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HVL
HVL
HVL - Highveld - Interim Report For The Six Months Ended 30 June 2009
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 2009
* Group revenue from continued operations decreased by 51%
* Headline earnings per share from continued operations decreased by 86%
* Positive signs of some domestic market recovery after a very difficult
December 2008 to May 2009 period
* Appointment of new Financial Director
Group Reviewed Financial Results
Basis of preparation
The Group`s interim condensed consolidated financial statements for the six
months ended 30 June 2009 set out below have been prepared in accordance with
IFRS and IAS 34 Interim Financial Reporting. The interim condensed consolidated
financial statements do not include all the information and disclosures required
in the annual financial statements, and should be read in conjunction with the
Group`s annual financial statements as at 31 December 2008.
Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group`s annual financial statements for the year ended 31
December 2008, except for the adoption of new Standards and Interpretations as
of 1 January 2009, noted below:
- IFRS 2 - Share-based Payment - Vesting Conditions and Cancellations
The Standard has been amended to clarify the definition of vesting conditions
and to prescribe the accounting treatment of an award that is effectively
cancelled because a non-vesting condition is not satisfied. The adoption of this
amendment did not have any impact on the financial position or performance of
the Group.
- IFRS 7 - Financial Instruments: Disclosures
The amended Standard requires additional disclosure about fair value measurement
and liquidity risk. These amendments did not have any significant impact on the
Group`s results.
- IAS 1 - Revised Presentation of Financial Statements
The revised Standard separates owner and non-owner changes in equity. The
statement of changes in equity includes only details of transactions with
owners, with non-owner changes in equity presented as a single line.
In addition, the Standard introduces the statement of comprehensive income:
it presents all items of recognised income and expense, either in one single
statement, or in two linked statements. The Group has elected to present two
statements.
- IAS 39 and IFRS 7 - Amendment - Reclassification of Financial Assets
The Standards have been amended to permit an entity to reclassify
non-derivative financial assets (other than those designated at fair value
through profit or loss by the entity upon initial recognition) out of the fair
value through profit or loss category in particular circumstances. The amendment
also permits an entity to transfer from the available-for-sale category to the
loans and receivables category a financial asset that would have met the
definition of loans and receivables (if the financial asset had not been
designated as available-for-sale), if the entity has the intention and ability
to hold that financial asset for the foreseeable future. The adoption of these
amendments did not have any impact on the financial position or performance of
the Group.
- IAS 32 - Financial Instruments: Presentation and IAS 1 - Puttable Financial
Instruments and Obligations Arising on Liquidation
The Standards have been amended to allow a limited scope exception for puttable
financial instruments to be classified as equity if they fulfill a number of
specific criteria. The adoption of these amendments did not have any impact on
the financial position or performance of the Group.
- IFRIC 13 - Customer Loyalty Programmes
This interpretation requires customer loyalty credits to be accounted for as a
separate component of the sales transaction in which they are granted. As the
Group has no customer loyalty programmes, this interpretation had no impact on
the Group.
- IFRIC 9 - Re-assessment of Embedded Derivatives and IAS 39 - Financial
Instruments: Recognition and Measurement
These amendments to IFRIC 9 require an entity to assess whether an embedded
derivative must be separated from a host contract when the entity reclassifies a
hybrid financial asset out of the fair value through profit or loss category.
This assessment is to be made on circumstances that existed on the later of the
date the entity first became party to the contract and the date of any contract
amendments that significantly change the cash flows of the contract. IAS 39 now
states that if an embedded derivative cannot be reliably measured, the entire
hybrid instrument must remain classified as at fair value through profit or
loss. As the Group has no embedded derivatives, these amendments had no impact
on the Group`s results.
- IFRIC 15 - Agreement for the Construction of Real Estate
This interpretation clarifies when and how revenue and related expenses from the
sale of a real estate unit should be recognised if an agreement between a
developer and a buyer is reached before the construction of the real estate is
completed. As the Group has no real estate under construction, this
interpretation has had no impact in the financial position or results.
- IFRIC 16 - Hedges of a Net Investment in a Foreign Operation
IFRIC 16 provides guidance on the accounting for a hedge of a net investment in
terms of identifying the foreign currency risks that qualify for hedge
accounting in the hedge of a net investment. As the Group does not hedge any net
investment in a foreign operation, this interpretation had no impact on the
financial position or results.
