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HVL
HVL
HVL - Highveld Steel and Vanadium Corporation Limited - Interim report for the
six months ended 30 June 2008
HIGHVELD STEEL AND VANADIUM CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1960/001900/06)
Share code: HVL ISIN: ZAE000003422
("Highveld" or "the Corporation")
Interim Report
for the six months ended 30 June 2008
Headline earnings increased by 100 per cent
Group turnover from continuing operations increased by 36 per cent
Group Reviewed Financial Results
The Group`s financial results for the six months ended 30 June 2008 set out
below have been prepared in accordance with the principal accounting policies of
the Group, which comply with International Financial Reporting Standards
("IFRS") and in the manner required by the Companies Act in South Africa and are
consistent with those applied in the Group`s most recent annual financial
statements, except for the Standards and Interpretations as listed below.
These results are presented in terms of IAS 34 applicable to Interim Financial
Reporting.
In the current year, the Group has adopted all of the new and revised Standards
and Interpretations issued by the International Accounting Standards Board ("the
IASB") and the International Financial Reporting Interpretation Committee of the
IASB ("IFRIC"), that are relevant to its operations and effective for
accounting periods beginning on or after 1 January 2008.
The adoption of these new and revised Standards and Interpretations has resulted
in changes in the Group`s accounting policies and are disclosed as follows:
IFRS 8 - Operating Segments
The Group has elected to early adopt this standard with effect from 1 January
2008. The adoption of this standard has resulted in additional disclosures
contained in the condensed group segmental report.
IAS 23 - Borrowing Costs (revised)
The Group has elected to early adopt this standard prospectively with effect
from 1 January 2008. The early adoption amounts to a change in accounting policy
but did not have any impact on the results as the Group did not incur any
borrowing costs on qualifying assets for the period from 1 January 2008.
IFRIC 12 - Service Concession Arrangements
This interpretation had no impact on the Group`s interim results as the Group
does not operate consession arrangements.
IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset, minimum Funding
Requirements and their Interaction. This interpretation had no impact on the
Group`s results as the Group has no plan assets in respect of retirement
benefits.
The IASB has issued Improvements to IFRS - a collection of amendments to
International Financial Reporting Standards in line with their annual
improvement project. It deals with amendments to certain accounting standards
contained in this document which are effective to annual periods beginning on or
after 1 January 2009. The Group does not intend to early adopt these amendments.
Following the restatement and reclassifications as announced in the December
2007 annual report, the comparative information for 30 June 2007 has been
restated.
The impact of the changes in these policies are disclosed in note 6.
The financial information has been reviewed by Ernst & Young Inc. in accordance
with ISRE 2410 "Review of Interim Financial Information Performed by the
Independent Auditors of the entity", whose unmodified review report is available
for inspection at the Corporation`s registered office.
Chairman`s Statement and CEO`s Review
Strategic direction
Highveld has been part of the Evraz Group S.A. for just over a year and has now
become a focused producer of steel and vanadium - bearing slag, the latter
through its steel manufacturing process. Its next objective is to maximise its
steel production, further optimise efficiencies in the steel manufacturing
process and to increase the production of vanadium-bearing slag. An intensive
programme of becoming a Total Productive Organisation is being implemented with
the main driver of reducing "wastage" in the broadest sense of the word and to
improve competitiveness.
All operational divisions are undergoing evaluation with the objective of
increased efficiencies. Further organisational changes are also envisaged in
order to develop a leaner management structure to deliver enhanced decision
making. Service to our clients is another important focus for improvement.
Financial results
The Corporation had its best ever headline earnings in any six month period.
Headline earnings increased from R644 million in 2007 to R1 287 million in 2008.
The improvement was mainly due to significant price increases on both steel and
vanadium products. Operating profit increased by R881 million to R1 882 million
after a depreciation charge of R129 million (2007: R128 million).
Headline earnings per share increased from 649.2 cents in 2007 to 1 297.7 cents
in 2008.
Net cash outflow for the period was R98 million, decreasing the cash on hand to
R670 million from R768 million at 31 December 2007. The cash inflow from
operations amounted to R1 680 million and this was reduced by taxation payments
of R228 million, dividend payments of R1 784 million and capital expenditure of
R240 million.
Business risks
The availability of all services supplied by the Government still remain high on
the list of event risks with the reliability of electricity supply, rail
service and water supply being the most significant over the medium term.
