While the firm which is Africa’s largest steelmaker recorded a loss in the first half of the year, when almost all its operations were stopped for the first time in the company’s history, a R1 022 million profit was recorded in the second half of the year.
Pandemic-impacted revenue decreased by 40% to R24 643 million due to a 47% reduction in total sales volumes. This was partly mitigated by a 6% improvement in net realised global steel prices in rand terms against the comparative period. At an operating level, the operating loss decreased from R2 359 million to R924 million, while the headline loss decreased from R3 265 million to R2 043 million, amounting to a 186 cents per share loss against 297 cents loss for 2019. This improvement has been a direct result of a structured multi-year cost reduction programme and adjustments to the company’s asset configuration. In South Africa, multiple customer surveys throughout the year reflected changing estimates of steel demand as time progressed. In many instances, views on the sustainability of the higher-than-expected demand were mixed, especially as the second wave of Covid-19 took hold in the country. Against the backdrop of an arduous 2019 which led to downstream steel market inventories being at diminished levels, the second blast furnace at Vanderbijlpark Works was restarted earlier than planned, in December 2020, followed by the third basic oxygen furnace and the direct reduced iron plant to support flat steel supply. The electric arc furnace at Vereeniging, which was scheduled to be placed under care and maintenance in the third quarter of 2020, will continue to operate for the foreseeable future in support of long steel supply. Kobus Verster, Chief Executive Officer of ArcelorMittal South Africa commented: “The invaluable lessons learnt during this period are being incorporated into the customer centricity and sales and operational planning elements of our new OneOrganisation operating model. More than ever, it is clear from our numerous engagements that customers are eager for closer collaboration to integrate value chains and pursue value-adding product development.” The company continued to implement its strategic initiatives in 2020 to achieve long-term sustainability. A key element was the finalisation of the asset footprint review. Despite significant cost savings from the BTP initiatives, the company’s cash cost per tonne of steel sold increased by 8%, largely driven by lower volumes. Impacted by the lower number of work hours, the lost-time injury frequency rate (LTIFR) increased from 0.44 to 0.58 and the total injury frequency rate (TIFR) increased from 6.57 to 7.21. Notwithstanding the intention to achieve zero fatalities and injuries, ArcelorMittal South Africa regrettably had one fatal incident at its Newcastle plant on 13 November 2020. The board and management extend their deepest condolences to family and colleagues of the deceased. Safety remains the company’s number one priority, as demonstrated by ArcelorMittal South Africa’s proactive response to the Covid-19 pandemic. The health and wellbeing of employees during these unprecedented and difficult times will continue to receive significant attention, especially considering Covid-19 infection rates remain a risk. Barring a return to more restrictive lockdown regulations, it is anticipated that both sales volumes and prices should improve. Strong international steel prices are expected to remain in the near-term. “We are hopeful that the improved price and volume environment, together with the sustained benefits of our fixed cost reduction programme, the strategic asset footprint review and our OneOrganisation operating model footprint benefit, will ensure that the improved performance from the second half of 2020 will continue into the first half of the new year,” concludes Verster.
