Wrap Text
Reviewed condensed consolidated financial statements for the six months ended 30 June 2016
ArcelorMittal South Africa Limited
Registration number: 1989/002164/06
Share code: ACL ISIN: ZAE 000134961
(AMSA, the company or the group)
Reviewed condensed consolidated financial statements for
the six months ended 30 June 2016
Overview
- All 10 applications on import duties gazetted
- Designation of steel approved on certain products
- Significant improvement in net cash position
- Continued focus on sustainability
General overview
Global steel markets remain constrained due to the lack of demand. Turbulent financial markets and political instability
in many developing countries, combined with a slowdown of the Chinese economy, have led to a global oversupply of steel.
Chinese mills are facing overcapacity which will take a number of years to normalise, and this has led to the export
price of hot-rolled coils from China dropping below the cost of production. Although global steel prices have increased
towards the latter part of the first half of 2016, they were still lower when compared to prices of the first half of
2015.
Due to excess capacity in China, the governments of other primary steel producing countries have provided assistance
in the form of import protection to ensure the survival of their local steel industries. ArcelorMittal South Africa
Limited acknowledges the support provided by government to ensure a viable steel sector. In particular, the import tariffs
at a bound rate of 10% on 10 locally produced products have been implemented and National Treasury has issued instruction
notes prescribing minimum local content thresholds on a number of products, including solar water heater components, rail
rolling stock, electric cables, conveyance pipes, steel power pylons, photovoltaic systems and components, and working
vessels. In addition, in instances where there was a provision deeming all steel as local (including imported steel),
this has been removed. However, South Africa’s steel sector remains vulnerable and still needs government support. Other
measures such as safeguard duties, a fair pricing mechanism and further designation initiatives on construction materials
are still necessary. The swift finalisation and implementation of these initiatives will go a long way to ensuring the
sustainability of the South African steel sector.
ArcelorMittal South Africa has acknowledged that it cannot rely solely on government support and needs to ensure that
it operates efficiently. The company has initiated a number of strategic initiatives across the operations aimed at
improving efficiencies and optimising costs. The time management system introduced at all ArcelorMittal South Africa Limited
operations together with the strategic initiative at Vanderbijlpark Works are expected to yield material savings over the
next 18 months. Other initiatives are being investigated on an ongoing basis in order to improve and ensure the sustainability
of our operations.
While safety is still our number one priority, we regrettably had two fatal incidents at our operation in Newcastle in this
reporting period. This is unacceptable and we are intensifying our efforts to ensure the safety of our employees and contractors
and reinforcing our commitment to zero harm.
Financial overview
Liquid steel production for the first six months of the year was 2.5 million tonnes, a decrease of 43 000 tonnes compared
to the first six months of 2015, after the closure of Vaal Meltshop at the Vereeniging Works. Capacity utilisation
improved from 80% to 83%.
Total sales volumes were up by 10% (210 000 tonnes) against the comparative period in 2015, primarily due to the 10%
import duties, market restocking and the closure of Evraz Highveld Steel which increased local sales by 15%, partially
offset by a 5% decrease in export sales.
The headline loss was R458 million, compared to a headline loss of R109 million in the first six months of 2015. EBITDA
decreased by R359 million from R641 million to R282 million and the loss before interest and tax decreased by R302 million
from a profit of R27 million to a loss of R275 million, primarily due to lower steel prices. The net loss of R450 million
is R339 million more than the net loss of R111 million for the six months ended June 2015.
Cash generated from operations was R592 million, compared to utilisation of R727 million in the corresponding period
last year, which was primarily driven by better working capital management.
The decrease in the net borrowing position from R2 522 million to a net cash position of R1 010 million was due to the
successful rights issue, which resulted in a cash injection of R4 500 million in January 2016. This was used to repay
the ArcelorMittal Holdings AG loan and for capital expenditure to maintain operations.
