Johannesburg - ArcelorMittal South Africa says it succeeded
in reducing both its operating and headline losses in the year to December.
In a statement issued on Friday, the listed company said
it trimmed its operating loss by R3.6 billion, while its headline loss declined
by R2.78 billion.
This, it says, was due to an 8 percent increase in
average net realised steel sales prices, sustainable cost improvements and a
reduction in once-off items.
“The domestic and export markets in which the company
operates continued to be extremely constrained with minimal growth as a result
of import substitution and minimal local investment and infrastructural spend.
“Added to this extremely challenging environment, South
Africa and key African markets continued to import large quantities of steel,
especially from China,” it says.
ArcelorMittal South Africa says, despite a 10 percent tariff
on imported steel products implemented during the year, 1.2 million tonnes came
into SA, which it says “reflects the need for safeguard measures for primary
steel manufacturers to address the surge in imports”.
Apparent steel consumption decreased by 3.4 percent as a
result of subdued economic growth.
“Encouragingly, post year-end the authorities approved
the designation of South African steel for use in state infrastructural
projects.”
The listed steel producer says revenue increased by 5
percent to R32.7 billion, mainly due to an 8 percent increase in average net
realised steel prices, from R6 727 per tonne to R7 282 per tonne partly offset
by lower sales volumes.
Read also: ArcelorMittal profits up 20%
Its loss from operations decreased to R1 billion, mostly due
to improved revenue from higher selling prices, fewer once-off items and
depreciation declining as a result of the substantial impairment of the Saldanha
cash-generating unit in 2015.
Its net borrowing position has also declined, going from
R2.9 billion to R290 million because of the R4.5 billion cash injection from
the rights issue.
Proceeds from that share issue were used to mitigate
reduction in facility from local banks, support working capital, capital and
maintenance expenditure and to repay a portion of the ArcelorMittal Holdings loan,
it says.
The company, which did not declare a dividend, says
domestic steel demand is likely to remain subdued due to low economic growth
and lack of infrastructure spend, which will be mitigated by import
substitution and new products, namely heavy structural products from Evraz
Highveld. Export markets are likely to be more resilient, however,
authoritative projections being that Africa will experience demand growth in
the order of 4 percent, it adds.
ArcelorMittal South Africa also warns that the volatile currency
will also continue to impact its results.