Photo by: Creamer Media
Steel producer ArcelorMittal South Africa (AMSA) on Wednesday announced that it would review the operational and financial sustainability of certain of its major operating sites, individual plants and production areas, and warned that the review may lead to the closure of some sites and plants.
AMSA said the objective of the review was to strengthen the long-term sustainability of the company.
"The board is highly committed to the establishment of an affordable asset footprint with an enduring competitive advantage. However, certain of the company’s operating sites, individual plants and production areas have proven to be particularly vulnerable from a financial perspective given the extended period of economic weakness, structural disadvantages, and an increasingly uncompetitive cost base – notably manifested in unaffordable regulated tariffs and raw material prices.
"By actively addressing those operating sites, individual plants and production areas which historically have had a negative impact on the company’s financial results, the board aims to strengthen the financial fundamentals of those business areas which are underpinned by the targeted asset footprint, thus improving the inherent investment case of the company," the steel producer said.
AMSA reported a R638-million headline loss for the six months to June 30. Engineering News Online last month reported that the company was concerned about high electricity, port and rail tariffs, as well as subdued domestic steel demand and the many pressures facing the local steel industry.
The company previously announced plans to cut about 2 000 jobs at its operations.
Meanwhile, AMSA on Wednesday said the review would exclude its commercial market coke operations and would not impact on its planned acquisition of the Highveld Structural Mill (HSM).
AMSA last month announced the proposed acquisition of HSM – Africa's only producer of heavy structural steel – for R150-million in cash plus a possible further payment of up to R150-million, subject to HSM securing an offtaker for the type of steel required to build mainline railway infrastructure in South Africa and elsewhere in Southern Africa.