Key statistics
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 31 December 2015
Reviewed Reviewed Unaudited Audited
17 006 16 443 14 698 Revenue (R million) 31 141
6 845 7 209 6 256 Average net realisable price (R/t) (unaudited) 6 727
282 641 (1 450) Ebitda (R million) (809)
126 315 (691) Ebitda/tonne (R/t) (unaudited) (196)
1.7 3.9 (9.9) Ebitda margin (%) (2.6)
(275) 27 (9 017) (Loss)/profit before interest and tax (R million) (8 990)
(450) (111) (8 524) Net loss (R million) (8 635)
(44) (28) (2 125) Loss per share (cents) (2 152)
(458) (109) (5 261) Headline loss (R million) (5 370)
(45) (27) (1 311) Headline loss per share (cents) (1 338)
1 010 (2 522) (2 865) Net cash/(borrowings) (2 865)
Unaudited information
2 520 2 563 2 276 Liquid steel production (000 tonnes) 4 839
2 242 2 032 2 099 Steel sales (000 tonnes) 4 131
1 795 1 561 1 478 - Local 3 039
447 471 621 - Export 1 092
238 252 199 Commercial coke sales (000 tonnes) 451
83 80 69 Capacity utilisation (%) 74
0.90 0.43 0.53 Lost time injury frequency rate 0.48
Market review
International
Overcapacity in the Chinese steel market and lower steel prices has negatively affected the global steel market.
Although steel prices increased towards the latter part of H1 2016, they remained lower than the corresponding period
last year. The slow growth of the Chinese economy and a policy shift towards consumer-driven economic growth, with subdued
construction activities, continue to affect steel demand negatively. Despite weak economic growth in sub-Saharan Africa,
steel demand remains positive, which is largely due to infrastructure-related investments.
Domestic
Key market segments in South Africa - manufacturing, mining and construction in particular - have registered depressed
growth figures into 2016. Limited infrastructure-related investments and reduced housing development have negatively
affected the steel industry. High-operational costs, coupled with the continued influx of cheap imports, remain a
challenge.
Financial review
Six months ended 30 June 2016 compared to six months ended 30 June 2015 (reviewed)
Revenue increased 3% to R17 006 million following a 10% increase in sales volumes. Local shipments increased by 15%
while exports were down by 5%. Flat steel shipments were up 10% and long steel by 12%. In rand terms, total net realised
prices declined by 5% with domestic prices down 5% and exports down 7%. Revenue from the Coke and Chemicals business
decreased by 18% to R811 million as a result of lower prices and volumes. For commercial coke, sales volumes and prices
decreased by 6% and 14% respectively. Tar sales volumes decreased by 21% and prices decreased by 3%.
Cash costs per tonne of liquid steel produced decreased by 2% from R6 431 to R6 337. Raw materials, consisting of iron
ore, coal and scrap, which together account for approximately 45% of costs, decreased by 7% against the comparative
period. Consumables and auxiliaries, which account for approximately 30% of costs, have increased by 3%, while fixed costs
per tonne increased by 4%. The ebitda margin decreased from 3.9% to 1.7%.
Liquid steel production was 43 000 tonnes lower (2%), of which long steel production was down by 8% while flat steel
was up by 2%. Capacity utilisation improved from 80% to 83%.
The headline loss increased to R458 million, compared to R109 million at the end of June 2015. This was as a result of
the following:
- Ebitda was R282 million compared to R641 million in the previous year, due to lower sales prices;
- Financing costs decreased to R362 million, compared to R418 million in the previous comparative period, primarily
due to repayment of borrowings using funds generated from the rights issue and the devaluation of the rand which
resulted in higher foreign exchange gains; and
- The company’s share of profit from equity-accounted investments after taxation decreased by R52 million due to
reduced profits from the Macsteel International Holding BV joint venture, due to lower shipping freight income.
Six months ended 30 June 2016 compared to six months ended 31 December 2015 (unaudited)
Revenue increased 16% to R17 006 million following a 9% increase in average net realised prices. Domestic and export
prices were up 7% and 10% respectively. Prices for flat steel and long steel were up by 7% and 14% respectively. Total
steel shipments were up 7%, with local shipments up by 21% while exports were down by 28%. Shipments for flat products
increased by 13% while long products decreased by 3%. Revenue from the Coke and Chemicals business was R811 million, which
is relatively consistent with the prior period. This is due to the 20% increase in commercial coke sales volumes offset
by an 11% decrease in net realised prices. Tar sales volumes were down 24% while prices increased by 3%.
