ARCELORMITTAL South Africa (Amsa), Africa’s biggest steel maker, withheld its interim dividend payout despite swinging to an interim profit and slashing debt during the half year ended June this year.
As a result, its shares dipped and ended the day 7.44 percent lower at R6.59 on the JSE yesterday.
Chief financial officer Desmond Maharaj told the virtual financial presentation for the six months ended June 2021 that the company had a long way to go before strengthening its balance sheet.
“Once we think the balance sheet is strong enough, and resilient enough to handle the various steel cycles, then we will be in a position to have a discussion about when we can resume the dividend,” said Maharaj.
Amsa rode the wave of surging international steel prices on increasing production by China, the world’s biggest steel market.
Amsa, a subsidiary of the Mittal Group, said the 79 percent rise in international dollar steel prices and a 42 percent increase in realised rand prices had been a tailwind.
Chief executive Kobus Verster said the group had recorded earnings before interest taxation depreciation and amortisation (Ebitda) of R3.218 billion against a R1.256bn loss in the previous period, its strongest in a decade thanks to stronger sales volumes and the benefit of robust price-cost effects as a result of higher steel prices against raw material costs.
“This performance was remarkably achieved against the backdrop of one of the most challenging operating environments in our company’s long history,” said Verster.
Amsa recorded a R2.945bn operating profit up from a R1.528bn loss a year earlier. The group generated a headline profit of R2.482bn marking a recovery from a loss of R2.613bn, amounting to a 223 cents per share profit against 239 cents loss for the comparative period in 2020.
Amsa generated 55 percent more revenue in the half year under review at R18.596bn due to a jump in total steel sales volumes and a 42 percent rise in net realised steel sales prices.
Total sales volume were 10 percent higher at 1.3 million tons due to a 21 percent rise in domestic sales and a 39 percent fall in mainly seaborne exports.
Amsa said in South Africa, apparent steel consumption for the six months had increased by 9 percent to 2.2 million tons compared to the preceding six months.
“The improvement in steel demand is being driven by faster recovery in the mining, automotive and fabrication, construction and infrastructure sectors along with energy projects,” said Amsa.
Amsa declared a force majeure following the unrest and riots in KwaZulu-Natal, saying it could not meet its contractual obligations as the corridor to and from Newcastle was affected.
The group reported four fatalities in the past six months, including three fatalities in an explosion at the Vanderbijlpark in February. Last month an employee was struck by a car at Newcastle’s coke making operation. Verster said Amsa had adopted safety protocols of ArcelorMittal’s Brazil operations.
“We are working with them to see how we can transform the safety culture that is currently in that operation and embed that in our DNA in South Africa,” the company said, adding that it had made progress and was committed to eliminating facilities.
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