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Iscor Limited - Unaudited Group Headline Earnings And Physical Information
Iscor Limited
Registration number: 1989/002164/06
Share code: ISC ISIN code: ZAE000022729
Unaudited group headline earnings
and physical information for the quarter ended 30 September 2002
- major improvement in earnings and cash flow
GROUP INCOME STATEMENT (RM)
Quarter ended Year ended
30 September 30 June
2002 2001 2002
Revenue 4 849 3 191 14 467
Flat steel
products
- 2 673 1 864 8 051
Vanderbijlpark
- Saldanha 795 320 1 724
Steel - total
- Iscor share 795 160 1 444
Long steel 1 293 1 063 4 628
products
Suprachem 169 141 653
Other 196 79 343
Intra Group (277) (116) (652)
Operating 885 153 1 176
profit
Flat steel
products
- 524 86 842
Vanderbijlpark
- Saldanha 128 (114) (510)
Steel - total
- Iscor share 128 (46) (379)
Long steel 223 102 679
products
Suprachem 30 15 121
Other 2 8 17
Group costs (22) (12) (104)
Financing costs
- Iscor (48) (46) (388)
- Saldanha (98) (156)
Steel
Taxation (259) (13) (206)
Equity 23 15 54
accounted
earnings
(excluding
Saldanha)
Headline 601 11 480
earnings
- per share 134,8 2,5 107,7
(cents)
(based on 445
752 132 shares)
PHYSICAL
INFORMATION
(`000 TONS)
Flat steel
products
-
Vanderbijlpark
Liquid steel 957 930 3 512
production
Sales 816 748 2 984
- Local 612 462 2 016
- Exports 204 286 968
- Local as % of 75 62 68
total
- Saldanha
Steel
Liquid steel 311 254 933
production
Sales 275 201 887
- Local 28
- Export 247 201 887
- Local as % of 10
total
Long steel
products
Liquid steel 535 525 2 008
production
Sales 449 468 1 749
- Local 278 266 1 032
- Export 171 202 717
- Local as % of 62 57 59
total
Total
Liquid steel 1 803 1 709 6 453
production
Sales 1 540 1 417 5 620
- Local 918 728 3 048
- Export 622 689 2 572
- Local as % of 60 51 54
total
FINANCIAL RESULTS
Operating profit for the quarter showed a major improvement on the comparative
quarter last year. This was the result of a number of significant developments
during the past twelve months:
- sharp turnaround in the international steel price cycle;
- weakening of the exchange rate against the US dollar;
- strong growth in domestic steel demand coupled with a drop in steel imports;
and
- achievement of full capacity output and improved efficiencies at Saldanha
Steel following the successful Corex repair.
In order to facilitate comparison of results, the income statement includes a
line-by-line consolidation of Iscor`s 50% share of Saldanha Steel`s results
prior to acquisition of full control on 28 November 2001 (revenue, operating
profit, interest and tax). The first-quarter results for 2001 have also been
adjusted for the benefit of receiving iron ore at cost plus 3% as from 1 July
2001, which was only accounted for after the unbundling and not included in last
year`s published first quarter results.
At headline earnings level, the results for the quarter exceeded those for the
full 2001/2 financial year, aided by the reduction in finance charges after the
rights issue.
MARKET REVIEW
International
International steel prices have shown a significant upswing since February this
year, triggered in part by safeguard measures introduced in the United States,
the European Union and China as well as by closer realignment of international
steel supply and demand. South Africa, as a developing economy and member of the
World Trade Organisation, and through careful management of exports below the 3%
threshold level for imports into safeguard countries, has not been negatively
affected by the safeguard measures.
There is currently no indication of global inventory build-up, with forecasting
agencies predicting relatively stable prices through 2003.
Domestic
The quarter was characterised by continuing buoyant demand driven by large
resource projects, construction activity and secondary exports, which have
become more competitive with the weaker currency. Domestic deliveries were
further boosted by a drop in steel imports from 5,4% to 4,1% of consumption
since the first quarter of last year.
Prices have moved in line with global trends, although the impact on our
earnings has been delayed by the lead time from order placement to delivery.
Measured in real terms, steel prices during the past financial year reached the
lowest levels in 30 years.
Our domestic pricing policy is grounded on international parity principles.
South African steel prices have been consistently lower than domestic prices in
all major world markets as illustrated by the following graph:
COST REDUCTION
We are committed to a policy of continuous cost reduction in excess of the long-
term real rate of US dollar steel price erosion, which has averaged 1,2% per
annum over the past 40 years and is expected to continue to decline in line with
most commodity prices.
Our average cost per ton of steel for the quarter, excluding Saldanha, was $245,
some 8,9% lower than the first quarter last year.
The business assistance agreement with the LNM Group, approved by shareholders
in January 2002, is aimed at reducing non-labour cash costs by at least R700
million, equivalent to some $12/ton over the next three years. These savings
will be over and above those we could reasonably expect to achieve ourselves.
Significant potential savings, particularly on procurement, have already been
identified but will only start flowing through later in the financial year.
SALDANHA STEEL
The successful repair of the Corex melter/gassifier unit during May and June
allowed Saldanha to produce at full design capacity during the quarter. This was
combined with significant efficiency improvements, particularly lower coke and
pellet usage, and a very satisfactory 36% production level of thin-gauge
material for which premium prices were received.
Combined with the improved pricing levels, Saldanha has swung from a major drag
on group profits to a significant profit generator. The operating margin for the
quarter of 16,1% compares with Vanderbijlpark`s 19,6% and long products` 17,3%.
Further cost savings, as well as production levels above design capacity, are
targeted which should bring Saldanha`s cash costs per ton well within the lowest
quartile of the global cost curve, a position our other plants already enjoy.
CASH FLOW
Cash generation was strong with net debt reducing from R1,139 million at the
start of the quarter to R457 million at the end. Second quarter operating cash
flows should remain healthy but will be affected by the dividend payment of R178
million and our first tax payment of R510 million after working off our assessed
loss.
OUTLOOK
Order books for the second quarter are full at current prices and volume levels
for both domestic and export markets which should produce a further set of good
results, despite the short December delivery period. Second half results will
depend on the level of domestic demand and the direction of international steel
prices, but should be significantly better than last year.
24 October 2002
Website: http://www.iscor.com
Shareholders: Please call the Iscor ShareCare Line toll free if you have any
queries regarding Iscor or your Iscor shares on 0800 006 960 or +27 11 775 3420
if calling from outside South Africa
Iscor Limited
Registered office
Iscor Head Office, Roger Dyason Road
Pretoria West, Pretoria, 0002
Company secretary: A van der Merwe
Transfer secretaries
Stakeholder Data Services (Pty) Limited
First National House
108 Johan Avenue, Sandton
PO Box 652000, Benmore, 2010
Date: 24/10/2002 01:30:00 PM Produced by the JSE SENS Department
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