Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — H1 2018 Earnings Presentation
32 slides from Arcelormittal South Africa's earnings presentation, Aug 1, 2018
Slide 1: Financial results for the six months ended 30 June 2018
Financial results For the six months ended 30 June 2018
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: Contents
Contents Overview Steel Operational Financial Outlook Questions market review review CEO CEO CEO Acting CFO CEO CEO Financial results for the six months ended 30 June 2018 3
Slide 4: Overview
Kobus Verster ’ ArcelorMittal transformingtomorrow
Slide 5: Safety
Safety Safety improvements • Proactive approach through more focused “safety by choice” programme Fatalities • Safety retraining of employees and 1 (3) contractors LTIFR 0.83 (0.62) • Intensified management visibility on shop floor TIFR 6.33 • Improvement in TIFR encouraging (7.49) LTIFR – Lost Time
Slide 6: Salient features
Salient features Total Revenue volumes Costs Landscape 19% -6% • International steel prices remain strong 10% • Strong ZAR limits increase in realised local Long prices (+8%) EBITDA 397% 17% Fixed cost • Weak domestic market - ASC lowest in nine (R2 121m) Flat 7% -8% years (2.5mt) • Sales volumes up
Slide 7: Steel Market
Steel Market Kobus Verster ArcelorMittal transformingtomorrow
Slide 8: The industry - global
The industry - global Global steel output (mt) 900 • Global steel production increased by 4.3% to 800 874mt 700 • Asia market share remained at 69% growing 600 25mt despite plant closures and 605 environmental shutdowns in China 544 546 563 559 552 539 551 558 579 587 500 • Africa output increased b
Slide 9: Macro backdrop
Macro backdrop South African GDP* growth • SA economy remains weak with -3.1% GDP growth negative in Q1 18 -5.9% Trade Electricity -0.5% • Major steel consuming sectors in -4.8% negative growth -6.4% Manufacturing -3.7% 0.9% - Manufacturing -6.4% -1.6% Transport -1.9% - Construction -1.9% Constructi
Slide 10: The industry – raw materials
The industry – raw materials International raw material basket (Weight in % and spread in $/t) 400 100% AMSA AMSA Commodity International 38% ($/t) (R/t) 80% 48% 39% 43% 39% 300 50% 51% % change % change % change 60% 200 Iron ore -6% -1% -8% 40% 47% 41% 43% 43% Hard coking 31% 31% 32% +17% -14% -20%
Slide 11: The industry - domestic
The industry - domestic Primary carbon steel sales into the South African domestic market 134 Long product sales 3 000 72 57 Total steel sales 1 000 91 96 129 65 65 145 126 161 672 407 404 295 393 434 2 500 378 382 295 266 410 395 480 587 569 390 392 751 500 569 513 571 590 600 505 558 494 571 540 6
Slide 12: The industry - domestic
The industry - domestic Primary carbon steel imports into the South African domestic market 590 800 30% 600 40% 538 524 27% 700 445 35% 25% 25% 500 478 35% 35% 442 23% 440 600 22% 22% 417 32% 30% 21% 22% 31% 408 20% 20% 400 28% 500 27% 27% 25% 18% 26% 27% 325 335 16% 15% 400 15% 300 20% 751 22% 22%
Slide 13: The industry - domestic
The industry - domestic Primary carbon steel inventory levels in South Africa outside the primary steel producers 900 9 600 10 8.5 8.4 9.2 800 8 8.8 8.6 9.1 9 7.9 7.7 7.6 500 7.4 7.3 8.1 8.1 8.2 8 7.4 700 7.0 7.1 7.0 7 7.4 6.6 7.3 7.2 7.1 7.2 7.0 6.9 7 600 6 400 6.3 6.7 6.3 6.4 6.2 6.1 6 500 5 300 5
Slide 14: Operational review
Operational review Kobus Verster
Slide 15: Flat steel division
Flat steel division Liquid steel output (kt) Product sales distribution (%) 2000 1867 100% 1809 1814 5% 5% 6% 6% 6% 7% 6% 7% 9% 7% 8% 1800 1694 1719 1707 1732 90% 5% 6% 6% 6% 4% 4% 4% 4% 3% 5% 1649 4% 5% 4% 4% 5% 7% 7% 6% 6% 6% 5% 6% 1600 1535 1489 80% 9% 8% 8% 7% 8% 8% 7% 6% 6% 8% 1438 7% 70% 11% 1
Slide 16: Long steel division
Long steel division Liquid steel output (kt) Product sales distribution (%) 1000 100% 946 921 11% 11% 12% 13% 11% 14% 9% 9% 13% 11% 13% 90% 2% 3% 856 838 2% 2% 3% 3% 3% 2% 2% 2% 2% 788 80% 14% 14% 14% 15% 19% 20% 14% 13% 800 762 16% 725 727 745 17% 18% 667 70% 60% 24% 21% 22% 20% 20% 16% 15% 21% 22%
Slide 17: Coke & Chemicals division
Coke & Chemicals division Commercial coke (kt) Coke & Chemicals source of revenue % 400 350 336 1% 3%3% 294 3% 300 4% 256 255 7% 242 250 211 228 210 217 200 196 200 181 178 13% 157 150 66% 100 94 90 94 100 86 92 89 88 50 0 FeCr Alloy Aluminium 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2
