ArcelorMittal SA posts headline loss of R1 890 million
The international steel environment in 2023 was characterised by low demand in almost all markets and prices were under pressure, especially in the second half. Slow growth in China resulted in a substantial increase in Chinese steel exports.
Locally, steel demand remained relatively flat at historically low levels, and prices followed international downward trends. All these factors resulted in an extremely difficult trading environment.
Given these pressures, ArcelorMittal South Africa posted a headline loss of R1 890 million against earnings of R2 607 million in 2022.
EBITDA before impairment of R56 million fell substantially (2022: R4 270 million). Depreciation and amortisation expense increased by 14% to R878 million (2022: R771 million) and net finance charges increased by 11% to R1 057 million (2022: R952 million).
Excluded from the headline loss, are impairment charges for the year that amounted to R2 115 million. This included R2 096 million for the impairment of the property plant and equipment and other intangible assets relating to the Longs Business.
Despite these major earnings challenges, the intense focus on cash management yielded notable benefits, enabling the Company to maintain net borrowing levels within tolerable levels. Consequently, the net borrowings position of R3 215 million compared to R2 990 million and R2 808 million at June 2023 and December 2022 respectively.
The Company’s average capacity utilisation increased from 47% for 2022 to 54% in 2023.
Sales volumes rose 12%, with crude steel production 15% higher against the comparable period. Compared to the immediately preceding six months, sales volumes improved by 2% to 1,2 million tonnes, while crude steel production was 4% higher at 1,4 million tonnes.
ArcelorMittal South Africa’s realised average steel prices decreased by 9% in Rand terms. Its raw material basket was flat (being in absolute terms and on a delivered basis).
The components in the basket moved as follows: imported coking coal decreased by 2%, scrap decreased by 21%, while iron ore increased by 28%. After accounting for conversion cost, the variable cash cost of steel increased by 10% (1).
Fixed costs marginally decreased by R25 million to R6 619 million despite inflationary pressures. Pleasingly, these costs decreased by R481 million (14%) compared to the immediately preceding six months.
The Value Plan realised improvements of R2 093 million (2022: R1 561 million) consisting of commercial-related initiatives of R909 million (2022: R839 million) and cost-based initiatives of R1 184 million (2022: R722 million).
Free cash outflow of R431 million (2022: R1 600 million cash outflow) was after capital expenditure cash outflow of R1 489 million (2022: R1 912 million), which consisted of R865 million (2022: R989 million) sustaining (including safety and structures), R300 million environmental (2022: R259 million) and R324 million (2022: R664 million) of strategic investments.