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, except for IFRS 5 amendment which is effective 1 July
2009. The Group adopted the amendments which are effective 1 January 2009 with
no material impact on the results of the Group. The financial information has
been reviewed by Ernst & Young Inc. in accordance with ISRE 2410 "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity", whose unmodified review report is available for inspection at the
Corporation`s registered office.
First Half 2009 Review by Acting Chairman and Chief Executive Officer
Business strategy
When considering the cautiously optimistic perception of the market on the
turnaround of global economies, it would seem as if this turnaround has bottomed
out to a large extent, with some signs of improved demand, especially for steel.
With the expected upswing in demand, even though it would be gradual, the
Corporation must position itself to ensure that the increased demand can be met
in a profitable manner.
In this regard, the Corporation has adjusted its labour restructuring and
retrenchment programme to align its human resources requirements with the
expected increase in production. The cost savings drive remains a top priority
with a continuous focus on reducing working capital.
Financial results
The economic slowdown is clearly evident in the Corporation`s headline earnings
for the first six months of 2009 at R145 million, compared to the headline
earnings of R1 287 million in the same period last year. Operating profit before
depreciation for the period was R182 million, which decreased by R1 829 million
from R2 011 million in 2008.
Net cash outflow for the period was R533 million, decreasing the cash on hand to
R1 068 million from R1 601 million as at 31 December 2008. The net cash position
as at 30 June 2008 was R519 million.
Business risks
The dominant business risks remain the depressed markets, including prices, and
significant variations in exchange rates. The Corporation is in continuous
liaison with Transnet to manage the unavailability of sufficient rail transport.
The supply of services from eMalahleni Municipality, particularly water, is also
a high business risk that requires continual monitoring.
Operations
Steel
After two consecutive years of world crude steel production exceeding 1.3
billion tons, the global crude steel production has decreased substantially to
549 million tons for the first six months of 2009, a 21.3% decrease from the
same period last year. Of this production, 267 million tons were produced in
China, representing 48.5% of total world crude steel production.
During the six months under review, Highveld`s gross steel output (production)
decreased by 35% compared to the output of the same period in 2008.
Total sales volumes decreased by 25% compared to the sales of the same period
during 2008. Most notably, sales of casted products (blooms and slabs) increased
from 2 084 tons (zero exports) in the first six months of 2008 to 117 743 tons
in the first six months of 2009, with almost 100% exported.
Overall and as a result of the combined effects of the extremely weak domestic
demand and extensive destocking by local merchants, export sales increased
dramatically and accounted for 53% of total sales, compared to 9% during the
same period in 2008.
Vanadium
Concomitant with the decrease in steel production, the vanadium slag production
also decreased substantially. A total of 18 280 tons of vanadium slag, with 2
314 551 kg of V in V2O5 was produced for the first six months of 2009, compared
to 32 385 tons of vanadium slag and 3 771 357 kg of V in V2O5 in the same period
last year.
The vanadium prices have recovered somewhat during the last few months with an
average FeV price for June of $22.56/kg compared to the lowest price in the
period of $18.96/kg.
Safety, health, environment and quality
It is with deep regret that the Board reports the fatality of an employee from a
gassing incident in May 2009. More focus has been placed on safety with, inter
alia, the review of the Hazard Identification Risk Assessment programme and the
implementation of additional safety training.
Depositary Receipt Agreement
The Corporation has had an unsponsored Depositary Receipt facility since October
1981 listed on the NASDAQ market. The NASDAQ listing terminated effective 31
July 2009, following the lapsing of the exemption period of three years granted
by the U.S. Securities and Exchange Commission to companies that were traded on
NASDAQ and exempt from registration, such as Highveld, in terms of the United
States Securities Exchange Act of 1933.
The Corporation has since resolved to improve the unsponsored facility to a
sponsored Level 1 Depositary Receipt (DR) programme in conjunction with The Bank
of New York Mellon as exclusive depositary bank, thereby providing its DR
investors, inter alia, with a more transparent facility and better structured
communication channel through the depositary bank.
