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EHS
EHS
EHS - Evraz Highveld Steel and Vanadium Limited - Group unaudited financial
results
Evraz Highveld Steel and Vanadium Limited
Registration number: 1960/001900/06
(Incorporated in the Republic of South Africa)
Share code: EHS
ISIN ZAE000146171
("the Company")
GROUP UNAUDITED FINANCIAL RESULTS
Basis of preparation
The Group`s condensed consolidated financial statements for the nine months
ended 30 September 2011 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, including the Standards and
Interpretations as listed below.
These results are presented in terms of International Accounting Standards
("IAS") 34 applicable to Interim Financial Reporting.
Significant accounting policies
The accounting policies adopted and methods of computation are consistent
with those of the previous financial year ended 31 December 2010, except
for the adoption of the following new and amended IFRS standards and IFRIC
interpretations during the current period as of 1 January 2011:
(i) IAS 32, Classification of rights issues (Amended)
ii) IAS 24, Related party disclosures (Amended)
iii) IFRIC 14, Pre-payments of a minimum funding requirement (Amended)
iv) IFRIC 19, Extinguishing financial liabilities with equity instruments
v) May 2010 Improvements to IFRS (improvements effective for the current
financial year).
The Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective.
Where necessary, disclosures have been updated in accordance with these
standards, amendments or interpretations. The adoption thereof did not
have an impact on the results, cash flows or financial position of the
group in the current period.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
30 Sep 30 Sep 31 Dec
2011 2010 2010
Rm Rm Rm
ASSETS
Non-current assets 1 853 1 825 1 661
Property, plant and 1 693 1 825 1 607
equipment
Deferred tax asset 160 - 54
Current assets 2 297 2 732 2 402
Inventories 713 1 181 1 084
Trade and other receivables 832 976 826
and pre-payments
Cash and short-term 752 575 492
deposits
TOTAL ASSETS 4 150 4 557 4 063
EQUITY AND LIABILITIES
Total equity 2 556 2 904 2 510
Non-current liabilities 583 603 536
Provisions 583 519 536
Deferred tax liability - 84 -
Current liabilities 1 011 1 050 1 017
Trade and other payables 749 773 745
Income tax payable 40 79 54
Provisions 222 198 218
TOTAL EQUITY AND 4 150 4 557 4 063
LIABILITIES
Net asset value - cents per 2 578 2 928 2 532
share
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Unaudited Unaudited Audited
for the for the for the for the for the
three three nine nine year
months months months months ended
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
2011 2010 2011 2010 2010
Note Rm Rm Rm Rm Rm
Sale of goods 1 249 1 372 4 234 3 911 5 125
Revenue 1 249 1 372 4 234 3 911 5 125
Cost of sales (1 099) (1 256) (3 783) (3 697) (5 031)
Gross profit 150 116 451 214 94
Selling and (64) (85) (237) (217) (301)
distribution costs
Administrative (76) (73) (231) (268) (353)
expenses
Other operating 5 (203) (16) (123) (42) (263)
expenses
Operating loss (193) (58) (140) (313) (823)
Finance costs (8) (12) (28) (37) (49)
Finance income 6 10 20 29 36
Loss before tax (195) (60) (148) (321) (836)
Income tax credit 6 78 32 117 149 287
Loss for the (117) (28) (31) (172) (549)
period/year
Reviewed for the
Reviewed for the six months ended
six months ended
30 Jun 2011 30 Jun 2010
Note Rm Rm
Sale of goods 2 985 2 539
Revenue 2 985 2 539
Cost of sales (2 684) (2 441)
Gross profit 301 98
Selling and (173) (132)
distribution costs
Administrative (155) (195)
expenses
Other operating 5 80 (26)
expenses
Operating loss 53 (255)
Finance costs (20) (25)
Finance income 14 19
Loss before tax 47 (261)
Income tax credit 6 39 117
Loss for the 86 (144)
period/year
Cents Cents Cents Cents Cents
Loss per share - (118.0) (28.2) (31.3) (173.5) (553.7)
basic and diluted
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Unaudited Unaudited Audited
for the for the for the for the for the
three three nine nine year
months months months months ended
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
2011 2010 2011 2010 2010
Rm Rm Rm Rm Rm
Loss for the (117) (28) (31) (172) (549)
period/year
Other
comprehensive
income/(loss):
Exchange 50 2 77 2 (15)
differences on
translation of
foreign
operations
Total (67) (26) 46 (170) (564)
comprehensive
(loss)/income
for the
period/year
HEADLINE EARNINGS PER SHARE
Unaudited Unaudited Unaudited Unaudited Audited
for the for the for the for the for the
three three nine nine year
months months months months ended
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
2011 2010 2011 2010 2010
Rm Rm Rm Rm Rm
Reconciliation
of headline
earnings/(loss)
Loss for the (117) (28) (31) (172) (549)
period/year
Add after tax
effect of:
Net (1) (2) 3 4 166
(profit)/loss on
disposal and
scrapping of
property, plant
and equipment
Headline loss (118) (30) (28) (168) (383)
Cents Cents Cents Cents Cents
Loss per share - (119.0) (30.3) (28.2) (169.4) (386.3)
headline and
diluted
Million Million Million Million Million
Number of shares
Ordinary shares 99.2 99.2 99.2 99.2 99.2
in issue as at
end date *+
* Rounded to
nearest hundred
thousand.
