| Tue 7 Feb 2012, 9:16 | | ACL - ArcelorMittal South Africa Limited - Reviewed group results for the year |
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ACL
ACL
ACL - ArcelorMittal South Africa Limited - Reviewed group results for the year
ended 31 December 2011
ArcelorMittal South Africa Limited
Registration number: 1989/002164/06
Share code: ACL ISIN: ZAE 000134961
(ArcelorMittal South Africa, the company or the group)
Reviewed group results for the year ended 31 December 2011
- Revenue of R31.5 billion up 4%
- Steel sales volumes of 4.7 million tonnes down 7%
- Profit from operations down 86%
- Lost time injury frequency rate improved by 24%
Condensed group statement of comprehensive income
Quarter ended (Unaudited) Year ended
Rm 31 Dec 30 Sept 31 Dec 31 Dec 31 Dec
2011 2011 2010 2011 2010
Reviewed Audited
Revenue 7 258 7 620 6 832 31 453 30 224
Raw materials and (5 672) (4 453) (4 100) (19 886) (17 027)
consumables used
Employee costs (758) (813) (709) (3 164) (2 951)
Energy (653) (856) (626) (3 177) (2 419)
Movement in inventories of 932 (85) (472) 1 733 744
finished goods and work in
progress
Depreciation (363) (346) (339) (1 409) (1 360)
Amortisation of intangible (4) (4) (3) (14) (11)
assets
Other operating expenses (1 025) (1 410) (1 145) (5 239) (5 049)
(Loss)/profit from (285) (347) (562) 297 2 151
operations
Finance and investment 5 7 18 31 71
income
Finance costs (Note 4) (106) (74) (158) (168) (507)
Income/(loss) from equity 120 (145) (53) (34) 122
accounted investments (net
of tax)
(Loss)/profit before tax (266) (559) (755) 126 1 837
Income tax credit/(charge) 82 97 258 (118) (492)
(Note 5)
(Loss)/profit for the (184) (462) (497) 8 1 345
period
Other comprehensive income
Exchange differences on 14 268 (95) 315 (200)
translation of foreign
operations
(Losses)/gains on available-(10) (2) 41 (12) 29
for-sale investment taken
to equity
Movement in gains deferred 8
to equity on cash flow
hedges
Share of other 154 (12) 7 75
comprehensive income of
equity accounted
investments
Tax effect on amounts taken (2)
directly to equity
Total comprehensive (180) (42) (563) 318 1 255
(loss)/income for the
period
(Loss)/profit attributable
to:
Owners of the company (184) (462) (497) 8 1 345
Total comprehensive
(loss)/income attributable
to:
Owners of the company (180) (42) (563) 318 1 255
Attributable(loss)/earnings
per share (cents)
- basic (46) (115) (124) 2 335
- diluted (46) (115) (124) 2 335
Condensed group statement of financial position
Rm As at As at As at
31 Dec 30 Sept 31 Dec
2011 2011 2010
Reviewed Unaudited Audited
Assets
Non-current assets 19 573 18 998 19 110
Property, plant and equipment 16 618 16 304 16 432
Intangible assets 126 81 84
Equity accounted investments 2 772 2 546 2 386
Other financial assets 57 67 208
Current assets 12 849 12 920 12 608
Inventories 9 935 9 232 7 156
Trade and other receivables 2 374 2 392 1 816
Taxation 100 18
Other financial assets 1 20 112
Cash and cash equivalents 439 1 276 3 506
Total assets 32 422 31 918 31 718
Equity and liabilities
Shareholders` equity 22 669 22 842 22 556
Stated capital 37 37 37
Non-distributable reserves (2 231) (2 322) (2 475)
Retained income 24 863 25 127 24 994
Non-current liabilities 4 474 4 458 4 592
Borrowings and other payables (Note 6) 241 227 224
Finance lease obligations 451 471 515
Deferred income tax liability 2 310 2 246 2 354
Provision for post-retirement medical 7 7 8
costs
Non-current provisions 1 465 1 507 1 491
Current liabilities 5 279 4 618 4 570
Trade and other payables 4 644 3 957 4 020
Borrowings and other payables 107 104 88
Finance lease obligations 57 52 59
Taxation 124
Current provisions 471 381 403
Total equity and liabilities 32 422 31 918 31 718