Unsponsored DR`s are facilities that are established based on investor demand
with no involvement of the Issuer Company. Sponsored DR`s are controlled by the
Issuer Company by means of a written deposit agreement, being a tripartite
agreement entered into between the Issuer Company, the depositary bank and the
investors, setting out the provisions of the programme as well as the various
rights and obligations of the parties.
Change in directorate
We are pleased to announce that Mrs Bernie de Beer has been appointed as
Financial Director of the Corporation as of 26 August 2009. We wish Bernie all
the best with the new appointment and challenges.
Outlook for 2009
The outlook for the steel market has improved somewhat from the low demand seen
in the first half of the year with increased economic activity in certain global
markets. Slight price increases for some of the flat and casted products have
been achieved in the second half of the year. It is anticipated that, subject to
demand, particularly in the domestic market, the operational levels would be
increased systematically to full production during the later part of the year.
Subsequent to the evaluation of the net cash position of the Corporation at the
end of this reporting period, the marginally improved market and increased
production levels, together with the continuous strict implementation of the
cost management programme, the Board is of the opinion that the Corporation
remains a going concern.
In view of the uncertainties in the market, the Board has decided to pass the
payment of an interim dividend but will review its distribution options on a
regular basis.
J W Campbell W G Ballandino
(Acting Chairman) (Chief Executive Officer)
26 August 2009
Directors: J W Campbell (Acting Chairman), W G Ballandino
(Chief Executive Officer) (Italian), G C Baizini (Italian), C B Brayshaw, B E de
Beer, A V Frolov (Russian), G A Mannina (Swiss), B J T Shongwe and P S Tatyanin
(Russian)
Company Secretary: Mrs C I Lewis
Registered office:
Portion 93 of the farm
Schoongezicht No. 308 JS
District eMalahleni
Mpumalanga
PO Box 111
Witbank 1035
Tel: (013) 690-9911
Fax: (013) 690-9293
Transfer secretaries:
Computershare Investor Services
(Proprietary) Limited
70 Marshall Street
Johannesburg
PO Box 61051
Marshalltown 2107
Tel: (011) 370-5000
Fax: (011) 688-5200
Condensed Consolidated Income Statements
Reviewed Unaudited
for the three for the three
months ended months ended
30 Jun 2009 30 Jun 2008
Notes Rm Rm
CONTINUING OPERATIONS
Revenue from the sale of goods 978 2 218
Operating profit before
Depreciation 4 1 051
Depreciation, scrapping and
changes in estimated useful lives of
property, plant and equipment (57) (65)
Operating (loss)/profit (53) 986
Interest and investment income
received 16 46
Finance costs (16) (7)
(Loss)/Profit before tax (53) 1 025
Income tax credit/(expense) 6 69 (388)
Profit for the period/year from
continuing operations 16 637
DISCONTINUED OPERATIONS
Revenue from the sale of goods - 548
Operating profit before
depreciation
(EBITDA) - 269
Depreciation, scrapping and
changes in estimated useful lives of
property, plant and equipment - -
Operating profit - 269
Profit on disposal of discontinued
operations 4 - (4)
Interest and investment income
received - 2
Finance costs - (5)
Profit before tax - 262
Income tax expense - (78)
Profit for the period/year from
discontinued operations - 184
TOTAL OPERATIONS
Revenue from the sale of goods 978 2 766
Operating profit before
depreciation (EBITDA) 4 1 320
Depreciation, scrapping and
changes in estimated useful
lives of property, plant and equipment (57) (65)
Operating (loss)/profit (53) 1 255
Profit on disposal of discontinued
operations 4 - (4)
Interest and investment income
received 16 48
Finance costs (16) (12)
(Loss)/Profit before tax (53) 1 287
Income tax credit/(expense) 6 69 (466)
Profit for the period/year 16 821
Earnings per share - basic and diluted Cents Cents
From continuing operations 15.9 642.7
