ArcelorMittal South Africa [JSE: ACL], the largest steel company in Africa, said in a statement on Thursday that it had incurred a loss of R4.68bn for the year as the "downturn in world steel" deepened.
In the trading update for the year ended 31 December 2019, the mineral company said the loss was largely due to weak steel demand in 2019, which "presented an extremely challenging situation, especially against the backdrop of escalating geopolitical and trade tensions throughout the year".
Contributing factors to the loss included net impairment charges of R1.4bn, compared to 2018’s R10m. This was made up largely of R1bn for the impairment of the property, plant and equipment at Newcastle Works, R294m for Saldanha Works and R99m towards the closure of the tin plant at Vanderbijlpark Works, the steelmaker said.
ArcelorMittal also suffered a 9% drop in revenue to R41.4bn as sales volumes reduced by 8%, with the company noting that revenue from the coke and chemicals business fell due to lower selling prices.
Ebitda went down by R4.2bn to a loss of R632m, while turnaround in headline earnings dropped from a profit of R968m to a loss of R3.3bn, amounting to a 299 cents per share loss against an 89 cents per share profit.
In operations, the ArcelorMittal said the production of liquid steel fell by 13% from 5.1 million tonnes to 4.4 million tonnes.
"These metrics reflect the planned and unplanned repair outages affecting mainly flat products, electricity load shedding and dramatically weaker domestic trading conditions.
"The successful blast furnace D interim repair at Vanderbijlpark Works resulted in the loss of an equivalent 272 000 tonnes of liquid steel during the planned downtime of 60 days," the statement said.
The steel producer said restructuring it announced in July 2019 - which at the time was said to place some 2 000 jobs at risk - had largely been finalised at year end.
"Through natural attrition and avoidance of vacancy filling, it has been possible to reduce the directly affected own employees, yet still reaching the cost saving targets," the statement said. According to an announcement in January, job losses stood at around 1 000.
Thursday's statement added that the shutdown of Saldhana Works was expected to be concluded towards the end of the first quarter of 2020.
ArcelorMittal noted an "intense focus on cash preservation" and cost reductions had been necessary, having released some R1.9bn from working capital alone. This was needed "along with the launching of strategic asset footprint review targeting the establishment of an affordable asset footprint with an enduring competitive advantage, and in so doing, ensuring the long term sustainability of the company".