Condensed group statement of changes in equity
Rm Stated Treasury Other Retained Total
capital share reserves earnings
equity
reserve
Nine months ended 30
September 2010 (Unaudited)
Balance as at 1 January 2010 37 (3 918) 1 574 24 232 21 925
Total comprehensive income (24) 1 842 1 818
Management share trust: net (12) (12)
of treasury share purchases
Share-based payment reserve 23 23
Transfer of equity accounted 118 (118)
earnings
Dividend paid (602) (602)
Balance as at 30 September 37 (3 918) 1 679 25 354 23 152
2010 (unaudited)
Quarter ended 31 December
2010 (unaudited)
Balance as at 30 September 37 (3 918) 1 679 25 354 23 152
2010
Total comprehensive income (66) (497) (563)
Management share trust: net (42) (42)
of treasury share purchases
Share-based payment reserve 9 9
Transfer of equity accounted (137) 137
earnings
Balance as at 31 December 37 (3 918) 1 443 24 994 22 556
2010 (audited)
Six months ended 30 June 2011
(reviewed)
Balance as at 31 December 37 (3 918) 1 443 24 994 22 556
2010
Total comprehensive income (114) 654 540
Management share trust: net (6) (6)
of treasury share purchases
Share-based payment reserve 11 11
Transfer of equity accounted (17) 17
earnings
Balance as at 30 June 2011 37 (3 918) 1 317 25 665 23 101
(reviewed)
Quarter ended 30 September
2011 (unaudited)
Balance as at 30 June 2011 37 (3 918) 1 317 25 665 23 101
(reviewed)
Total comprehensive income 420 (462) (42)
Management share trust: net (1) (1)
of treasury share purchases
Share-based payment reserve 5 5
Transfer of equity accounted (145) 145
earnings
Dividend paid (221) (221)
Balance as at 30 September 37 (3 918) 1 596 25 127 22 842
2011 (unaudited)
Quarter ended 31 December
2011 (unaudited)
Balance as at 30 September 37 (3 918) 1 596 25 127 22 842
2011
Total comprehensive income 4 (184) (180)
Management share trust: net (5) (5)
of treasury share purchases
Share-based payment reserve 12 12
Transfer of equity accounted 80 (80)
earnings
Balance as at 31 December 37 (3 918) 1 687 24 863 22 669
2011 (reviewed)
Condensed group statement of cash flows
Quarter ended (Unaudited) Year ended
31 December
Rm 31 Dec 30 Sept 31 Dec 2011 2010
2011 2011 2010 Reviewed Audited
Cash in/(out) flows from 35 (909) 947 (1 368) 1 337
operating activities
Cash generated 169 (627) 1 163 (836) 2 666
from/(utilised in)
operations
Interest income 4 7 17 29 69
Finance costs (41) (23) (22) (102) (85)
Dividend paid (221) (221) (602)
Income tax paid (81) (265) (243) (653)
Realised foreign exchange (16) (45) 54 5 (58)
movement
Cash outflows from (619) (350) (913) (1 318) (1 706)
investing activities
Investment to maintain (450) (244) (599) (924) (1 259)
operations
Investment to expand (75) (85) (363) (266) (455)
operations
Shares acquired in (137) (21) (21) (180) (120)
associate and equity
accounted investment
Investment income - 1 2 2
interest
Dividend from equity 43 69 50 126
accounted investments
Cash outflows from (232) (189) (110) (529) (374)
financing activities
Repayment of borrowings, (232) (189) (110) (529) (374)
finance lease obligations
and other payables
Decrease in cash and cash (816) (1 448) (76) (3 215) (743)
equivalents
Effect of foreign exchange (21) 101 (132) 148 (99)
rate changes
Cash and cash equivalents 1 276 2 623 3 714 3 506 4 348
at beginning of period
Cash and cash equivalents 439 1 276 3 506 439 3 506
at end of period
Segment information
Quarter ended Year ended
(Unaudited) 31 December
31 Dec 30 Sept 31 Dec 2011 2010
2011 2011 2010 Reviewed Audited
Flat steel products
Revenue (R million)
- External 5 284 5 034 4 216 21 092 18 848
- Internal 265 247 186 701 586
EBITDA (R million) (152) (232) (400) 597 1 442
Depreciation and (292) (276) (272) (1 133) (1 095)
amortisation (R million)