From discontinued operations - 185.2
From total operations 15.9 827.9
Reviewed Reviewed Audited
for the six for the six for the
months ended months ended year ended
30 Jun 2009 30 Jun 2008 31 Dec 2008
Rm Rm Rm
CONTINUING OPERATIONS
Revenue from the sale
of goods 1 904 3 915 8 022
Operating profit before
depreciation 182 1 637 3 321
Depreciation, scrapping and
changes in estimated useful
lives of property,
plant and equipment (117) (129) (252)
Operating (loss)/profit 65 1 508 3 069
Interest and investment
income received 49 83 161
Finance costs (33) (15) (39)
(Loss)/Profit before tax 81 1 576 3 191
Income tax credit/(expense) 65 (553) (1 015)
Profit for the period/year
from continuing operations 146 1 023 2 176
DISCONTINUED OPERATIONS
Revenue from the sale of
goods - 902 1 288
Operating profit before
depreciation (EBITDA) - 374 610
Depreciation, scrapping and
changes in estimated
useful lives of property,
plant and equipment - - -
Operating profit - 374 610
Profit on disposal of
discontinued operations - 217 13
Interest and investment income
received - 3 8
Finance costs - (10) (16)
Profit before tax - 584 615
Income tax expense - (142) (252)
Profit for the period/year
from discontinued operations - 442 363
TOTAL OPERATIONS
Revenue from the sale of
goods 1 904 4 817 9 310
Operating profit before
depreciation (EBITDA) 182 2 011 3 931
Depreciation, scrapping and
changes in estimated useful
lives of property,
plant and equipment (117) (129) (252)
Operating (loss)/profit 65 1 882 3 679
Profit on disposal of
discontinued operations - 217 13
Interest and investment income
received 49 86 169
Finance costs (33) (25) (55)
(Loss)/Profit before tax 81 2 160 3 806
Income tax credit/(expense) 65 (695) (1 267)
Profit for the period/year 146 1 465 2 539
Earnings per share - basic
and diluted Cents Cents Cents
From continuing operations 146.9 1 032.0 2 194.6
From discontinued
operations - 445.4 366.1
From total operations 146.9 1 477.4 2 560.7
Condensed Consolidated Statements of Financial Position
Reviewed as at
30 Jun 2009
Notes Rm
ASSETS
Non-current assets 2 000
Property, plant and equipment 1 952
Deferred tax asset 48
Available-for-sale investments -
Current assets 2 681
Inventories 995
Trade and other receivables 606
Prepaid expenditure 12
Cash and short-term deposits 3 1 068
Assets of disposal group classified as
held-for-sale 8 -
TOTAL ASSETS 4 681
EQUITY AND LIABILITIES
Total equity 2 943
Non-current liabilities 759
Provisions 442
Deferred tax liability 317
Current liabilities 979
Income tax payable 6 225
Other current liabilities 754
Liabilities directly associated with the
assets classified as held-for-sale 8 -
TOTAL LIABILITIES 1 738
TOTAL EQUITY AND LIABILITIES 4 681
Net cash 3 1 068
Net asset value - cents per share 2 968
Reviewed as at Audited as at
30 Jun 2008 31 Dec 2008
Rm Rm
ASSETS
Non-current assets 1 826 1 956
Property, plant and equipment 1 825 1 956
Deferred tax asset - -
Available-for-sale investments 1 -
Current assets 2 868 3 381
Inventories 541 831
Trade and other receivables 1 657 769
Prepaid expenditure - 180
Cash and short-term deposits 670 1 601
Assets of disposal group classified as
held-for-sale 686 -
TOTAL ASSETS 5 380 5 337
EQUITY AND LIABILITIES
Total equity 3 123 2 842
Non-current liabilities 734 739
Provisions 368 422
Deferred tax liability 366 317
Current liabilities 1 451 1 756
Income tax payable 153 722
Other current liabilities 1 298 1 034
Liabilities directly associated with the
assets classified as held-for-sale 72 -
TOTAL LIABILITIES 2 257 2 495
TOTAL EQUITY AND LIABILITIES 5 380 5 337
Net cash 519 1 601
Net asset value - cents per share 3 150 2 866
Condensed Consolidated Statements of Cash Flows
Reviewed
for the six
months ended
30 Jun 2009
Note Rm
Cash flows from operating activities
Cash generated by operations before taxation paid 58
Income tax paid (474)
Net cash (used in)/from operating activities (416)
Cash flows from investing activities
Proceeds from disposal of discontinued operations -
