| Mon 19 Aug 2002, 0:00 | | Highveld Steel And Vanadium Corporation Limited - |
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HIGHVELD STEEL AND VANADIUM CORPORATION LIMITED - INTERIM REPORT FOR THE SIX
MONTHS TO 30 JUNE 2002
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
Interim report for the six months to 30 June 2002
- Improved vanadium prices
- Strong domestic steel consumption
- Headline earnings improved to R95.5 million
The unaudited group results for the half-year ended 30 June 2002 set out below
have been prepared in accordance with the South African Statements of Generally
Accepted Accounting Practice and on a basis consistent with the prior year`s
interim report and the audited financial statements at 31 December 2001.
ABRIDGED CONSOLIDATED INCOME STATEMENTS
Unaudited Unaudited Unaudited Audited
Six months Six months Six months Year to
to 30.6.02 to 30.6.01 to 31.12.01 31.12.01
R`000 R`000 R`000 R`000
Continuing
operations
Revenue 1 855 192 1 502 241 1 684 055 3 186 296
Operating profit 147 659 2 569 58 661 61 230
Net interest paid 18 023 29 209 12 383 41 592
Operating 129 636 (26 640) 46 278 19 638
profit/(loss)
after interest
Discontinued
Columbus
operation
Revenue - 560 269 680 936 1 241 205
Operating - (31 383) 44 245 12 862
(loss)/profit
Net interest paid - 16 775 16 775 33 550
Operating - (48 158) 27 470 (20 688)
(loss)/profit
after interest
Total operations
Revenue 1 855 192 2 062 510 2 364 991 4 427 501
Operating profit 199 021 61 132 209 904 271 036
before
depreciation
Depreciation 51 362 89 946 106 998 196 944
Operating 147 659 (28 814) 102 906 74 092
profit/(loss)
after
depreciation
Net interest paid 18 023 45 984 29 158 75 142
Operating 129 636 (74 798) 73 748 (1 050)
profit/(loss)
after interest
Loss on sale of - (610 059) (112 551) (722 610)
operations
Profit/(loss) 129 636 (684 857) (38 803) (723 660)
before taxation
Taxation (34 702) 231 504 9 846 241 350
(charge)/credit
Profit/(loss) 94 934 (453 353) (28 957) (482 310)
attributable to
Highveld
shareholders
Headline
earnings/(loss)
Profit/(loss) 94 934 (453 353) (28 957) (482 310)
attributable to
Highveld
shareholders
Add/(less) after
tax effect of:
Loss on sale of - 427 041 78 786 505 827
operations
Impairment of - - 1 820 1 820
fixed assets
Cost of 560 - - -
restructuring
Profit on - - (83) (83)
disposal and
scrapping of
property, plant
and equipment
Headline 95 494 (26 312) 51 566 25 254
earnings/(loss)
Weighted average 97 628 022 97 560 574 97 567 166 97 574 036
number of shares
in issue
Attributable 97.2 (464.7) (29.7) (494.3)
earnings/(loss)
per share (cents)
Headline 97.8 (27.0) 52.9 25.9
earnings/(loss)
per share (cents)
Dividend per 45 - 15 15
share
attributable to
calendar profits
(cents)
Dividend cover 2.2 - 3.5 1.7
based on headline
earnings
ABRIDGED CONSOLIDATED BALANCE SHEETS
Audited
as at
Unaudited Unaudited 1.1.02
as at as at (after sale of
30.6.02 30.6.01* Columbus)
R`000 R`000 R`000
ASSETS
Fixed assets 1 066 457 2 515 112 1 030 800
Investments (1) 847 593 11 709 847 632
Net cash on hand/ (short- 185 520 72 203 (53 347)
term borrowings)
Net current 64 685 (241 571) 227 464
assets/(liabilities)
Current assets 1 086 416 1 416 637 1 080 767
Current liabilities 1 021 731 1 658 208 853 303
Total assets 2 164 255 2 357 453 2 052 549
Equity and liabilities
Shareholders` equity 1 470 788 1 445 678 1 389 858
Deferred taxation 260 634 235 008 225 932
Long-term liabilities 432 833 676 767 436 759
Total equity and 2 164 255 2 357 453 2 052 549
liabilities
(1) Investments
Acerinox SA - at cost 533 333 - 533 333
(market value 30 June
2002: R842 million)
Columbus Stainless (Pty) 300 000 - 300 000
Ltd - at cost
Other 14 260 11 709 14 299
847 593 11 709 847 632
Debt to equity ratio- 5 36 22
percentage
Net worth - cents/share 1 506 1 482 1 424
Net debt 69 554 516 951 312 364
*Includes Columbus Joint Venture
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Share capital,
share premium and
non-distributable Retained
reserve profit Total
R`000 R`000 R`000
Balance at 1 January 2002 557 724 832 134 1 389 858
Attributable profit - 94 934 94 934
Dividend: final no. 54 - (14 630) (14 630)
2001
Proceeds from shares 626 626
issued
Balance at 30 June 2002 558 350 912 438 1 470 788
ABRIDGED CONSOLIDATED CASH FLOW STATEMENTS
Audited
Year to
Unaudited Unaudited Unaudited to 1.1.02
Six months Six months Six months (after sale
of
to 30.6.02 to 30.6.01* to 1.1.02 Columbus)
R`000 R`000 R`000 R`000
Net cash inflow 329 202 111 261 12 741 124 002
from operating
activities
Net cash (86 392) (76 848) 32 766 (44 082)
outflow/(inflow)
from investing
activities