(Loss)/profit from (444) (508) (672) (536) 347
operations (R million)
Unaudited information
Liquid steel production 989 918 865 4 060 3 814
(`000 tonnes)
Steel sales (`000 tonnes) 806 798 807 3 424 3 348
- Local 554 588 463 2 468 2 336
- Export 252 210 344 956 1 012
Capacity utilisation (%) 70 64 60 71 67
Assets 21 322 20 818 19 177 21 322 19 177
Long steel products
Revenue (R million)
- External 1 384 2 199 2 005 8 044 8 976
- Internal 832 123 212 1 470 793
EBITDA (R million) 74 65 (36) 500 1 090
Depreciation and (67) (66) (65) (269) (264)
amortisation (R million)
(Loss)/profit from 7 (1) (101) 231 826
operations (R million)
Unaudited information
Liquid steel production 209 262 334 1 393 1 860
(`000 tonnes)
Steel sales (`000 tonnes) 187 335 392 1 284 1 693
- Local 171 274 198 1 039 1 078
- Export 16 61 194 245 615
Capacity utilisation (%) 36 46 58 61 81
Assets 6 965 5 950 5 277 6 965 5 277
Coke and chemicals
Revenue (R million)
- External 590 387 611 2 317 2 400
- Internal 14 13 10 61 49
EBITDA (R million) 225 161 265 870 1 029
Depreciation and (15) (14) (12) (52) (44)
amortisation (R million)
Profit from operations 210 147 253 818 985
(R million)
Unaudited information
Commercial coke produced 154 162 232 633 745
(`000 tonnes)
Commercial coke sales (`000 163 92 168 631 629
tonnes)
Tar sales 30 27 33 117 125
Assets 1 082 1 068 1 079 1 082 1 079
Corporate and other
Operating (loss)/profit (65) 9 (50) (247) (39)
before depreciation and
amortisation (R million)
Depreciation and 7 6 7 31 32
amortisation credit
(R million)
(Loss)/profit from (58) 15 (43) (216) (7)
operations (R million)
Assets 3 053 4 082 6 185 3 053 6 185
Salient features
Quarter ended Year ended
(Unaudited) 31 December
Rm 31 Dec 30 Sept 31 Dec 2011 2010
2011 2011 2010 Reviewed Audited
Reconciliation of earnings
before interest, taxation,
depreciation and
amortisation (EBITDA)
(Loss)/profit from (285) (347) (563) 297 2 151
operations
Adjusted for:
- Depreciation 363 346 339 1 409 1 360
- Amortisation of 4 4 3 14 11
intangible assets
EBITDA for the period 82 3 (221) 1 720 3 522
Reconciliation of headline
(loss)/earnings
(Loss)/profit for the period (184) (462) (497) 8 1 345
Adjusted for:
-(Profit)/loss on disposal (104) 3 (82) 44
or scrapping of assets
- Tax effect 28 (1) 22 (12)
Headline (loss)/earnings for (260) (460) (497) (52) 1 377
the period
Headline (loss)/earnings per
share (cents)
- basic (65) (115) (124) (13) 343
- diluted (65) (115) (124) (13) 343
Return on ordinary
shareholders` equity per
annum
- Attributable earnings (%) (3.2) (8.0) (8.7) 0.0 6.1
- Headline earnings (%) (4.6) (8.0) (8.7) (0.2) 6.2
Net cash to equity (%) 0.4 4.1 14.2 0.4 14.2
Share Statistics
Ordinary shares (thousands)
- in issue 401 202 401 202 401 202 401 202 401 202
- weighted average number 401 202 401 202 401 202 401 202 401 202
of shares
- diluted weighted average 401 271 401 259 401 433 401 444 401 532
number of shares
Share price (closing) (rand) 68.58 59.39 79.22 68.58 79.22
Market capitalisation (R 27 514 23 827 31 783 27 514 31 783
million)
Net asset value per share 56.50 56.93 56.22 56.50 56.22
(rand)
Dividend per share (cents)
- interim 55 150
Notes to the reviewed condensed consolidated financial statements
1. Basis of preparation
The condensed reviewed consolidated financial statements have been
prepared in compliance with the Listings Requirements of the JSE
Limited, the recognition and measurement requirements of
International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB), the AC500
standards as issued by the Accounting Practices Board and the
South African Companies Act. These statements were compiled under
the supervision of Mr RH Torlage, the Chief Financial Officer.
