Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — H1 2019 Earnings Presentation
35 slides from Arcelormittal South Africa's earnings presentation, Aug 1, 2019
Slide 1: Financial Results
Financial Results For the six months ended 30 June 2019 1 August 2019
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 not historical facts. These statem
Slide 3: Contents
Contents Overview Market Financial Transform for Outlook and review sustainability operational and growth Questions review Capital allocation CEO CEO CEO CFO CEO Financial results for the six months ended 30 June 2019 3
Slide 4: Overview
Overview Overview Kobus Verster Kobus Verster, CEO 4 Financial results for the six months ended 30 June 2019
Slide 5: Salient Features
Salient Features • Stronger international steel market in 2018 reversed in H1 2019 with USD prices down 13% • Revenue declined by 5% due to lower sales Sales volumes, despite a weaker exchange rate volumes benefiting realised prices Total • Domestic steel consumption slumped to a ten- -9% year low (
Slide 6: Safety is Our Priority
Safety is Our Priority Lost Time Injury Frequency Rate • Period under review was fatality free and 0.7 (Employees and Contractors) achieved a LTIFR of 0.38 compared to 0.83 in H1 2018 0.6 • Safety initiatives aided by: – ‘Man and machine separation’ campaign 0.5 – Intensified risk management and fat
Slide 7: Market and Operational overview
Market and Operational overview Kobus Verster, CEO
Slide 8: Global Steel Environment
Global Steel Environment Global crude steel output (mt) 1 000 801 805 839 858 882 931 925 • 5% increase in H1 2019 global 28 33 29 crude steel production to 925m 800 23 24 25 27 tonnes • 10% increase from China and 1% from North America, while Europe’s 600 660 660 and South America’s output 596 615
Slide 9: Global Steel Environment
Global Steel Environment • ArcelorMittal South Africa’s raw material basket constitutes 51% of total production AMSA steel basket prices compared costs to international RMB (Indexed) • International RMB1 increased by 7% with iron ore rising 28% (with a weighting of 47%) 200 184 176 170 • ArcelorMitt
Slide 10: Flat Steel Products – Falling Domestic Demand
Flat Steel Products – Falling Domestic Demand • Lower production volumes following the planned interim stave repair at Blast Furnace D to restore capacity • Overall production performance was satisfactory with capacity utilisation of 78% (H1 2018: 87%) while the two month strike had limited impact •
Slide 11: Long Steel Products – Stable Operations, but Weak Demand
Long Steel Products – Stable Operations, but Weak Demand • Increased output (+14% or 102kt) from, amongst others, additional Vereeniging Works volumes (39kt) since the restart of its EAF in January 2019 • Total utilisation equaled 74% (H1 2018: 79%) • Demand affected by broadly the same factors affe
Slide 12: Coke & Chemicals
Coke & Chemicals 157 Production 160 • Production of market coke during H1 2019 was 29% below the comparable 120 100 95 90 94 90 period in 2018 due to internal 80 67 metallurgical coke requirements 36 37 36 40 41 39 39 • Tar operations were stable 40 • Tar sales were marginally higher due 0 2016 H120
Slide 13: Financial overview and capital allocation
Financial overview and Financial capitalDesmond review allocation Maharaj Desmond Maharaj, CFO 18 Financial results for the six months ended 30 June 2019 18
Slide 14: Financial Results
Financial Results • Sales price reductions along with sharp rises in raw material price resulted in a R1 420m reduction in EBITDA to R167m – Sales volume down 9% due to weak local and international demand eroding R470m – Softer steel prices more than countered the benefit from the exchange rate – Ra
Slide 15: Cash Outflow Resulted in Net Debt Increase
Cash Outflow Resulted in Net Debt Increase • Net borrowings of R1 741m increased by R1 266m compared to December 2018 • Cash generated by operations of R334m before working capital deterioration of R578m • Net finance cost of R126m were 62% less than H1 2018 • CAPEX of R862m was R262m higher than th
Slide 16: Capital Allocation to Complement Strategic Objective
Capital Allocation to Complement Strategic Objective • Invest in strength and sustainability • Top projects – BFD interim stave repair Vanderbijlpark Long Products – Coating strategy R474m R82m – Installation of side-injectors (R200m) (R110m) • Invest in high-return opportunities with AMSA R611m (H1
Slide 17: Acquisition of the Highveld Structural Mill
Acquisition of the Highveld Structural Mill • Transaction rationale − Unique asset capable of producing heavy section structural steel for infrastructural development, and, with further investment, mainline rails − The localisation of mainline rails will support jobs, strengthen industrial capabilit
Slide 18: Driving transformation and strategy
Driving transformation and strategy Operational review Kobus Verster Kobus Verster, CEO 13
Slide 19: Reality Dashboard
Reality Dashboard • Markets – Global steel production continued to increase, notably in China and North America, despite contracting demand – Domestic steel consumption at a ten-year low (70% of 2008 levels) while imports increased by 18% (especially from Russia, Taiwan, South Korea and Japan) – Tar
Slide 20: Reality Dashboard (cont.)