Net cash inflow 242 810 34 413 45 507 79 920
Net cash outflow (267 887) (77 113) (3 922) (81 035)
from financing
activities
Net 25 077 42 700 (41 585) 1 115
decrease/(increase)
in cash and cash
equivalents
Net borrowings
Long-term 255 074 545 030 259 017 259 017
borrowings
Short-term 54 348 418 895 318 292 318 292
borrowings
Cash and cash (239 868) (446 974) (264 945) (264 945)
equivalents
69 554 516 951 312 364 312 364
*Includes Columbus Joint Venture
ABRIDGED SEGMENTAL INFORMATION PERTAINING TO CONTINUING OPERATIONS
Steel and vanadium Ferro-alloys Total continuing
operations
Unaudited Unaudite Unaudite Unaudite Unaudited Unaudited
d d d
Six Six Six Six Six Six
months months months months months months
to to to to to to
30.6.02 30.6.01 30.6.02 30.6.01 30.6.02 30.6.01
R`000 R`000 R`000 R`000 R`000 R`000
Revenue* 1 412 857 1 182 442 335 319 300 1 855 192 1 502 241
941
Operating 67 888 (25 176) 79 771 27 745 147 659 2 569
profit/
(loss)
*Revenue pertaining to the steel and vanadium segment comprises
R1 110.8 million (2001: R1 009.9 million) in respect of steel and R302.1 million
(2001: R173.0 million) in respect of vanadium.
Financial results
Improved export prices for the group`s range of products, a strong local steel
market and the rand weakening against the US$ contributed to a significantly
improved operating profit of R147.7 million compared to a loss of R28.8 million
for the corresponding period last year. Headline earnings improved to R95.5
million from a loss of R26.3 million. Cost saving initiatives of R45.3 million
also contributed to the improved results.
The attributable profit for the six months was R94.9 million compared to a loss
of R453.4 million in 2001.
The headline profit per share was 97.8 cents, compared to the headline loss per
share of 27.0 cents in the first six months of 2001.
A strong cash inflow of R242.8 million was achieved and the group`s net
borrowings decreased to R69.6 million compared to R312.4 million in December
2001. In view of the results the Board has decided to declare an interim
dividend of 45 cents per share (2001: Nil).
Carbon steel and vanadium
World crude steel production increased by 3.2 per cent in the first six months
of 2002 compared to the same period last year reaching an annualised rate of 860
million tons. Whilst production in North America and the European Union
declined, production in China grew by a remarkable 22 per cent to an annualised
rate of 169 million tons surpassing the production levels of the old Soviet
Union in the mid 1980s.
World steel markets were influenced by safeguard measures in the United States
and the European Union. South Africa, as a WTO developing country member with
imports of less than 3 per cent has largely been exempted from the measures in
these areas.
As a result of these trade actions a shortage of certain products occurred in
the United States, resulting in substantial price increases.
Domestically the consumption of structural sections in South Africa improved
substantially while demand for hot rolled flat products remained similar to last
year. With many major projects underway inventories, while increasing, remained
at acceptable levels.
Full production was maintained at the steelworks during the period under review,
with the exception of iron making furnace no. 2 which was off-line for four
months undergoing a major rebuild after 32 years.
Vanadium consumption was steady, with good consumption in Europe and improved
demand in China while consumption in the United States declined in line with
their lower crude steel production.
The growing use in China is a long awaited positive development and it is
believed that China will become one of the major vanadium consuming markets as a
result of their expanding and improved steel production. China has been a focus
of the Vanadium International Technical Committee (Vanitec) whose secretariat
Highveld sponsors and whose objective is to promote the use of vanadium.
Vanadium prices improved over the past six months from the historically low
levels of around US$6.00 per kg vanadium for ferrovanadium to the current level
of about US$8.50 per kg vanadium.
The first commercial order for vanadium battery electrolyte was shipped to the
United States for a 2 MWh battery which is presently being commissioned.
Ferro-alloys
Export prices for bulk ferro-alloys were extremely low at the start of the year
but improved toward mid-year mainly due to supply-side factors. Local demand for
ferrosilicon and the manganese alloys remained strong but the paste market
continued to be adversely affected by reduced demand.
