| Tue 11 Feb 2003, 15:52 | | The audited group results for the year ended 31 De |
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HIGHVELD STEEL AND VANADIUM
Registration no. 1960/001900/06
(Incorporated in the Republic of South Africa)
Share code: HVL ISIN: ZAE 000003422
A member of the Anglo American plc group
("Highveld" or "the corporation")
Abridged Chairman`s Review
The audited group results for the year ended 31 December 2002 set out below have
been prepared in accordance with the South African Statements of Generally
Accepted Accounting Practice and International Financial Reporting Standards and
on a basis consistent with the prior year`s audited financial statements at 31
December 2001. The auditors, Deloitte & Touche, have issued their opinion on the
group financial statements for the year ended 31 December 2002. A copy of the
auditors` unqualified report is available for inspection at the corporation`s
registered office.
Financial Results
The reporting period was characterised by a strong local steel market, improved
export steel and ferro-alloy selling prices, and a weaker rand resulting in a
significantly higher group operating profit of R360.8 million, compared to a
profit of R74.1 million in 2001. The profit attributable to Highveld
shareholders was R240.1 million compared to a loss of R482.3 million in 2001.
This was after a tax charge of R122.0 million (2001: R241.3 million tax credit).
Headline earnings for the full year were R252.3 million, being nearly ten times
the previous year`s R25.3 million, and equivalent to 258,4 cents per share
(2001: 25.9 cents per share).
Flowing from the operating profit and the reduction in working capital, there
was a cash inflow of
R401.3 million for the year compared with an inflow of
R53.1 million in 2001, resulting in borrowings of
R96.9 million at year-end compared to R498.2 million at the end of 2001.
In view of the results achieved, the Board has decided to pay a final ordinary
dividend of 90 cents per share, bringing the total dividend for the year to 135
cents per share, compared with 15 cents per share in 2001.
Carbon Steel and Vanadium
Production cuts in certain major producing areas during the latter part of 2001
and the first half of 2002, resulted in a general improvement in international
steel prices.
Steel production growth resumed in the latter half of 2002, leading up to an
annual record for world crude steel production in excess of 900 million tons.
From a Highveld group perspective the most important factor was that steel
consumption in South Africa rose by 16 per cent to an estimated 4.7 million
tons, the highest level since 1989. This resulted in Highveld achieving record
domestic sales of 570 000 tons, which surpassed the previous best year of 1997.
There were mixed fortunes for vanadium during the period under review with
prices starting the year at the lowest levels in over 25 years, rising to
acceptable levels by mid-year, collapsing again during the third quarter to
uneconomical levels, only to rebound at year-end when the ferrovanadium price
rose to US$10 per kgV following difficulties experienced by Russian producers.
The ferrovanadium dumping case in the United States was finalised in December
2002 with the imposition of punitive dumping duties on Chinese and South African
producers. The impact on Highveld`s sales was minimal as business into the
United States has generally represented less than a tenth of Highveld`s
ferrovanadium sales. During the year, one kiln at Vanchem remained idle but will
be commissioned when market conditions dictate.
Ferro-alloys
Export prices of manganese ferro-alloys started the year at low levels and
drifted downwards before improving significantly from June onwards as supplies
tightened.
Transalloys production was at improved levels with several output records being
established.
Full production was maintained at Rand Carbide with good output levels as local
demand for ferrosilicon remained strong.
Manpower
The corporation`s HIV/AIDS drive gained momentum with a successful HIV/AIDS
Awareness Day on 14 March 2002.
During this day some 85 per cent of the total work force of the corporation
participated in anonymous saliva testing. The overall proportion of HIV positive
individuals was determined to be 22 per cent and the corporation is now
finalising a cost model which will enable it to take informed decisions and
assist the effective administering of Anti Retroviral Therapy.
Peer Educators have been trained and it is expected that these employees will
build on existing awareness and encourage employees to follow a low risk
lifestyle and to report for individual testing and counselling on a confidential
basis. This was given impetus in December when the corporation celebrated World
HIV/AIDS Day during which facilities for individual testing were made available.