Additions to property, plant and equipment (89)
Net cash (used in)/from investing activities (89)
Cash flows from financing activities
Decrease in loan to joint venture -
Dividends paid -
Net cash used in financing activities -
Effects of exchange rate changes on cash held in
foreign currencies (28)
Net (decrease)/increase in cash and cash equivalents (533)
Cash and cash equivalents at the beginning of the
period/year 1 601
Cash and cash equivalents at the end of the
period/year 3 1 068
Reviewed Audited
for the six for the
months ended year ended
30 Jun 2008 31 Dec 2008
Rm Rm
Cash flows from operating activities
Cash generated by operations
before taxation paid 1 680 3 994
Income tax paid (228) (530)
Net cash (used in)/from
operating activities 1 452 3 464
Cash flows from investing activities
Proceeds from disposal of
discontinued operations 1 055
Additions to property, plant and equipment 57 (543)
Net cash (used in)/from investing
activities 57 512
Cash flows from financing activities
Decrease in loan to joint venture 168 17
Dividends paid (1 784) (3 173)
Net cash used in financing activities (1 616) (3 156)
Effects of exchange rate changes on cash held
in foreign currencies 9 13
Net (decrease)/increase in cash and cash
equivalents (98) 833
Cash and cash equivalents at the beginning of
the period/year 768 768
Cash and cash equivalents at the end of the
period/year 670 1 601
Condensed Consolidated Statements of Comprehensive Income
Reviewed Unaudited Reviewed
for the three for the three for the six
months ended months ended months ended
30 Jun 2009 30 Jun 2008 30 Jun 2009
Rm Rm Rm
Profit for the
period/year 16 821 146
Other comprehensive (loss)/income:
Currency translation
differences (35) 2 (45)
Total comprehensive (loss)/income
for the period/year (19) 823 101
Reviewed Audited
for the six for the
months ended year ended
30 Jun 2008 31 Dec 2008
Rm Rm
Profit for the period/year 1 465 2 539
Other comprehensive (loss)/income:
Currency translation differences 64 97
Total comprehensive (loss)/income for
the period/year 1 529 2 636
Headline Earnings Per Share
Reviewed Unaudited Reviewed
for the three for the three for the six
months ended months ended months ended
30 Jun 2009 30 Jun 2008 30 Jun 2009
Rm Rm Rm
Reconciliation of headline earnings
Profit for the
period/year 16 821 146
Add/(Deduct) after tax
effect of:
Loss/(Profit) on disposal
of discontinued
operations - 3 -
Impairment losses
recognised - - -
(Profit)/Loss on disposal
and scrapping of property,
plant and equipment (2) - (1)
Headline earnings 14 824 145
Headline earnings
From continuing
operations 14 701 145
From discontinued
operations - 122 -
Headline earnings 14 824 145
Earnings per share
- headline and diluted Cents Cents Cents
From continuing operations 13.5 707.1 146.3
From discontinued operations - 122.4 -
From total operations 13.5 829.5 146.3
Number of shares Million Million Million
Ordinary shares in issue
as at end date * 99.2 99.1 99.2
Weighted average number of
ordinary shares * 99.2 99.1 99.2
Diluted number of ordinary
shares * 99.2 99.1 99.2
Reviewed Audited
for the six for the
months ended year ended
30 Jun 2008 31 Dec 2008
Rm Rm
Reconciliation of headline earnings
Profit for the period/year 1 465 2 539
Add/(Deduct) after tax effect of:
Loss/(Profit) on disposal of
discontinued operations (178) 73
Impairment losses recognised - 5
(Profit)/Loss on disposal and scrapping
of property, plant and equipment - 11
Headline earnings 1 287 2 628
Headline earnings
From continuing operations 1 023 2 192
From discontinued operations 263 436
Headline earnings 1 287 2 628
Earnings per share
- headline and diluted Cents Cents
From continuing operations 1 032.0 2 210.6
From discontinued operations 265.7 439.5
From total operations 1 297.7 2 650.1
Number of shares Million Million
Ordinary shares in issue as at end
date * 99.1 99.2
Weighted average number of ordinary
shares * 99.1 99.2
Diluted number of ordinary shares * 99.1 99.2
* Rounded to nearest hundred thousand.
