Try our mobile app
Salient features
Weaker trading environment Raw material basket (RMB)
down 86%
EBITDA
Renewables and regional
with substantially lower
international market prices
up 2% (rand terms) at R499 million
infrastructure projects expected to
(international RMB down support steel demand
and stagnant economic (2022 H1: R3 591 million)
growth 13% in rand terms)
Medium and longer-term
Sales volumes Headline loss of investment case remains
up 3% to Value Plan added
R448 million intact
1.2 million R1 007 million (2022 H1: R3 025 million
(crude steel production up (2022 H1: R577 million) profit) Modified 2016 B-BBEE
29% to 1.4 million) transaction to improve
Realised rand steel prices up 3% to
Fixed costs Net borrowings of the prospect of
down 8% R3 549 million R2 990 million meaningful future
(down 22% in dollar terms) (2022 H1: R3 448 million) (2022 H2: R2 808 million) value creation
Short-form announcement
Reviewed condensed consolidated financial results for the six months ended 30 June 2023
and proposed modification of 2016 existing B-BBEE transaction
Overview and sustainability Financial results Key statistics
In February 2023, at the announcement of the company’s 2022 financial results, it was ArcelorMittal South Africa reported EBITDA of R499 million against R3 591 million in
indicated that, barring the impacts of loadshedding and rail service unreliability, the H1 2022, while its operating profit decreased from R3 235 million to R94 million. The Six months ended Year-ended
six-month outlook for the trading environment appeared to be improving compared to headline loss of R448 million (H1 2022: R3 025 million profit), amounted to a 40 cents 30 June 30 June 31 December
the difficult close to 2022. Unsustainable price-cost pressures and positive movements per share loss (H1 2022: 271 cents profit). EBITDA decreased by 27% compared to 2023 2022 % Change 2022
in early 2023’s international steel prices offered reasons for some optimism. R683 million in the immediately preceding six months.
Despite the buoyance of 2021 and the first half of 2022 having passed (remembering Revenue decreased by 5% to R21 045 million (H1 2022: R22 176 million) due to an 8% Financials (R millions)
that the latter is the comparable period for this interim 2023 report), the international fall in net realised steel sales prices, despite a 3% increase in total steel sales volumes.
trading environment in the first half of 2023 benefitted from the end to de-stocking and 21 045 22 176 (5.1) Revenue 40 771
Revenue increased by 13% (H2 2022: R18 596 million) compared to the immediately
less painful energy prices. However, locally, the trading environment caught no such preceding six months. 499 3 591 (86.1) EBITDA 4 274
tail-winds, as the burden of electricity loadshedding, high inflation, high interest rates
The company’s raw material basket (iron ore, coking coal and scrap), representing 48% 94 3 235 (97.1) Profit from operations 3 499
and mixed growth (only automotive reflected noteworthy growth of 8,3%) in key steel
(H1 2022: 43%) of cash cost per tonne, was 2% up in rand terms, compared to a 13% (359) 3 072 (111.7) Net (loss)/profit 2 634
consuming sectors such as manufacturing (+1.0%), machinery and equipment (+1.0%),
decrease in the international basket. The local basket was flat in rand terms compared
mining (-1.1%) and construction (0%), pummelled already fragile consumer confidence. (448) 3 025 (114.8) Headline (loss)/earnings 2 607
to the immediately preceding six months.
Falling international commodity demand affected most sectors. Understandably, steel
demand remained muted, which put significant pressure on local prices. Consumables and auxiliaries represent 31% of cash cost per tonne (based on crude (2 990) (1 087) 175.1 Net borrowing (2 808)
steel production) (H1 2022: 31%). Electricity tariffs increased by 14%, while dollar- 11 341 12 143 (6.6) Net asset value 11 675
The company committed to adopt a flexible approach to operating plants in reaction
denominated commodity-indexed consumables decreased by 12%.
to the available order book, adjusting fixed cost levels accordingly, and following an Financial ratios (%)
assertive cash management process. Fixed costs increased from R3 448 million in H1 2022 to R3 549 million for the period
under review, an increase of 3%. Fixed costs increased by 11% (H2 2022: R3 196 million) in 2.4 16.2 EBITDA margin 10.5
By and large these actions were implemented; mostly by design, but in some instances
the immediately preceding six months. Return on ordinary
due to unplanned internal and external interruptions.
