Steel producer ArcelorMittal SA plunged into losses in the first quarter to March.
Its headline loss of R237-million compared with a R1.14-billion profit in the fourth quarter of 2008.
The loss, said chief executive Nonkululeko Nyembezi-Heita, reflected the decline in demand and price and high raw material input costs, especially for coking coal, exacerbated by sharply lower income from the coke and chemicals business, and losses on foreign currency transactions.
Despite the bottom line loss, and indications from Nyembezi-Heita that the outlook for the second quarter looked equally gloomy, the share price rose almost 6percent in early trade yesterday, largely due to its announcement of a share buy-back.
ArcelorMittal SA said the headline loss reflected “a sharp decline in demand and prices of steel and the persistence of high contract prices for raw material inputs, particularly coking coal.
It said worsening economic conditions had a substantial negative impact on sales and income, and revenue dropped 24percent to R6.17- billion compared with the previous quarter.
The operating loss was R145-million from a profit of R1.61-billion in the fourth quarter of 2008, while the bottom line loss was even bigger due to lower income from the coke and chemicals business “amid a slump in demand for market coke from the ferro-alloy industry”.
There were also losses on foreign currency transactions as the rand strengthened against the dollar.
Nyembezi-Heita said the performance was affected by the sharp decline in steel prices; continued weak demand; and the slower than expected pace of de-stocking by steel merchants.
“The outlook for global steel production has not improved significantly and it now appears that the second quarter will be extremely challenging,” she said.
She said additional cost-saving measures were introduced in the first quarter “in the light of the deepening crisis”, and, following a continued decline in prices in April, further actions are under consideration.
She said steel export prices are falling below the operating cost level of many steel mills and sometimes even below their marginal costs.
World steel figures put the decline in steel output at 24percent year-on- year in the first quarter.
Source: The Times Of South Africa
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