By year-end 708 individuals had been counselled and tested individually
representing 16.8 per cent of employees in the group.
Safety, Health and Environmental Matters
An intensified safety drive was undertaken with a number of initiatives having
been launched to improve safety performance within the Highveld group. Major
progress was made and at year-end the Lost Time Injury Frequency Rate (LTIFR)
had improved to 0.52 from 1.4 in 2001.
Environmental matters continued to receive attention with the focus on achieving
certification of operating divisions in terms of the ISO 14001 Environmental
Management System. It is pleasing to report that Rand Carbide, which was
certificated in respect of ISO 14001 in 2001, was re-audited during the period
under review and retained its certification. A major achievement was the
certifying authority recommending certification for Vanchem and Transalloys.
The forward plan is for the steelworks and Mapochs mine to be audited during
2003/2004.
Investments
As a result of the sale agreements effective as at the end of 2001 the
corporation has holdings of 2.9 per cent in Acerinox, S.A. and 12 per cent in
Columbus Stainless. Acerinox is the controlling shareholder in Columbus and is a
major stainless steel producer based in Spain with facilities in the European
Union, United States and South Africa.
The performance of both companies was very pleasing during the year with
earnings increasing strongly. While no dividend was paid by Columbus, a dividend
was received from Acerinox during the period under review and further dividends
are anticipated in 2003.
Outlook
Going into 2003 there is a possibility that increasing steel production against
a background of slow growth in some major world economies could cause carbon
steel prices to decline. However, the positive effect of the rapidly growing
demand in China cannot be ignored and should cause demand for steelmaking raw
materials to be firm, and combined with U.S. dollar weakness may result in steel
prices firming in U.S. dollars.
On the basis of the relatively strong South African growth rate and numerous
capital projects which are planned, it is expected that overall domestic demand
for Highveld`s steel products could approach that in 2002. The first half will
however be slow due to inventory build-up which has occurred and what is
perceived to be a temporary lull in capital projects.
The vanadium market is showing more positive signs in that demand is steady
while the long-standing excess production has been alleviated by reduced output
from Russia and rumours of reduction from Australia. The prospect for achieving
economic prices is thus better than it has been for several years.
Demand for the group`s silicon and manganese ferro-alloys should remain firm on
the basis of increasing world wide steel production.
The single most significant risk relates to currency. While most parties would
subscribe to the benefits for South Africa of a floating exchange rate for the
rand, and ongoing relaxation of restrictions on the transfer of funds, the wild
volatility of the rand experienced over the past year and a half will impact
negatively on industry and commerce in South Africa if it continues.
Should the rand maintain its strength against the U.S. dollar for much of the
year it will be difficult to maintain earnings in 2003 at the same level as
2002.
General
2002 was a successful year with improved financial results, progress on cost
savings and on consolidation for the future. I thank the management and all
employees for their efforts in achieving these significantly improved returns on
investment.
