| Mon 5 Mar 2001, 0:00 | | Highveld Steel And Vanadium Corporation Limited - |
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HIGHVELD STEEL AND VANADIUM CORPORATION LIMITED
Registration no. 1960/001900/06
(Incorporated in the Republic of South Africa)
A member of the Anglo American plc group
Abridged Chairman's Review and Final Distributions to Shareholders
Headline earnings increased by 79,8% Columbus losses substantially lowe
Financial results
The reporting period was characterised by strong upward price movement in the
first half, which was more than reversed in the latter part of the year.
Nevertheless, operations were maintained at full capacity for the entire period
and with substantially lower losses in the Columbus Joint Venture and a
weakening in the rand, an operating profit of R121,5 million was achieved
compared to a loss of R79,4 million in 1999. After charging net interest of
R65,4 million (1999: R32,3 million) and a tax credit of R32,4 million (1999:
R168,3 million tax credit), the profit attributable to shareholders for the
year was R88,5 million compared with R56,6 million in 1999. This includes R21,9
million (1999: R132,6 million loss) being Highveld's share of the Columbus
Joint Venture loss for the period.
Headline earnings increased by 79,8 per cent to R115,6 million (1999: R64,3
million) equivalent to 118,6 cents per share (1999: 66,1 cents per share).
Mainly as a result of reduced working capital, there was a cash inflow of R116
million for the six months to December. This reduced the cash outflow for the
year to R39,4 million compared with an outflow of R423,6 million in 1999,
increasing total net debt to R551 million and the debt to equity ratio to 0,29
from 0,27 in 1999.
In view of the results achieved, the Board has decided to pay a final ordinary
dividend of 30 cents per share. The total dividend for the year is thus 50
cents, compared with 30 cents per share in 1999.
Carbon steel and vanadium
The International Iron and Steel Institute estimated that world steel
consumption in 2000 was once again a record, increasing by 5,8 per cent to 752
million tons. The latest estimates of production also indicate a record at 828
million tons, an increase of 7,4 per cent over last year. Unfortunately the
substantial and rapid rise in output exceeded demand by mid-year and
consequently an inventory build-up occurred which will take time to correct.
These factors had a severe impact on international steel prices, particularly
for hot rolled coil, and prices quickly declined to the extremely low levels
which prevailed in 1998.
As previously reported, the group's steel production was brought up to capacity
operation toward the end of 1999 and this was maintained throughout the year
under review.
In South Africa, production rose by 2,8 per cent to 7 million tons, mainly as a
result of increased domestic sales of consumer related products following the
lowering of interest rates, and was aided by the strong demand on international
markets in the first half of the year. It is pleasing to report that the use of
construction related products increased marginally for the first time in
several years with some projects which were approved towards the end of 1999
having a positive impact. Consumption in South Africa increased by 6 per cent
to almost 4 million tons.
Demand for vanadium was strong during 2000 and, while there are no completely
accurate statistics, consumption was probably an annual record. Nevertheless an
oversupply situation prevailed for most of the year and there is little
evidence that this situation will be rectified in the short-term. Thus prices
came under pressure during the second quarter and deteriorated for the
remainder of the year. Highveld continued to supply vanadium slag to Vametco
near Brits, which effectively kept the equivalent of 8 per cent of primary
production out of the vanadium market by replacing Vametco's mined ore.
Production was maintained on kilns no. 2 and 3 at Vanchem. The modernisation of
kiln no. 1, to increase its capacity to that of kiln no. 2, continued and,
dependent on market conditions, it may be commissioned during the second
quarter of 2001.
Production of ferrovanadium continued to improve throughout the year and
satisfactory sales of vanadium chemicals were achieved.
Ferro-alloys
Rand Carbide maintained full production of ferrosilicon to satisfy continued
strong local demand. Export prices for ferrosilicon were extremely soft in all
markets throughout the year.
Production of metallurgical char and electrode paste was flexed to match the
reduced local demand.
Export prices of manganese alloys produced at Transalloys improved during the
early part of the year but deteriorated significantly from mid-year. Full
capacity utilisation was maintained but as the market deteriorated the
opportunity was taken to perform extended maintenance on the furnaces.
Rheem
It was resolved that the Rheem division was non-core and consequently
negotiations are in progress for its sale in 2001. The beverage can plant
ceased production in September due to unsuccessful negotiation to supply
Coca-Cola with cans.
Columbus Stainless
Demand and conversion margins for stainless steel firmed during the first half
of the year and then weakened sharply due to high inventory levels, nickel
price volatility and trade actions by China which disrupted the normal import
channels. This weakness is expected to continue through the first quarter of
2001 before more favourable supply/demand patterns resume.
Operational performance showed good progress with saleable production
increasing by 15 per cent to 433 907 tons and cold rolled production increasing
by 20,5 per cent to 158 869 tons.
Steel plant throughput and quality continued to improve. Slab production at 531
812 tons was up 10,6 per cent and the highest monthly throughput of 47 914 tons
was achieved in September.
The local market performed below expectations, however Columbus sales grew by
replacing imports, and sales at 97 596 tons were 9,0 per cent up on 1999.
Investment continued in the automotive sector and the Motor Industry
Development Programme (MIDP) was confirmed through to 2007.
Manpower
The corporation spent R21,4 million during the year on training and developing
employees and on bursaries which represented 5,2 per cent of the total direct
labour costs for the year.
The employment equity committee met regularly and good progress has been made
in setting and meeting employment equity objectives. The corporation timeously
submitted its group employment equity plan to the Department of Labour. The
scope of the divisional employment equity committees has been expanded to
incorporate wider aspects of human resource development.
