JSE-listed steel producer ArcelorMittal South Africa (AMSA) warned on Thursday that it would swing back into a large lossmaking position following an “exceptionally difficult” 2019 financial year, which the company described as the most challenging for the steel industry since the Global Financial Crisis of 2008.
In a note to shareholders, AMSA cautioned that its headline earnings for the year would plummet by at least R4.3-billion, representing a massive deterioration from the headline profit of R968-million reported in 2018; the group’s first profit since 2010.
Attributable profit for the period, meanwhile, would decrease by at least R6.1-billion, from R1.37-billion in 2018.
AMSA will release its 2019 financial results on February 6.
The group also provided an update on actions it had been taking in line with a strategic asset footprint review, launched in July last year in an effort to ensure the long-term sustainability of the company.
A large-scale employee reorganisation had been “largely finalised” and had resulted in a reduction of over 1 000 direct employees. “Additionally, a significant repricing and rescoping of subcontractor services will be completed by the end of the first quarter of 2020.”
Following the first phase of the asset review AMSA announced in November that it would be closing its Saldanha Steel Works in the Western Cape.
In a business update, the group told shareholders that the “orderly and commercial wind-down” of the flat-steel plant was progressing according to plan and was anticipated to be largely completed by the end of the first quarter.
Following the second phase of the asset review, which was initiated in November, AMSA had decided to refrain from closing significant long-steel capacity, however.
The second phase focused on its Newcastle Works, in KwaZulu-Natal, as well as certain of the long-steel rolling facilities in Pretoria and Vereeniging, in Gauteng.
AMSA had considered halting primary steelmaking operations at Newcastle, but it told shareholders that these would continue, with the intention of primarily serving the domestic and Africa overland markets.
“Significant organisational configuration opportunities have been identified to improve both operational effectiveness and controllable cost competitiveness of not only the long-steel product business, but that of the overall company. Development of this ‘One Organisation’ initiative has begun, with an envisaged implementation in 2020.”
AMSA said that, owing to challenging trading conditions, as well as the interventions it had made in response to the difficult market, abnormal and impairment charges had been recognised.