However, the softness of the market amid the unprecedented severity of the electricity Net financing charges were higher at R536 million (H1 2022: R250 million) mainly due to (7.8) 57.1 shareholders’ equity 25.2
loadshedding in the last six months, was very much underestimated, which in turn higher net interest charges on bank overdrafts and loans of R163 million and lower net
foreign exchange gains of R113 million. (26.4) (9.0) Net borrowing to equity (24.1)
affected the response time with which production could be adjusted in a responsible
Share statistics (cents)
and well-considered manner. Building and maintaining any semblance of operating
rhythm, which is an absolute necessity in running a continuous, integrated steel making
Cash flow and borrowing position
Cash generated from operations of R891 million was R211 million lower against the (32) 276 (111.6) (Loss)/profit per share 236
process in a cost-aware manner, proved especially problematic.
comparable period (H1 2022: R1 102 million cash generated) mainly due to lower profit Headline (loss)/earnings
The challenging trading environment not only made the anticipated unwind of the from operations after adjusting for non–cash flow items, of R2 855 million, and lower
higher net working capital position, which had built up in last quarter of 2022, very
(40) 271 (114.8) per share 234
operating working capital requirements of R2 644 million.
difficult. This resulted in additional cash being utilised in operations for the period under – – Dividends per share –
Net finance charge outflows of R234 million (H1 2022: R232 million) was in line with
review.
comparative period. Net asset value per
Consequently, the net borrowings position of R2 990 million was R1 903 million and 10.16 10.89 (6.7) share 10.47
R182 million higher compared to June 2022 and December 2022 respectively. Actions The net capital expenditure cash outflow was R818 million against R693 million in
are underway to improve the company’s net borrowing position in the wake of the H2 2022, an increase of R125 million. Safety
weaker-for-longer steel trading environment in the region. The net borrowing position of R2 990 million at 30 June 2023 increased by R182 million Lost-time injury
Sales volumes were 3% up, with crude steel production 29% higher against the from R2 808 million at 31 December 2022 mainly due to cash generated from
0.72 0.71 frequency rate 0.87
comparable period. Against the immediately preceding six months, sales volumes operations of R891 million offset by capital expenditure of R818 million, finance cost of
improved by 19%, while crude steel production was on par. R234 million and tax of R43 million. At 30 June 2022, the net borrowings position was Operational statistics
R1 087 million. (‘000 tonnes)
ArcelorMittal South Africa’s realised average steel prices decreased by 8% in Rand
terms. Its raw material basket increased by 2% with, in absolute terms, imported coking Legal and regulatory matters 1 356 1 051 (29.0) Crude steel production 2 408
coal having increased by 1%, while iron ore increased by 4% and scrap decreased by Proposed modification of 2016 Existing B-BBEE Transaction 1 193 1 159 2.9 Steel sales 2 160
5%. After accounting for conversion cost, the variable cash cost of steel decreased
by 5% (based on crude steel production). In 2016 ArcelorMittal South Africa implemented a Broad-Based Black Economic 963 1 022 (5.8) – Local 1 872
Empowerment (“B-BBEE”) ownership transaction (“Existing B-BBEE Transaction”)
Fixed costs increased by R101 million (3%) to R3 549 million. The outcome of the 2023
introducing black ownership through:
230 137 67.9 – Export 288
wage negotiations, which yielded a three-year agreement, was beneficial for both
• a commercial strategic component, by issuing a new class of notionally funded 20 120 (83.3) Commercial coke 176
the company and its employees. The agreement provides the certainty and stability
required to allow for a focus on performance, productivity and value add. shares (“A1 Ordinary Shares”) to Amandla We Nsimbi (RF) Proprietary Limited Segmental
(“Amandla”), a special purpose vehicle, the ordinary shares of which are held by performance (R millions)
Markets Likamva Resources Proprietary Limited (“Likamva”);
Global crude steel production (source: World Steel Association) decreased by Steel operations
• a community component (the “Existing Communities Trust”) which acquired the
1% or 11 million tonnes in the first half of 2023 to 946 million tonnes. This reflected A1 Ordinary Shares in Amandla; and 20 619 20 864 (1.2) – Revenue 38 765
disappointing demand with insufficient end‑user consumption levels, thin margins and
• an employee component through the issue of a new class of notionally funded 460 3 460 (86.7) – EBITDA 3 748
low profitability levels, along with notable pressure to reduce costs, as upstream steel
shares (“A2 Ordinary Shares”) to the Isabelo Employee Share Trust (the “Existing
making raw material prices remained at relatively elevated levels. Global crude steel Non-steel operations
Employee Trust”) for the benefit of employees, which constitutes approximately
production increased by 8% in H1 2023, compared to the immediately preceding six
21.75% of the total issued share capital held by and for the benefit of black people. 460 1 324 (65.3) – Revenue 2 049
months.
Africa’s output increased by 4% to 8 million tonnes due to higher production in South The Existing B-BBEE Transaction has not yielded the envisaged value for 75 443 (83.1) – EBITDA 614
Africa, Tunisia and Libya. South Africa’s crude steel production increased by 14% to empowerment partners, employees and the company. This is largely as a result of
Corporate
2.4 million tonnes. a lack in adequate growth in the share price in relation to the funding terms of the
Existing B-BBEE Transaction. (36) (312) 88.5 – EBITDA (88)
Turning to South Africa and the regional economy, the GDP growth rate forecast for
South Africa is 0.4% for 2023, with those for near and sub-Saharan African markets Current projections reflect that the materialisation of any meaningful future value
based on the current terms and structure of the 2016 B-BBEE Transaction is unlikely.
forecasted to be between 3.4% and 3.6%.
