CEO of ArcelorMittal South Africa Kobus Verster presents the companies results for the year to December 2019 at the JSE Auditorium, Sandton.  Photo: Karen Sandison/African News Agency (ANA)
CEO of ArcelorMittal South Africa Kobus Verster presents the companies results for the year to December 2019 at the JSE Auditorium, Sandton. Photo: Karen Sandison/African News Agency (ANA)

ArcelorMittal to cut more Newcastle jobs before May as profits drop

By Siphelele Dludla Time of article published Feb 7, 2020

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JOHANNESBURG – ArcelorMittal South Africa (Amsa) said on Thursday that it was planning to shed more jobs at its Newcastle operations before May, after profits fell to R4.67 billion during the year to the end of December as a result of a slowdown in global steel demand.

The group said more than 400 employees would be affected by the retrenchments.

Amsa, which is Africa’s largest steelmaker, shed more than 1 000 jobs company-wide during a large-scale reorganisation late last year.

The group said it would now focus on the domestic market and Africa instead of exporting to destinations such as China, in order to mitigate against escalating costs, which had risen higher than the steel price.

In 2018, Amsa made a R1.37bn profit.

Chief executive Kobus Verster said weak global steel demand presented an extremely challenging situation, particularly against the backdrop of escalating geopolitical and trade tensions.

Verster said the downturn had been faster and deeper than anticipated.

He said the size of the dislocation between steel prices and raw material costs was very unusual.

“From our perspective, the cost base of the business doesn’t really justify exports under these market conditions. So what we are saying is we are not focusing on exports, and we are focusing on growing the South African market, and growing our market share here as well as in Africa,” Verster said.

“Both markets are not in a good shape at the moment, but hopefully we will get some normalisation. To the extent that the cost dynamics or the international price dynamics change, we can consider ramping up Vanderbijlpark as well as Newcastle.”

Verster said Amsa issued section 189 notices to workers in Newcastle on Friday, while processes in Saldanha began at the end of last year.

“In Saldanha, we have 450 people that will be affected. And we have to address (the) Newcastle cost base further. We anticipate around 400 workers will be impacted in Newcastle,” he said.

Average international steel prices fell by 15 percent, while the company’s overall realised steel price in dollars fell by 9 percent.

Amsa said its headline earnings fell to R3.3bn for the year from a profit of R968 million to a 299 cents per share loss against an 89c per share profit.

Earnings before interest, tax, depreciation and amortisation decreased by R4.2bn to a loss of R632m, and took a total net hit of R1.4bn for the impairment of property, plant and equipment.

Verster said increases in electricity, port and rail tariffs had a detrimental impact on the company’s international competitiveness.

He said Amsa spent R3.1bn on electricity for the year, and R3.4bn on Transnet for rail and ports.

“Our plan around electricity is to reduce consumption by improving efficiencies. And we’ve got quite a programme around there of technical adjustments to reduce consumption,” he said.

“The second element is self-generation, and we use some of our excess gas to be converted into electricity. The third element we have to address is the price side of electricity.”

The company’s raw material basket was made up of iron ore, coking coal and scrap, which represents 51 percent of costs, increased by 12 percent in rand terms, driven by sharp increases in iron ore.

Total sales volumes fell by 8 percent to 4 million ton, mainly due to an 11 percent reduction in domestic sales.

Amsa shares fell 4 percent to close at R1.20 on the JSE on Thursday.

BUSINESS REPORT

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