2. Significant accounting policies
These condensed reviewed group financial results for the year
ended 31 December 2011 have been prepared on the historical cost
basis, except for the revaluation of financial instruments.
The accounting policies and methods of computation applied in the
presentation of the financial results of the group are consistent
with those applied for the year ended 31 December 2010, except for
the adoption of the following Amendments and Interpretations in
advance of their effective date with no impact on the group`s
financial results or disclosures:
-?IAS 12 (Amendment): Deferred Tax - recovery of underlying
assets;
-?IFRS 1 (Amendment): First Time Adoption of IFRS - severe
hyperinflation and removal of fixed dates for first-time adopters;
-?IFRS 7 (Amendment): Financial Instruments: Disclosure -
offsetting financial assets and financial liabilities;
-?IAS 32 (Amendment): Financial Instruments: Presentation -
offsetting financial assets and financial liabilities.
The results for the year ended 31 December 2011 included the
results from Coal of Africa Limited for the period 1 October to 30
September 2011.
3. Independent review by the auditors
The condensed consolidated financial results have been reviewed by
the company`s auditors, Deloitte & Touche, in accordance with
International Standards on Review Engagements 2410. They expressed
an unmodified review opinion on the financial information for the
12 month period ended 31 December 2011. No opinion is expressed on
the quarterly information disclosed herein. A copy of their report
is available for inspection at the company`s registered office.
Any reference to future financial performance included in this
announcement has not been reviewed or reported on by the company`s
auditors.
Quarter ended (Unaudited) Year ended
31 December
Rm 31 Dec 30 Sept 31 Dec 2011 2010
2011 2011 2010 Reviewed Audited
4. Finance costs 106 74 158 168 507
Interest expense on 24 5 3 32 8
bank overdrafts and
loans
Interest expense on 17 17 19 71 77
finance lease
obligations
Discounting rate 25 31 24 22 100
adjustment of the
non-current
provisions
Net foreign exchange (23) 76 (124) 150
(gains)/losses on
financing activities
Unwinding of the 40 44 36 167 172
discounting effect
in the present
valued carrying
amount of the non-
current provisions
5. Income tax (82) (97) (258) 118 492
(credit)/expense
Current normal and (82) (119) (210) 101 476
deferred tax
(credit)/expense
Normal and deferred (41) (5) (44)
tax expense
recognised in
relation to tax of
prior years
Secondary tax on 22 (7) 22 60
companies
6. Borrowings and other
payables
Leave pay 328 311 282 328 282
Loan 20 20 30 20 30
Total 348 331 312 348 312
Disclosed as:
- non-current 241 227 224 241 224
- current 107 104 88 107 88
7. Capital expenditure
Incurred 525 329 962 1 190 1 714
Contracted 887 621 641 887 641
Authorised but not 728 877 1 045 728 1 045
contracted
8. Contingent
liabilities
Guarantees 1 1 1 1 1
9. Operating lease 278 270 313 278 313
commitments
Less than one year 83 88 148 83 148
More than one year 190 175 161 190 161
and less than five
years
More than five years 5 7 4 5 4
10. Related party transactions
The group is controlled by ArcelorMittal Holdings AG which
effectively owns 52.02% of the company`s shares. During the year,
the company and its subsidiaries, in the ordinary course of
business, entered into various sale and purchase transactions with
associates and joint ventures. These transactions occurred under
terms that are no less favourable than those arranged with third
parties.
11. Corporate governance
The group subscribes to the Code on Corporate Practices and
Conduct as contained in the third King Report on corporate
governance.
