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Mittal Steel South Africa today announced headline earnings of R5, 08 billion for the 2005 financial year to December, a 12% increase on the previous year. The excellent results were driven by higher average sales prices; higher export sales and the non-recurrence of Business Assistance Agreement payments made during 2004.
Chief Executive Officer Davinder Chugh said: “These results are even more impressive if you take into account the fact that the international price of iron ore has increased by over 70% since January 2005 and coking coal has increased more than 120% since April 2005, shifting the entire steel industry cost curve up considerably.”
Revenue for the period under review increased by 4% to R24 billion. Headline earnings a share for the full year improved by 12% to 1139 cents a share from 1020 cents a share. Cash and cash equivalents at year-end were R5, 2 billion.
Mittal Steel South Africa has declared a final dividend of 140 cents a share, payable on 20 March 2006. This brings the total dividend for the year to 380 cents per share.
Mittal Steel South Africa experienced all time record levels in earnings in the first and second quarter of 2005. However earnings decreased by approximately 40% during the third and fourth quarters as a result of a decline in sales prices and increased costs.
“Even so, the level of earnings during the last two quarters was substantially higher compared to the levels achieved during 2003 and the beginning of 2004,” Chugh said.
During the period under review domestic sales volumes decreased by 10% compared to the previous year, mainly due to a correction in inventory levels and a delay in orders in anticipation of lower prices.
“This started to change during the last quarter as domestic order intake showed a noticeable improvement driven by low inventory levels as well as a general increase in the demand for steel.”
Liquid steel production for the year increased 3% to 7,3 million tonnes while total sales were unchanged at 6,2 million tonnes.
Chugh warned however that some of Mittal Steel South Africa’s customers were experiencing difficulty exporting as a result of the strong rand. Some customers were facing difficulty competing with cheap imports from China.
In the international market, Mittal Steel South Africa increased exports by 17% compared to 2004 as lower domestic sales were redirected to exports. The average export prices for 2005 were 11% higher than in 2004.
All divisions once again traded profitably with Long Products showing an 18% increase in operating profit to R2, 1 billion. On a comparable basis, decreases in operating profit were recorded at Vanderbijlpark, Saldanha and Coke & Chemicals. Despite their reduced levels, earnings for these units also remain healthy in terms of margins.
“We have seen a substantial increase in the cost of our raw materials, especially coking coal, iron ore pellets and scrap,” Chugh explained.
Chugh said the main reasons for the increase in operating profit for Long Products compared to the decline for flat products were a higher increase in sales prices, a lower decline in domestic off take and an increase in total sales volumes.
According to Chugh, the demand from the local market, which started to improve towards the end of 2005, was expected to further improve during the first quarter of the 2006 financial year.
Mittal Steel South Africa said the outlook for the first quarter was in line with the previous quarter, depending on movements in the exchange rate.
In December, the Zero Effluent Discharge project at the Vanderbijlpark Steel Works was completed at a cost of R220 million upon commissioning of the main water treatment plant. This will ensure that there is no effluent release from the plant into any water system- river or underground. The project was completed on time and cost.
The project will ensure there is no negative impact from any effluent discharge on the environment or in the community and will contribute to the Department of Water Affairs’ objective to lower the salinity in the Vaal River Catchments Area.
An added benefit will be a 30% reduction of fresh water intake from the Vaal Dam and Vaal River into the Vanderbijlpark plant.
The Zero Effluent Discharge project is part of Mittal Steel South Africa’s R1 billion environmental projects plan to ensure the company meets the highest environmental standards.
Mittal Steel South Africa has strengthened its management team with the appointment of Rick Reato as Chief Operating Officer and Kobus Verster as Executive Director, Finance to replace Harak Chand Banthia.
Contact:
Tami Didiza
General Manager, Corporate Affairs
Mittal Steel SA
Tel: +27 16 889 2462br>Fax: +27 16 889 2465
Email: [email protected]
For complete financial statements see Mittal Steel SA website:
http://www.mittalsteelsa.com
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