ArcelorMittal South Africa's (Amsa) share price bled 17 percent on the JSE yesterday after the steel producer announced that more than 2000 jobs were on the line as it resorts to cost-cutting measures.
The share price slid to R2.87 on the announcement, closing the day at R2.91.
However, the group said the final outcome and number of positions affected was subject to a formal consultation process. In a trading update, it said the South African steel industry continued to face significant challenges due to the difficult domestic economic environment.
“Certain costs that are not within the company's control - such as high electricity, rail, port and primary raw material costs - have contributed to these challenges,” the group said.
As a result, Amsa had embarked on several initiatives to improve efficiencies and address expenditure that was within its control.
However, it said these cost-saving initiatives would not be sufficient.
“More significant measures have become necessary, including the review of staffing levels, together with other interventions. Shareholders are accordingly advised that the company will be commencing with a consultation process in terms of section 189(3) of the Labour Relations Act. A large-scale restructuring is contemplated and in excess of 2 000 positions might be affected,” the group said.
Earlier this year, Amsa’s local operations were affected by a five-week strike by the National Union of Metalworkers of South Africa over labour brokers with roughly 2000 permanent employees and contract workers.
Amsa was served with a summons and criminal proceedings were instituted in May. It faced charges of contravening environmental pollution laws with a potential R15 million fine.
Last year, US President Donald Trump imposed a 10 percent tariff on aluminium imports and 25 percent on steel products. But through engagements, the US granted South Africa tariff exemptions on 161 aluminium and 36 steel products.
Jordan Weir, a trader at Citadel, said: “The company is also likely to face additional headwinds as it navigates the formal consultation process, which will assess the feasibility and impact of the 2 000 job losses potentially being considered as part of the firm's cost-cutting strategy,” Weir said.
In the upcoming half-year results next month, the group expected its headline earnings to decline by R650 million, leading the group to report a loss during the period compared to headline earnings of R54m reported last year.
Its headline earnings per share (Heps) will decline by at least 59 cents a share.
ArcelorMittal South Africa’s interim results are expected to be released on August 1.