ArcelorMittal South Africa (Amsa) expects improvements in electricity supply and operational improvements at Transnet to yield higher production levels and cost competitiveness after half-year headline losses in the steel producer worsened by 150% and its net asset value per share took a 42% dive.
After deciding to continue with its longs steel business, Amsa said the unit was “broadly performing stably” and within expectations. However, the company’s production of crude steel decreased by 10%, or 133 000 tons to 1.22 million tons, in the first half year to June compared to the previous year. Sales volumes for the period were 2% softer, at 1.2 million tons.
Interim revenues were 3% narrower, at R20.5 billion.
Shares in Amsa traded 2.26% weaker. at R1.30, in afternoon trade on the JSE yesterday.
This was after it reported a 150% further plunge in its headline losses per share 100 cents. The company’s net asset value per share of R5.91 was also down for the period, by 42%.
Amsa posted a headline loss of R1.1bn during the half-year period under review, against a loss of R448 million in the comparable period. In the half year to December, the company’s losses amounted to R1.4bn.
Amsa operated at an average capacity utilisation of 60%, lower from the 66% utilisation it was operating at in the 2023 first half. It has attributed this to “the blast furnace chilled hearth conditions” at Vanderbijlpark.
The company expected the increased power generation over the past few months, coupled with the renewable energy projects that are scheduled to come on stream over the next two years, to yield higher production levels for South African manufacturers.
Amsa CEO Kobus Verster said: “The new Transnet leadership has enabled a more positive and aligned focus on making much-needed operational improvements (and) this has yielded some positive outcomes on port efficiencies, rail performance and increased volumes. Consequential cost improvements for the company are critically necessary, given Transnet’s uncompetitive logistics tariffs.”
However, market analyst Simon Brown said “Transnet was still a struggle” for South African miners.
Fixed costs for the period, at R3.4bn, were lower, by R132m, “despite inflationary pressures” haunting South African mining companies.
That left the company with borrowings of R3.7bn compared to almost R3bn in the previous year.
“The financial results were negatively impacted by the difficult local and regional trading conditions, and by the negative volume and direct cost impact of operational interruptions of the two blast furnaces at Vanderbijlpark,” said Amsa.
Despite the company’s dipping earnings, steel consumption in South Africa rose by 10% to 2.2 million tons. Steel imports increased to 711 000 tons in the first six months of 2024, with the now-rescinded closure of Amsa’s longs steel business “a contributing factor” to the higher imports.
Last month, Amsa said it had obtained an additional 12-month secured working capital facility of R1bn to support initiatives. The funding facility could be “called upon to support” continued operations for the company.
BUSINESS REPORT