Cash costs per tonne of liquid steel produced decreased by 3% from R6 502 to R6 337 in the current period. Raw materials,
consisting of iron ore, coal and scrap, which together account for approximately 45% of costs, decreased by 3% when
compared to the period ended December 2015. Consumables and auxiliaries, which accounted for 30% of costs, remained
flat, while fixed costs decreased by 6% on a rand per tonne basis. Ebitda margin improved from negative 9.9% to positive
1.7%.
The loss before interest and tax was R275 million compared to a loss before interest and tax of R9 017 million in
December 2015 as result of improved steel prices and volumes in the six months ended 30 June 2016 as well as the impairment
of R4 254 million recognised in December 2015.
Liquid steel production was 244 000 tonnes higher, of which flat steel production was up 294 000 tonnes, while long
steel was down 50 000 tonnes. Capacity utilisation for flat steel was higher at 83% compared to 68% in the prior period
and long steel improved from 72% to 83%.
Environmental
Despite the tough economic conditions under which the company operates, key environmental projects remain a focus area
to ensure environmental compliance. After experiencing commissioning delays, the Newcastle zero-effluent discharge
facility is now operational. The effluent recovery and treatment systems at the Vanderbijlpark Works are being improved at
a cost of R88 million. It is expected that this project will be completed by the end of Q3 2016.
The proposed implementation of a carbon tax bill by the National Treasury remains a concern as the company’s financial
recovery and competitiveness will be affected. The Carbon Tax Bill - as published in November 2015 - forms the basis of
further engagement with the National Treasury.
ArcelorMittal South Africa Limited actively participated in the Department of Environmental Affairs’ carbon budget
setting process during the second half of 2015, but no final carbon budget has been declared as yet. There is some degree
of misalignment between these two climate change related instruments and the company will support any further initiatives
to ensure that they are better aligned.
Competition Commission
As previously reported, the negotiations regarding the terms of the draft settlement agreement with the Competition
Commission are close to being finalised.
Contingent liabilities
Thabazimbi mine environmental rehabilitation
In terms of the Amended and Restated Settlement and Supply Agreement between Sishen Iron Ore Company (SIOC) and
ArcelorMittal South Africa Limited, ArcelorMittal South Africa Limited is liable for the costs relating to the rehabilitation
of SIOC’s Thabazimbi iron ore mine for the duration that it was a captive mine. The mine ceased to be a captive mine on
31 December 2014. ArcelorMittal South Africa Limited is required to fund its obligation through bank guarantees and/or
cash in a trust fund managed by SIOC. ArcelorMittal South Africa Limited received a request from SIOC for additional
funding of approximately R300 million based on a revised assessment of the expected rehabilitation costs by their external
mining consultants. However, according to a recent assessment performed by ArcelorMittal South Africa’s independent
consultants, the current environmental rehabilitation provision, together with the cash held in trust, will be adequate to
settle the company’s rehabilitation obligation to SIOC. ArcelorMittal South Africa Limited and SIOC are working towards
resolving the matter.
Dividends
No dividends were declared for the six months ended 30 June 2016.
Evraz Highveld Steel and Vanadium Limited
ArcelorMittal South Africa Limited and the Industrial Development Corporation (IDC) are investigating options, together
with the business rescue practitioner of Evraz Highveld Steel and Vanadium Limited (Highveld), of supplying blooms and
slabs to Highveld for processing into heavy structural steel. If successful, this could result in the reopening of the
heavy section mill by the business rescue practitioner, making available the supply of heavy structural products into
the South African market. It is anticipated that the blooms and slabs would be processed by the heavy section mill into
heavy structural steel initially in terms of a one-year agreement. The possibility of ArcelorMittal South Africa Limited
and the IDC having the option, (at their sole discretion) to acquire the heavy section mill, after a period of one year,
is also being considered. If the agreement for the supply of blooms and slabs is implemented, this should have a positive
impact on the revenue of ArcelorMittal South Africa Limited due to increased volumes. Shareholders will be advised of
further developments.
