Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — H1 2017 Earnings Presentation
32 slides from Arcelormittal South Africa's earnings presentation, June 2017
Slide 1: Financial results for the six months ended 30 June 2017
Financial results For the six months ended 30 June 2017
Slide 2: Disclaimer
Disclaimer Forward-looking statements This presentation includes forward-looking information and statements about ArcelorMittal South Africa (“AMSA”) and its subsidiaries that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical
Slide 3: Content
Content Overview The industry Operational information Financial outcomes Outlook and focus areas Questions 3
Slide 4: Overview
ArcelorMittal Hy Ht fi 4 diz Overview Wim de Klerk
Slide 5: Salient features
Salient features • Business confidence in SA declined Safety Revenue Production Sales • Recession looming with static GDP 3 fatalities Up 13% down 6% Down 4% • Downgrade to sub-investment grade • Minimal local infrastructure spend • ASC** decreased 3.8% (-97kt) Domestic • Despite import duties and d
Slide 6: Safety, key to a sustainable business
Safety, key to a sustainable business • Improved LTIFR, DIFR and TIFR frequency Safety performance rates • Reduction in number of injuries sustained • AMCC and Pretoria Works achieved 414 and 371 days without LTI’s respectively • Smoking areas halved as part of smoke free drive LTIFR – Lost Time Inj
Slide 7: The industry
ArcelorMittal. The industry Wim de Klerk
Slide 8: The industry - global
The industry - global Asia steel output (mt crude steel) Global steel output (mt crude steel) 300 271 280 270 267 266 285 280 279 280 297 75 79 74 73 72 77 77 79 410 413 408 428 72 74 400 399 394 385 388 404 405 Asia 200 Despite reported 350 plant closures, 100 197 207 197 194 210 204 202 201 218 Ch
Slide 9: The industry – raw materials
The industry – raw materials International raw material basket ($/t) AMSA raw material basket (R/t) 600 100% RMB cost 9000 100% 49% 50% 51% 51% 51% 49% 45% 36% 49% 39% 50% 48% 48% 50% 47% 48% 45% 40% 500 RMB H1 H1 H1 H1 80% weight 2016 2017 2016 2017 38% 35% 80% 400 International AMSA Iron 6000 60%
Slide 10: The industry – domestic (total)
The industry – domestic (total) SA apparent steel consumption (kt) ASC (kt) 1501 1185 1252 1086 1263 1298 1285 1007 1244 1219 29% 30% • AMSA’s market share declined with the 1 400 11% 28% 27% contraction in ASC stemming from the 1 200 19% 25% 9% 24% 10% 11% 24% lower long product market share over 1
Slide 11: The industry – domestic (flat and long)
The industry – domestic (flat and long) SA flat apparent steel consumption SA long apparent steel consumption ASC (kt) 972 687 768 699 801 786 778 619 801 794 ASC (kt) 529 498 483 388 461 512 507 389 443 425 100% • AMSA gains market 100% 6% 6% 3% 4% 3% 9% 7% 7% 15% 17% 15% 16% 13% 12% 14% 17% 14% sh
Slide 12: The industry – domestic (inventories)
The industry – domestic (inventories) Flat steel inventories (kt) Long steel inventories (kt) 700 12 12 AMSA’s 300 600 estimated end- 9.9 10 10 user inventory 250 500 7.8 levels indicate 7.8 8 8 fairly constant flat 200 6.6 400 product levels 6 6 300 663 while long 150 578 508 product stock 453 4 4
Slide 13: Operational information
Operational information Dean Subramanian
Slide 14: Flat steel division
Flat steel division Domestic sales (kt) 600 Liquid steel output (kt) 400 1 732 1 649 Flat 1000 905 utilisation 200 896 slowly rising 571 412 503 429 560 586 518 433 620 547 827 836 0 811 813 772 777 at 79% 2015 2016 2017 800 Flat exports 712 250 Export sales (kt) 666 at 65% of 200 total exports 600
Slide 15: Flat steel division
Flat steel division Structural metal (95%*) 200 Product sales 150 Total (kt) 571 412 503 429 560 585 518 433 620 547 100 100% • Main product is HRC 50 7% 8% 6% 6% 6% 7% 7% 6% 6% 5% 6% 6% 8% 5% 4% 5% 6% 4% 5% • Increased HRC of late due 0 8% 7% 8% 80% 7% 6% 7% 10% 10% 10% 10% 8% 8% to import replacem
Slide 16: Long steel division
Long steel division Domestic sales (kt) 325 324 302 294 296 276 300 252 Liquid steel output (kt) Long 233 235 227 788 725 200 500 utilisation on 453 downward 100 428 410 trend to 77% Long 403 400 403 0 388 386 400 exports at 2015 2016 2017 359 Export sales (kt) 339 35% of total 150 141 exports 99 92
Slide 17: Long steel division