The impact of infrastructural shortcomings and lack of capacity in Government
related sectors of the South African service industry is still posing
unprecendented challenges to business. While impossible to redress the majority
of these in the short term, it remains critical that Government, at all levels,
prioritise capital investment to assist in alleviating pressure on industry,
particularly in relation to electricity supply and rail infrastructure.
In the first half of the year Eskom suffered a serious electricity generation
crisis resulting in a declaration of force majeure. Load shedding and demand
market participation agreements with Eskom during January and February 2008
resulted in significant production losses. Eskom and Government`s power
conservation strategy, which includes possible legislated power rationing, is a
serious future concern.
The reliability of municipal water supply also remains a threat. A number of
unplanned water supply interruptions occurred during the first half of the year.
However, production losses were narrowly averted.
On 19 June 2008, personnel from the Competition Commission visited the
Corporation`s office as part of its investigation into possible price fixing in
the steel industry. The Corporation has co-operated with the authorities on the
matter in making available all the information that was requested.
Operations
Steel
World crude steel production has grown to an annual rate of almost 1.4 billion
tons for the first six months of the year, which is a 5.7 per cent increase over
the same period last year. China continues to be the top producer, with 263
million tons for the first six months of this year, which is 9.6 per cent up on
the same period last year and now accounts for 38 per cent of global
steel production.
Highveld`s gross rolled steel output decreased by 7.3 per cent compared with the
budget. Output was negatively affected by operational interruptions due to
electricity supply constraints, operational difficulties and capital projects.
Major contributing factors to the decrease were problems within Ironmaking and
Continuous Casting, with the Structural Mill and the Plate Mill suffering for
lack of supply from these upstream divisions. These production problems led to a
production loss of 28 000 tons of saleable product against budget.
The Corporation`s total steel sales volumes for the first six months of this
year decreased by 2.4 per cent against budget. Domestic despatches, however,
increased by 12 per cent compared with the budget. Highveld`s priority is to
satisify its South African customers. With the commencement of the new power
station projects and some other projects, it is believed that overall sales to
the domestic market will still remain strong in the medium term, despite
downward pressure on the domestic demand for structurals in the short term.
Domestic and export prices for our steel products have increased considerably in
the first six months in line with international price trends. The Corporation,
however, was not able to take full advantage of the export opportunity due to
production problems, mainly at the beginning of the year, coupled with strong
domestic demand and associated higher prices.
Vanadium
The first six months of 2008 showed a great deal of volatility in the market.
South African producers were adversely affected by power outages due to the
inconsistent performance of Eskom. Chinese producers were also adversely
affected, firstly by disruptive weather conditions in the beginning of the year
and thereafter by power outages. This resulted in demand outstripping supply
with prices peaking at US$90 per kg V for ferrovanadium.
The Hochvanadium joint venture in Austria performed well and sales volumes for
the first six months exceeded budget by 3.8 per cent.
Production at Vanchem during the first six months was only about 80 per cent of
the anticipated volumes. Vanchem was particularly badly affected by power
outages in the form of load shedding during the period. Kiln outages due to non
- continuous operations also negatively affected efficiencies.
At Vanchem good progress was made in implementing the Integrated Water and Waste
Management Plan, with a number of projects either well underway or nearing
completion.
Safety, health, environment and quality
No significant accidents were recorded for the first half of the year. With much
attention being paid to safety and health, it is pleasing to report a steady
decrease in the Corporation`s lost time injury frequency rate from 0.66 in
January 2008 to 0.49 in June 2008.
Highveld continues to monitor the well-being of its workforce and contractors
and operates a range of programmes for occupational health, which includes HIV
wellness and personal well-being. It is pleasing that no reportable occupational
diseases were recorded.
The Corporation`s programme for integrated water and waste management and
emission control improvement continues. With the shortage of electricity in
South Africa, alternatives to improve energy conservation or to generate
electricity internally are being investigated.
The Environmental Management Inspectorate ("EMI") of the Department of
Environmental Affairs and Tourism ("DEAT") issued a report during June 2008
regarding its visit to the Steelworks in November 2007. The inspection formed
part of "Operation Ferro", a national environmental compliance campaign focusing
on the iron, steel and ferro-alloy industries. An appropriate response
had been submitted to DEAT.