Changes to the board of directors
Wim de Klerk was appointed as chief executive officer (CEO) and executive director of the company with effect from 1 July 2016.
Dean Subramanian, who was acting CEO, will resume his position as chief financial officer (CFO) and Gerhard van Zyl, who was
acting CFO, will resume his position as senior manager in the finance function.
Paul O’Flaherty resigned as a non-executive director on the ArcelorMittal South Africa board with effect from 20 July 2016.
Davinder Chugh and Mark Vereecke both resigned as non-executive directors with effect from 15 July 2016.
Henri Blaffart and David Clarke were appointed as non-executive directors to the ArcelorMittal South Africa board with effect
from 19 July 2016.
Outlook for the second half of 2016
Although the average net realisable steel price is expected to improve, costs are also expected to increase in H2 2016. Under
the current trading conditions, shipments are expected to remain consistent with H1 2016. Changes in the exchange rate will
also have an important financial impact on the company’s performance.
On behalf of the board of directors
WA de Klerk D Subramanian
Chief executive officer Chief financial officer 19 July 2016
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 2016 and the condensed consolidated statement 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 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 enquiries 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 2016 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 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 note 10 of the condensed consolidated financial statements
which sets out management’s plans and initiatives, which, should they not materialise, along with other matters, indicates
the existence of a material uncertainty which may cast significant doubt on the company’s and the group’s ability to
continue as a going concern.
Deloitte & Touche
Registered Auditors
Per: M Mantyi
Partner
28 July 2016
National Executive: LL Bam chief executive officer*, TMM Jordan deputy chief executive officer*, MJ Jarvis chief
operating officer*, GM Pinnock audit*, N Sing risk advisory*, NB Kader tax*, TP Pillay consulting, S Gwala BPaaS, K Black
clients & industries*, JK Mazzocco talent & transformation*, MJ Comber reputation & risk*, TJ Brown chairman of the board*
*Partner and registered auditor
A full list of partners is available on request.
B-BBEE rating: Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code
Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited
Condensed consolidated statement of comprehensive income
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
17 006 16 443 14 698 Revenue 31 141
(9 519) (10 954) (8 229) Raw materials and consumables used (19 183)
(1 993) (1 826) (2 201) Employee costs (4 027)
(1 965) (1 855) (1 969) Energy (3 824)
(405) 1 597 (2 054) Movement in inventories of finished goods and work in progress (457)
(518) (676) (670) Depreciation (1 346)
(12) (12) (11) Amortisation of intangible assets (23)
(2 863) (2 690) (4 327) Other operating expenses (7 017)
(269) 27 (4 763) Profit/(loss) from operations (4 736)
(6) - (310) Impairment of other assets (310)
- - (3 944) Impairment of property, plant and equipment and intangible assets (3 944)
86 66 109 Finance and investment income 175
(362) (418) (790) Finance costs (1 208)
108 160 35 Income from equity accounted investments (net of tax) 195
(443) (165) (9 663) Loss before tax (9 828)
(7) 54 1 139 Income tax credit/(expense) 1 193
(450) (111) (8 524) Loss for the period (8 635)
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss:
(209) 209 1 023 Exchange differences on translation of foreign operations 1 232
43 60 (41) Gains/(losses) on available-for-sale investment taken to equity 19
39 71 8 Share of other comprehensive income/(loss) of equity-accounted 79
investments
(577) 229 (7 534) Total comprehensive income/(loss) for the period (7 305)
Loss attributable to:
(450) (111) (8 524) Owners of the company (8 635)
(577) 229 (7 534) Total comprehensive income/(loss) attributable to:
