| Wed 11 May 2011, 7:05 | | ACL - ArcelorMittal South Africa Limited - Unaudited group earnings and |
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ACL
ACL
ACL - ArcelorMittal South Africa Limited - Unaudited group earnings and
physical information for the quarter ended 31 March 2011
ArcelorMittal South Africa Limited
Registration number: 1989/002164/06
Share code: ACL
ISIN: ZAE 000134961
("ArcelorMittal South Africa", "the company" or "the group")
Unaudited group earnings and physical information for the quarter ended
31 March 2011
Financial review
In a significant turnaround from the R496 million loss reported for quarter
four 2010, attributable earnings of R184 million were achieved for the first
quarter of 2011.
This came on the back of a 36% increase in domestic sales volumes, a 6%
increase in average realised selling prices in Rand terms and a 20% increase
in liquid steel production. The Rand/US Dollar exchange rate weakened by 3%
over the quarter, resulting in a net foreign exchange gain of R97 million
compared to a loss of R75 million for the previous quarter. The cash cost of
steel sales on a Rand per tonne basis decreased by 7% compared to the
previous quarter as a consequence of a rise in production volumes of both
flat and long products.
Attributable earnings for this quarter were 75% lower than those reported for
the corresponding period last year. This was due to a 7% decrease in liquid
steel production, a 3% decrease in sales volumes and a 20% increase in the
cash cost per tonne of steel sales. The higher costs were mainly driven by
significant increases in the prices of imported coking coals, iron ore, local
metallurgical coals and alloys.
Market review
International
Apparent global steel consumption rebounded strongly during the quarter amid
continued global economic recovery. The steel industry`s landscape has
changed rapidly, particularly after the international financial crisis, with
emerging economies like China, India, Brazil and Russia accounting for an
increased share of global consumption while demand in developed economies
remained sluggish.
Export sales decreased by 26% compared to the previous quarter, mainly due to
higher domestic sales, and by 7% compared to the corresponding period last
year due to lower production. The Group`s average realised export price in US
Dollars was 18% higher compared to the corresponding period last year and 4%
higher than the previous quarter.
Domestic
The South African economy registered a growth rate of 3.2% in the first
quarter of 2011, with total fixed capital formation remaining weak at 2.4%.
The Rand was strong against the US Dollar averaging around R7.00. This had a
negative impact on the overall performance potential of key exporting sectors
such as manufacturing and mining. The construction sector remains depressed
with minimal activity coming through from both commercial and residential
segments.
Domestic steel sales increased by 36% compared to the previous quarter,
driven by re-stocking activities and, to a lesser extent, modest recovery in
underlying demand. Domestic sales remained in line with the same quarter last
year.
Segmental review
Flat Carbon Steel Products
Earnings before interest, tax, depreciation and amortisation (EBITDA) of R459
million were 48% lower than the corresponding period last year but materially
better than the loss of R400 million for the previous quarter. Sales volumes
increased by 15% against the corresponding period last year and 23% compared
to the previous quarter whilst average realised prices in Rand terms were 2%
down and 6% higher, respectively.
The production cash cost of hot rolled coil increased by 25% year-on-year and
was down 3% compared to the previous quarter. Liquid steel production of 1
million tonnes remained at the same level as a year ago, and increased by 21%
compared to the last quarter.
Long Carbon Steel Products
The R15 million EBITDA loss was materially lower than the R389 million EBITDA
reported in the corresponding period last year and a marginal improvement on
the R35 million loss for the previous quarter. Sales volumes dropped 36% on
this time last year and 23% quarter-on-quarter. Net realised sales prices in
Rand terms were on average 14% higher than first quarter 2010 and 6% higher
than the previous quarter.
The production cash cost of billets increased by 41% over the corresponding
period last year and 8% compared to the previous quarter. The equivalent
figures for liquid steel production over the same periods was 23% lower and
15% higher respectively. The cause of the decline was the unstable blast
furnace conditions experienced at Newcastle Works following a planned stop in
December 2010. Production was stabilised during January and the furnace is
now operating normally.
