| Wed 16 May 2007, 8:00 | | MLA - Mittal Steel South Africa - Unaudited Group |
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MLA
MLA
MLA - Mittal Steel South Africa - Unaudited Group Earnings and Physical
Information for the quarter ended 31 March 2007
Mittal Steel South Africa Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1989/002164/06)
Share Code: MLA
ISIN: ZAE000064044
("Mittal Steel South Africa" or "the Company")
Unaudited Group Earnings and Physical Information for the quarter ended 31 March
2007
FINANCIAL RESULTS
Headline earnings for the quarter of R1 504 million increased by 19% compared to
the previous quarter. This was mainly driven by higher domestic sales, higher
international sales prices, an improved sales mix and, in comparison with
quarter one last year, a substantially weaker Rand/US Dollar exchange rate. This
was partially offset by an increase in input material costs and lower export
volumes.
MARKET REVIEW
International
Export volumes for the quarter remained in line with the previous quarter but
decreased by 43% compared to the corresponding period last year due to higher
domestic sales and lower production volumes.
The international demand for steel remained strong in all major regions and the
high prices experienced during the latter part of last year continued to prevail
during the past quarter with further price increases experienced during quarter
two of this year. The average prices for our export product range increased by
27% compared to quarter one last year.
Domestic
Domestic despatches for the quarter were very strong and increased by 13%
compared to the previous quarter and 15% compared to the corresponding period
last year. This was mainly driven by an increase in demand, predominantly from
the building and construction sector, while the weaker Rand against the US
Dollar stimulated demand from downstream export orientated industries.
PRODUCTION
Liquid steel production for the quarter decreased by 10% compared to the
previous quarter and by 5% compared to the corresponding period last year. This
was mainly due to the reline of Blast Furnace D at Vanderbijlpark, which
commenced during the middle of February 2007, as well as production problems
experienced on the Electric Arc Furnace route at Vanderbijlpark.
COST
Production cash cost of hot rolled coil increased by 14% compared to the first
quarter last year and by 11% compared to the previous quarter, while the cash
cost of billets increased by 18% and 8% respectively. The increase, compared to
quarter one last year, was mainly driven by an increase in the cost of domestic
coals, scrap, imported iron ore pellets, tin, nickel, aluminium and ferro alloys
while the lower production volumes increased our fixed cost expressed on a Rand
per ton basis. The cost of galvanised material increased by 5% compared to the
previous quarter and 42% compared to the corresponding period last year, as a
result of the increase in zinc prices.
In order to continue to service our domestic and key export customers during the
reline period of Blast Furnace D at Vanderbijlpark, we imported 135 000 tonnes
of slabs at a higher cost than our own production cost on a delivered basis.
Approximately 50% of these slabs were consumed during the past quarter while the
balance will be used during the second quarter of this year.
CONTINGENT LIABILITIES
The Alternative Dispute Resolution (ADR) process followed with SARS regarding
the disallowance of the tax deduction of the payments made in terms of the
Business Assistance Agreement is still in progress, with a response from SARS
expected before the end of the second quarter. The full amount at risk is R403
million of tax plus interest. An amount equal to 20% of the tax effect was
accounted for at the 2006 year end.
In the case at the Competition Tribunal on alleged excessive pricing brought by
the gold miners, Harmony and DRD Gold, the Competition Tribunal ruled that
Mittal Steel South Africa contravened section 8(a) of the Competition Act by
charging excessive prices for its flat products. However they dismissed the
complaint that the Company induced its customers not to deal with competitors.
We have already lodged an appeal against this ruling. Dates for arguments on
administrative penalties are set for the last three days of July 2007. No
provision has been raised and no contingent liability quantified in respect of
this ruling.
During the past quarter a complaint was referred to the Competition Tribunal
involving accusations by Barnes Fencing Industries of price and payment
condition discriminations on domestic sales of low carbon wire rod products.
Mittal Steel South Africa filed its answering affidavit on 26 April 2007 and is
still awaiting a date to be set for a hearing. We are confident of our case and
no provision has been raised nor any contingent liability quantified in respect
of this complaint.
OUTLOOK
We expect the results of the second quarter of 2007 to improve marginally
compared to the past quarter, driven mainly by higher international sales prices
and an improved sales mix. The improvement will however, be limited by increases
in the cost of rail transport, scrap and alloys, as well as lower sales volumes
following the lower production levels experienced during the first quarter.
GROUP INCOME STATEMENT
Quarter ended Year
ended
31 31 31 31
March March December December
2007 2006 2006 2006
Rm Rm Rm Rm
Revenue 7 242 5 800 6 333 25 363
Flat Steel Products 4 831 3 848 4 354 17 350
Long Steel Products 2 260 1 865 1 883 7 691
Coke and Chemicals 432 221 331 1 033
Inter group eliminations (281) (134) (235) (711)
Operating profit 1 941 996 1 686 5 833
Flat Steel Products 1 191 535 999 3 550
Long Steel Products 646 433 597 2 100
Coke and Chemicals 119 27 75 184
Corporate and Other (15) 1 15 (1)
Gains/(losses) on changes in
foreign exchange rates and
financial instruments 199 (9) (310) 480
Net interest income 74 34 29 193
Income from investments 1 1 4 7
Income from equity accounted
investments before taxation 32 55 214 195
Income tax expense (743) (393) (359) (2 062)
Profit from ordinary activities 1 504 684 1 264 4 646
Profit attributable to:
* Ordinary shareholders 1 504 684 1 264 4 646
Additional information
Headline earnings 1 504 684 1 264 4 646
Performance per ordinary share
Attributable earnings per share
(cents) 337 153 284 1 042
Headline earnings per share (cents) 337 153 284 1 042
PHYSICAL INFORMATION
Quarter ended Year
ended
31 31 31 31
March March December December
`000 tonnes 2007 2006 2006 2006
Flat Steel Products
Liquid steel production 1 053 1 146 1 213 4 863
Sales 1 021 1 092 943 4 268
Long Steel Products
Liquid steel production 526 522 546 2 192
Sales 488 507 423 1 926
Total
Liquid steel production 1 579 1 668 1 759 7 055
Sales 1 509 1 599 1 366 6 194
* Local 1 187 1 034 1 052 4 400
* Export 322 565 314 1 794
* Local sales as % of total sales 79 65 77 71
Registered Office
Mittal Steel South Africa Limited
Room N3-5, Main Building
Delfos Boulevard
Vanderbijlpark, 1911
Transfer Secretaries
Computershare Investor Services
2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Directors:
Dr KDK Mokhele* (Chairman), EM Reato (Chief Executive Officer), DK Chugh*#, EK
Diack*, S Maheshwari*#, JJA Mashaba, M Mukherjee*#, MJN Njeke*, ND Orleyn*, HJ
Verster, M Wurth*+
* Non-executive # Citizen of India + Citizen of Luxembourg
Company Secretary:
Xoliswa Motswai
FORWARD-LOOKING STATEMENTS
Certain 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
known and unknown risks and uncertainties and can be affected by other factors,
that 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).
This report is available on the Mittal Steel South Africa web site at:
http://www.mittalsteelsa.com.
Share queries: Please call the Mittal Steel Share care toll free on 0800 006
960 or +27 11 370 7850 if calling from outside South Africa
Date: 16/05/2007 08:00:01 Produced by the JSE SENS Department.