Owners of the company (7 305)
Attributable loss per share (cents)
(44) (28) (2 125) - basic (2 152)
(44) (28) (2 125) - diluted (2 152)
Condensed consolidated statement of financial position
As at
In millions of rand 30 June 2016 30 June 2015 31 December 2015
Reviewed Reviewed Audited
Assets
Non-current assets 17 567 20 297 17 634
Property, plant and equipment 12 046 15 719 11 859
Intangible assets 115 122 112
Equity accounted investments 5 037 4 037 5 090
Other financial assets 369 419 573
Current assets 15 426 14 668 13 328
Inventories 9 436 11 493 9 385
Trade and other receivables 3 133 2 704 1 666
Taxation 74 73 75
Other financial assets 24 20 38
Cash and bank balances 2 759 378 2 164
Non-current asset held for sale - 298 -
Total assets 32 993 35 263 30 962
Equity and liabilities
Shareholders’ equity 17 416 20 966 13 472
Stated capital 4 537 37 37
Non-distributable reserves 177 (899) 175
Retained income 12 702 21 828 13 260
Non-current liabilities 3 463 3 288 3 324
Other payables 336 223 236
Finance lease obligations 159 225 193
Deferred income tax liability 4 1 142 -
Non-current provisions 2 964 1 698 2 895
Current liabilities 12 114 11 009 14 166
Trade payables 9 134 6 558 7 761
Borrowings 1 749 2 900 5 029
Finance lease obligations 66 71 63
Current provisions 249 282 541
Other payables 835 1 192 758
Other financial liabilities 81 6 14
Total equity and liabilities 32 993 35 263 30 962
Condensed consolidated statement of cash flows
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
191 (1 086) (21) Cash inflow/(outflow) from operating activities (1 107)
592 (727) 463 Cash generated from/(utilised in) operations (264)
33 4 5 Interest income 9
(226) (242) (312) Finance cost (554)
(2) (35) (5) Income tax paid (40)
(206) (86) (172) Realised foreign exchange movement (258)
(771) (835) (305) Cash outflows from investing activities (1 140)
(754) (630) (534) Investment to maintain operations (1 164)
(42) (26) (66) Investment to expand operations (92)
1 (306) 298 Decrease/(increase) in equity accounted investment (8)
21 4 (2) Proceeds from disposal of assets 2
3 3 5 Investment income - interest 8
- 120 (6) Dividend from equity accounted investments 114
1 189 1 848 2 089 Cash inflows from financing activities 3 937
(3 311) 1 848 2 089 (Decrease)/increase in borrowings and finance lease obligations 3 937
4 500 - - Rights issue -
609 (73) 1 763 Increase/(decrease) in cash and cash equivalents 1 690
(14) (3) 23 Effect of foreign exchange rate changes 20
2 164 454 378 Cash and cash equivalents at beginning of period 454
2 759 378 2 164 Cash and cash equivalents at end of period 2 164
Condensed consolidated statement of changes in equity
In millions of rand Stated Treasury share Other Retained
capital equity reserve reserves earnings Total
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
Six months ended 31 December 2015
Balance as at 30 June 2015 37 (3 918) 3 019 21 828 20 966
Total comprehensive income/(loss) - - 990 (8 524) (7 534)
Share-based payment reserve - - 40 - 40
Transfer of equity accounted earnings - - 44 (44) -
Balance as at 31 December 2015 (audited) 37 (3 918) 4 093 13 260 13 472
Six months ended 30 June 2016 (reviewed)
Balance as at 31 December 2015 37 (3 918) 4 093 13 260 13 472
Total comprehensive (loss) - - (127) (450) (577)
Rights issue 4 500 - - - 4 500
Share-based payment reserve - - 21 - 21
Transfer of equity accounted earnings - - 108 (108) -
Balance as at 30 June 2016 (reviewed) 4 537 (3 918)* 4 095 12 702 17 416
*Shares issued to Ikageng and Vicva are held as treasury shares.
Notes to the reviewed condensed consolidated financial statements for the period ended 30 June 2016
1. Reporting entity
ArcelorMittal South Africa Limited is a public company domiciled in the Republic of South Africa and listed on the
JSE Limited. These condensed consolidated financial statements for the six months ended 30 June 2016 comprise the
company and its subsidiaries (together referred to as the group). The group is one of the largest steel producers
on the African continent.
