| Wed 13 Feb 2002, 0:00 | | Hiveld chairmans statement |
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Highveld Steel And Vanadium Corporation Limited - Abridged Chairman's Review
Release Date: 13/02/2002 15:57:46Code(s): HVL © 2002 SharenetClick CODE for more details on the companyand Final Distributions to Shareholders
HIGHVELD STEEL AND VANADIUM CORPORATION LIMITED
Registration no. 1960/001900/06
(Incorporated in the Republic of South Africa)
Share code: HVL
ISIN: ZAE000003422
A member of the Anglo American plc group
Abridged Chairman's Review and Final Distributions to Shareholders
Financial results
The reporting period was characterised by weak international prices for the
group's entire range of products. However a strong local steel market in the
second half of the year and the weakening of the rand against other major
currencies enabled operations to be maintained at full output. Columbus
Stainless, which was consolidated in the Highveld figures for the last time,
showed a significant improvement in the second half of the year, but was
nevertheless below budget.
A group operating profit of R74,1 million was achieved, compared to a profit
of R121,5 million in 2000. The loss attributable to Highveld shareholders
was R482,3 million compared to a profit of R88,5 million in 2000. This was
principally as a result of the loss of R482,3 million on the prospective
sale of Columbus Stainless and the Highveld share of the Columbus Joint
Venture loss which was R49,4 million for the period (2000: R21,9 million
loss). The attributable loss also included net interest of R75,1 million
(2000: R65,4 million) and a tax credit of R24,5 million (2000: R32,4 million
tax credit).
During the year the sale of 64 per cent of Columbus Stainless by the three
South African partners to Acerinox SA was concluded with effect from 1
January 2002, leaving Highveld with a 12 per cent direct holding.
Simultaneously Highveld acquired a 2,9 per cent shareholding in Acerinox SA.
For clarity on the effect of this a proforma balance sheet immediately post
the transaction on 1 January is also included in the financial statements.
Headline earnings for the full year were R25,3 million, representing a
decrease of 78 per cent on the previous year's R115,6 million, being
equivalent to 25,9 cents per share (2000: 118,6 cents per share). However
the headline earnings for the second half of the year were R51,5 million
compared to a loss of R26,3 million at the interim stage.
Mainly as a result of receipts from the sales of Rheem Can and a redundant
pelletising plant, there was a cash inflow of R53,1 million for the year
compared with an outflow of R39,4 million in 2000, decreasing total net debt
to R498,3 million.
In view of the results achieved, the Board has decided to pay a final
ordinary dividend of 15 cents per share, being also the total dividend for
the year, compared with 50 cents per share in 2000.
Carbon steel and vanadium
World steel markets continued to suffer throughout the year from excess
production and declining demand. Although substantial production reductions
took place in North America and in the European Union, the growth in output
from China and other Asian countries effectively counter balanced them.
The terrorist attacks on New York and Washington in September had a profound
effect on sentiment in the United States which impacted negatively on the
already fragile steel prices as their economy faltered.
In June last year President Bush initiated a Section 201 Safeguard
Investigation in terms of the United States Trade Act. The process is near
completion as the International Trade Commission (ITC) concluded that
approximately 75 per cent of all steel imports had injured or might injure
United States producers and proposed remedies which range from quotas to
severe tariffs of up to 40 per cent. These measures, if approved by
President Bush, will be over and above the dumping duties which are already
in place. The South African steel industry is negotiating with the United
States authorities to find a solution to this problem as it is believed that
any new protectionist measures are in conflict with the ideals of the
African Growth and Opportunity Act.
The International Iron and Steel Institute (IISI) forecast that the final
data for 2001 would reflect almost flat world steel consumption relative to
2000, and modest growth in 2002.
In South Africa, carbon steel consumption continued to rise with a number of
sizeable projects entering the construction stage during the year. According
to the South African Iron and Steel Institute (SAISI) statistics the overall
domestic consumption was up 4,9 per cent. Consumption of long products in
the group's range rose by 12 per cent with only marginal growth in flat
products.
While consumption of vanadium was at reasonable levels and in line with
crude steel production, the market remained in an oversupply situation. As a
result, vanadium prices in US dollars declined to the lowest levels in 25
years.
Due to these poor market conditions, a maintenance programme was undertaken
at the ferrovanadium smelter during December. Vanchem continued to operate
only kilns no. 2 and 3 with the upgraded kiln no. 1 remaining idle.
The Ferroalloys Association in the United States has filed a dumping case
against the importation of ferrovanadium from South Africa and China. This
further protectionist measure by the United States will have only a small
impact on our vanadium exports.