Overview
Significant escalations in electricity and raw material prices experienced
during 2010 continued throughout 2011. This, together with pressures on global
steel prices and various operational problems placed enormous pressures on
operating margins, resulting in a headline loss of R52 million for the year
ended 31 December 2011. No dividend has been declared.
There was a reduced headline loss of R260 million for the fourth quarter of
2011 compared with the R460 million loss reported in the preceding quarter and
R497 million loss for the corresponding quarter of 2010.
EBITDA halved to R1.7 billion with the main contributors being lower sales and
significantly higher input costs.
Production was severely impacted by four significant production interruptions
during the year; the structural failure of the blast furnace dust catcher at
Newcastle Works and a 43 day stop to repair the corex tap-hole at Saldanha
Works, both in August, and chilled hearth conditions experienced at the blast
furnaces in Newcastle and Vanderbijlpark Works during the beginning of the
year.
Safety is a major focus throughout the Group and our Lost Time Injury
Frequency Rate (LTIFR) for the year dropped 24% to a new record of 1.24, with
all business units showing improvement. Despite this there were five
unfortunate fatalities during the year, as a result of which a major refocus
on entrenching compliance with the Group`s fatality prevention standards and
safe behavior code was initiated as part of the group`s Journey to Zero
programme for the elimination of all injuries and fatalities from the
workplace.
Key statistics
Quarter ended Year ended
(unaudited) 31 December
31 Dec 30 Sept 31 Dec 2011 2010
2011 2011 2010
Revenue (R million) 7 258 7 620 6 832 31 453 30 224
EBITDA (R million) 82 3 (221) 1 720 3 522
EBITDA/tonne (R/t) 83 3 (184) 365 699
EBITDA margin (%) 1.1 (3.2) 5.5 11.7
(Loss)/profit from operations (285) (347) (563) 297 2 151
(R million)
Net (loss)/profit (R million) (184) (462) (496) 8 1 345
Headline (loss)/earnings (260) (460) (497) (52) 1 377
(R million)
Headline (loss)/earnings per (65) (115) (124) (13) 343
share (cents)
Unaudited information
Liquid steel production 1 196 1 180 1 199 5 453 5 674
(`000 tonnes)
Steel sales (`000 tonnes) 993 1 133 1 199 4 708 5 041
- Local 725 862 661 3 507 3 414
- Export 268 271 538 1 201 1 627
Lost time injury frequency rate 0.88 1.79 1.41 1.24 1.64
Market review
Global steel demand improved moderately, growing at an estimated 5.9% in
2011, despite a series of expected and unanticipated negative developments,
such as the European sovereign debt crisis, political unrest in the Middle
East and North Africa region, and the earthquake in Japan, coupled with
tighter monetary measures in emerging economies.
A sustained recovery in international steel prices remains uncertain on the
back of sluggish global economic activity. Global steel prices were on a
downward trend towards the latter part of 2011 from higher levels earlier in
the year.
Economic growth in South Africa was relatively modest, with domestic GDP
growth rates registering a declining trend on a quarterly basis, reaching an
estimated 2.9% in the fourth quarter of 2011 from a high of 3.3% in the first
quarter. This effect was magnified in the main steel-consuming sectors of
mining, construction and manufacturing, although some sub-sectors within the
manufacturing sector such as vehicles and electrical appliances stimulated
steel demand to some degree.
The recent weakening in the South African rand against major currencies
improved the competitiveness of the country`s export industries and the
ability of domestic manufacturers to compete with imports. However, the South
African economy has not been spared from the global economic slowdown.
Financial review
Full year ended 31 December 2011 compared to full year ended 31 December 2010
Total revenue of R31.4 billion was 4% higher driven by a 12% increase in
average net realised prices. Total steel shipments were down 7%, of which flat
products were up 2% while long products dropped 24%, due to the dust catcher
failure at Newcastle Works. Export sales decreased by 26% following an
increase of 3% in domestic sales and lower production volumes. Revenue from
our Coke and Chemicals business of R2.3 billion was 3% lower with commercial
coke sales flat at 631 000 tonnes, tar sales down 6% and average net realised
prices down by 1%.
The increase in revenue was offset by higher operating costs, with the
production cash cost of hot rolled coil increasing by 19% and those of billets
by 23%. The increase was due to a rise in prices of imported coking coal
(52%), pellets (32%), iron ore (17%), scrap (29%) and electricity (28%),
resulting in an operating profit of R297 million, a decrease of 86% from the
previous year.