Manganese alloy production at Transalloys improved significantly and several new
output records were established. Furnace no. 7 was relined early in the year and
subsequently performed very well.
Operations at Rand Carbide were satisfactory and improved refining facilities
with fume extraction equipment were installed to meet the market demand for
lower aluminium ferrosilicon.
Stainless Steel - Investment in Acerinox SA
Acerinox SA, in which Highveld has a 2.9 per cent interest, achieved a
consolidated profit before tax for the year ending December 2001 of 86.5
million.
Highveld did not participate in any dividends during the period under review but
will benefit from all future dividends from Acerinox SA. Their share price
closed on 30 June 2002 at 42.45 compared to 39.10 on 2 January 2002.
Rheem
Agreements have been signed for the sale of the remaining divisions. Both sales
are subject to a number of conditions precedent, including Competition
Commission approval.
Capital expenditure
Capital expenditure by the group during the period amounted to R47.5 million
(2001: R28.9 million) and the total commitment in respect of further capital
expenditure is R57.1 million compared to R73.9 million at 31 December 2001.
Safety, Health and Environment
An intensified focus on safety initiatives was continued, however the
corporation most regrettably suffered a fatality in April 2002 at its ironmaking
operation.
Progress on the drive to zero tolerance and zero fatalities was positive in that
the lost time injury frequency rate per 200 000 hours (LTIFR) for the six months
to 30 June 2002 improved to 0.78 from 1.13 in the same period last year. Effort
was concentrated on a review of the methodology of risk assessments and regular
intensified plant visits by executive and senior management utilising the job
safety observation technique. In addition briefing sessions were conducted in
all the divisions to inform and involve all levels of supervision including the
explanation of the six safety "Cast Iron Rules" formulated for the Highveld
group. These initiatives will continue to be reinforced on an on-going basis.
Significant progress was made in reducing the injuries incurred by contractors
with close attention given to their working practices, their risk assessments
and specialised safety induction.
Concerted efforts were made over the past few months to give attention to
environmental practices in the group. Having attained ISO 14001 accreditation
for one division in 2001 the process is being rolled out to achieve
accreditation for two more divisions in 2002.
Directorate
Messrs CJ Colebank and DD Barber were appointed as non-executive directors with
effect from 1 January 2002 and 6 February 2002, respectively.
Corporate Governance
The group subscribes to and substantially complies with the principles set out
in the second King Committee Report on corporate governance and those matters
requiring further attention will be addressed during 2003.
Outlook
Demand for carbon steel products is now the main factor driving the Highveld
group`s profitability, both in terms of its influence on steel prices but also
as a result of the consequential consumption of ferro-alloys and particularly
vanadium products.
Despite the slow economic recovery in the United States and concerns about major
stock markets the short-term outlook for steel is that consumption will continue
to improve during the latter part of this year, driven very significantly by
China and the Asia/Pacific Rim.
Vanadium prices have improved from the historic lows reached early this year and
with increasing consumption in China prices could remain at more viable levels,
despite excess capacity overhanging the market.
Domestic demand for the group`s specific steel products is driven by capital
investment in buildings and plant and is likely to remain strong into next year.
It is too early to give a definitive picture of any effect of the new Minerals
and Petroleum Resources Development Bill on the group`s mining operations.
A significant negative factor is the poor service currently provided by Spoornet
which is, by their own admission, unlikely to improve in the short-term. Their
lack of ability to provide a level of service to which they have committed
themselves within their new commercial focus will impact seriously on the
group`s ability to move vital exports to the ports.
Nevertheless, aided by ongoing cost reduction drives at all of the manufacturing
divisions, it is expected that the results for the second half of 2002 will show
an improvement on the first half.
For and on behalf of the Board
T E Jones - Chairman and Chief Executive Officer Witbank
19 August 2002
Notice of interim ordinary dividend
On Monday, 19 August 2002, the directors of the corporation declared an interim
dividend no. 55 on the ordinary shares for the six months ended 30 June 2002, as
follows:
Amount (South African currency) 45 cents per share
Last day to trade to qualify for
dividend (and for changes of
address or dividend instructions) Friday, 4 October 2002
Dematerialisation suspended from Monday, 7 October 2002
to (inclusive) Friday, 11 October 2002
Ex-dividend on the JSE Securities
Exchange South Africa Monday, 7 October 2002
Record date Friday, 11 October 2002
Payment date of dividend Monday, 14 October 2002
By order of the Board
J Theiss Witbank
(Company Secretary) 19 August 2002
The interim report will be posted to all registered shareholders on or about 21
August 2002
Enquiries may be directed to e-mail address: general@hiveld.co.za
Registered Office Transfer Secretaries
Portion 29 of the farm Computershare Investor 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
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
and M Winstanley (British).
ALTERNATE DIRECTORS:
P M Baum and G F Young
Company Secretary:
JTheiss
Date: 19/08/2002 03:49:29 PM Produced by the JSE SENS Department