In addition, a detailed submission has been sent to DEAT in response to the EMI
report in respect of the visit to Vanchem during August 2007. Subsequently a
meeting was held with DEAT which discussed the way forward. Despite the
undertakings given, DEAT has since advised that it will issue a directive in
terms of the relevant legislation. Discussions with DEAT continue.
Action plans, including the necessary capital expenditure programme, are being
implemented to ensure that all the issues raised by DEAT, where reasonably
practicable, will be addressed to its satisfaction.
Highveld has implemented an integrated SHEQ management system. Currently the
Corporation is ISO 9001 and ISO 14001 certified by TUV Rheinland.
Divestments
The sale of Rand Carbide`s assets (property, plant and equipment and inventories
less certain employee related provisions) to Silicon Smelters (Proprietary)
Limited became effective on 1 February 2008 following regulatory approvals. The
proceeds from the disposal of the assets amounted to R297 million and the after
tax profit on this transaction was R182 million. The purchaser has instituted a
claim against the Corporation relating to a building
structural issue.
Following the disposal of the Transalloys division during 2007, the new owner
has also instituted two claims against the Corporation in respect of the sales
proceeds.
The Corporation is defending both claims of Rand Carbide and Transalloys and all
the parties have agreed to arbitration processes as provided for in the
respective sale of business agreements.
On 21 April 2008, the Corporation entered into definitive agreements with
Vanchem Vanadium Products (Proprietary) Limited, a subsidiary of Duferco
Investment Partners Inc, disposing of the Vanchem division and the shareholding
in South Africa Japan Vanadium (Proprietary) Limited ("SAJV").
All conditions set have been met with an effective date of 29 August 2008.
Capital expenditure
Capital expenditure incurred by the Group during the period amounted to R240
million (2007: R275 million) and the total commitment in respect of future
capital expenditure as at 30 June 2008 is R669 million compared with R471
million at 31 December 2007. This expenditure will be funded from internally
generated cash flows and borrowing facilities, if required.
The capital expenditures are aimed at establishing more reliable operations,
stabilise plant output and contribute to higher profitability.
Black economic empowerment
During the period under review, goods and services worth R386 million (2007:
R277 million) were purchased from a total of 135 (2007: 152) black empowerment
enterprises.
The Corporation is in the process of evaluating alternatives to divest the
required stake in Mapochs mine to a BEE partner to ensure conversion of its old
order mining rights.
Directorate
Sadly, on 28 March 2008 Leslie Boyd, the then Chairman of the Board, passed away
after a short illness. His commitment, contribution and dedication to Highveld
will be long remembered and is sorely missed. He was appointed to the Board on
28 July 1972 and served as Chairman from June 1983 to May 2001 and
again from 9 May 2007.
As the first General Manager, he assisted in establishing the Steelworks, built
its operations and then helped to direct the Corporation as a Board member and
Chairman. He served on the Board under both Anglo American and Evraz ownership
and his experience and integrity was an essential contribution during the recent
changeover in ownership.
Outlook
Domestic demand for all of the Corporation`s steel products is expected to come
under pressure in the short term due to higher than normal stock levels at
merchants. However, international demand and prices should allow the Corporation
to sell the balance of its production, notwithstanding inflationary pressures
jeopardising investment activities in foreign countries.
Vanadium demand should remain stable and prices are expected to remain at
current levels of some US$60 per kg V.
Raw material prices should become more stable and a slight reduction of prices
is envisaged.
The Corporation experienced an increase in excess of 27 per cent on the cost of
energy purchased from Eskom.
Labour costs have increased at a rate in excess of inflation.
As a result of the above, together with general cost increases and the uncertain
capability to continue to transfer the increases to the market, the cost
rationalisation project continues to be a top priority.
Provided that the Rand Dollar exchange rate remains at levels achieved in the
first half of 2008, a modest reduction in the financial performance in respect
of the continuing operations can be expected for the second half of the year.
