https://www.engineeringnews.co.za
Africa|Financial|Steel|Equipment|Operations
Africa|Financial|Steel|Equipment|Operations
africa|financial|steel|equipment|operations

AMSA slumps to R3.3bn loss amid ‘exceptionally difficult’ conditions

Wind-down of the Saldanha Works, in the Western Cape, to be largely completed by the end of the first quarter

Wind-down of the Saldanha Works, in the Western Cape, to be largely completed by the end of the first quarter

6th February 2020

By: Terence Creamer

Creamer Media Editor

     

Font size: - +

Steel producer ArcelorMittal South Africa (AMSA) slumped to a R3.3-billion headline loss in 2019, which the JSE-listed group described as an exceptionally difficult one for the South African economy and also the most challenging for the world steel industry since the global financial crisis of 2008.

Average international steel prices fell by 15%, while AMSA’s overall realised steel price in dollars fell by 9%. In rand terms, realised steel prices remained stable as the average dollar/rand exchange rates weakened 9% year-on-year.

AMSA’s total sales volumes fell by 8% to 4.1-million tonnes, mainly as a result of an 11% reduction in domestic sales. The company highlighted that 918 000 t of steel imports flowed into South Africa last year, which represented about 20% of apparent domestic steel consumption, up from 16% in 2018.

Group revenue, meanwhile, fell by 9% to R41.4-billion.

The loss represented a dramatic setback for AMSA, which last year reported a headline profit of R968-million, its first in ten years. The 2018 figure had been boosted, however, by the R415-million sale of AMSA’s investment in Macsteel.

Net impairment charges for the year surged to R1.4-billion against R10-million for 2018. The R1.1-billion impairment of the property, plant and equipment at Newcastle Works was a large contributor to the figure, along with R294-million for Saldanha Works and R99-million relating to the closure of the tin plant at the Vanderbijlpark Works.

“The downturn in world steel has been faster and deeper than could have ever been anticipated,” AMSA said in a statement to shareholders, adding that the correlation between steel prices and raw material costs had broken down.

“The size of the dislocation between  steel prices and raw material cost is very unusual, and although recently raw material prices have moderated  a little, the dislocation continues,” the company warned.

In response, AMSA had conducted a strategic asset footprint review, which had already resulted in job cuts, as well as a decision to wind-down the group’s Saldanha Works, in the Western Cape.

“The [wind-down] process is progressing according to plan and is anticipated to be largely completed by the end of the first quarter of 2020.”

Following the conclusion of the second phase of the review, AMSA had decided not to shut significant long-steel production capacity, including its primary steelmaking operations at the Newcastle Works. Instead the operations focus would shift to primarily servicing the domestic and Africa overland markets.

The company-wide operating model would, however, be reconfigured into a single platform and the balance sheet strengthened through targeted corporate actions.

AMSA said its ‘One Organisation’ strategy would be implemented in 2020 along with other cost-reduction initiatives to prepare the company for any upturn in the market. It would also seek to address “unaffordable regulated tariffs and developmentally priced raw materials”.

“Internationally margins have been tightly squeezed though elements of normalisation are becoming evident,” AMSA told shareholders.

Edited by Creamer Media Reporter

Comments

Showroom

Weir Minerals Africa and Middle East
Weir Minerals Africa and Middle East

Weir Minerals Europe, Middle East and Africa is a global supplier of excellent minerals solutions, including pumps, valves, hydrocyclones,...

VISIT SHOWROOM 
SAIMC (Society for Automation, Instrumentation, Mechatronics and Control)
SAIMC (Society for Automation, Instrumentation, Mechatronics and Control)

Education: Consulting with member companies to obtain the optimal benefits from their B-BBEE spending, skills resources as well as B-BBEE points

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.066 0.131s - 163pq - 2rq
Subscribe Now