TE Jones - Chairman and Chief Executive Officer
Witbank
11 February 2003
Abridged audited results for the year ended 31 December 2002
Abridged Audited Consolidated Income Statements
for the years ended 31 December
2002 2001
R`000 R`000
Revenue 4 011 745 4 427 501
Operating profit 360 834 74 092
Net interest paid 19 048 75 142
Profit/(loss) before disposal of
discontinuing operations 341 786 (1 050)
Profit/(loss) on disposal of
discontinuing operations 20 348 (722 610)
Profit/(loss) before taxation 362 134 (723 660)
Taxation (charge)/credit (122 041) 241 350
Profit/(loss) attributable to
Highveld shareholders 240 093 (482 310)
Transfer to non-distributable
reserve - (729)
Distributions to shareholders (58 583) (29 267)
Retained profit/(loss) for the year 181 510 (512 306)
Profit/(loss) attributable to
Highveld shareholders 240 093 (482 310)
Add/(less) after tax effect of:
Loss on disposals of
discontinuing operations 10 575 505 827
Impairment of fixed assets - 1 820
Loss/(profit) on disposal of
property, plant and equipment 1 620 (83)
Headline earnings 252 288 25 254
Weighted average number of shares
in issue during the year 97 653 171 97 574 036
Attributable earnings/(loss) per
share (cents) 245.9 (494.3)
Diluted earnings/(loss) per share
(cents) 242.9 (488.8)
Headline earnings per share (cents) 258.4 25.9
Dividends per share attributable to
calendar profits (cents) 135.0 15.0
ABRIDGED AUDITED CONSOLIDATED BALANCE SHEETS
31 Dec 31 Dec
2002 2001
R`000 R`000
ASSETS
Fixed assets 1 087 695 1 692 573
Investments 910 509 24 166
Net cash on hand/(short-
term borrowings) 143 411 (670)
Net current assets 43 006 620 979
Current assets 1 095 066 1 732 397
Current liabilities 1 052 060 1 111 418
TOTAL ASSETS 2 184 621 2 337 048
EQUITY AND LIABILITIES
Shareholders` equity 1 649 207 1 421 993
Deferred taxation 66 612 225 932
Long-term liabilities 468 802 689 123
TOTAL EQUITY AND
LIABILITIES 2 184 621 2 337 048
Net interest bearing debt 96 938 498 262
Debt to equity ratio-
percentage 6 35
Net worth - cents/share 1 687 1 457
ABRIDGED AUDITED CONSOLIDATED CASH FLOW STATEMENTS
for the years ended 31 December
2002 2001
R`000 R`000
Net cash inflow from operating
activities 352 649 106 133
Net cash inflow/(outflow) from
investing activities 48 676 (53 029)
Net cash inflow 401 325 53 104
Financed as follows: (401 325) (53 104)
Net cash outflow from financing
activities (728 859) (10 842)
Decrease/(increase) in cash on hand 327 534 (42 262)
ABRIDGED STATEMENT OF CHANGES IN EQUITY
at 31 December 2002
Share
capital,
share
premium
and non- Fair
distribut value
able surplus Retained
reserve profit Total
R`000 R`000 R`000 R`000
Balance at 31
December 2001 589 859 832 134 1 421 993
Attributable profit 240 093 240 093
Dividends (58 583) (58 583)
Fair value reserve 76 155 76 155
Disposal of
Columbus Joint (32 135) (32 135)
Venture
Proceeds from
shares issued 1 684 1 684
Balance at 31
December 2002 559 408 76 155 1 013 644 1 649 207
Notice of final ordinary dividend
On Tuesday, 11 February 2003, the directors of the corporation declared a final
dividend no. 56 on the ordinary shares for the year ended 31 December 2002, as
follows:
Amount (South African currency) 90 cents per share
Last day to trade to qualify for
dividend (and for changes of address
or dividend instructions) Friday, 28 March 2003
Ex-dividend on the JSE Securities
Exchange South Africa Monday, 31 March 2003
Record date Friday, 4 April 2003
Payment date of dividend Monday, 7 April 2003
Share certificates may not be dematerialised or rematerialised between Monday,
31 March 2003 and Friday, 4 April 2003, both days inclusive.
By order of the Board
J Theiss
(Company Secretary)
Registered Office
Portion 29 of the farm
Schoongezicht no. 308 JS
District Witbank
Mpumalanga
(P O Box 111, Witbank, 1035)
Tel: (013) 690-9911
Fax: (013) 690-9033
Witbank
11 February 2003
Transfer Secretaries
Computershare Investor Services Limited
70 Marshall Street
Johannesburg, 2001
(P O Box 61051, Marshalltown, 2107)
Tel: (011) 370-7700
Fax: (011) 836-0792
(011) 370-7916
The annual report will be posted to all registered shareholders on or about 7
March 2003
Enquiries may be directed to e-mail address: general@hiveld.co.za
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, G F Young
Company Secretary: J Theiss
Sponsoring broker
Cazenove
Date: 11/02/2003 03:43:00 PM Produced by the JSE SENS Department
