| Thu 24 Apr 2003, 14:37 | | ISCOR Limited - Unaudited group headline earnings |
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Iscor Limited
(Registration number: 1989/002164/06)
Share code: ISC
ISIN code: ZAE000037453
Unaudited group headline earnings and physical information for the quarter ended
31 March 2003
* continued strong earnings and cash flow
GROUP INCOME STATEMENT (Rm)
Quarter ended 9 months ended Year
31 March 31 March ended
30 June
2003 2002 2003 2002 2002
Revenue 4 629 3 792 14 399 10 518 14 467
Flat steel products
* Vanderbijlpark 2 519 1 831 7 803 5 722 8 051
* Saldanha Steel - total 791 600 2 456 1 405 1 724
- Iscor share 791 600 2 456 1 125 1 444
Long steel products 1 209 1 226 3 754 3 305 4 509
Suprachem 200 179 571 484 653
Other 19 23 89 63 83
Intra Group (109) (67) (274) (181) (273)
Operating profit 994 312 3 014 919 1 176
Flat steel products
* Vanderbijlpark 601 210 1 830 562 842
* Saldanha Steel - total 167 (65) 503 (252) (510)
- Iscor share 167 (65) 503 (121) (379)
Long steel products 224 158 673 437 679
Suprachem 33 32 106 94 121
Corporate (31) (23) (98) (53) (87)
Financing costs
* Iscor (42) (131) (119) (278) (388)
* Saldanha Steel - - - (156) (156)
Taxation (314) (59) (955) (158) (206)
Equity earnings 18 7 55 40 54
(excluding Saldanha)
Headline earnings 656 129 1 995 367 480
* per share (cents) 147 29 448 82 108
(based on 445 752 132
shares)
PHYSICAL INFORMATION ("000 tonnes)
Flat steel products
- Vanderbijlpark
Liquid steel production 903 843 2 803 2 655 3 512
Sales 776 671 2 318 2 164 2 984
* Local 413 476 1 556 1 481 2 016
* Exports 363 195 762 683 968
* Local as % of total 53 71 67 68 68
- Saldanha Steel
Liquid steel production 301 261 946 796 933
Sales 297 284 895 739 887
* Local 31 - 96 - -
* Export 266 284 799 739 887
* Local as % of total 10 - 11 - -
Long steel products
Liquid steel production 539 509 1 627 1 556 2 008
Sales 432 456 1 299 1 324 1 749
* Local 222 261 726 759 1 032
* Export 210 195 573 565 717
* Local as % of total 51 57 56 57 59
Total
Liquid steel production 1 743 1 613 5 376 5 007 6 453
Sales 1 505 1 411 4 512 4 227 5 620
* Local 666 737 2 378 2 240 3 048
* Export 839 674 2 134 1 987 2 572
* Local as % of total 44 52 53 53 54
FINANCIAL RESULTS
Earnings for the quarter and for the nine months were well ahead of the
comparative periods last year, largely as a result of higher steel prices and
the successful turnaround at Saldanha Steel.
Headline earnings of R656 million for the quarter were some 2% lower than
average quarterly earnings for the first half of the financial year. In US
Dollar terms, however, earnings improved by 18% from $67 million to $79 million
with an average spot rate for the first half of R10,02/$ compared to R8,32/$ for
the third quarter.
MARKET REVIEW
International
The major international steel markets have demonstrated wide behavioural
disparities during the quarter.
In Asia, steel prices increased substantially in January and February on the
back of exceptionally strong demand in China. This trend collapsed in March as a
result of rising inventories, speculative overbooking of forward business and
the completion of the Chinese tariff quotas. Import prices for hot rolled sheet
are now standing at $300 per tonne delivered to China compared to the February
peak of $395, although underlying Chinese demand for all steel products remains
strong. Long product prices have contracted less with billet and rebar prices
dropping by only $20 to $25 per tonne. The slowdown in Chinese imports has
resulted in a supply overhang causing steel prices to drop throughout the
region, which are now below European levels but expected to pick-up after the
overstocking is worked-off.
In the United States weak demand and increased supply by previously idled mills
caused prices to drop from the spectacular highs achieved during July to
September last year to a low point during February. Since then there has been
moderate price recovery to European levels.
At the end of March the World Trade Organisation ruled against the US
protectionist measures against steel imports introduced in February last year,
which may result in their suspension. If this materialises it could lead to the
reintroduction by the US of aggressive across-the-board anti-dumping measures,
which could make steel exports to the US economically unattractive. Contingency
plans are being made for redirection of US exports in such an event.
In the European Union it appears as if steel sheet prices have stabilised after
six consecutive quarterly price rises, as a result of careful supply-side
management by EU producers. Further price increases for long products are
expected on the back of the seasonal pick-up in construction activity during the
European summer.
East European and CIS steel producers are being affected by the slowdown in
Chinese imports although this is partially offset by the ongoing robust domestic
steel demand in their region. Dumping of distressed cargoes from this region,
following the freezing of the Baltic and Black Sea ports, is expected to
influence general export steel prices negatively for a number of months.
The following graph illustrates recent movements in the various markets for hot
rolled coil and the Commodity Research Unit"s forecast for the remainder of
calendar 2003.
No difficulty was experienced in placing our higher export volumes during the
quarter.
Domestic
The robust steel consumption growth experienced throughout most of calendar 2002
started to slow down in the fourth quarter, due to slower growth in
manufacturing production following the appreciation in the value of the rand and
persistent high interest rates. This had an adverse effect on all secondary
steel exporting sectors and steel demand dropped by12% year on year during the
quarter under review.
Imports of carbon steel for the quarter were 20% down on the comparative period
last year and now stand at only 4,3% of domestic consumption.
The lower level of demand is expected to continue into the first half of the
next financial year but should pick-up thereafter as interest rates start to
fall and domestic economic growth picks up. Consensus opinion is that the
economies of the sub-continent, with the exception of Zimbabwe, are in a phase
of sustained recovery. The South African position is illustrated by the trend in
steel consumption:
COST REDUCTION
Good progress continues to be made on the LNM Business Assistance Agreement cost
drive and we remain confident that the R700 million target will be achieved by
December 2004.
The cost reduction impact of the stronger currency will still take some time to
flow through to earnings, and did not make a significant impact in the quarter
under review.
SALDANHA STEEL
The Saldanha plant continues to perform well and has consistently achieved
design output levels since the Corex reline in May/June 2002. The percentage of
thin gauge material improved further during the quarter to a level of 47%, and
very satisfactory price premiums of up to 20% are being achieved.
CASH FLOW
Cash flow for the quarter of R450 million, after payment of the interim dividend
of R446 million, resulted in a swing into a net cash position of R228 million at
the end of the quarter.
OUTLOOK
Earnings for the second half of the financial year, expressed in US$ terms,
should be higher than the first half. The result in rand terms, however, will
depend on the exchange rate and the extent of the international steel price dip.
Pricing pressure and weak domestic deliveries are expected to extend into the
first half of the next financial year.
Iscor Limited
Registration number: 1989/002164/06
Share code: ISC ISIN code: ZAE000037453
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
108 Johan Avenue, Sandton
PO Box 652000, Benmore, 2010
This report is available on Iscor"s world-wide website at: http://www.iscor.com
If you have any queries regarding Iscor or your Iscor shares, please call the
Iscor ShareCare Line toll free on 0800 006 960 or +27 11 775 3420 if calling
from outside South Africa