2. Basis of preparation
The condensed consolidated financial statements were prepared in accordance with and containing the information
required by IAS 34: Interim Financial Reporting, as well as the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, Financial Pronouncements as issued by Financial Reporting Standards Council and the
requirements of the Companies Act of South Africa.
The condensed consolidated financial statements were prepared under the supervision of Mr D Subramanian CA(SA), the
Group’s chief financial officer.
3. Significant accounting policies
These condensed consolidated financial statements were prepared using accounting policies that comply with International
Financial Reporting Standards. The accounting policies in the condensed consolidated financial statements for the six
months ended 30 June 2016 have been prepared on the historical cost basis, except for the revaluation of certain financial
instruments. The accounting policies and methods of computation applied in the presentation of the financial results of
the group are consistent with those applied for the year ended 31 December 2015.
There were no new or revised accounting standards adopted that could have a material impact on the condensed consolidated
financial statements.
4. Capital expenditure commitments
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
1 162 607 992 Contracted 992
1 070 530 745 Authorised but not contracted 745
5. Related party transactions
The group is controlled by ArcelorMittal Holdings AG, which effectively owns 69% (December 2015: 52%) (treasury shares
held by Vicva Investments and Trading Nine (Pty) Ltd (Vicva) are excluded from the number of shares outstanding and the
Ikageng Broad-based Employee Share Trust (Ikageng) are also excluded until such time that the shares can vote) of the
group’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 concluded at arm’s length. At
30 June 2016, the outstanding ArcelorMittal Holdings AG loan amounted to nil (December2015: R3 200 million). Interest is
payable at three months Jibar plus 2.125% and an amount of R37 million (2015: R126 million) was incurred for the six months
ended 30 June 2016.
6. Fair value measurements
Certain 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
In millions of rand 30 June 30 June 31 December Fair value Valuation techniques
2016 2015 2015 hierarchy and key inputs
Reviewed Reviewed Audited
Available-for-sale 120 119 78 Level 1 Quoted prices in an active market
Held-for-trading assets 24 20 38 Level 1 Quoted prices in an active market
Held-for-trading liabilities 81 6 14 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.
7. Effective tax rate
The effective tax rate of 2% (compared to the statutory tax rate of 28%) for the six months ended 30 June 2016 is primarily
as a result of not recognising the deferred tax asset on the available income tax losses. This reduces the effective tax
rate by approximately 41%. Management believes that the turnaround initiatives will result in the group returning to
profitability at some point in the future. However, based on considerations presented, management believes it is premature
to conclude at this stage that it is more likely than not for sufficient future taxable profits to be available against
which the full proposed deferred tax asset can be used.
8. Competition Commission
As previously reported, the negotiations regarding the terms of the draft settlement agreement with the Competition
Commission are close to being finalised.
9. Contingent liabilities
Thabazimbi mine rehabilitation provision
In terms of the Amended and Restated Settlement and Supply Agreement between Sishen Iron Ore Company (SIOC) and ArcelorMittal
South Africa Limited, ArcelorMittal South Africa Limited is liable for the costs relating to the rehabilitation of SIOC’s
Thabazimbi iron ore mine for the duration that it was a captive mine. The mine ceased to be a captive mine on 31 December 2014.
ArcelorMittal South Africa Limited is required to fund its obligation through bank guarantees and/or cash in a trust fund
maintained by SIOC. ArcelorMittal South Africa Limited received a request from SIOC for additional funding of approximately
R300 million, based on a revised assessment of the expected rehabilitation costs by their external mining consultants. However,
according to a recent assessment performed by ArcelorMittal South Africa’s independent consultants, the current environmental
rehabilitation provision, together with the cash held in trust, will be adequate to settle the group’s rehabilitation obligation
to SIOC. ArcelorMittal South Africa Limited and SIOC are working together to resolve the matter.
