| Wed 14 Mar 2012, 16:20 | | EHS - EVRAZ Highveld Steel and Vanadium Limited - Group audited results for the |
|
EHS
EHS
EHS - EVRAZ Highveld Steel and Vanadium Limited - Group audited results for the
year ended 31 December 2011
EVRAZ Highveld Steel and Vanadium Limited
(Incorporated in the Republic of South Africa)
(Registration number 1960/001900/06)
Share code: EHS
ISIN: ZAE000146171
(the Company or the Group)
GROUP AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011
Headline loss R15 million
(2010: loss R383 million)
Net profit R45 million
(2010: loss R549 million)
- Change in directorate
- Successful completion of the conversion of Furnace 7
Chairman and CEO`s review
1. Safety
The Lost Time Injury Frequency Rate (LTIFR) as at 31 December 2011 was 1.57,
this is a 16% improvement from the LTIFR as at 31 December 2010 of 1.87.
It is with the deepest regret that 2 fatalities are reported for the period.
2. Key financials
The operating loss for the period was R49 million, compared to a loss of R823
million for the same period in 2010. The main reasons for the improvement are
higher sales volumes and prices. The EBITDA for the period was R153 million
profit, compared to a R264 million loss for the same period last year. Sales
revenue increased to R5 587 million compared to R5 125 million for the same
period last year as a result of higher sales prices and a change in volume mix.
Total steel margins improved from a negative 14% for 2010, to a negative 2% for
2011. The total steel margins increased from a negative 0.1% in the third
quarter of 2011 to a positive 4.7% in the fourth quarter of 2011.
3. Operations
Steel
The cast steel output for 2011 decreased by 13% to 670 880 tons, and liquid iron
output by 15% to 659 603 tons compared to 2010, mainly due to the outage to
convert Furnace 7 to open slag bath technology and the SEIFSA contractor strike.
Production of long products increased by 7% to 225 282 tons for the period
compared to the same period in 2010, mainly due to improved demand. The
production of flat products decreased by 16.5% to 287 473 tons due to the
reduced availability of cast steel, and a planned mill shut down during June and
July.
The improvement projects of the primary equipment in the Iron and Steel plants
were completed. These projects were focused towards the improvement of equipment
availability, the upgrade of hot metal rail infrastructure and the installation
of seven of a possible 13 caps on the kiln raw gas stacks.
The conversion of Furnace 7 to the open slag bath design was successfully
completed and reflected positively on fourth quarter liquid iron volume and
vanadium recovery.
Extensive improvements were completed in the Steel plant, including vessel
relining and installation of new hoods at both BOF 1 and BOF 3, and crane
upgrades. Improvements were progressed at the rolling mills, following some
initial challenges encountered as a result of the SEIFSA contractor strike. Most
significant was a two-phase project (in August and December) to upgrade several
electrical drives at the Structural mill, from which a yield improvement is
evident.
Vanadium
A total of 61 083 tons of vanadium slag was produced with 8 088 Mt V for the
period, compared to 64 202 tons, with 8 673 Mt V produced for the same period
last year.
4. Markets
Global and local markets
Global crude steel production for 2011 increased by 7.1% to 1.49 billion tons,
compared to such production for 2010. However, the global growth rate continues
to slow down from the peak experienced during July 2011. The South African crude
steel production for 2011 decreased by 12.7% compared to the production of 2010.
EVRAZ Highveld sales
Domestic steel sales volumes for the period increased by 15%, compared to 2010.
Export steel sales volumes decreased by 35%, with overall steel sales volumes
decreasing by 1%. This was mainly due to higher demand in the local market and
the volatility of the Rand that affected the viability of exports. Total semi
product sales for the period increased by 26%, compared to 2010, as a result of
changing market demand.
Domestic steel sales volumes of the fourth quarter 2011 increased by 18%,
compared to the third quarter of 2011. Export steel sales volumes decreased by
71.5% for the fourth quarter of 2011 compared to the third quarter, with an
increase of 4% for overall sales, which was mainly due to reduced production as
a result of the maintenance shutdown of the mills and the SEIFSA contractor
strike during the third quarter.