For and on behalf of the Board
JW Cambell WG Ballandino
Acting Chairman Chief Executive Officer 25 August 2008
Directors:
WG Ballandino (Chief Executive Officer) (Italian), GC Baizini (Italian), CB
Brayshaw, JW Campbell, AV Frolov (Russian), GA Mannina (Swiss), BJT Shongwe and
PS Tatyanin (Russian)
Company secretary:
Mrs CI Lewis
Registered office:
Portion 29 of the farm Schoongezicht No. 308 JS
District eMalahleni, Mpumalanga
P O Box 111, Witbank 1035
Tel: (013) 690-9911 Fax: (013) 690-9033
Transfer secretaries:
Computershare Investor
Services (Proprietary) Limited
70 Marshall Street, Johannesburg
P O Box 61051, Marshalltown 2107
Tel: (011) 370-5000
Fax: (011) 688-5200
Sponsor:
JPMorgan
Condensed consolidated income statements
Reviewed for the
six months ended
30 Jun 2008
Note Rm
CONTINUING OPERATIONS
Revenue 3 915
Operating profit before depreciation 1 637
Depreciation and scrapping of property, plant and
equipment (129)
Change in estimated useful lives of property, plant
and equipment
Operating profit 1 508
Interest and investment income received 83
Finance charges (15)
Profit before taxation 1 576
Taxation charge (553)
Profit after taxation from continuing operations 1 023
DISCONTINUED OPERATIONS
Revenue 902
Operating profit before depreciation 374
Depreciation and scrapping of property, plant and
equipment
Change in estimated useful lives of property, plant
and equipment
Operating profit 374
Profit on disposal of discontinued operation 217
Interest and investment income received 3
Finance charges (10)
Profit before taxation 584
Taxation charge (142)
Profit after taxation from discontinued operations 442
TOTAL OPERATIONS
Revenue 4 4 817
Operating profit before depreciation 2 011
Depreciation and scrapping of property, plant and
equipment (129)
Change in estimated useful lives of property, plant
and equipment
Operating profit 1 882
Profit on disposal of discontinued operation 217
Interest and investment income received 86
Finance charges (25)
Profit before taxation 2 160
Taxation charge (695)
Attributable profit 1 465
Basic earnings per share Cents
From continuing operations 1 032.0
From discontinued operations 445.4
From total operations 1 477.4
Basic earnings per share - diluted
From continuing operations 1 032.0
From discontinued operations 445.4
From total operations 1 477.4
Reconciliation of headline earnings Rm
Attributable profit 1 465
Add/(deduct) after tax effect of:
Profit on disposal of discontinued operation
(including costs of future disposal transactions) 7 (178)
Impairment losses recognised
Net profit on disposal and scrapping of property, plant
and equipment -
Headline earnings 1 287
Headline earnings per share Cents
From continuing operations 1 032.0
From discontinued operations 265.7
From total operations 1 297.7
Headline earnings per share - diluted
From continuing operations 1 032.0
From discontinued operations 265.7
From total operations 1 297.7
Number of shares Million
Ordinary shares in issue as at period-end date * 99.1
Weighted average number of ordinary shares * 99.1
Diluted number of ordinary shares * 99.1
Dividends per share - based on calendar profits Cents
Special dividend proposed and paid 1 800
Final dividend proposed and paid i.r.o. 2006
Special dividend proposed and paid
Reviewed for the
six months ended
Audited for
Restated the year ended
30 Jun 2007 31 Dec 2007
Rm Rm
CONTINUING OPERATIONS
Revenue 2 741 5 378
Operating profit before depreciation 767 1 421
Depreciation and scrapping of property,
plant and equipment (112) (250)
Change in estimated useful lives of
property, plant and equipment (26) -
Operating profit 629 1 171
Interest and investment income received 17 92
Finance charges (27) (64)
Profit before taxation 619 1 199
Taxation charge (248) (146)
Profit after taxation from continuing
operations 371 1 053
DISCONTINUED OPERATIONS
Revenue 1 159 1 780
Operating profit before depreciation 365 569
Depreciation and scrapping of property,
plant and equipment (16) 6
Change in estimated useful lives of
property, plant and equipment 23 -
Operating profit 372 575
Profit on disposal of discontinued operation 572
Interest and investment income received 3 5
Finance charges (28) (4)
Profit before taxation 347 1 148
Taxation charge (74) (298)
Profit after taxation from discontinued
operations 273 850
TOTAL OPERATIONS
Revenue 3 900 7 158
Operating profit before depreciation 1 132 1 990
Depreciation and scrapping of property,
plant and equipment (128) (244)
Change in estimated useful lives of
property, plant and equipment (3) -