Long steel division 40 Cables & Wire products (99%*) Product sales 30 Total (kt) 302 276 294 252 325 324 296 233 235 227 20 100% • Main product is wire rod 10 8% 10% 9% 7% 6% 7% 7% 7% 12% 8% • H117 lower sections and 4% 4% 3% 3% 3% 3% 3% 3% 3% 0 10% 3% 12% 13% 11% 12% rebar due to lower 2015 2016 20
Slide 18: Coke & Chemicals division
Coke & Chemicals division Commercial coke (kt) Commercial coke source of revenue 150 135 135 • Battery repairs at 80% 72% 120 120 65% 108104 107 10099 89 93 Newcastle completed in Q2 60% 100 85 85 86 76 71 2017 – the higher 40% 50 49 46 52 46 availability of ovens should 21% increase output 20% 6% 7
Slide 19: Capital expenditure
Capital expenditure H1 2017 H1 2016 Maintenance & expansion 558 665 Vdbp Environmental 13 61 R280m Total expenditure 572 726 Long Main projects completed during H1 2017 Saldanha AMSA products • Long products R65m R572m • Emergency repair of the bar mill control room R125m • Battery N2 bracing and en
Slide 20: Financial outcomes
Financial outcomes Dean Subramanian
Slide 21: Headline earnings
Headline earnings H1 2017 H1 2016 Revenue +13% Revenue 19 151 17 006 Price +19% Volume (4%) EBITDA (534) 282 Flat +R49m Depreciation and amortisation (449) (530) Long (R858m) MCC +R94m Once-off items (21) Other (R101m) Loss from operations (983) (269) Interest (overdraft and loans) (R131m) Impairmen
Slide 22: Divisional EBITDA
Divisional EBITDA H1 2017 H1 2016 Higher sales volume (+17kt or +1%) with better prices in ZAR Flat steel products (Rm) (69) (118) (+22%) offset by higher cost of raw materials EBITDA margin (0.5%) (1.1%) Lower sales volume (-112kt Net realised price R/t 8 413 6 889 or -15%) combined with higher cos
Slide 23: EBITDA bridge (Rm)
EBITDA bridge (Rm) • Results positively impacted 4 999 • Average domestic sales price increased with 23% and export values by 8% • Efficiencies improved • Increased prices doubled C&C profits • Results negatively impacted • Continued weak SA economy 162 • Exchange rate strengthened from R15.45 282 3
Slide 24: Cost dynamics and breakdown
Cost dynamics and breakdown Weight H1 2017 H1 2016 change 50% Raw materials R/t 4 143 2 840 +46% Main increases are: • Iron ore 1% F 29% Auxiliaries & consumables R/t 2 409 2 062 +17% • Pellets price 15% • Coal/Coke price 74% l 21% Fixed costs R/t 1 776 1 552 +14% • Alloys & Fluxes 21% a 100% Total
Slide 25: Cash flow and analysis (Rm)
Cash flow and analysis (Rm) H1 2017 H1 2016 Cash generated before WC (472) 243 Inventories (R562m) Receivables (R1 535m) Working capital (645) 349 Payables R1 482m Provisions (R30m) Capital expenditure (601) (796) Net finance costs (353) (190) Lower spending due to savings initiatives Investments (4
Slide 26: Working capital movement and analysis (Rm)
Working capital movement and analysis (Rm) H1 2017 H1 2016 Inventory increased by R562m Inventories (562) 159 • Finished metal stocks down 45kt • Work in progress metal stock down by 39kt, however coke 50kt, sinter Finished products 201 214 51kt and scrap 44kt stocks increased Work-in-progress (677)
Slide 27: Consolidated statement of financial position (Rm)
Consolidated statement of financial position (Rm) H1 2017 H1 2016 Current assets 18 837 15 426 Higher due to restricted cash Cash balance 3 723 2 759 Inventories 11 694 9 436 Raw materials +R676m and steel Trade & other receivables 3 342 3 133 stock +R1 582m due to higher prices Other current assets
Slide 28: Net debt and liquidity (Rm)
Net debt and liquidity (Rm) Cash flow and net debt/(cash) Liquidity (undrawn facilities plus cash) 2015 2016 2017 Average net debt of 5000 4660 4873 -30% large listed European -23.2% 4000 steel producers is at 4065 -21.3% 59% compared to 4000 3660 3225 -20% 4500 AMSA’s 23% 2000 -12.0% Source: Deutsc
Slide 29: Outlook and focus areas
Outlook and focus areas Wim de Klerk
Slide 30: Group outlook
Group outlook • Domestic steel demand expected to remain subdued - low economic growth/lack of infrastructure spend • Flat business should benefit when the safeguards are implemented • Long business should improve pending coal and scrap prices plus the full benefit of heavy sections/rail • Export ma
Slide 31: Action plan
Action plan Organisational Short term Procurement Commercial and industrial initiatives initiatives initiatives footprint Utmost cost control Benchmark Improve market Productivity over contracts initiatives share/increase improvements volumes Conclude lower Asset disposal electricity and rail Produc
Slide 32: Questions
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