Export vanadium slag sales decreased by 11% to 5 764 tons V for the period
compared to the same period in 2010. Domestic vanadium slag sales decreased by
68%, to 372 tons V as a result of the tolling of slag into MVO and Nitrovan at
EVRAZ Vametco Alloys Proprietary Limited. A total of 1 503 tons V MVO and
Nitrovan were sold during the period.
5. Change in directorate
We are pleased to announce that Mr Vusimuzi Moses Nkosi will join the Board as
from today as Non-executive Director. Vusi is the Chief Executive Officer of
Umnotho weSizwe, the strategic BEE partner at Mapochs Mine Proprietary Limited,
a subsidiary within the EVRAZ Highveld Group. Vusi has extensive knowledge of
the mining and mineral industry and sits on the boards of various other mining
related companies. Vusi holds a M.Phil in International Management with the
University of Pretoria.
Mr Alexander Vladimirovich Frolov has tendered his resignation as Non-executive
Director with effect from today. Mr Frolov was appointed to the Board on 27 July
2006 and is Director and Chief Executive Officer of EVRAZ Group S.A. and further
holds various other board positions within the EVRAZ Group. We are grateful for
the invaluable contribution that Mr Frolov made towards the management and
leadership of the Company since the date when the Company became part of the
EVRAZ Group and we would like to convey our most sincere appreciation to him.
The process to identify and appoint a suitable candidate as an independent non-
executive member of the Audit and Risk committee and director of the Board is
continuing and an announcement in this regard will be made in due course.
6. Outlook
Operational and quality performance is steadily improving following the
completion of the extensive capital maintenance and improvement projects. A
further key focus remains the reduction of costs across all functional areas of
the organisation.
However, global economic activity remains affected by mainly the ongoing
European sovereign debt crises and the unstable Middle East and North Africa
political situations.
The resultant general contraction of global GDP growth is, therefore, expected
to negatively affect demand and international prices. It has become evident that
the weak global economic situation is beginning to impact on the South African
economy as well, resulting in a persistent soft local steel market demand.
B J T Shongwe M D Garcia
(Chairman) (Chief Executive Officer)
14 March 2012
Basis of preparation
The Group`s financial results for the quarter and 12 months ended 31 December
2011 set out below 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
i) The Group has adopted the following new and revised Standards and
Interpretations issued by the International Accounting Standards Board (IASB)
and the International Financial Reporting Interpretation Committee (IFRIC) of
the IASB, that are relevant to its operations and effective for accounting
periods beginning on 1 January 2011. These Standards had no impact on the
results or disclosures of the Group:
- IAS 24, Amended - Related party disclosures (effective from 1 January 2011);
- IAS 32, Amended - Classification of rights issues denominated in a foreign
currency (effective from 1 February 2010);
- IFRIC 14, Amended - Prepayments of a minimum funding requirement (effective
from 1 January 2011);
- IFRIC 19, Extinguishing financial liabilities with equity instruments
(effective from 1 July 2010); and
- Improvements to IFRS (issued in May 2010 - effective from 1 July 2010).
ii) The following Standards, amendment to the Standards and Interpretations,
effective in future accounting periods have not been adopted in these financial
statements:
- IAS 1, Amended - Financial statements presentation: Presentation of items of
other comprehensive income (effective from 1 July 2012);
- IAS 12, Amended - Deferred tax: Recovery of underlying assets (effective from
1 January 2012);
- IAS 19, Amended - Employee benefits (effective from 1 January 2013);
- IAS 27, Separate financial statements (as revised in 2011) (effective from 1
January 2013);
- IAS 28, Investments in associates and joint ventures (as revised in 2011)
(effective from 1 January 2013);
- IFRS 7, Amended - Financial instruments: Disclosures - transfers of financial
assets (effective from 1 July 2011);
- IFRS 9, Financial instruments: Classification and measurement (effective from
1 January 2013);
- IFRS 10, Consolidated financial statements (effective from 1 January 2013);
- IFRS 11, Joint arrangements (effective from 1 January 2013);
- IFRS 12, Disclosure of involvement with other entities (effective from 1
January 2013);
- IFRS 13, Fair value measurement (effective from 1 January 2013); and
- IFRS 1, Amended - Severe hyperinflation and removal of fixed dates for first-
time adopters (effective from 1 July 2011).