Included in the results is an interim insurance recovery of R489 million
received during the fourth quarter, relating to the industrial accident at
Newcastle, of which R384 million was to compensate for loss of income. The
total claim is estimated at R1.1 billion with a deductible amount of R160
million.
Liquid steel production was lower by 221 000 tonnes or 4% compared to the
previous financial year. Unplanned liquid steel production losses of 880 000
tonnes occurred during the year. Capacity utilisation for flat steel was at
71% compared to 67% for the corresponding period and for long steel at 61%,
compared to 81%. On 29 December 2011, blast furnace D at Vanderbijlpark
experienced a burn-through, resulting in a four-week stop to repair the
damage. An increase in steel production from the electric arc furnaces
compensated for the lost production during the repairs.
Finance costs of R168 million for the year were significantly lower than the
R507 million reported for the previous year. Included in finance costs are net
foreign exchange gains of R124 million for the year compared to the net
foreign exchange loss of R150 million of last year. This was mainly due to the
weakening of the rand against the US dollar from R6.62 at the end of December
2010 to R8.18 at December 2011.
The net loss from equity accounted investments of R34 million for the year was
mainly due to our share of losses incurred by Coal of Africa Limited offset by
the equity income from Macsteel International Holdings BV.
The effective tax rate (ETR) for the year of 94% was disproportionate to the
previous year (27%) due to the drop in pre-tax profit from R1 837 million to
R126 million. Factors contributing to the increase in ETR are:
-?secondary tax on companies on dividends declared during the third quarter of
the year (17%);
-?non-deductible legal and other expenditure not decreasing in comparison with
the decrease in profit (16%);
-?losses incurred by offshore subsidiaries not tax deductible in South Africa
(11%);
-?non-recoverable withholding tax on dividends received from foreign
subsidiary (10%);
-?effect of consolidated loss from associates and joint ventures (7%);
-?income of controlled foreign companies taxable in South Africa (6%)
Available cash decreased by R3.2 billion as a consequence of an increase in
working capital of R2.8 billion, capital projects of R1.2 billion, further
investment of R180 million in associates and joint ventures of which R135
million related to Coal of Africa Limited, as well as a dividend payment of
R221 million.
Quarter ended 31 December 2011 compared with quarter ended 31 December 2010
(unaudited)
Total revenue of R7.3 billion was 6% higher than the corresponding quarter of
2010. Total steel shipments were 17% down, with domestic steel shipments
increasing by 10% and export steel shipments decreasing by 50% following a
significant drop in demand and the production problems mentioned earlier.
Average net realised prices for flat steel products increased by 26%, while
long steel products rose by 43%. Shipments for flat steel products remained at
the same level, whereas long steel products were down 52%. Revenue from our
Coke and Chemicals business decreased by 3% following an 11% decline in
commercial coke average net realised prices offset by a 7% increase in
volumes.
The production cash cost of hot rolled coil increased by 17% and that of
billets by 18%, largely due to increases in the prices of imported coking coal
(30%), local coking coal (20%), scrap (40%) and electricity (26%).
Total liquid steel production was in line with the corresponding period.
However, flat steel increased by 14% and long steel decreased by 37%. Capacity
utilisation for flat steel was at 70% compared to 60% and for long steel at
36% compared to 58%.
The operating loss of R285 million reduced from the loss of R563 million
reported in the corresponding period on the back of improved net realised
prices.
Finance costs decreased by R52 million to R106 million for this quarter,
mainly due to net foreign exchange losses of R76 million incurred during the
fourth quarter of 2010, following a 5% strengthening of the rand against the
US dollar over that quarter. Although the rand weakened against the US dollar
during quarter four of 2011, foreign-denominated cash and receivables were low
and resulted in an insignificant gain.
Income from equity-accounted investments of R120 million increased by R173
million compared to the loss of R53 million recorded in the corresponding
quarter. The increase was due to the group`s share of losses in Coal of Africa
Limited in the corresponding period against the reversal of the impairment
recorded during the fourth quarter following the impairment loss recognised
during the third quarter 2011. This was offset by lower income from Macsteel
International Holdings BV.