It is pleasing to report that in co-operation with our Canadian partners,
Vanteck, the prototype vanadium redox battery with a design capacity of
250kW / 520kWh was commissioned at the University of Stellenbosch. Following
this the first commercial order was received for a 2 MWh commercial unit to
be operating by mid 2002 in the state of Utah, U.S.A.
Ferro-alloys
The profit squeeze on the world steel industry impacted adversely on both
the demand and the export prices for bulk ferro-alloys.
Export prices for silicomanganese generally held steady at low levels while
firming somewhat in the United States at mid-year as anti-dumping actions
were taken against three supplying countries. Medium carbon ferromanganese
prices started the year at satisfactory levels but progressively
deteriorated to historic lows as major consumers in the United States
experienced bankruptcy or closure. Nevertheless full production was
maintained at Transalloys. Extensive reviews of operating practices and raw
material usage yielded operating benefits despite electrode problems
affecting the two larger furnaces.
Rand Carbide maintained full production of ferrosilicon as a result of good
local demand. Plant operations were good. The production of electrode paste
was restricted by the poor local demand arising from the low utilisation of
furnaces in the South African ferro-alloy industry.
Rheem
Demand for containers improved from a low base toward year end, which
resulted in a satisfactory profit for the year.
Although budgeted volumes were not met in the crown closure operation due to
the sluggish economy, modest profits were achieved.
The beverage can plant was sold to Latas De Allumino SA and negotiations
were progressed for the sale of the crown and container manufacturing
plants.
Safety, health and environmental matters
The safety performance of the corporation was unsatisfactory with the
disabling injury frequency rate deteriorating from 1,59 accidents per 200
000 hours worked in 2000 to 2,03 in 2001. Tragically two employees lost
their lives after an accident in December. The corporation target remains to
reduce the accident frequency rate to below 1 and to this end further
measures are in progress. A focused re-audit on risk assessments pertaining
to job safety is in progress, management has been coached on the techniques
of job observation and counselling of individuals, and the reporting of
"near miss" incidents is being encouraged by means of a competition.
Environmental matters received the required attention to ensure improved
conditions and minimising of adverse impacts on the environment in which the
corporation operates.
It is pleasing to report that environmental accreditation in respect of ISO
14001 was achieved at the Rand Carbide division of the corporation in 2001
and two further divisions will apply during 2002.
Outlook
The group enters 2002 with a better balance sheet and order book than in
2001. This is largely as a result of the conversion of its 33 per cent
ownership of Columbus Stainless to a reduced 12 per cent and a 2,9 per cent
holding in Acerinox SA. In addition the group packaging interests have
either been sold or are in the process of disposal. Thus in contrast to
recent years the group's earnings will be driven more by the carbon steel
and vanadium activities.
World steel is in a reassessment and adjustment period caused by poor
returns on equity and characterised by increasing privatisation and
globalisation. The United States producers are in a particularly difficult
situation with high costs (partly due to dollar strength), ageing plants,
declining demand and high costs of closing operations. One of the results
has been intensified protectionism, which is likely to be reinforced when
President Bush announces his remedies under Section 201 of the United States
Trade Act. Elsewhere in the world, and despite the OECD led initiative to re-
structure the world steel industry, the slow pace of closure of inefficient
plants allied to new and de-bottlenecked capacity coming into production is
likely to keep international prices low for most of 2002.
Domestically the South African Iron and Steel Institute has forecast
consumption growth of about 2 per cent for 2002. The inventory corrections
which hampered sales over the past 18 months have tapered off and mill
orders now more closely reflect real domestic consumption.
Vanadium usage is expected to weaken somewhat, particularly in North
America, and oversupply will prevail despite this business being dominated
world wide by only four significant players. Prices are thus expected to
remain near the current depressed levels unless production cuts are made.
Vanchem is currently only operating two of the three installed roasting
units.
Despite the generally poor export market conditions for our products, and
with the above mentioned exception of kiln no.1 at Vanchem and a major
rebuild of iron making furnace no.2 in the first quarter, it is planned that
the group's operations will continue at full capacity in 2002. This will
clearly be influenced by the outcome of trade protection measures in the
United States, Canada and Europe, and also by the SA rand/US dollar exchange
rate.
However given no major change from the status quo it is expected that
earnings in the 2002 financial year will be improved on those in 2001.