Operating profit 1 001 1 746
Profit on disposal of discontinued operation 572
Interest and investment income received 20 97
Finance charges (55) (68)
Profit before taxation 966 2 347
Taxation charge (322) (444)
Attributable profit 644 1 903
Basic earnings per share Cents Cents
From continuing operations 373.2 1 061.9
From discontinued operations 276.0 857.5
From total operations 649.2 1 919.4
Basic earnings per share - diluted
From continuing operations 373.2 1 061.9
From discontinued operations 276.0 857.5
From total operations 649.2 1 919.4
Reconciliation of headline earnings Rm Rm
Attributable profit 644 1 903
Add/(deduct) after tax effect of:
Profit on disposal of discontinued operation
(including costs of future disposal
transactions) (455)
Impairment losses recognised - (7)
Net profit on disposal and scrapping of
property, plant
and equipment - 3
Headline earnings 644 1 444
Headline earnings per share Cents Cents
From continuing operations 373.2 1 058.0
From discontinued operations 276.0 398.8
From total operations 649.2 1 456.8
Headline earnings per share - diluted
From continuing operations 373.2 1 058.0
From discontinued operations 276.0 398.8
From total operations 649.2 1 456.8
Number of shares Million Million
Ordinary shares in issue as at period-end
date * 99.1 99.1
Weighted average number of ordinary shares * 99.1 99.1
Diluted number of ordinary shares * 99.1 99.1
Dividends per share - based on calendar
profits Cents Cents
Special dividend proposed and paid
Final dividend proposed and paid i.r.o. 2006 350 350
Special dividend proposed and paid 100 100
*Rounded to nearest hundred thousand
Condensed consolidated balance sheets
Reviewed as at
30 Jun 2008
Notes Rm
ASSETS
Non - current assets 1 826
Property, plant an d equipment 1 825
Environmental trust investments -
Available for sale investments 1
Current assets 2 868
Assets of disposal group classified as held for sale 8 686
TOTAL ASSETS 5 380
EQUITY AND LIABILITIES
Shareholders` equity 3 123
Non-current liabilities 734
Long-term borrowings -
Long-term provisions 368
Deferred taxation 369
Current liabilities 1 451
Liabilities directly associated with the assets
classified
as held for sale 8 72
TOTAL EQUITY AND LIABILITIES 5 380
Net cash/(borrowings) 3 519
Net asset value - cents per share 3 150
Reviewed as at Audited for the
Restated year ended
30 Jun 2007 31 Dec 2007
Rm Rm
ASSETS
Non - current assets 1 660 1 764
Property, plant an d equipment 1 654 1 763
Environmental trust investments 3 -
Available for sale investments 3 1
Current assets 2 027 2 276
Assets of disposal group classified as
held for sale 1 058 884
TOTAL ASSETS 4 745 4 924
EQUITY AND LI ABILITIES
Shareholders` equity 2 082 3 379
Non - current liabilities 556 723
Long term borrowings 1 -
Long term provisions 247 344
Deferred taxation 308 379
Current liabilities 2 000 749
Liabilities directly associated with the
assets classified
as held for sale 107 73
TOTAL EQUITY AND LIABILITIES 4 745 4 924
Net cash/(borrowings) (340) 785
Net asset value - cents per share 2 100 3 408
Condensed consolidated cash flow statements
Reviewed for the
six months ended Audited for the
Restated year ended
30 Jun 2008 30 Jun 2007 31 Dec 2007
Rm Rm Rm
Cash available from
operations before
taxation paid 1 680 1 068 1 922
Taxation paid (228) (258) (665)
Net cash flows from
operating activities 1 452 810 1 257
Net cash flows
from/(used in)
investing activities 57 (275) 389
Net cash inflow before
financing activities 1 509 535 1 646
Net cash flows
from/(used in)
financing activities
excluding
dividends paid 168 (130) (965)
Dividends paid (1 784) (446) (446)
Net (decrease)/increase in
cash and cash
equivalents (107) (41) 235
Effects of exchange
rate changes on cash
held in foreign
currencies 9 10 22
Cash and equivalents
at beginning of period 768 511 511
Cash and equivalents
at end of period 670 480 768
Condensed consolidated statements of recognised income and expense
Reviewed for the
six months ended Audited for
Restated the year ended
30 Jun 2008 30 Jun 2007 31 Dec 2007
Rm Rm Rm
Currency translation differences 64 6 47
Fair value revaluation - - (3)
Net income recognised directly
in equity 64 6 44
Attributable profit for the
period 1 465 644 1 903
Total recognised income and
expense for the period 1 529 650 1 947
Condensed group segmental reports
The Group is organised into business units based on their products and has
three reportable segments as follows:
Steelworks
The major products of the steel segment are structural steel, plate, coil and
vanadium slag.
