are required to publish a trading statement as soon as they become reasonably certain that the
financial results for the next period to be reported on will be more than 20% different from those of the previous
corresponding period or from a profit forecast previously provided to the market in relation to such period.
Following from the last trading update dated 6 November 2015, which included the write off of R568 million
relating to the deferred contribution to stripping costs, the impairment of property, plant and equipment of R378
million resulting from the Meltshop at Vereeniging being placed under care and maintenance, the write down of
iron ore inventory of R233 million and the retrenchment provision of R350 million relating to the Thabazimbi mine,
significant additional once-off items set out below further contributed to an increase in the loss for the period,
more than what was previously expected.
Shareholders are advised that the loss per share for the year ended 31 December 2015 is expected to be more
than 2 100 cents or 54 times (5 385%) and the headline loss per share is expected to be higher by more than
1 250 cents or 22 times (2 193%) when compared to the year ended 31 December 2014 (39 cents loss per share
and 57 cents headline loss per share).
The operating loss includes once off pre-tax items of R 2 558 million for the year consisting of adjustments
previously announced as detailed above and further once off pre-tax adjustment consisting primarily of:
- The Company has engaged and made significant progress with the Competition Commission (“the
Commission”) regarding the settlement of the outstanding competition matters. Whilst the draft settlement
agreement is still subject to final approval by the Commission and the Competition Tribunal, a provision of
R1 245 million representing the present value of a proposed administrative penalty of R 1 500 million
payable over 5 year was recognized; and
- Developmental costs owed to Thabazimbi due to the end of life of mine of R200 million, which reflects the
provisional amount as indicated by the Sishen Iron Ore Company (Pty) Ltd, which is still subject to review
before the final amount is determined.
In addition , total pre-tax impairments of R4 254 million have been recognized for the year, consisting
primarily of the Vaal Meltshop, announced previously, and:
- An impairment of R3 574 million related to Saldanha Works due to the poor international steel export prices
and the extremely high local electricity tariffs, consequently the future of the operation is currently being
reviewed; and
- An impairment of R302 million for the investment in the Northern Cape Iron Ore Mining Operations,
previously classified as a non-current asset held for sale, impaired due to current depressed iron ore prices.
The local steel industry continues to be threatened by the weak international steel environment with imports
primarily from China continuing to enter our local market. The Company would like to re-emphasise that without
the requisite tariffs as applied for and without the initiatives committed by Government regarding the use of local
steel for government infrastructure projects, the steel industry and the Company will need to undertake significant
structural change.
Based on the current initiatives and with the expectation that the tariff and designation measures will be in place
by the end of Q1 2016, or shortly thereafter, the Board remains of the view that these interventions have a
reasonable prospect of returning the Company to profitability in the medium term.
The financial information on which the above trading statement has been provided has not been reviewed or
reported by the external auditors of the company.
Renewal of Cautionary Announcement
Further to the cautionary announcement released on the Stock Exchange News Service of the JSE Limited on 6
November 2015 wherein ArcelorMittal’s shareholders (“shareholders”) were advised of a proposed B-BBEE
transaction, shareholders are further advised that the process in relation to the proposed transaction is ongoing
and if successfully concluded, may have a material effect on the price of the company’s securities.
The Board has now finalised its selection of a potential B-BBEE partner with whom to commence negotiations to
conclude the transaction for an equity interest in the Company. It is anticipated that the full terms announcement
will be issued early in the second quarter of 2016. Accordingly, shareholders are advised to continue to exercise
caution when dealing in the company's securities until a further announcement is made in this regard.
Vanderbijlpark
4 February 2016
Corporate advisor, transaction sponsor and legal advisor in relation to the B BBEE Transaction
KPMG Services Proprietary Limited
Sponsor to ArcelorMittal South Africa Limited
J.P. Morgan Equities South Africa Pty Ltd
Date: 04/02/2016 12:30:00 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
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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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