Condensed Consolidated Statements of Changes in Equity
Share capital Translation Fair
and share and other value
premium reserves reserves
Rm Rm Rm
2008
Balance at 1 January 2008
- Audited 585 94 -
Total comprehensive income for
the quarter 62
Balance at 31 March 2008
- Unaudited 585 156 -
Total comprehensive income for
the quarter 2
Dividends
Balance at 30 June 2008
- Reviewed 585 158 -
Total comprehensive
(expense)/income for
the quarter (12) (1)
Dividends
Balance at 30 September
2008 - Unaudited 585 146 (1)
Total comprehensive income
for the quarter 45 1
Balance at 31 December 2008
- Audited 585 191 -
Total comprehensive
(expense)/income for the quarter (10)
2009
Balance at 31 March 2009
- Reviewed 585 181 -
Total comprehensive
(expense)/income for the quarter (35)
Balance at 30 June 2009
- Reviewed 585 146 -
Retained
earnings Total
Rm Rm
2008
Balance at 1 January 2008 - Audited 2 700 3 379
Total comprehensive income for the quarter 644 706
Balance at 31 March 2008 - Unaudited 3 344 4 085
Total comprehensive income for the quarter 821 823
Dividends (1 785) (1 785)
Balance at 30 June 2008 - Reviewed 2 380 3 123
Total comprehensive (expense)/income for
the quarter 642 629
Dividends (1 388) (1 388)
Balance at 30 September 2008 - Unaudited 1 634 2 364
Total comprehensive income for the quarter 432 478
Balance at 31 December 2008 - Audited 2 066 2 842
Total comprehensive (expense)/income for
the quarter 130 120
2009
Balance at 31 March 2009 - Reviewed 2 196 2 962
Total comprehensive (expense)/income for
the quarter 16 (19)
Balance at 30 June 2009 - Reviewed 2 212 2 943
Reviewed Unaudited Reviewed
for the three for the three for the six
months ended months ended months ended
30 Jun 2009 30 Jun 2008 30 Jun 2009
Cents Cents Cents
Dividends per share
Dividends declared
and paid - 1 800 -
Reviewed Audited
for the six for the
months ended year ended
30 Jun 2008 31 Dec 2008
Cents Cents
Dividends per share
Dividends declared and paid 1 800 3 200
Condensed Consolidated 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 magnetite iron ore, vanadium slag,
structural steel, plate and coil.
Vanadium
The major product of the continuing vanadium segment is ferrovanadium. Vanadium
pentoxide, ferrovanadium and various vanadium chemicals are included in the
discontinued vanadium segment.
Ferro-alloys
The major products of the ferro-alloys segment are ferrosilicon, char,
ferromanganese and silicomanganese and this segment is included under
discontinued operations.
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, operating profit and total assets
information regarding the Group`s operating segments:
Reviewed for the three months ended
30 Jun 2009
Continuing operations
Steelworks Vanadium Total
Rm Rm Rm
Revenue from the sale of goods
Revenue from external customers 771 207 978
Inter segment - revenues 46 - 46
Total segment revenue 817 207 1 024
Unaudited for the three months ended
30 Jun 2008
Continuing operations
Steelworks Vanadium Total
Rm Rm Rm
Revenue from the sale of goods
Revenue from external customers 1 476 742 2 218
Inter segment - revenues 172 - 172
Total segment revenue 1 648 742 2 390
Discontinued operations
Vanadium Ferro-alloys Total
Rm Rm Rm
Revenue from the sale of goods
Revenue from external customers 548 - 548
Inter segment - revenues 1 - 1
Total segment revenue 549 - 549
Reviewed for the six months ended
30 Jun 2009
Continuing operations
Steelworks Vanadium Total
Rm Rm Rm
Revenue from the sale of goods
Revenue from external customers 1 411 493 1 904
Inter segment - revenues 112 - 112
Total segment revenue 1 523 493 2 016
Reviewed for the six months ended
30 Jun 2008
Continuing operations
Steelworks Vanadium Total
Rm Rm Rm
Revenue from the sale of goods
Revenue from external customers 2 612 1 303 3 915
Inter segment - revenues 342 342
Total segment revenue 2 954 1 303 4 257
Discontinued operations
Vanadium Ferro-alloys Total
Rm Rm Rm
Revenue from the sale of goods
Revenue from external customers 882 20 902
Inter segment - revenues 2 6 8
Total segment revenue 884 26 910
Audited for the year ended
31 Dec 2008
Continuing operations
Steelworks Vanadium Total
Rm Rm Rm
Revenue from the sale of goods
Revenue from external customers 5 542 2 480 8 022
Inter segment - revenues 529 - 529
Total segment revenue 6 071 2 480 8 551
Discontinued operations
Vanadium Ferro-alloys Total
Rm Rm Rm
Revenue from the sale of goods
Revenue from external customers 1 268 20 1 288
Inter segment - revenues 4 6 10
Total segment revenue 1 272 26 1 298
Inter segment - revenues are eliminated on consolidation.