Vanadium
The major products of the vanadium segment are vanadium pentoxide,
ferrovanadium and various vandium chemicals.
Ferro-alloys
The major products of the ferro alloys segment are ferrosilicon, char,
ferromanganese and silicomanganese.
No operating segments have been aggregated to form the above reportable
operating segments. Management monitors the operating results of its business
units separately for the purposes of making decisions about resource allocation
and performance assessment. Segment performance is evaluated based on operating
profit.
The following tables present the revenue and operating profit information
regarding the Group`s operating segments.
Reviewed for the six months ended 30 Jun 2008
Continuing operations
Steelworks Vanadium Total
Rm Rm Rm
Revenue
Revenue from external customers 2 612 1 303 3 915
Intersegmental revenue 342 342
Total segment revenue 2 954 1 303 4 257
Discontinued operations
Vanadium Ferro-alloys Total
Rm Rm Rm
Revenue
Revenue from external customers 882 20 902
Intersegmental revenue 2 6 8
Total segment revenue 884 26 910
Reviewed for the six months ended 30 Jun 2007
Restated
Continuing operations
Steelworks Vanadium Total
Rm Rm Rm
Revenue
Revenue from external customers 2 026 715 2 741
Intersegmental revenue 62 62
Total segment revenue 2 088 715 2 803
Discontinued operations
Vanadium Ferro-alloys Total
Rm Rm Rm
Revenue
Revenue from external customers 515 644 1 159
Intersegmental revenue 1 58 59
Total segment revenue 516 702 1 218
Audited for the year ended 31 Dec 2007
Continuing operations
Steelworks Vanadium Total
Rm Rm Rm
Revenue
Revenue from external customers 3 929 1 449 5 378
Intersegmental revenue 135 135
Total segment revenue 4 064 1 449 5 513
Discontinued operations
Vanadium Ferro-alloys Total
Rm Rm Rm
Revenue
Revenue from external customers 957 823 1 780
Intersegmental revenue 181 97 278
Total segment revenue 1 138 920 2 058
Intersegmental revenues are eliminated on consolidation.
Reviewed for the six months ended
30 Jun 2008
Continuing Discontinued Continuing
operations operations Total operations
Operating profit
Steelworks 995 995 419
Vanadium 513 343 856 210
Ferro-alloys 31 31
Total 1 508 374 1 882 629
Audited for the year ended
Restated
30 Jun 2007 31 Dec 2007
Discontinued Continuing Discontinued
operations Total operations operations Total
Operating
profit
Steelworks 419 749 749
Vanadium 335 545 422 458 880
Ferro-
alloys 37 37 117 117
Total 372 1 001 1 171 575 1 746
Notes to the condensed consolidated financial statements
1.Companies Act and JSE Limited Listings Requirements Compliance with the
Companies Act No. 61 of 1973 as well as the Listings Requirements of the JSE
Limited has been maintained throughout the reporting periods.
2.Related party transactions
Transactions entered into between the Group and its related parties during the
reporting periods were arms length transactions between knowledgeable, willing
parties at fair value.
3.Net cash/(borrowings)
Net cash/(borrowings) is calculated by subtracting the financial leases (long-
term debt) and the short term-loans (including loans receivable from
subsidiaries and joint ventures) from the cash and cash equivalents.
4.Supplementary revenue information
Unaudited Unaudited Unaudited
30 Jun 2008 30 Jun 2007 31 Dec 2007
Sales volumes of
major products
Total steel Tons 366 859 381 657 730 228
Vanadium
pentoxide
(Vanchem) kg V2O5 1 789 142 2 173 787 4 276 779
Ferrovanadium and
ferrovanadium
nitride kg V 3 801 365 3 907 417 8 723 085
Vanadium chemicals kg V2O5 553 780 762 627 1 300 759
Vanadium slag tons V2O5 6 830 6 903 14 243
Weighted average
selling prices
achieved for
major products
Total steel $/t 846 702 731
Vanadium
pentoxide
(Vanchem) $/kg V2O5 26 14 15
Ferrovanadium $/kg V 58 34 35
Vanadium chemicals $/kg V2O5 31 16 18
Average R/$
exchange rate 7.65 7.17 7.06
5. Financial
ratios
Current ratio 2.33 1.46 3.84
Market
capitalisation - Rm 15 864 9 221 11 203
6.Impact of
changes in
accounting
policies
The impact of the
changes in
accounting
policies on
earnings per
share for the
2007 comparative
period is as follows:
Basic - Headline -
Basic Diluted Headline Diluted
cents cents cents cents
Earnings per
share 30 June 2007 as
previously reported 648.2 648.2 648.2 648.2
Impact of changes
in accounting policies:
Equity accounting
of joint ventures 2.0 2.0 2.0 2.0
Employee benefits (1.0) (1.0) (1.0) (1.0)
Earning s per
share 30 June
2007 as restated 649.2 649.2 649.2 649.2
7.Disposal of discontinued operation
Following the disposal of the Rand Carbide division during the period under
review, the comparative information for June 2007 has been restated as required
in terms of IFRS 5 Non - current Assets Held for Sale and Discontinued
Operations.