Reality Dashboard (cont.) • Business Transformation Programme improvement target of $50/t by 2021 • International iron ore prices have increased sharply by 28% while steel prices have decreased by 13% in USD terms – Iron ore prices negatively impacted earnings by R700 million against H1 2018 – High
Slide 21: Transforming for Sustainability and Growth
Transforming for Sustainability and Growth Evolving from 2018 and 2019, the emphasis moves firmly to execution 01 11 02 10 09 04 08 05 07 06 Financial results for the six months ended 30 June 2019 21
Slide 22: Transforming for Sustainability and Growth
Transforming for Sustainability and Growth Evolving from 2018 and 2019, the emphasis moves firmly to execution • Business Transformation Programme − Establish an affordable asset footprint with an enduring competitive advantage − Intensify the Business Transformation Programme − Improve cash flow ge
Slide 23: Transforming for Sustainability and Growth
Transforming for Sustainability and Growth Evolving from 2018 and 2019, the emphasis moves firmly to execution • Commercial − Strategic approach to import replacement and localisation − Adhering to the basket price mechanism − Target market approach to grow market share − Focus on Africa Overland (A
Slide 24: Transforming for Sustainability and Growth
Transforming for Sustainability and Growth Evolving from 2018 and 2019, the emphasis moves firmly to execution • Increase Raw Material and Energy Self-Sufficiency − Increase self-sufficiency and / or cost-linked raw material and energy supply from Southern Africa − Energy optimization and co-generat
Slide 25: Conclusion
Conclusion Financial review Desmond Maharaj Kobus Verster, CEO 18 Financial results for the six months ended 30 June 2019
Slide 26: Outlook
Outlook • Outlook H2 2019 − Domestic steel demand will remain under pressure until real infrastructure spend and economic growth improve − International steel prices are expected to improve while the raw material basket is likely to be lower culminating in improved spreads − ArcelorMittal South Afri
Slide 27: Appendix
Outlook Kobus Verster Appendix 26 Financial results for the six months ended 30 June 2019
Slide 28: Domestic Steel Consumption
Domestic Steel Consumption Total apparent steel consumption Flat apparent steel consumption (kt) (kt) 1 600 35% 2 800 30% 33% 442 442 326 339 30% 1 200 313 417 26% 464 25% 28% 27% 27% 2 400 25% 22% 23% 22% 20% 601 577 800 389 420 15% 377 490 23% 10% 2 000 603 400 20% 1 146 951 1 166 1 186 1 160 1 08
Slide 29: Domestic Steel Inventories
Domestic Steel Inventories Primary carbon steel inventory levels in South Africa outside the primary steel producers 800 Total steel inventory 8 500 Flat steel inventory 8 400 7.6 7.8 6 700 6.6 6.5 7.4 300 6.1 6.1 6.1 7.1 5.6 7.0 4 6.8 6.6 6.5 200 600 6 2 100 500 453 373 398 363 353 333 333 0 0 2016
Slide 30: Headline Earnings (Rm)
Headline Earnings (Rm) H1 2019 H1 2018 Revenue 21 743 22 868 EBITDA 167 1 587 Depreciation and amortisation (389) (363) (Loss)/profit from operations (222) 1 224 Impairment (7) (5) Net finance costs (472) (1 306) Income after tax from equity-accounted investments (5) 137 Income taxation credit 62 -
Slide 31: Divisional EBITDA
Divisional EBITDA H1 2019 H1 2018 Flat steel products (Rm) 86 1 183 EBITDA margin 0.6% 7.5% Net realised price R/t 9 659 8 995 Long steel products (Rm) (66) 336 EBITDA margin (0.9%) 4.4% Net realised price R/t 8 734 8 465 Coke and Chemicals (Rm) 108 201 EBITDA margin 18.8% 27.5% Corporate and other
Slide 32: Cost Dynamics and Breakdown
Cost Dynamics and Breakdown Weight H1 2019 H1 2018 Change 50% Raw materials (R/t) 4 463 3 600 24% F 29% Auxiliaries & consumables (R/t) 2 602 2 325 12% l 21% Fixed costs (R/t) 1 866 1 607 16% a 100% Total (R/t) 8 931 7 532 19% t Liquid steel (kt) 1 613 1 814 -11% Average ZAR rate 14.20 12 29 16% Ave
Slide 33: Cash Flow and Analysis (Rm)
Cash Flow and Analysis (Rm) H1 2019 H1 2018 Cash generated from operations before working capital 334 1 881 Working capital (578) 671 Cash (utilised in)/ generated from operations (244) 2 552 Capital expenditure (862) (600) Net finance costs (126) (330) Tax refund/(paid) 7 (1) Realised foreign excha
Slide 34: Working Capital Movement and Analysis (Rm)
Working Capital Movement and Analysis (Rm) H1 2019 H1 2018 Inventories (602) 1 306 Finished products (105) 251 Work-in-progress (251) 720 Raw materials (206) 370 Plant spares and stores (40) (35) Receivables (849) (1 524) Payables 873 889 Working capital movement (578) 671 34 Financial results for t
Slide 35: Thank you
Thank you ArcelorMittal South Africa Limited Room N3-5 Main Building Delfos Boulevard Vanderbijlpark, 1911 South Africa www.arcelormittal.com/southafrica/ 30 Financial results for the six months ended 30 June 2019
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