Slide 18: Capital expenditure
Capital expenditure H1 2018 H1 2017 Main projects completed in H1 2018 Maintenance 213 402 • Long steel products Expansion 61 127 – Refurbishment of boiler 4 Environmental 74 11 – Replacement of basic oxygen furnace and secondary metallurgy level automation Other 24 32 – Battery N2 dedusting refurbi
Slide 19: Financial review
Financial review Gerhard van Zyl
Slide 20: Headline earnings (Rm)
Headline earnings (Rm) H1 2018 H1 2017 Revenue 22 868 19 151 EBITDA 1 587 (534) Depreciation and amortisation (363) (449) Profit/(loss) from operations 1 224 (983) Impairment (5) (604) Net finance costs (1 306) (622) Equity earnings 137 (14) Fair value adjustment on asset held for sale (1 652) - Los
Slide 21: Sale of non-core asset
Sale of non-core asset Macsteel International Holdings (Rm) H1 2018 Fair value (USD 220million x R12.52*) 2 752 Equity accounted investment (4 404) Fair value adjustment on asset held for sale recognised for the period (1 652) Foreign currency translation reserve (FCTR) 1 862 * Exchange rate as at 3
Slide 22: Divisional EBITDA
Divisional EBITDA H1 2018 H1 2017 Flat steel products (Rm) 1 183 (69) EBITDA margin 7.5% (0.5%) Net realised price R/t 8 995 8 413 Long steel products (Rm) 336 (706) EBITDA margin 4.4% (13.0%) Net realised price R/t 8 465 7 492 Coke and Chemicals (Rm) 201 191 EBITDA margin 27.5% 26.0% Corporate and
Slide 23: Cost dynamics and breakdown
Cost dynamics and breakdown Weight H1 2018 H1 2017 Change 48% Raw materials 3 600 3 849 (7%) F 31% Auxiliaries & consumables 2 325 2 409 (4%) l 21% Fixed costs 1 607 1 776 (8%) a 100% Total 7 532 8 034 (6%) t Liquid steel (kt) 1 814 1 649 +10% Average ZAR rate 12.29 13.23 (7%) Average NRP (R/t) 8 99
Slide 24: Cash flow and analysis (Rm)
Cash flow and analysis (Rm) H1 2018 H1 2017 Cash generated/(utilised) from operations before working capital 1 881 (502) Working capital 671 (615) Capital expenditure (600) (601) Net finance costs (330) (353) Investment in associates and joint ventures (2) (4) Income tax paid (1) (7) Interest income
Slide 25: Working capital movement and analysis (Rm)
Working capital movement and analysis (Rm) H1 2018 H1 2017 Inventories 1 306 (562) Finished products 251 201 Work-in-progress 720 (677) Raw materials 370 (126) Plant spares and stores (35) 40 Receivables (1 524) (1 535) Payables 889 1 482 Working capital movement 671 (615) Financial results for the
Slide 26: Consolidated statement of financial position (Rm)
Consolidated statement of financial position (Rm) H1 2018 H2 2017 H1 2017 Current assets 21 907 18 131 18 837 Cash and bank balances 3 662 3 138 3 723 Inventories 10 449 11 519 11 694 Trade & other receivables 4 522 2 988 3 342 Asset held for sale 3 018 - - Other current assets 256 486 78 Non-curren
Slide 27: Net borrowings bridge (Rm)
Net borrowings bridge (Rm) 671 (1 888) 1881 (330) (3 262) (600) (223) (25) Net Cash from Working Finance Capex Forex Other Net borrowings operations capital cost borrowings Dec 2017 June 2018 Financial results for the six months ended 30 June 2018 27
Slide 28: Outlook
Outlook Kobus Verster “~~ ArcelorMittal Se transformingtomorrow
Slide 29: H1 2018 initiatives
H1 2018 initiatives What we set out to do Progress • Productivity • Higher crude steel production Short term improvements • Increased PCI injections rate in blast • Cost reduction furnaces • Operational stability • Improved energy usage at long steel • Balance sheet products and Saldanha optimisatio
Slide 30: Transforming for sustainability and growth
Transforming for sustainability and growth • Implement a structured business transformation project: • Global cost benchmarking identified $50/t cost reduction through • Stretched variable cost and efficiency savings • Fixed costs procurement and business footprint savings • Restart Vereeniging elec
Slide 31: Outlook H2 2018
Outlook H2 2018 • Various initiatives will be implemented to ensure profitability and positive cash flow • Domestic and export steel sales likely to remain stable in Q3 • Sales prices expected to remain strong • Volatility in the ZAR/USD exchange rate will continue to have a material impact on the f
Slide 32: Questions
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