10. Going concern
Due to the recently implemented import duties and the weak Rand/US dollar exchange rate, ArcelorMittal South Africa Limited
expects improved sales volumes for the next 12 months. ArcelorMittal South Africa Limited is also intending to convert its
short-term borrowing facilities to medium-term debt and is exploring various alternatives in this regard. The group also
continues to benefit from the full support of ArcelorMittal Holdings AG.
Based on the group’s 12-month funding plan and the initiatives as detailed above, the board believes that the group will have
sufficient funds to pay its debts as they become due over the next 12 months, and therefore remains a going concern. The group
would like to re-emphasise that the local steel industry continues to be threatened by imports entering the market, primarily
from China, despite the positive progress made on duties and designation initiatives to date. Shareholders are cautioned that
the safeguard duties, fair pricing mechanism and other designation initiatives that the South African government have committed
to regarding the use of local steel for government infrastructure projects, are essential to ensure the sustainability of the
group. Should these government interventions not materialise in the next 12 months, there remains a material uncertainty
regarding the ability of ArcelorMittal South Africa Limited and the local steel industry to continue operating without
significant structural changes.
11. Subsequent events
The directors are not aware of any matter or circumstances arising since the end of June 2016 to the date of this report that
would significantly affect the operations, the results or financial position of the group.
Segment information
Flat steel products
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
11 127 10 678 9 229 Revenue (R million) 19 907
10 797 10 466 9 017 - External 19 483
330 212 212 - Internal 424
(118) 155 (1 424) Ebitda (R million) (unaudited) (1 269)
(1.1) 1.5 (15.4) Ebitda margin (%) (unaudited) (6.4)
6 889 7 289 6 458 Average net realisable price (R/t) (unaudited) 6 891
(339) (488) (485) Depreciation and amortisation (R million) (973)
(406) (333) (2 758) (Loss) from operations (R million) (3 091)
(406) (333) (6 332) (Loss) before interest and tax (R million) (6 665)
Unaudited information
1 732 1 707 1 438 Liquid steel production (000 tonnes) 3 145
1 489 1 358 1 320 Steel sales (000 tonnes) 2 678
1 146 983 932 - Local 1 915
343 375 388 - Export 763
83 82 68 Capacity utilisation (%) 75
Long steel products
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
5 593 5 719 5 153 Revenue (R million) 10 872
5 425 5 020 4 929 - External 9 949
168 699 224 - Internal 923
152 18 (366) Ebitda (R million) (unaudited) (348)
2.7 0.3 (7.1) Ebitda margin (%) (unaudited) (3.2)
6 758 7 048 5 919 Average net realisable price (R/t) (unaudited) 6 423
(188) (197) (194) Depreciation and amortisation (R million) (391)
(12) (179) (1 047) (Loss) from operations (R million) (1 226)
(12) (179) (1 417) (Loss) before interest and tax (R million) (1 596)
Unaudited information
788 856 838 Liquid steel production (000 tonnes) 1 694
753 674 779 Steel sales (000 tonnes) 1 453
649 578 546 - Local 1 124
104 96 233 - Export 329
83 75 72 Capacity utilisation (%) 73
Coke and Chemicals
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
811 990 809 Revenue (R million) 1 799
784 957 752 - External 1 709
27 33 57 - Internal 90
97 229 198 Ebitda (R million) (unaudited) 427
12.0 23.1 24.5 Ebitda margin (%) (unaudited) 23.7
(16) (18) (17) Depreciation and amortisation (R million) (35)
81 211 181 Profit from operations (R million) 392
81 211 181 Profit before interest and tax (R million) 392
Unaudited information
157 228 178 Commercial coke produced (000 tonnes) 406
238 252 199 Commercial coke sales (000 tonnes) 451
37 47 49 Tar sales (000 tonnes) 96
Corporate and other
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
151 239 142 Ebitda (R million) 381
13 15 15 Depreciation and amortisation credit (R million) 30
(96) 74 (1 296) Once-off items (1 222)
164 254 157 Profit/(loss) from operations excluding once - off items (R million) 411