8. Disposal groups
In terms of an European Union competition ruling Highveld is required to dispose
of the Vanchem division and its interest in South Africa Japan Vanadium
(Proprietary) Limited ("SAJV"). The Vanchem division and the interest in SAJV
have been treated as disposal groups for the period to 30 June 2008 and are
reported as discontinued operations. The sale agreements for the Vanchem
division and SAJV have been concluded and the effective date of sale for the
Vanchem division is 29 August 2008. The assets and related liabilities of these
disposal groups are as follows:
Reviewed
Reviewed Restated Audited
30 Jun 2008 30 Jun 2007 31 Dec 2007
Rm Rm Rm
ASSETS
Non-current assets classified
as held for sale 549 560 573
Current assets classified as
held for sale 137 498 311
686 1 058 884
EQUITY AND LIABILITIES
Liabilities directly associated
with assets
classified as held for sale 72 107 73
The cash flows were as follows:
Cash inflow from operating
activities 120 194 417
Cash outflow from investing
activities (37) (75) (117)
Cash outflow from financing
activities - (62) (66)
Total cash inflow 83 57 234
9.Condensed statements of changes in equity
Translation and
Share capital share-based
and share payment Fair value
premium reserves reserves
Rm Rm Rm
2007
Currency translation
differences 6
Net income recognised
directly in equity 6 -
Attributable profit for
the period as previously stated
Total recognised income
and expense for the period 6 -
Balance at 31 December
2006 as audited 585 54 3
Dividends paid
Change in accounting policy
Recognition of share-
based payments (7)
Restated balance at 30
June 2007 - Reviewed 585 53 3
Currency translation
differences 41
Fair value adjustments (3)
Net income/(expense)
recognised directly in equity 41 (3)
Attributable profit for
the period
Total recognised income
and expense for the period 41 (3)
Balance at 31 December
2007 - audited 585 94 -
Interim - 2008
Currency translation
differences 64
Net income recognised
directly in equity 64 -
Attributable profit for
the period
Total recognised income
and expense for the period 64 -
Balance at 31 December
2007 - audited 585 94 -
Dividends paid
Balance at 30 June 2008 -
reviewed 585 158 -
Retained
profit Total
Rm Rm
2007
Currency translation differences 6
Net income recognised directly in equity - 6
Attributable profit for the period as previously stated 643 643
Total recognised income and expense for the period 643 649
Balance at 31 December 2006 as audited 1 243 1 885
Dividends paid (446) (446)
Change in accounting policy 1 1
Recognition of share-based payments (7)
Restated balance at 30 June 2007 - Reviewed 1 441 2 082
Currency translation differences 41
Fair value adjustments (3)
Net income/(expense) recognised directly in equity - 38
Attributable profit for the period 1 259 1 259
Total recognised income and expense for the period 1 259 1 297
Balance at 31 December 2007 - audited 2 700 3 379
Interim - 2008
Currency translation differences 64
Net income recognised directly in equity - 64
Attributable profit for the period 1 465 1 465
Total recognised income and expense for the period 1 465 1 529
Balance at 31 December 2007 - audited 2 700 3 379
Dividends paid (1 785) (1 785)
Balance at 30 June 2008 - reviewed 2 380 3 123
10. Contingent liabilities
As required by the Mineral and Petroleum Resources Development Act, a guarantee
amounting to R190 million (2007: R176 million) was issued in favour of the
Department of Minerals and Energy for the unscheduled closure of the Mapochs
mine.
www.highveldsteel.co.za
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