In a period characterised by depressed economic conditions and weak steel demand, ArcelorMittal SA has reported a headline loss of R518 million for the year ending December 31, 2012, the company announced.
This compared to a loss of R52mn in the prior year. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) declined by 35 percent to R1.12 billion from R1.72bn in 2011 due to a modest drop in domestic steel dispatches and a substantial decline in commercial coke sales.
However, 2012 saw a significant improvement in cash flow, operational stability, and the best safety record to date with zero fatalities.
Revenue of R32.3bn was three percent higher than reported a year ago. Total steel shipments decreased two percent, with domestic shipments down five percent, offset by higher exports of seven percent.
ArcelorMittal SA chief executive Nonkululeko Nyembezi-Heita said: "As anticipated, 2012 was a very tough year with subdued economic activity and poor demand.
"At the same time, we are pleased with the strides we have made in achieving operational stability and containing costs.
"Safety is an area where we have seen significant improvement over the last year, as can be seen in our lost time injury frequency rate, which dropped to 0.61 from 1.24 a year earlier," she said.
Domestic steel demand continued to be weak, driven by sluggish demand from the building and construction sector, the largest steel consumer.
On a compounded basis, steel demand in South Africa had grown at an annual average rate of only 1.1 percent over a 20 year period.
Domestic steel sales declined by five percent as a result of weak demand and destocking in the second half of the year, while net realised prices in rand terms increased by seven percent.
Dollar prices of key raw materials, such as coking coal, pellets, and scrap were flat, while electricity costs increased by another 16 percent.
Liquid steel production was down seven percent, with capacity utilisation at 66 percent, marginally lower than the 68 percent achieved the previous year.
Compliance with environmental legislation, coupled with high electricity price increases, necessitated the closure of three electric arc furnaces (EAF) in Vanderbijlpark during October 2012.
This effectively reduced the company's annual achievable liquid steel capacity from 8.0mn to 6.5mn tonnes per annum, the company said.
The poor financial performance was exacerbated by a 27 percent drop in commercial coke sales due to the shutdown of furnaces by ferrochrome producers participating in Eskom's electricity buy-back programme.
Ferrochrome producers accounted for about 90 percent of ArcelorMittal SA's commercial coke sales.
The company realised a net cash inflow of R445mn for the year, bringing its closing cash position to R884mn from R439mn the year before.
Production costs were in line with inflation and well maintained on the back of softer raw material prices and a marked improvement in operational efficiencies, but this was not sufficient to offset the impact of lower sales.
Nyembezi-Heita said the company expected the loss-making position to be reversed in the first quarter, amid signs of improved domestic sales volumes as well as marginally higher prices.
"We expect a turnaround from the loss-making position realised in the previous quarter to a breakeven in the first quarter. This view is supported by a modest rise in international steel prices and domestic demand."
Sales volumes were expected to be higher amid restocking in the market and increased production volumes. Commercial coke sales on the other hand were expected to be down due to lower production by some ferrochrome producers participating in Eskom's electricity buy-back program, she said.
ArcelorMittal posts R518m headline loss
In a period characterised by depressed economic conditions and weak steel demand, ArcelorMittal SA has reported a headline loss of R518 million for the year ending December 31, 2012, the company announced.
This compared to a loss of R52mn in the prior year. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) declined by 35 percent to R1.12 billion from R1.72bn in 2011 due to a modest drop in domestic steel dispatches and a substantial decline in commercial coke sales.
However, 2012 saw a significant improvement in cash flow, operational stability, and the best safety record to date with zero fatalities.
Revenue of R32.3bn was three percent higher than reported a year ago. Total steel shipments decreased two percent, with domestic shipments down five percent, offset by higher exports of seven percent.
ArcelorMittal SA chief executive Nonkululeko Nyembezi-Heita said: "As anticipated, 2012 was a very tough year with subdued economic activity and poor demand.
"At the same time, we are pleased with the strides we have made in achieving operational stability and containing costs.
"Safety is an area where we have seen significant improvement over the last year, as can be seen in our lost time injury frequency rate, which dropped to 0.61 from 1.24 a year earlier," she said.
Domestic steel demand continued to be weak, driven by sluggish demand from the building and construction sector, the largest steel consumer.
On a compounded basis, steel demand in South Africa had grown at an annual average rate of only 1.1 percent over a 20 year period.
Domestic steel sales declined by five percent as a result of weak demand and destocking in the second half of the year, while net realised prices in rand terms increased by seven percent.
Dollar prices of key raw materials, such as coking coal, pellets, and scrap were flat, while electricity costs increased by another 16 percent.
Liquid steel production was down seven percent, with capacity utilisation at 66 percent, marginally lower than the 68 percent achieved the previous year.
Compliance with environmental legislation, coupled with high electricity price increases, necessitated the closure of three electric arc furnaces (EAF) in Vanderbijlpark during October 2012.
This effectively reduced the company's annual achievable liquid steel capacity from 8.0mn to 6.5mn tonnes per annum, the company said.
The poor financial performance was exacerbated by a 27 percent drop in commercial coke sales due to the shutdown of furnaces by ferrochrome producers participating in Eskom's electricity buy-back programme.
Ferrochrome producers accounted for about 90 percent of ArcelorMittal SA's commercial coke sales.
The company realised a net cash inflow of R445mn for the year, bringing its closing cash position to R884mn from R439mn the year before.
Production costs were in line with inflation and well maintained on the back of softer raw material prices and a marked improvement in operational efficiencies, but this was not sufficient to offset the impact of lower sales.
Nyembezi-Heita said the company expected the loss-making position to be reversed in the first quarter, amid signs of improved domestic sales volumes as well as marginally higher prices.
"We expect a turnaround from the loss-making position realised in the previous quarter to a breakeven in the first quarter. This view is supported by a modest rise in international steel prices and domestic demand."
Sales volumes were expected to be higher amid restocking in the market and increased production volumes. Commercial coke sales on the other hand were expected to be down due to lower production by some ferrochrome producers participating in Eskom's electricity buy-back program, she said.
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