Coke and Chemicals
EBITDA of R222 million was 5% higher year-on-year and 16% lower quarter-on-
quarter. Sales volumes were 37% higher than a year ago and 17% over the
previous quarter whilst average realised prices in Rand terms were down 2%
and 12% respectively.
Dispute with Sishen Iron Ore Company (Proprietary) Limited
The arbitration hearing has been set for May 2012.
Broad-based black economic empowerment transaction ("B-BBEE")
The cautionary announcement relating to the B-BBEE transaction was renewed on
SENS on 25 March 2011. The satisfaction of conditions precedent remains
outstanding and the parties are in the process of extending the fulfilment
period.
Proposed acquisition of ICT
The fulfilment of conditions precedent as part of the agreement to acquire
the shares of Imperial Crown Trading 289 (Proprietary) Limited ("ICT")
remains outstanding.
Safety
Tragically, a fatal incident occurred at Vanderbijlpark Works in February
2011. The company extends its deepest condolences to the family, friends and
colleagues of the deceased.
The lost time injury frequency rate improved to 1.08 compared to 1.76
achieved in first quarter last year and 1.42 achieved in the previous
quarter.
Environment
The company has spent R1 032 million over the past five years and further
investment is planned in order to stay abreast of changing legislation. The
focus will be on air related improvements over the next four to 10 year
period in order to comply with the new Air Quality Act. Water related
improvements also feature prominently. Of particular note over the first
quarter 2011 was the completion of the installation of a new emission
abatement system at the sinter plant at Vanderbijlpark Works; final
commissioning will be completed during the second quarter of 2011.
Particulate emissions from this significant emission source will be reduced
by more than 70%.
The Carbon Tax Discussion Paper published on 13 December 2010 remains a
concern as the current proposal will have a severe financial impact on
ArcelorMittal South Africa. The company is engaging with the relevant state
departments to seek a more feasible alternative. At this stage the steel
sector has only limited potential to reduce greenhouse gases significantly
and this makes the climate change discussion particularly challenging for
ArcelorMittal South Africa.
Contingent liabilities
The two cases referred by the Competition Commission to the Competition
Tribunal, namely the Barnes Fencing Industries Limited case relating to
alleged price and exclusionary conduct on the sale of low-carbon wire-rod
products and the case of alleged price fixing and market division in respect
of certain long steel products, remain disclosed as contingent liabilities.
The facts of these two cases remain unchanged to those reported as at the end
of December 2010.
Competition Commission investigations
There is no progress to report on the four cases under investigation by the
Competition Commission.
Changes to the board of directors
Ms FA du Plessis was appointed as an independent non-executive director and
member of the Audit and Risk Committee with effect from 4 May 2011.
Outlook for quarter two 2011
The financial results for the second quarter of 2011 are expected to show a
significant improvement on the first quarter of 2011 as a result of higher
expected sales volumes and prices, partially offset by higher raw material
input costs and electricity tariffs. Movements in the Rand/US Dollar exchange
rate will have an important bearing on earnings.