For and on behalf of the Board
T E Jones (Chairman and Chief Executive Officer)
13 February 2002
Results for the year ended 31 December 2001
ABRIDGED AUDITED CONSOLIDATED INCOME STATEMENTS
for the years ended 31 December
2001 2000
R'000 R'000
Revenue 4 427 501 4 521 895
----------- -----------
Operating profit 74 092 121 530
Net interest paid 75 142 65 447
----------- -----------
(Loss)/profit before taxation (1 050) 56 083
Taxation credit 24 567 32 415
----------- -----------
Net profit from ordinary activities 23 517 88 498
After tax loss on prospective sales (505 827) -
----------- -----------
(Loss)/profit attributable to
shareholders (482 310) 88 498
Transfer (to)/from non-distributable
reserve (729) 59
Distributions to shareholders (29 267) (38 974)
----------- -----------
Retained (loss)/profit for the year 512 306) 49 583
----------- -----------
(Loss)/profit attributable to
shareholders (482 310) 88 498
Add/(less) after tax effect of:
Loss on prospective sales 505 827 -
Loss on closure of operation - 27 960
Impairment of fixed assets 1 820 -
Profit on disposal of unlisted
investment - (2 982)
(Profit)/loss on disposal and
scrapping of property, plant and
equipment (83) 2 120
----------- -----------
Headline earnings 25 254 115 596
----------- -----------
Weighted average number
of shares in issue during the year 97 574 036 97 500 348
Attributable (loss)/earnings
per share (cents) (494,3) 90,8
Headline earnings per share (cents) 25,9 118,6
Dividends per share attributable to
calendar profits (cents) 15,0 50,0
ABRIDGED AUDITED CONSOLIDATED BALANCE SHEETS
31 Dec 31 Dec 1 Jan
2001 2000 2002
R'000 R'000 R'000
ASSETS
Fixed assets 1 692 573 2 527 886 1 030 799
Investments 24 166 10 839 847 633
(Short-term borrowings)/
net cash on hand (670) 34 244 (98 489)
Net current assets 620 979 538 369 227 465
Current assets 1 732 397 1 459 547 1 080 767
Current liabilities 1 111 418 921 178 853 302
--------- --------- ---------
TOTAL ASSETS 2 337 048 3 111 338 2 007 408
--------- --------- ---------
EQUITY AND LIABILITIES
Shareholders' equity 1 421 993 1 928 494 1 389 858
Deferred taxation 225 932 465 500 225 932
Long-term liabilities 689 123 717 344 391 618
--------- --------- ---------
TOTAL EQUITY AND
LIABILITIES 2 337 048 3 111 338 2 007 408
--------- --------- ---------
Debt to equity
ratio-percentage 35 29 22
Net worth - cents/share 1 457 1 977 1 424
Net debt 498 262 551 364 312 364
ABRIDGED AUDITED CONSOLIDATED CASH FLOW statementS
for the years ended 31 December
2001 2000
R'000 R'000
Net cash inflow from operating
activities 106 131 114 139
Net cash outflow from investing
activities (53 030) (153 541)
--------- ---------
Net cash inflow/(outflow) 53 101 (39 402)
Financed as follows: (53 101) 39 402
Net cash outflow from financing
activities (10 840) (11 792)
(Increase)/decrease in cash on hand (42 261) 51 194
Notice of final ordinary dividend
On Wednesday, 13 February 2002, the directors of the corporation declared a
final dividend no. 54 on the ordinary shares for the year ended 31 December
2001, as follows:
Amount (South African currency) 15 cents per share
Last day to trade to qualify for
dividend (and for changes of
address or dividend instructions) Wednesday, 27 March 2002
Dematerialisation suspended from Wednesday, 20 March 2002
to (inclusive) Friday, 5 April 2002
Ex-dividend on the JSE Securities
Exchange South Africa Thursday, 28 March 2002
Record date Friday, 5 April 2002
Payment date of dividend Monday, 8 April 2002
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) 13 February 2002
The annual report will be posted to all registered shareholders on or about
8 March 2002
Enquiries may be directed to e-mail address: general@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) 370-7916
Sponsoring broker
Cazenove
DIRECTORS: T E Jones (Chairman and Chief Executive Officer), D D Barber, E
Barnardo, L Boyd, C B Brayshaw, J A Chegwidden, C J Colebank, B E Davison, E
K Diack, A Harris, L Matteucci, Ms D R Motsepe, Dr A J Pienaar, B J T
Shongwe, A J Trahar, M Winstanley (British)
ALTERNATE
DIRECTORS: P M Baum, G F Young
Company Secretary: J Theiss