62 328 (1 449) (Loss)/profit before interest and tax (R million) 1 121
Additional information
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
Reconciliation of earnings before interest, taxation,
depreciation and amortisation (ebitda)
(269) 27 (4 763) Profit/(loss) from operations (4 736)
Adjusted for:
518 676 670 - Depreciation 1 346
12 12 11 - Amortisation of intangible assets 23
(75) - 682 - Thabazimbi mine closure costs 682
- (74) 51 - Tshikondeni mine closure costs (23)
114 - 1 245 - Competition Commission settlement 1 245
(37) - - - Unclaimed dividends -
- - 86 - Vereeniging closure cost 86
19 - 568 - Derecognised payment in advance 568
282 641 (1 450) Ebitda for the period (809)
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015 In millions of rand 31 December 2015
Reviewed Reviewed Unaudited Audited
Reconciliation of headline (loss)/earnings
(450) (111) (8 524) Loss for the period (8 635)
Adjusted for:
6 - 4 254 - Impairment charge 4 254
(17) 2 3 - (Profit)/loss on disposal or scrapping of assets 5
3 - (994) - Tax effect (994)
(458) (109) (5 261) Headline loss for the period (5 370)
Headline loss per share (cents)
(45) (27) (1 311) - basic (1 338)
(45) (27) (1 311) - diluted (1 338)
Return on ordinary shareholders’ equity per annum
(5.8) (1.1) (99.0) - Attributable earnings (%) (50.5)
(5.9) (1.0) (61.2) - Headline earnings (%) (31.4)
5.8 (12.0) (21.3) - Net cash to equity (%) (21.3)
Share statistics
Ordinary shares (thousands)
1 138 060 445 752 445 752 - in issue 445 752
1 093 510 401 202 401 202 - outstanding 401 202
1 025 040 401 202 401 202 - weighted average number of shares 401 202
1 025 040 401 202 401 202 - diluted weighted average number of shares 401 202
8.39 12.15 4.50 Share price (closing) (Rand) 4.50
9 175 4 875 1 805 Market capitalisation (R million) 1 805
15.30 52.26 33.58 Net asset value per share (Rand) 33.58
Other information
Registered office
ArcelorMittal South Africa Limited, Room N3-5, Main Building, Delfos Boulevard, Vanderbijlpark, 1911
Directors
Non-executive: PM Makwana* (chairman), H Blaffartº, L Cele*, D Clarke[#], RK Kothari+, NP Mnxasana*, JRD Modise*, LP
Mondi, N Nicolau*
[#]Citizen of Australia ºCitizen of Belgium +Citizen of India *Independent non-executive
Executive: WA de Klerk (chief executive officer), D Subramanian (chief financial officer)
Company secretary
Nomonde Bam
Sponsor
J.P. Morgan Equities South Africa (Pty) Ltd, 1 Fricker Road, Illovo, 2196, Private Bag X9936, Sandton, 2146
Transfer secretaries
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, 2001, PO Box 61051, Marshalltown, 2107
Release date
29 July 2016
Forward looking statements
Statements in this announcement 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 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
group’s auditors.
Disclaimer
This document may contain forward-looking information and statements about ArcelorMittal South Africa and its
subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements
regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding
future performance.
Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “target” or similar expressions.
Although ArcelorMittal South Africa’s management believes that the expectations reflected in such forward-looking statements are
reasonable, investors and holders of ArcelorMittal South Africa’s securities are cautioned that forward-looking information and
statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the
control of ArcelorMittal South Africa, that could cause actual results and developments to differ materially and adversely from
those expressed in, or implied or projected by, the forward-looking information and statements.
ArcelorMittal South Africa undertakes no obligation to publicly update its forward-looking statements, whether as a result of new
information, future events, or otherwise.
This report is available on ArcelorMittal South Africa’s website at:
www.arcelormittal.com/southafrica
Share queries:
Please call the ArcelorMittal South Africa share call toll free line
on 0800 006 960 or +27 11 370 7850
Date: 29/07/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