Reviewed for the three months ended
30 Jun 2009
Continuing Discontinued
operations operations Total
Rm Rm Rm
Operating profit
Steelworks (55) - (55)
Vanadium 2 - 2
Ferro-alloys - - -
Total (53) - (53)
Unaudited for the three months ended
30 Jun 2008
Continuing Discontinued
operations operations Total
Rm Rm Rm
Operating profit
Steelworks 656 - 656
Vanadium 330 256 586
Ferro-alloys - 13 13
Total 986 269 1 255
Reviewed for the six months
ended 30 Jun 2009
Continuing Discontinued
operations operations Total
Rm Rm Rm
Operating profit
Steelworks 16 - 16
Vanadium 49 - 49
Ferro-alloys - - -
Total 65 - 65
Reviewed for the six months
ended 30 Jun 2008
Continuing Discontinued
operations operations Total
Rm Rm Rm
Operating profit
Steelworks 995 995
Vanadium 513 343 856
Ferro-alloys 31 31
Total 1 508 374 1 882
Audited for the year
ended 31 Dec 2008
Continuing Discontinued
operations operations Total
Rm Rm Rm
Operating profit
Steelworks 2 105 - 2 105
Vanadium 964 577 1 541
Ferro-alloys - 33 33
Total 3 069 610 3 679
Reviewed as at
30 Jun 2009
Continuing Discontinued
operations operations Total
Rm Rm Rm
Total assets
Steelworks 4 245 - 4 245
Vanadium 436 - 436
Total 4 681 - 4 681
Reviewed as at
30 Jun 2008
Continuing Discontinued
operations operations Total
Rm Rm Rm
Total assets
Steelworks 3 868 - 3 868
Vanadium 826 686 1 512
Total 4 694 686 5 380
Audited as at
31 Dec 2008
Continuing Discontinued
operations operations Total
Rm Rm Rm
Total assets
Steelworks 4 891 - 4 891
Vanadium 446 - 446
Total 5 337 - 5 337
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.
Steel sales to East Metals S.A. (a fellow subsidiary of Mastercroft Limited)
amounted to R403 million for the six months ended 30 June 2009. This constitutes
29% of total steel revenue for the year to date, compared to 0.59% for the year
ended 31 December 2008.
Steel sales to East Metals S.A. (a fellow subsidiary of Mastercroft Limited)
amounted to R366 million for the three months ended 30 June 2009. This
constitutes 26% of total steel revenue for the year to date, compared to 0.59%
for the year ended 31 December 2008.