This abridged report was prepared under supervision of the Financial Director,
Mr Jan Valenta (Chartered Accountant).
The financial information has been audited by Ernst & Young Inc. whose
unmodified audit report is available for inspection at the Company`s registered
office.
To obtain a copy of the financial statements that this abridged report
summarises, the Company can be contacted at +27 13 690 8888, or visit the
Company`s website at www.evrazhighveld.co.za.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Audited as at Audited as at
31 Dec 2011 31 Dec 2010
Rm Rm
ASSETS
Non-current assets 1 927 1 661
Property, plant and equipment 1 760 1 607
Deferred tax asset 167 54
Current assets 2 531 2 402
Inventories 831 1 084
Trade and other receivables and pre-payments 516 826
Cash and short-term deposits 1 184 492
TOTAL ASSETS 4 458 4 063
EQUITY AND LIABILITIES
Total equity 2 620 2 510
Non-current liabilities 624 536
Provisions 624 536
Current liabilities 1 214 1 017
Trade and other payables 1 016 745
Income tax payable 45 54
Provisions 153 218
TOTAL EQUITY AND LIABILITIES 4 458 4 063
Net asset value - cents per share 2 642.5 2 531.5
CONDENSED CONSOLIDATED INCOME STATEMENTS
Unaudited Unaudited
for the for the Audited Audited
three three for the for the
months months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Notes Rm Rm Rm Rm
Sale of goods 1 353 1 214 5 587 5 125
Revenue 1 353 1 214 5 587 5 125
Cost of sales (967) (1 334) (4 750) (5 031)
Gross profit/(loss) 386 (120) 837 94
Other operating income 87 - 87 -
Selling and
distribution costs (64) (84) (301) (301)
Administrative expenses (75) (85) (306) (353)
Other operating expenses 5 (243) (221) (366) (263)
Operating profit/(loss) 91 (510) (49) (823)
Finance costs (22) (12) (50) (49)
Finance income 6 7 26 36
Profit/(loss) before tax 75 (515) (73) (836)
Income tax credit 6 1 138 118 287
Profit/(loss) for
the period/year 76 (377) 45 (549)
Cents Cents Cents Cents
Profit/(loss) per share -
basic and diluted 76.7 (380.2) 45.4 (553.7)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited Audited
for the for the for the for the
three months three months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Rm Rm Rm Rm
Profit/(loss) for the period/year 76 (377) 45 (549)
Other comprehensive (loss)/income:
Exchange differences on
translation of foreign operations (22) (17) 55 (15)
Total comprehensive
income/(loss) for the period/year 54 (394) 100 (564)
HEADLINE EARNINGS PER SHARE
Unaudited Unaudited
for the for the Audited Audited
three three for the for the
months months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Rm Rm Rm Rm
Reconciliation of headline
earnings/(loss)
Profit/(loss) for the period/year 76 (377) 45 (549)
(Deduct)/add after tax effect of:
Insurance claim proceeds on items
of property, plant and equipment
scrapped (63) - (63) -
Loss on disposal and scrapping
of property, plant and equipment - 162 3 166
Headline earnings/(loss) 13 (215) (15) (383)
Cents Cents Cents Cents
Earnings/(loss) per share -
headline and diluted 13.1 (216.8) (15.1) (386.3)
Million Million Million Million
Number of shares
Ordinary shares in issue
as at end date *+ 99.2 99.2 99.2 99.2
* Rounded to nearest hundred thousand.
