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Amsa shares climb 19% on a surprisingly upbeat forecast

The shares of ArcelorMittal South Africa climbed 19 percent on Friday after the troubled steel giant surprised the market with a profit forecast for the second half of last year. Picture: Karen Sandison/African News Agency(ANA)

The shares of ArcelorMittal South Africa climbed 19 percent on Friday after the troubled steel giant surprised the market with a profit forecast for the second half of last year. Picture: Karen Sandison/African News Agency(ANA)

Published Feb 8, 2021

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JOHANNESBURG - THE SHARES of ArcelorMittal South Africa (Amsa) climbed 19 percent on Friday after the troubled steel giant surprised the market with a profit forecast for the second half of last year.

Amsa shares were up 8.52 percent to R1.91 at the close on Friday.

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Amsa expected profit per share of up to 57 cents per share during its 2020 second half, a 224 percent surge compared with a headline loss of 240c a share a year earlier.

Profit per share was forecast to hit 38c per share, 210 percent stronger than the attributable loss per share of 369c in 2019.

Amsa also told investors that it expected the headline loss per share to decrease to between 190 and 180c per share, from 299c per share the previous year, representing a change of 30 to 40 percent.

The group said attributable losses for the period would be slashed by at least R2.2bn, compared with the R4.67bn loss reported a year earlier.

Amsa said 2020 had proved to be an exceptionally difficult year with unprecedented challenges.

“Despite this, the year also proved to be highly transformative with constructive learnings, best demonstrated through the company’s return to earnings before interest, taxes, depreciation, and amortisation profitability in the second half of the year, in sharp contrast to the significant first half loss materially influenced by the hard economic lockdown,” said Amsa.

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The Covid-19 pandemic had necessitated the accelerated implementation of the company’s restructuring programme, realising sustainable cost benefits.

Ian Cruickshanks, the chief economist at the Centre for Risk Analysis, said on Friday that despite the promising half-year outlook, Amsa was not out of the woods, because it had not made an annual profit, underscoring the lacklustre domestic and global economy.

“Annual losses are not as bad as last year. The big question is, when can they get positive returns to shareholders?” Cruickshanks said, adding that the company needed good management, a good economic environment the world steel market to pick up, and manufacturing to improve.

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Last month, Amsa decided to continue its Vaal Meltshop operation, citing the sudden increase in demand in South Africa and Africa overland markets, and the associated supply chain shortages. The Vaal Meltshop operations were originally scheduled to be placed under care and maintenance at the end of December 2020.

Amsa also restarted the second blast furnace at Vanderbijlpark Works on December 20 in response to the higher steel demand and the depletion of steel inventories at all stages of the steel supply chain following the Covid19 lockdowns.

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