3. Net cash
Net cash is calculated as follows:
Reviewed as at Reviewed as at Audited as at
30 Jun 2009 30 Jun 2008 31 Dec 2008
Rm Rm Rm
Cash and cash
equivalents 1 068 670 1 601
Overdraft included in
other current
liabilities - (151) -
Net cash 1 068 519 1 601
4. (Loss)/Profit on disposal of discontinued operations
Reviewed for the Unaudited for the Reviewed for the
three months ended three months ended six months ended
30 Jun 2009 30 Jun 2008 30 Jun 2009
Rm Rm Rm
Total proceeds - - -
Net asset
value disposed of - (4) -
Profit on
disposal before
taxation - (4) -
Taxation
charge - 1 -
(Loss)/Profit
on disposal
after taxation - (3) -
Reviewed for the six Audited for the
months ended year ended
30 Jun 2008 31 Dec 2008
Rm Rm
Total proceeds 305 1 244
Net asset value disposed of (88) (1 231)
Profit on disposal before taxation 217 13
Taxation charge (39) (86)
(Loss)/Profit on disposal
after taxation 178 (73)
5. Supplementary revenue information - Unaudited
For the three For the three For the six
months ended months ended months ended
30 Jun 2009 30 Jun 2008 30 Jun 2009
Sales volumes of major products
Continuing operations
Total steel Tons 197 441 183 826 275 176
Ferrovanadium kg V 1 301 145 1 271 771 2 376 658
Vanadium slag Tons V2O5 - -
Fines ore Tons 85 294 - 193 646
Weighted average selling prices
achieved for major products
Continuing operations
Total steel $/t 521 942 545
Ferrovanadium $/kg V 19 80 23
Fines ore $/t 3 - 6
Average R/$ exchange rate 8.48 7.77 9.21
For the six For the
months ended year ended
30 Jun 2008 31 Dec 2008
Sales volumes of major products
Continuing operations
Total steel Tons 366 859 668 116
Ferrovanadium kg V 2 873 133 5 194 834
Vanadium slag Tons V2O5 1 582 13 580
Fines ore Tons - 130 225
Weighted average selling prices
achieved for major products
Continuing operations
Total steel $/t 846 953
Ferrovanadium $/kg V 62 60
Fines ore $/t - 42
Average R/$ exchange rate 7.65 8.00
6. Income taxation
The Group has assessed tax losses which arose in its foreign operations. These
tax losses arose as a result of tax deductions exceeding taxable profit. A
deferred tax asset has been recognised in respect of these losses as management
believes that these losses will be recoverable in the foreseeable future. These
losses have been reflected in the computation of the Group estimated average
annual effective income tax rate and resulted in a credit to the income tax
amount (which is based on the best estimate of the weighted average annual
income tax rate for the full financial year).
7. Financial ratios - Unaudited
For the three For the three For the six
months ended months ended months ended
30 Jun 2009 30 Jun 2008 30 Jun 2009
Current ratio 2.74 2.33 2.74
Market capitalisation - Rm 6 346 15 864 6 346
For the six For the
months ended year ended
30 Jun 2008 31 Dec 2008
Current ratio 2.33 1.93
Market capitalisation - Rm 15 864 6 345
8. Disposal groups
In terms of a 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 had
been treated as disposal groups for the period to 30 June 2008 and were 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
was 29 August 2008. The assets and related liabilities and cash flows of these
disposal groups were as follows:
Reviewed Reviewed Audited
30 Jun 2009 30 Jun 2008 31 Dec 2008
Rm Rm Rm
ASSETS
Non-current assets classified
as held-for-sale - 549 -
Current assets classified as
held-for-sale - 137 -
- 686 -
EQUITY AND LIABILITIES
Liabilities directly associated
with assets classified as
held-for-sale - 72 -
Reviewed for the Unaudited for the Reviewed for the
three months ended three months ended six months ended
30 Jun 2009 30 Jun 2008 30 Jun 2009
Rm Rm Rm
The cash flows were
as follows:
Cash inflow from
operating
activities - 49 -
Cash (outflow)/inflow
from investing
activities excluding
disposal
proceeds - (26) -
Cash outflow from
financing
activities - - -
Total cash
inflow - 23 -
Reviewed for the six Audited for the
months ended year ended
30 Jun 2008 31 Dec 2008
Rm Rm
The cash flows were
as follows:
Cash inflow from
operating activities 120 323
Cash (outflow)/inflow
from investing activities
excluding disposal proceeds (37) (58)
Cash outflow from
financing activities - -
Total cash inflow 83 265
9. Retrenchment costs
The Corporation has incurred retrenchment costs to the value of R27 million for
the six months ended 30 June 2009. Retrenchment costs for the quarter ended 30
June 2009 amounted to R19 million.
10. Contingent liabilities
As required by the Mineral and Petroleum Resources Development Act, a guarantee
amounting to R235 million (2008: R191 million) was issued in favour of the
Department of Minerals and Energy for the unscheduled closure of Mapochs Mine.
In terms of the Corporation`s employment policies, certain employees could
become eligible for post-retirement medical aid benefits at any time in the
future prior to their retirement subject to certain conditions. The potential
liability, should they become medical scheme members in the future, is R55
million (2008: R55 million).
11. Subsequent events
There have been no reportable events after the reporting period until the date
of this announcement.
26 August 2009
Sponsor
J.P. Morgan
Date: 26/08/2009 16:31:01 Produced by the JSE SENS Department.
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