+ Agree to
weighted average
and diluted
number of
ordinary shares.
Unaudited Reviewed
for the for the
six six
months months
ended ended
30 Jun 30 Jun
2011 2010
Rm Rm
Reconciliation
of headline
earnings/(loss)
Loss for the 86 (144)
period/year
Add after tax
effect of:
Net 4 6
(profit)/loss on
disposal and
scrapping of
property, plant
and equipment
Headline loss (215) 90 (138)
Cents Cents
Loss per share - 90.8 (139.2)
headline and
diluted
Million Million
Number of shares
Ordinary shares 99.2 99.2
in issue as at
end date *+
* Rounded to
nearest hundred
thousand.
+ Agree to
weighted average
and diluted
number of
ordinary shares.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD/YEAR ENDED
Issued Other Retained Total
capital capital earnings
and share reserves
premium
Rm Rm Rm Rm
2010
Balance at 1 585 153 2 336 3 074
January 2010
Loss for the (17) (17)
period
Other 2 2
comprehensive
income for the
quarter
Balance at 31 585 155 2 319 3 059
March 2010 -
Reviewed
Loss for the (127) (127)
period
Other (2) (2)
comprehensive
loss for the
quarter
Balance at 30 585 153 2 192 2 930
June 2010 -
Reviewed
Loss for the (28) (28)
period
Other 2 2
comprehensive
income for the
quarter
Balance at 30 585 155 2 164 2 904
September 2010 -
Unaudited
Loss for the (377) (377)
period
Other (17) (17)
comprehensive
loss for the
quarter
Balance at 31 585 138 1 787 2 510
December 2010 -
Audited
2011
Profit for the 21 21
period
Other 20 20
comprehensive
income for the
quarter
Balance at 31 585 158 1 808 2 551
March 2011 -
Unaudited
Profit for the 65 65
period
Other 7 7
comprehensive
income for the
quarter
Balance at 30 585 165 1 873 2 623
June 2011 -
Reviewed
Loss for the (117) (117)
period
Other 50 50
comprehensive
income for the
quarter
Balance at 30 585 215 1 756 2 556
September 2011 -
Unaudited
Unaudited Unaudited Unaudited Unaudited Audited
for the for the for the for the for the
three three nine nine year
months months months months ended
ended ended ended ended
30 Sep 2011 30 Sep 30 Sep 30 Sep 31 Dec
2010 2011 2010 2010
Cents Cents Cents Cents Cents
Dividends per
share
Dividends - - - - -
declared and
paid
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
for the for the for the
nine nine year
months months ended
ended ended
30 Sep 30 Sep 31 Dec
2011 2010 2010
Rm Rm Rm
Cash flows from operating
activities
Cash generated by/(used in) 568 (215) (179)
operations before tax paid
Income tax paid (5) (83) (109)
Net cash generated by/(used in) 563 (298) (288)
operating activities
Cash flows from investing
activities
Net additions to property, (331) (172) (250)
plant and equipment
Net cash used in investing (331) (172) (250)
activities
Net increase/(decrease) in cash 232 (470) (538)
and cash equivalents
Cash and cash equivalents at 492 1 072 1 072
the beginning of the
period/year
Effects of exchange rate 28 (27) (42)
changes on cash held in foreign
currencies
Cash and cash equivalents at 752 575 492
the end of the period/year
(0)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 Companies Act and JSE Limited Listings Requirements
Compliance with the Companies Act, No 71 of 2008, as well as the
Listings Requirements of the JSE Limited has been maintained
throughout the reporting periods.