Quarter ended 31 December 2011 compared with quarter ended 30 September 2011
(unaudited)
Revenue of R7.3 billion was 5% lower than the previous quarter. Total steel
shipments were 12% down, with domestic steel shipments decreasing by 16% and
export steel shipments remaining unchanged. Shipments for flat steel products
remained static, while long steel products dropped by 44%. Revenue from the
Coke and Chemicals business increased by 55% following the previous weak
quarter where demand from the ferro-alloy industry was curtailed due to high
electricity prices experienced during the winter months. Commercial coke
volumes were 77% higher, but this was largely offset by a 5% drop in average
net realised prices.
The production cash cost of hot rolled coil produced decreased by 4%, while
billets increased by 2%. The prices of imported coal, electricity and pellets
decreased by 7%, 30% and 6%, respectively, whereas the prices of scrap
increased by 3%.
Total liquid steel production was 1% higher than the previous quarter, however
flat steel increased by 8% and long steel decreased by 20%. Flat steel
products achieved capacity utilisation of 70% compared to 64% the previous
quarter. The equivalent figures for long steel were 36% and 46% respectively.
Income from equity-accounted investments for the quarter was R120 million
compared to the loss of R145 million the previous quarter, following the
reversal of the group`s share of the impairment loss in Coal of Africa Limited
recognised in the third quarter.
Environment
The company`s environmental focus during 2011 and for the foreseeable future
will remain on air and water-related projects to ensure compliance with
legislation. The requirements of the Air Quality Act (the Act) remain a top
priority and significant expenditure will commence over the next five-year
period to improve the performance of coke-making facilities at Vanderbijlpark
and Newcastle Works.
The new Sinter Plant Emission Abatement Project at Vanderbijlpark Works was
completed during 2011 and commissioning is now anticipated by the end of March
2012. This project will significantly reduce particulate and SO2 emissions
from the Vanderbijlpark facility and ensure compliance with the new Act.
Plans remain on track for Newcastle Works to achieve zero effluent discharge
status by end 2013. At Vanderbijlpark Works, significant effluent treatment
problems were experienced during 2011. Urgent steps have been taken to ensure
that the situation is remedied without undue delay.
During 2011, the carbon tax and climate change debate received significant
attention, with additional prominence added by the COP 17 event in Durban,
which was fully supported by the group. Constructive debate took place with
National Treasury during the year regarding the carbon tax proposal and
potential structuring options which, as it stands, would have a severe impact
on the viability of steel production in South Africa. This engagement is
expected to continue during 2012.
Contingent liabilities
The case brought before the Competition Tribunal (Tribunal) by Barnes Fencing
Industries Limited relating to alleged price and exclusionary conduct on the
sale of wire rod is continuing in accordance with Tribunal procedures. A date
for the hearing has not been set.
The Competition Commission (Commission) has referred the company and three
other primary steel producers in South Africa to the Tribunal for alleged
price fixing and market division in respect of certain long steel products.
The Commission has recommended the imposition of a financial penalty of 10% of
the company`s 2008 annual turnover. On 3 September 2010, the Tribunal refused
access to the bulk of the documentation requested by the company; the company
then filed a notice of appeal with the Competition Appeal Court (CAC) to
review the Tribunal`s decision. The company also requested the CAC to suspend
the Tribunal`s order that the company should file its answering affidavit,
pending the outcome of the appeal. An appeal and review hearing was heard on 2
December 2011. The decision is still outstanding and not expected before the
end of the first quarter. ArcelorMittal South Africa has also filed an
application challenging the validity of the referral of this matter to the
Tribunal. No date has been set for the hearing of this application.
During the fourth quarter of 2011, South Africa Revenue Services (SARS) issued
a letter of assessment relating to the erroneous claiming of customs value
added tax (VAT) by ArcelorMittal South Africa for the period 2005 to 2008,
where it was actually relating to the wholly owned subsidiary Saldanha Steel
(Proprietary) Limited, but not claimed by Saldanha. In the letter, the
position of SARS is that the principal amount of R249 million should be repaid
by the Company and that SARS may consider imposing interest and penalties
thereon, though no amount was quantified. The Company issued a letter of
objection to this because, in the same vein, Saldanha did not claim the input
VAT, arguing that SARS was not negatively disadvantaged. The Company has
proposed to SARS that the dispute be advanced to a formal Alternative Dispute
Resolution process. No amount has been recognised as a provision.