The corporation's training and development plan, in terms of the Skills
Development Act, was submitted to the Manufacturing, Engineering and Related
Services Education and Training Authority (MERSETA) in December 2000.
Safety, health and environmental matters
It is pleasing to report that the safety performance of the corporation showed
satisfactory improvement over 1999, with the disabling injury frequency rate
improving from 2,43 accidents per 200 000 hours worked to 1,52 in 2000.
Management focus on further improvement continues.
During April 2000 the corporation outsourced the occupational health care
function to African Oxygen Health Care (AFROHC) and a focused effort to
minimise occupational diseases continues.
The programme leading to accreditation in terms of the ISO 14001 environmental
management system continued during the period under review with the aim of the
first divisions complying during 2001.
Outlook
It is planned that the group's operations will continue at full capacity in
2001, although this may prove difficult in the light of the decline in the
United States economy and pending trade actions against South Africa from both
the United States and Canada.
Vanadium prices are likely to remain low with excess capacity, both new and
expanded, overhanging the market. Similarly, with carbon and stainless steel
prices starting the year at very low levels, earnings will be under severe
pressure in the first half of the year.
Notwithstanding the steeper than anticipated decline in the United States
economy, it is expected that world economic growth will recover and that
production adjustments by less competitive producers will cause steel prices to
firm in the second half of the year. Despite this, it will be difficult to
maintain the group's earnings at the same level as in 2000.
General
Due to volatile market conditions, the year proved difficult, despite which
improved and better quality earnings were achieved. I thank Trevor Jones, his
management and all employees for their concerted efforts.
Market conditions at the start of 2001 are adverse, but I remain confident that
Highveld will overcome the challenges presented to it.
For and on behalf of the Board
L Boyd (Chairman)
5 March 2001
Results for the year ended 31 December 2000
ABRIDGED AUDITED CONSOLIDATED INCOME STATEMENTS
for the years ended 31 December
2000 1999
R'000 R'000
Revenue 4 521 895 3 477 124
Operating profit/(loss) 121 530 (79 377)
Net interest paid (65 447) (32 270)
Taxation 32 415 168 270
Profit attributable to Highveld
shareholders 88 498 56 623
Profit attributable to Highveld
shareholders 88 498 56 623
Add/(less) after tax effect of:
Goodwill written off - 8 079
Discontinued operation 27 960 -
Profit on disposal of
unlisted investment (2 982) (814)
Loss on disposal of property, plant
and equipment 2 120 409
Headline earnings 115 596 64 297
Weighted average number
of shares in issue during the year 97 500 348 97 318 133
Attributable earnings per share
(cents) 90,8 58,2
Headline earnings per share (cents) 118,6 66,1
Dividends per share attributable to
calendar profits (cents) 50,0 30,0
ABRIDGED AUDITED CONSOLIDATED BALANCE SHEETS
as at 31 December
2000 1999
R'000 R'000
ASSETS
Property, plant and equipment 2 527 886 2 579 497
Investments 10 839 10 887
Current assets 1 949 221 1 744 272
TOTAL ASSETS 4 487 946 4 334 656
EQUITY AND LIABILITIES
Shareholders' equity 1 928 494 1 874 152
Deferred taxation 465 500 493 344
Long-term liabilities 717 344 856 829
Current liabilities 1 376 608 1 110 331
TOTAL EQUITY AND LIABILITIES 4 487 946 4 334 656
Debt to equity ratio-percentage 29 27
Net worth - cents/share 1 977 1 925
ABRIDGED AUDITED CONSOLIDATED CASH FLOW statementS
for the years ended 31 December
2000 1999
R'000 R'000
Net cash inflow/(outflow) from
operating activities 114 139 (227 230)
Net cash outflow from investing
activities (153 541) (196 368)
Net cash outflow (39 402) (423 598)
Financed as follows:
Net cash outflow from financing
activities (11 792) (77 102)
Decrease in cash on hand 51 194 500 700
Notice of final ordinary dividend
On Monday, 5 March 2001, the directors of the corporation declared a final
dividend no. 53 on the ordinary shares for the year ended 31 December 2000, as
follows:
Amount (South African currency) 30 cents per share
Last day to register for dividend (and for changes
Of address or dividend instructions) Friday, 23 March 2001
Registers closed from Saturday, 24 March 2001
to (inclusive) Saturday, 31 March 2001
Ex-dividend on the JSE Securities Exchange
South Africa Monday, 26 March 2001
Payment date of dividend Friday, 4 May 2001
The full conditions relating to the dividend may be inspected at the registered
office of the corporation and the office of its transfer secretaries.
By order of the Board
J Theiss Witbank
(Company Secretary) 5 March 2001
The annual report will be posted to all registered shareholders on or about 22
March 2001
Enquiries may be directed to e-mail address: cornia@hiveld.co.za
Registered Office Transfer Secretaries
Portion 29 of the farm Computershare Services Limited
Schoongezicht no. 308 JS Second Floor, Edura, 41 Fox Street
District Witbank Johannesburg, 2001
Mpumalanga (P O Box 61051, Marshalltown, 2107)
(P O Box 111, Witbank, 1035) Tel: (011) 370-7700
Tel: (013) 690-9911 Fax: (011) 836-0792
Fax: (013) 690-9033 (011) 838-6496
DIRECTORS: L Boyd (Chairman), T E Jones (Chief Executive Officer), E Barnardo,
W F E Bragg (British), C B Brayshaw, J A Chegwidden, BE Davison, E K Diack, A
Harris, DPMartin,
L Matteucci, Ms DRMotsepe, G R Pardoe, Dr A J Pienaar, B J T Shongwe, A J
Trahar, M Winstanley (British)
ALTERNATE
DIRECTORS: DBPfaff, GF Young
Company Secretary: J Theiss