Accordingly, the company is embarking on a process to modify the Existing B-BBEE
Short-form announcement
In South Africa, apparent steel consumption (ASC) for the first half of 2023 increased This short-form announcement is the responsibility of the board of directors of ArcelorMittal
by 2% to 2.1 million tonnes, while ASC increased by 4% compared to 2.0 million in the Transaction in order to improve the prospects of sustainable value creation and South Africa and is a summarised version of the group’s full announcement and as such, it
immediately preceding six months. realisation, and B-BBEE ownership for the strategic empowerment partners, employees does not contain full or complete details pertaining to the group’s results. This short‑form
Steel imports of primarily HRC, galvanised sheet and plates decreased to and communities (“Modified B-BBEE Transaction”), in line with its commitment to announcement is itself not reviewed but extracted from the reviewed condensed
596 000 tonnes (June: AMSA estimate) after a surge in the immediately preceding six promote transformation and economic empowerment. consolidated financial statements which was reviewed by Ernst & Young who issued an
months of 720 000 tonnes. This volume constituted some 29% of South Africa’s ASC unmodified review conclusion on the reviewed consolidated interim financial statements.
(H2 2022: 36%).
Outlook for the second half of 2023 Their review conclusion report can be obtained from the company’s registered office
Safety remains ArcelorMittal South Africa’s highest priority. and on the group’s website at https://southafrica.arcelormittal.com/InvestorRelations/
The company’s total sales volumes increased by 3%, or 34 000 tonnes, to 1.2 million
Internationally, the World Steel Association expects a 2.2% increase in steel demand. InterimResults.aspx.
tonnes compared to the comparable volumes in 2022. This was composed of a 6%
fall in domestic sales to 1.0 million tonnes while exports increased by 68% to 230 000 Chinese GDP growth will continue to play a role in international steel demand and Any investment decisions by investors and or shareholders should be made after taking
tonnes. Africa overland sales rose by 47% to 119 000 tonnes. Total sales volumes pricing trends. into consideration the full announcement. The full results announcement is available
increased by 19% compared to the immediately preceding six months, with domestic According to the South African Reserve Bank, 2023 GDP is expected at 0.4%. for viewing at https://senspdf.jse.co.za/documents/2023/JSE/ISSE/ACL/AMSAInt23.pdf
sales increasing by 13%, and Africa overland sales increasing by 133%. Africa overland and on the group’s website at https://southafrica.arcelormittal.com/InvestorRelations/
Steel demand is expected to improve as economic indicators strengthen. Inflation
sales as percentage of total exports, improved to 52% (H2 2022: 34%). InterimResults.aspx.
is moving back towards the target range of between 3-6% which should lessen the
pressure on interest rates and assist with lifting consumer confidence. The full announcement is available for inspection at no charge, at the registered office
Operations of ArcelorMittal South Africa Limited, (Room N3-7, Main Building, Delfos Boulevard,
The company’s average capacity utilisation increased from 42% in H1 2022 to 53% Renewables and regional infrastructure projects are expected to support steel Vanderbijlpark) and the offices of the sponsor (Absa Bank Limited (acting through its
in 2023. demand. Corporate and Investment Banking Division), 15 Alice Lane, Sandton, from 09:00 to 16:00
Crude steel production increased by 29%, or 305 000 tonnes, from 1.05 million Exchange rates will continue to have an impact as will rail service and electricity on business days.
to 1.36 million tonnes for the first six months of 2023. Crude steel production was reliability. Copies of a full announcement can be requested from the registered office by contacting
unchanged against the immediately preceding six months. ArcelorMittal South Africa is positioned to navigate the immediate and near-term (016) 889 2352. The short-form announcement has not been audited or reviewed by the
As previously reported, the fourth quarter of 2022 saw the start-up of one of the blast challenging market conditions while remaining focused on its medium to longer-term company’s auditors.
furnaces at Vanderbijlpark being delayed due to weak domestic demand. The hot objectives.
blast stove restoration programme is currently underway on the second blast furnace.
ArcelorMittal South Africa Limited
(ArcelorMittal South Africa, the company or the group)
The blast furnace in Newcastle is performing well, however, extreme rain conditions On behalf of the board of directors Registration number: 1989/002164/06 Share code: ACL ISIN: ZAE000134961
(resulting in flooding) disrupted production on several occasions.
For H1 2023, commercial coke production was 85% lower at 9 000 tonnes, with This report is available on the ArcelorMittal South Africa’s website at:
sales volumes down by 83% at 20 000 tonnes due to the previously communicated HJ Verster GA Griffiths http://www.arcelormittal.com/southafrica/.
continuing restoration of the coke batteries. A meaningful recovery is expected from Chief Executive Officer Interim Chief Financial Officer Share queries: Please call the ArcelorMittal South Africa Share care number toll free on
2025 onwards. 27 July 2023 0800 006 960 or +27 11 370 7850.
