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ArcelorMittal SA Eyes Growth In Africa

Johannesburg – ArcelorMittal South Africa is focusing on growing its market share in neighbouring countries, where demand for steel has been boosted by infrastructure development projects in rail and energy.

ArcelorMittal SA’s plan to exploit opportunities in the rest of Africa comes alongside yesterday’s report that it made a R123 million headline loss for the six months to June compared with headline earnings of R106m in the first half of last year.

The headline losses occurred against a backdrop of declining demand for steel in South Africa as a result of a slump in construction, slower-than-expected infrastructure investment by the government and weak mining sector production.

ArcelorMittal SA’s revenue declined by 11 percent to R15.9 billion in the period under review, on the back of a 16 percent decline in steel shipments.

During the period, exports were down 40 percent while domestic shipments dropped 7 percent. Flat steel shipments fell 20 percent and long steel volumes were down 9 percent, the company said.

The company would grow its market share by up to 45 percent in neighbouring southern African countries and in east African countries such as Rwanda, Kenya and Tanzania, chief marketing officer Sunil Kumar said at the interim results presentation yesterday.

He noted that there had been significant growth in the past couple of years in the rest of Africa.

“East Africa remains a strategic market for us,” Kumar said.

The local subsidiary of the largest global steel producer planned to beef up exports to southern African countries from 750 000 tons to 1.1 million tons. It expected to improve supply in east Africa from 600 000 tons to 2 million tons a year.

Stephen Meintjes, a mining analyst with Imara SP Reid, said ArcelorMittal SA’s results were in line with market expectations. “They are at the start of a long and difficult recovery.”

The firm’s share price had dropped 25 percent in the past year amid major setbacks including a fire at its Vanderbijlpark steelmaking plant in February.

The force majeure imposed at the Vanderbijlpark facility was lifted on May 9.

ArcelorMittal SA lost R765 million as a result of the Vanderbijlpark fire, which would be partially covered by insurance, the company said.

Liquid steel production was 2.48 million tons, a decline of 9 percent from the first half of last year as a result of the fire.

Steel production in the half year to June dropped by 246 000 tons, while steel sales for the period declined to 2.1 million tons from 2.5 million tons in the period to June last year.

Asked whether ArcelorMittal SA had lost market share as a result of the incident, Kumar said that the market share remained a challenge, but the key was ensuring reliable operations.

“We can recoup market share and I think we will have a better picture next year,” he said.

In the short term, the company expected lower third-quarter earnings than in the second quarter.

Nonkululeko Nyembezi-Heita, ArcelorMittal SA’s chief executive, said: “Domestic sales are expected to remain flat and any increase in steel prices will be more than offset by increasing costs – in particular, higher winter electricity tariffs and iron ore costs.”

The company has been unscathed by the unrest in the mining sector after reaching a settlement with the National Union of Metalworkers of SA in June for wage hikes of between 7 percent and 9 percent.

The shares rose 1.88 percent to close at R34.07. – Business Report

 

Source – Dineo Faku, BusinessReport