Competition commission investigations
The Commission is formally investigating five complaints against ArcelorMittal
South Africa. The first involves alleged price fixing in the flat steel market
and the second, alleged excessive pricing of tinplate. The third investigation
involves alleged prohibited vertical practices in respect of purchases of
scrap steel. The fourth investigation appears to involve an extension of the
Barnes Fencing Industries Limited case described under contingent liabilities,
into a later period. The fifth investigation relates to excessive pricing in
the flat steel market and the iron ore surcharge introduced, and later
cancelled by the Company in 2010. The Company is co-operating fully with the
Commission in these investigations and delivered all the requested
documentation to the authorities.
Dispute with Sishen Iron Ore Company (Proprietary) limited (SIOC)
On 15 December 2011 Judge Zondo, in the North Gauteng High Court review
application brought by SIOC against the Department of Mineral Resources (DMR)
and Imperial Crown Trading 289 (Pty) Limited (ICT) of which ArcelorMittal
South Africa was joined at the request of SIOC, ruled that SIOC owned 100% of
the rights in the Sishen mine and set aside the grant of the prospecting right
to ICT. This ruling supports ArcelorMittal South Africa argument in the review
application and the arbitration proceedings that SIOC was awarded 100% of the
mining right in the Sishen mine. SIOC and ArcelorMittal South Africa agreed to
postpone the arbitration proceedings, which were scheduled to take place in
May 2012, until the appeal process in the High Court review application is
finalised. We remain convinced that SIOC erred in cancelling our supply
agreement and we have full confidence that the arbitration process will rule
in our favour.
Acquisition
The due diligence on the Northern Cape Iron Ore mining project is complete,
barring the final approval of the transaction by the Minister in terms of the
Minerals and Petroleum Resources Development Act, No 28 of 2002. The proposed
transaction outlines terms to acquire certain prospecting rights, which were
renewed during the due diligence process, in the Northern Cape area, on which
the group will then be able to start early-stage exploration activities. This
is our first step in our drive to become more self-sufficient in iron ore.
Changes to the board of directors
The following appointments and resignations occurred during the financial year
and to the date of this report:
-?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;
-?Mr AMHO Poupart-Lafarge resigned as non-executive director on 25 May 2011;
-?Mr G Urquijo was appointed as a non-executive director with effect from 27
May 2011; and
-?Mr CPD Cornier resigned as non-executive director with effect from 24
January 2012.
Outlook for quarter one 2012
Earnings for the first quarter are expected to improve significantly due to
production stability and higher sales volumes partially offset by lower
international steel prices.
On behalf of the Board
N Nyembezi-Heita (Chief Executive Officer)
RH Torlage (Chief Financial Officer)
1 February 2012
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:?MJN Njeke* (Chairman), DK Chugh
Non-executive:?FA du Plessis*, M Macdonald*, S Maheshwari, LP Mondi,
DCG Murray*, ND Orleyn*, G Urquijo
Citizen of India? Citizen of Spain?* Independent non-executive
Executive:?N Nyembezi-Heita (Chief Executive Officer),
RH Torlage (Chief Financial Officer)
Company Secretary:?Premium Corporate Consulting Services (Proprietary) Limited
Sponsor:?Deutsche Securities (SA) (Proprietary) Limited, 87 Maude Street,
Sandton, 2196, Private Bag X9933, Sandton, 2146
Transfer Secretaries:?Computershare Investor Services (Proprietary) Limited,
70 Marshall Street, Johannesburg, 2001, PO Box 61051, Marshalltown, 2107
This report is available on ArcelorMittal South Africa`s Web site at:
http://www.arcelormittal.com/southafrica/??
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Share queries: Please call the ArcelorMittal South Africa share care toll free
on 0800 006 960 or +27 11 370 7850
Date: 07/02/2012 09:15:58 Produced by the JSE SENS Department.
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