Group income statement
Quarter ended Year ended
R million 31 March 31 March 31 December 31 December
2011 2010 2010 2010
Revenue 7 777 7 507 6 832 30 224
Flat Carbon Steel 5 562 4 837 4 404 19 434
Products
Long Carbon Steel 1 945 2 415 2 218 9 769
Products
Coke and Chemicals 687 516 621 2 449
Intergroup (417) (261) (411) (1 428)
eliminations
Profit/(loss) before 648 1 449 (219) 3 522
depreciation,
amortisation and
impairment
Flat Carbon Steel 459 877 (400) 1 442
Products
Long Carbon Steel (15) 389 (35) 1 090
Products
Coke and Chemicals 222 211 264 1 029
Corporate and other (18) (28) (48) (39)
Depreciation and (350) (343) (344) (1 371)
amortisation
Flat Carbon Steel (282) (276) (273) (1 095)
Products
Long Carbon Steel (66) (67) (66) (264)
Products
Coke and Chemicals (10) (10) (12) (44)
Corporate and other 8 10 7 32
Profit/(loss) from 298 1 106 (563) 2 151
operations
Flat Carbon Steel 177 601 (673) 347
Products
Long Carbon Steel (81) 322 (101) 826
Products
Coke and Chemicals 212 201 252 985
Corporate and other (10) (18) (41) (7)
Finance and 6 15 19 71
investment income
Finance costs 37 (107) (157) (507)
Interest expenses on (1) (2) (6) (8)
bank overdrafts and
loans
Interest expense on (18) (20) (15) (77)
finance lease
obligations
Discounting rate (28) (25) (100)
adjustment of the non-
current provisions
Net foreign exchange 97 (12) (75) (150)
profit/(losses) on
financing activities
Unwinding of the (41) (45) (36) (172)
discounting effect in
the present valued
carrying amount of
the non-current
provisions
(Loss)/income after (62) 26 (53) 122
tax from equity
accounted investments
Profit/(loss) for the 279 1 040 (754) 1 837
period before tax
Income tax expense (95) (295) 258 (492)
Profit/(loss) from 184 745 (496) 1 345
ordinary activities
for the period
Attributable to: 184 745 (496) 1 345
Owners of company
Attributable 46 186 (124) 335
earnings/(loss) per
share (cents)
Additional information
Quarter ended Year ended
R million 31 March 31 March 31 December 31 December
2011 2010 2010 2010
Reconciliation of
headline
earnings/(loss)
Profit/(loss) for the 184 745 (496) 1 345
period
Adjusted for:
- loss on disposal or 15 4 1 44
scrapping of assets
- tax effect (4) (1) (12)
Headline 195 748 (495) 1 377
earnings/(loss) for
the period
Headline 49 186 (123) 343
earnings/(loss) per
share (cents)
Physical information
Quarter ended Year ended
`000 tonnes 31 March 31 March 31 December 31 December
2011 2010 2010 2010
Flat Carbon Steel
Products
Liquid steel 1 052 1 052 866 3 814
production
Sales 991 860 808 3 348
Long Carbon Steel
Products
Liquid steel 385 497 334 1 860
production
Sales 302 471 391 1 693
Total
Liquid steel 1 437 1 549 1 200 5 674
production
Sales 1 293 1 331 1 199 5 041
- Local 896 904 661 3 414
- Export 397 427 538 1 627
Local sales as % of 69 68 55 68
total sales
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).
Registered office:
ArcelorMittal South Africa Limited, Room N3-5, Main Building, Delfos
Boulevard, Vanderbijlpark, 1911
Directors:
Non-executive: MJN Njeke* (Chairman), DK Chugh, CPD Cornier#,
FA du Plessis*, M Macdonald*, S Maheshwari, LP Mondi, DCG Murray*,
ND Orleyn*, AMHO Poupart-Lafarge#
Executive: N Nyembezi-Heita (Chief Executive Officer),
RH Torlage (Chief Financial Officer)
Citizen of India?#Citizen of France?*Independent non-executive
Company Secretary:
Premium Corporate Consulting Services (Proprietary) Limited
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited, 87 Maude Street, Sandton,
2146. Private Bag X9933, Sandton, 2146
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg, 2001. PO Box 61051, Marshalltown, Johannesburg, 2107
This report is available on ArcelorMittal South Africa`s website at:
http://www.arcelormittal.com/southafrica/
Share queries: Please call the ArcelorMittal South Africa share care
toll free on 0800 006 960 or +27 11 370 7850.
11 May 2011
Vanderbijlpark
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Date: 11/05/2011 07:05:01 Produced by the JSE SENS Department.
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