ArcelorMittal SA sees 62% slump in FY HEPS

ArcelorMittal South Africa recently announced a 2.7 per cent increase in revenue, while its headline earnings per share (HEPS) dropped by a significant 62 per cent. The company attributed this decline to various factors, including the ongoing energy crisis, international price corrections, and soft local demand. In a recent interview with CNBC Africa, Kobus Verster, the Chief Executive Officer of ArcelorMittal South Africa, delved into the details of the financial results and discussed the challenges the company faced in the past year. Verster highlighted that the decrease in sales volumes by 13 per cent, coupled with a price-cost squeeze, led to a reduction in profitability. Despite a 17 per cent increase in prices during the first half of the year, costs surged by 34 per cent, primarily driven by rising raw material prices. The company managed to partially offset these challenges by reducing fixed costs by 11 per cent. Verster also pointed out that customer destocking, a common occurrence when market confidence is low, further impacted sales volumes. The company adjusted its production capacity utilization from 60 per cent to 47 per cent last year but has since ramped it up to 79 per cent based on improving market conditions. The recent shutdown of a furnace in November 2020 was restarted in February 2021 due to an uptick in orders and dispatches. When discussing rising costs, Verster mentioned that imported hard coking coal prices increased by 117 per cent for the company, significantly impacting production costs. Additionally, external stoppages, such as a strike in the first half of the year, also contributed to cost escalations. Looking ahead, Verster expressed optimism regarding the company's outlook. He noted that prices have started to recover, with a $150 increase compared to November last year. International demand is showing positive signs, especially with China emerging from lockdown. Verster suggested that these factors could potentially have a favorable impact on both demand and international prices. However, challenges remain, including the shortage of road trucks, which has disrupted logistics due to truck companies redirecting their resources to address issues at export coal terminals. Despite these challenges, ArcelorMittal South Africa remains hopeful for a positive trajectory in the coming months. Investors and stakeholders will be monitoring the company's strategies closely as it navigates through a challenging economic environment.