Amsa, which has been loss- making since 2010, reported that its net borrowing position had widened for the year to R3.262billion from R290million mainly due to the funding requirements of business operations and capital expenditure.
The loss for the year increased to R5.12bn by R422m, largely due to a R2.5bn impairment resulting from the declining economic environment and the strong rand against the US dollar towards the end of the fourth quarter of last year.
A total of R2.59bn was impaired on property, plant and equipment. Additional impairment of R1996m was raised since the first half of 2017, primarily due to the strong exchange rate at year-end.
Revenue increased by 19percent to R39822m, mainly due to a 15percent increase in average net realised steel prices, from R7282 a ton to R8338 a ton.
Ian Cruickshanks, the chief economist at the SA Institute of Race Relations, said the results were disappointing and were against the backdrop of difficult circumstances.
“They (Amsa) did the best they can do. Their ageing infrastructure is problematic. They are not going to replace current production infrastructure, because the money is not there to invest in production,” said Cruickshanks. He called on the government to support the steel industry.
“The situation will not change until the government comes to the party with allowances, similar to those in the motor trade were there has been a huge amount of government investment. The government makes it difficult for the steel industry. I do not think the government is doing enough to help Amsa and the downstream steel industry. I would say they are surviving, best they can say, in difficult situation.”
Amsa needs an exchange rate of R13 to the US dollar and a 2percent gross domestic growth to keep afloat.
Amsa chief executive designate Hendrick “Kobus” Verster said that given the currency volatility the group had identified cash-generating initiatives including procurement savings, stock liquidation, increased operational reliability and efficiencies through best-practice benchmarking and sale of non-core assets.
He told journalists that the company had identified R1.5bn in low-hanging fruit it would make on savings. Verster also said that strengthening the balance sheet was a priority, adding that there was potential upside in the business.
He highlighted that the firm lagged behind in terms of operational benchmarks compared to the rest the Mittal group, and this issue would be addressed.
Amsa, which employs more than 13000 full-time employees, including contractors, entered a Section 189 process of the Labour Law in August, and yesterday said 433 full-time employees had left the company last year after a decision not to fill positions or forced retrenchments, in a bid to cut cost.
ArcelorMittal shares closed 0.81percent lower at R3.68 on the JSE yesterday.
- BUSINESS REPORT