ArcelorMittal South Africa's Vanderbijlpark operation
Photo by: Creamer Media
Steel producer ArcelorMittal South Africa's (AMSA's) share price on the JSE fell by more than 42% on Tuesday afternoon after it announced that it was expecting to report a loss a share of between 30c and 38c for the six months ended June 30, compared with the earnings a share of R2.76 reported for the first six months of 2022.
It was also expecting to report a headline loss of share of between 38c and 46c for the period under review, compared with headline earnings a share of R2.71 in the prior comparable period.
AMSA, which is scheduled to publish its interim results on July 27, noted that the international trading environment improved in the first half of this year, on the back of destocking and "less painful" energy prices.
"Locally, the trading environment caught no such tailwinds, as the burden of electricity loadshedding, high inflation and interest rates, and negative growth in key steel-consuming sectors such as manufacturing, automotive, mining and construction affected already fragile consumer confidence.
"The softness of the market amid the unprecedented severity of the electricity loadshedding in the last six months, was very much underestimated, which in turn affected the response time with which production could be adjusted in a responsible and well-considered manner.
"Building and maintaining any semblance of operating rhythm, which is an absolute necessity in running a continuous, integrated steelmaking process in a cost-aware manner, proved especially problematic," AMSA stated.
It added that, given a weaker pricing environment and faced with cost compressibility challenges, the company anticipates reporting a substantially weaker financial performance for the reporting period compared with the prior comparable period.
"Furthermore, the anticipated release of working capital proved to be much more difficult, resulting in the net borrowings position remaining at elevated levels.
"Remedial actions are under way to improve the company’s net borrowing position in the wake of the weaker-for-longer steel trading environment in the region," it said.
The company's share price closed the day 42.69% lower, at R2 apiece, compared with Monday's close of R3.49 a share.