Johannesburg - Shares in ArcelorMittal South Africa rallied more than 5 percent on Friday on the strength of the steel maker’s outlook for this year.
Although the results for the year to December last year were lacklustre, Abdul Davids, the head of research at Kagiso Asset Management, said ArcelorMittal SA’s export earnings would be boosted by the weak rand.
The 58 percent increase in earnings before interest, tax, depreciation, and amortisation to R1.8 billion was also a factor in the 5.21 percent share rally to close at R44.80.
ArcelorMittal SA said the depreciation in the rand against major currencies from May 2013 onwards improved its competitive position, with respect to export sales, which are dollar denominated while inputs are rand denominated. Its revenue increased marginally to R32.4bn from R32.2bn in the prior corresponding period.
Outgoing chief executive Nonkululeko Nyembezi-Heita said conditions in the industry were tough in 2013, not only in South Africa but worldwide. Global steel demand was weak. “Across the board, all the engines we required did not fire. Activity in the domestic manufacturing industry was low because of domestic demand.”
She said there was a groundswell of opinion that conditions would be better this year.
The headline loss narrowed from R518 million to R224m despite losses following a fire at the Vanderbijlpark plant last February.
Matthias Wellhausen, the chief financial officer, said the fire caused damage of $60m (R660m at Friday’s rate) and resulted in the loss of 361 000 tons in production and 165 000 tons in sales. As a result, 300 tons were imported.
Exports slowed by 14 percent to minimise the effect of the fire on local customers. The fire also caused a record 20 percent import penetration between April 2013 and August 2013, which affected results.
Nyembezi-Heita said domestic steel demand had grown by 1 percent a year over the past 20 years, but contracted by 6 percent a year since 2007.
Domestic shipments shrank 6 percent in 2013 because of the continued weak building construction and mining sectors.
The reduced levels of government fixed investment spend also had a disproportionate impact on demand for steel.
She said the logistical service by Transnet Freight Rail was deteriorating. “Our mills are not designed to deliver by road, and trucks are more expensive. The export market depends on rail, except in Saldanha Bay. We are at the behest of roads and trucks.” This added R150m a year to costs. - Business Report