+ Agree to weighted average and diluted number of ordinary shares.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Issued capital
and share Other Retained
premium reserves earnings Total
Note Rm Rm Rm Rm
2010
Balance at 1 January 2010
- Audited 585 153 2 336 3 074
Loss for the period (17) (17)
Other comprehensive
income for the quarter 2 2
Balance at 31 March 2010
- Reviewed 585 155 2 319 3 059
Loss for the period (127) (127)
Other comprehensive loss
for the quarter (2) (2)
Balance at 30 June 2010
- Reviewed 585 153 2 192 2 930
Loss for the period (28) (28)
Other comprehensive
income for the quarter 2 2
Balance at 30
September 2010 - Unaudited 585 155 2 164 2 904
Loss for the period (377) (377)
Other comprehensive loss
for the quarter (17) (17)
Balance at 31
December 2010 - Audited 585 138 1 787 2 510
2011
Balance at 1
January 2011 - Audited 585 138 1 787 2 510
Profit for the period 21 21
Other comprehensive
income for the quarter 20 20
Balance at 31
March 2011 - Unaudited 585 158 1 808 2 551
Profit for the period 65 65
Other comprehensive
income for the quarter 7 7
Balance at 30 June
2011 - Reviewed 585 165 1 873 2 623
Loss for the period (117) (117)
Other comprehensive
income for the quarter 50 50
Balance at 30
September 2011 - Unaudited 585 215 1 756 2 556
Profit for the period 76 76
Other comprehensive loss
for the quarter (22) (22)
Share-based
payment reserve 7 10 10
Balance at 31
December 2011 - Audited 585 203 1 832 2 620
Unaudited Unaudited Audited Audited
for the for the for the for the
three months three months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Cents Cents Cents Cents
Dividends per share
Dividends declared and paid - - - -
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited
for the for the Audited Audited
three three for the for the
months months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Rm Rm Rm Rm
Cash flows from operating activities
Cash generated by/(used in)
operations before tax paid 502 36 1 070 (179)
Income tax paid (1) (26) (6) (109)
Net cash generated by/(used in)
operating activities 501 10 1 064 (288)
Cash flows from investing activities
Proceeds from sale and scrapping
of property, plant and equipment 88 - 90 13
Net additions to property,
plant and equipment (152) (78) (485) (263)
Net cash used in
investing activities (64) (78) (395) (250)
Net increase/(decrease) in
cash and cash equivalents 437 (68) 669 (538)
Cash and cash equivalents at the
beginning of the period/year 752 575 492 1 072
Effects of exchange rate
changes on cash held in
foreign currencies (5) (15) 23 (42)
Cash and cash equivalents
at the end of the period/year 1 184 492 1 184 492
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 have been maintained throughout the reporting
periods.
2. Related party transactions
Sales to East Metals A.G. (a fellow subsidiary) amounted to R652 million (2010:
R895 million) for the year ended 31 December 2011. This constitutes 12% of total
revenue for the year, compared to 17% for the year ended 31 December 2010.
Technical services (slag tolling agreement) with EVRAZ Vametco Alloys
Proprietary Limited (a fellow subsidiary) amounted to R110 million (2010: R34
million).
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 Audited Audited
for the for the for the for the
three months three months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Rm Rm Rm Rm
Revenue from the sale of goods
Steelworks 952 799 3 957 3 612
Vanadium 401 415 1 630 1 513
Total 1 353 1 214 5 587 5 125
Intersegment revenue is eliminated on consolidation.
Unaudited Unaudited Audited Audited
for the for the for the for the
three months three months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Rm Rm Rm Rm
Operating (loss)/profit
Steelworks (42) (559) (542) (1 220)
Vanadium 133 49 493 397
Total 91 (510) (49) (823)
Audited Audited
as at as at
31 Dec 31 Dec
2011 2010
Rm Rm
Total assets
Steelworks 3 664 3 340
Vanadium 794 723
Total 4 458 4 063
4. Supplementary revenue information - Unaudited
For the three For the three For the For the
months months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Sales volumes
of major products
Total steel Tons 132 481 158 315 603 094 610 602
Ferrovanadium Tons V 1 491 1 153 6 031 5 488
Modified Vanadium
Oxide Tons V 94 421 398 468
Nitrovan Tons V 310 - 1 105 -
Vanadium slag Tons V2O5 127 - 664 2 102
Fines ore Tons 167 601 167 610 662 395 623 928
Vanadium slag sales reduced from 2 102 tons V2O5 for the year ended 31 December
2010 to 664 tons V2O5 for the year ended 31 December 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$/t 822 663 825 715
Ferrovanadium US$/kg V 25 28 27 27
Modified Vanadium
Oxide US$/kg V 17 21 21 20
Nitrovan US$/kg V 25 - 27 -
Vanadium slag US$/kg V2O5 5 - 5 6
Fines ore US$/t 23 37 33 38
Average R/$
exchange rate 8.10 6.91 7.26 7.32
5. Other operating expenses
The R366 million other operating expenses for the year ended 31 December 2011
relates mainly to net stock write down of R10 million (expense), profit related
bonus adjustment of R25 million (income), gain on foreign exchange differences
of R27 million (income) and idle plant costs of R342 million (expense). For the
year ended 31 December 2010, the expense of R263 million consisted mainly of
property, plant and equipment impairment loss.