2 Related party transactions
Sales to East Metals A.G. (a fellow subsidiary) amounted to R564
million (September 2010 YTD: R331 million) for the nine months ended
30 September 2011. This constitutes 13% of total revenue for the
period, compared to 14% for the nine months ended 30 September 2010.
3 Segment information
The Group is organised into business units based on their products
and has two reportable segments as follows:
Steelworks
The major products of the steel segment are magnetite iron ore,
structural steel, plate and coil.
Vanadium
The major products of the vanadium segment are vanadium slag and
ferrovanadium. Vanadium slag is a waste product from the steelmaking
process, and this slag is transferred from the Steelworks to the
Vanadium plant, which then forms the input into the business of the
Vanadium business.
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:
Unaudited Unaudited Unaudited Unaudited Audited
for the for the for the for the for the
three three nine nine year
months months months months ended
ended ended ended ended
30 30 Sep 30 Sep 30 Sep 31 Dec
Sep 2010 2011 2010 2010
2011
Rm Rm Rm Rm Rm
Revenue from
the sale of
goods
Steelworks 874 1 014 3 005 2 813 3 612
Vanadium 375 358 1 229 1 098 1 513
Total 1 249 1 372 4 234 3 911 5 125
Intersegment revenue is eliminated on consolidation.
Unaudited Unaudited Unaudited Unaudited Audited
for the for the for the for the for the
three three nine nine year
months months months months ended
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
2011 2010 2011 2010 2010
Rm Rm Rm Rm Rm
Operating
profit/(loss)
Steelworks (307) (150) (500) (661) (1 220)
Vanadium 114 92 360 348 397
Total (193) (58) (140) (313) (823)
Unaudited Unaudited Audited
as at as at as at
30 Sep 30 Sep 31 Dec
2011 2010 2010
Rm Rm Rm
Total assets
Steelworks 3 374 4 280 3 340
Vanadium 776 277 723
Total 4 150 4 557 4 063
Reviewed for the Reviewed for
six months ended the six months
ended
30 Jun 2011 30 Jun 2010
Rm Rm
Revenue from the sale of
goods
Steelworks 2 131 1 799
Vanadium 854 740
Total 2 985 2 539
Intersegment revenue is eliminated on consolidation.
Reviewed for the Reviewed for
six months ended the six months
ended
30 Jun 2011 30 Jun 2010
Rm Rm
Operating profit/(loss)
Steelworks (193) (511)
Vanadium 246 256
Total 53 (255)
4 Supplementary revenue information - Unaudited
For the For the For the For the For the
three three nine nine year
months months months months ended
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
2011 2010 2011 2010 2010
Sales volumes of
major products
Total steel Tons 127 121 148 790 470 614 452 288 610 602
Ferrovanadium Tons V 1 601 1 219 4 541 4 336 5 488
Modified Vanadium Tons V - - 304 - 468
Oxide
Nitrovan Tons V 225 - 795 - -
Vanadium slag Tons 182 226 537 2 102 2 102
V(2)O(5)
Fines ore Tons 152 363 170 353 494 794 456 318 623 928
For the For the
six months six months
ended ended
30 Jun 30 Jun
2011 2010
Sales volumes of
major products
Total steel Tons 343 493 303 498
Ferrovanadium Tons V 2 940 3 116
Modified Vanadium Tons V 304 0
Oxide
Nitrovan Tons V 570 0
Vanadium slag Tons 355 1,875.15
V(2)O(5)
Fines ore Tons 342 431 285 965
Vanadium slag sales reduced from 2 102 tons V2O5 for the nine months ended
30 September 2010 to 537 tons V2O5 for the nine months ended 30 September
2011. No sales occurred in 2011 to a fellow subsidiary due to a slag
tolling agreement with this company.
