ArcelorMittal South Africa Annual Report 2009
Finance report
This report should be read in conjunction with the financial statements
presented on pages 61 to 203 of this annual report.
Basis of preparation
The group financial results have been prepared on the historical-cost
basis, except for the revaluation of financial instruments. The group
has adopted all of the new and revised standards, amendments and
interpretations issued by the International Accounting Standards
Board (IASB) and the International Financial Reporting Interpretations
Committee (IFRIC) of the IASB, that are relevant to its operationsand
effective from 1 January 2009.
The principal accounting policies and methods of calculation are
consistent with those applied in 2008, except for the early adoption of
new revised and amended standards and interpretations as set out in
our accounting policies. The new revised and amended statements
interpretations did not have a significant impact on our financial results.
Headline earnings
The following table provides a comparable view of our earnings
for 2009.
Year ended 31 December
2009
Rm
2008
Rm
Revenue
25 598
39 914
Profit from operations
229
12 159
(Losses)/gains on changes in
foreign exchange rates and
financial instruments
(813)
637
Interest received
199
318
Finance costs
(276)
(238)
Income from investments
3
3
Income from equity-accounted
investments (net of tax)
206
331
Impairment reversal
9
36
Income tax expense
(35)
(3 865)
(Loss)/profit attributable to owners
of the company
(478)
9 381
Adjusted for:
Loss on disposal or scrapping of assets 29
39
Impairment charge
26
121
Impairment reversal
(9)
(36)
Tax effect
(8)
(21)
Headline (loss)/earnings
(440)
9 484
Headline (loss)/earnings per
share (cents)
(104)
2 128
A headline loss of R440 million was reported for
2009 as ArcelorMittal South Africa, like most
other steel companies, was hit by sharply falling
demand and significantly lower prices for its
products in the wake of the global economic
recession.
Amid lower demand and average realised prices
that were down by 26% last year, revenue
decreased by 35.9% to R25 598 million
compared to 2008. Sales volumes were 12%
lower than those achieved in 2008, while
domestic sales as a percentage of total sales
decreased from 86% in 2008 to 69% in 2009.
Export sales increased significantly, especially to
East and West Africa.
Profit from operations declined by 98.1% to
R229 million, as lower production volumes
combined with expensive raw material costs
for most of the year prevailed. In particular,
expensive coal contracts entered into in 2008
only ran out during the third quarter of 2009.
Liquid steel production was 8% lower than in
2008 and our capacity utilisation levels were
reduced from 76% to 66%.
The revaluation of the USD-denominated
cash, receivables and payables led to a loss of
R813 million, of which R529 million was realised.
The reason for the loss was the strengthening
of the Rand by 21% to R7.40 against the
USD during 2009. In 2008 the currency had
weakened by 38%, which had led to a profit of
R637 million.
Interest received was down by 37.4% due to
lower interest rates and a reduced cash balance
following our R3 918 million share buy-back
transaction in 2009. Income from equity-
accounted investments decreased from
R331 million to R206 million, mainly due to
lower income from our marketing and shipping
joint venture, Macsteel International Holdings.
The impairment reversal of R9 million relates to
Pietersburg Iron Company (Proprietary) Limited,
an equity-accounted investment, following
a mining feasibility study underway at that
company.