6. Income tax
Unaudited Unaudited Audited Audited
for the for the for the for the
three months three months year year
ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Rm Rm Rm Rm
South African
Normal
Current - - - -
Prior year under provision - 1 - 1
Deferred
Current (7) (159) (112) (318)
Prior year (over)/under provision (1) 21 (1) 21
Non-South African
Normal
Current 3 (1) 3 13
Prior year under/(over) provision 4 - (8) (4)
Income tax credit (1) (138) (118) (287)
7. Share-based payment reserve
Certain key management personnel participate in a Long Term Incentive Plan
(LTIP) over Global Depositary Receipts (GDR`s) in EVRAZ plc. The GDR`s are
traded on the London Stock Exchange. The vesting of the GDR`s occur on the 90th
day following the announcement of EVRAZ plc financial results.
The cost of the LTIP award will be settled in equity or cash by EVRAZ plc. The
amount recognised according to IFRS 2 in 2011 is R10 million (2010: Rnil).
8. Financial ratios - Unaudited
Current ratio 2.08 2.36 2.08 2.36
Market capitalisation - Rm 3 618 8 279 3 618 8 279
9. Steel margins - Unaudited
Total steel margins improved from negative 14% for the year ended 31 December
2010, to negative 2% for the year ended 31 December 2011. The total steel
margins increased from negative 0.1% in the third quarter of 2011 to positive
4.7% in the fourth quarter of 2011.
10. Contingent liabilities and guarantees
As required by the Mineral and Petroleum Resources Development Act, a guarantee
amounting to R264 million (2010: R264 million) was issued in favour of the
Department of Mineral Resources (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 R31
million before tax and R22 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.
A supplier company has claimed against the Company in respect of structural
damage to assets sold in the past. The claim is in the amount of R42 million.
Arbitration has and will continue in 2012. The Company has been advised by its
legal counsel that there is not a reasonable probability that the claim will
succeed. Accordingly, no provision for any liability has been made in these
financial statements.
A supplier company has claimed against the Company in respect of allegedly money
owed for services rendered to the former subdivision Transalloys (R277 000) and
for consequential damages due to the cancellation of the service contract (R1
million). The Company has been advised by its legal counsel that there is not a
reasonable probability that the claim will succeed. Accordingly, no provision
for any liability has been made in these financial statements.
11. Subsequent events
The final conditions precedent to the 26% BEE transaction were fulfilled by the
DMR approving the transfer of the converted new order right to Mapochs Mine
Proprietary Limited. The BEE transaction has accordingly become unconditional in
accordance with its terms, and the effective date was 29 February 2012.
EVRAZ Highveld is fully co-operating with the Competition Commission in respect
of the Competition Commission`s investigation relating to the allegation that
EVRAZ Highveld had an exclusive stock replacement arrangement for a certain
period of time. It is not clear to EVRAZ Highveld whether the Competition
Commission will, at the conclusion of its investigation, refer a complaint
against EVRAZ Highveld to the Competition Tribunal. EVRAZ Highveld did not raise
a provision or a contingent liability as, amongst other things, the above
allegation is still being investigated by the Competition Commission and a
contravention of the relevant provision of the Act, No. 89 of 1998 will not
result in the imposing of an administrative penalty unless the conduct in
question is substantially a repeat by the same firm of conduct previously found
by the Competition Tribunal to be a practise prohibited in terms of Chapter 2 of
the Competition Act, No. 89 of 1998.
Directors:
B J T Shongwe (Chairman), G C Baizini (Italian), M Bhabha, M D Garcia
(Chief Executive Officer) (American), Mrs B Ngonyama, V M Nkosi, D Scuka
(Czech), P M Surgey, P S Tatyanin (Russian), J Valenta (Czech) and
T I Yanbukhtin (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
Sponsor:
J.P. Morgan Equities Limited
Date: 14/03/2012 16:20:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