Weighted average selling prices achieved for major products
Total steel US$/t 880 786 834 726 715
Ferrovanadium US$/kg V 27 27 28 27 27
Modified US$/kg V - - 22 - 20
Vanadium Oxide
Nitrovan US$/kg V 28 - 28 - -
Vanadium slag US$/kg 5 6 6 6 6
V(2)O(5)
Fines ore US$/t 32 34 37 38 38
Average R/$ 7.13 7.33 6.98 7.53 7.32
exchange rate
Total steel US$/t 819 706
Ferrovanadium US$/kg V 29 27
Modified Vanadium Oxide US$/kg V 22 0
Nitrovan US$/kg V 28 0
Vanadium slag US$/kg 6 6
V2O5
Fines ore US$/t 39 41
Average R/$ exchange 6.90 7.53
rate
5 Other operating expenses
The R123 million other operating expenses for the nine months ended 30
September 2011 relates mainly to the adjustment of the Net Realisable Value
provision of R147 million (income), net stock write down of R22 million
(expense), profit related bonus adjustment of R33 million (income) and idle
plant costs of R277 million (expense) . For the same period 2010, the
expense of R42 million consisted mainly of net stock write up, idle plant
costs and foreign exchange loss.
6 Income tax
Unaudited Unaudited Unaudited Unaudited Audited
for the for the for the for the for the
three three nine nine year
months months months months ended
ended ended ended ended
30 Sep 30 Sep 30 Sep 30 Sep 31 Dec
2011 2010 2011 2010 2010
Rm Rm Rm Rm Rm
South African
Normal
Current - - - - -
Prior year - - - - 1
under provision
Deferred
Current (75) (35) (105) (159) (318)
Prior year - - - - 21
under provision
Non-South
African
Normal
Current - 3 - 14 13
Prior year over (3) - (12) (4) (4)
provision
Income tax (78) (32) (117) (149) (287)
credit
Unaudited for the Reviewed for the
three months three months
ended ended
31 Mar 2011 31 Mar 2010
Rm Rm
South African
Normal
Current - -
Prior year under - -
provision
Deferred
Current (30) (124)
Prior year under - -
provision
Non-South African
Normal
Current - 11
Prior year over (9) (4)
provision
Income tax credit (39) (117)
The period income tax expense is accrued using the estimated average annual
effective income tax rate applied to the pre-tax income of the interim
report.
7 Financial ratios - Unaudited
Current ratio 2.27 2.60 2.27 2.60 2.36
Market 3 956 8 428 3 956 8 428 8 279
capitalisation -
Rm
8 Steel margins
Total steel margins improved from negative 10% for the nine months
ended 30 September 2010, to negative 4% for the nine months ended 30
September 2011. The total steel margins decreased from positive 5% in
Quarter 2, 2011 to negative 0.1% in Quarter 3, 2011.
9 Contingent liabilities and guarantees
As required by the Mineral and Petroleum Resources Development Act
No.28 of 2002, a guarantee amounting to R264 million before tax and
R190 million after tax (2010: R264 million before tax and R190 million
after tax) was issued in favour of the DMR for the unscheduled closure
of Mapochs Mine.
In terms of the Company`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 R32 million before tax and R23
million after tax (2010: R32 million before tax and R23 million after
tax).
As required by certain suppliers to the Company, guarantees were
issued in favour of these suppliers to the value of R9 million (2010:
R9 million) in the event that the Company will not be able to meet its
obligations to the suppliers.
10 Status of previously reported possible litigation
A summons was received on 13 May 2010 from the Competition Commission
relating to a complaint referring to price fixing allegations of flat
products. A comprehensive response with requested documentation was
compiled and submitted to the Commission on 5 July 2010. No further
response has been received from the Commission.
A summons was received on 3 March 2010 from Xai-Xai Slag Distributors
Proprietary Limited and Rothinvest 30 Proprietary Limited t/a Xai-Xai
Slag Management (in liquidation) ("Xai-Xai"). The Company brought an
application for exception, which was heard on 14 February 2011. An
adverse judgement in the exception hearing was received and the
Company`s plea was filed and served. Further action is awaited from
Xai-Xai. Trial preparation has commenced. From the consultations held
and the possible evidence available to the Company, it is clear that
Xai-Xai`s reasonable chances of success are slim.
11 Subsequent events
There are no events to be reported on since 30 September 2011.
15 November 2011
Sponsor:
J.P. Morgan Equities Limited
Date: 15/11/2011 12:31:01 Produced by the JSE SENS Department.
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