Charlotte Mathews
29 October 2009
Johannesburg — STEEL MAKER ArcelorMittal SA "could neither confirm nor deny" its interest in bidding for Scaw Metals, the Anglo American subsidiary being put up for sale, ArcelorMittal SA CEO Nonkululeko Nyembezi-Heita said yesterday.
"We will take a look as more information becomes available," she said. As the sale would be a complex process it was unlikely that much would happen within the next two months.
ArcelorMittal SA also had a 50:50 joint venture with Scaw Metals in Consolidated Wire Industries, and held a pre-emptive right to buy out its partner.
Anglo American declined to put a value on Scaw Metals in answer to questions this week and said the timing of its sale would depend on preparatory work and market conditions. But analysts have valued Scaw at about 1bn.
In the three months to September ArcelorMittal SA reduced its headline loss to 16c a share from a 136c loss in the June quarter. An operating profit of R30m showed a turnaround from the June quarter's operating loss of R177m, but a bottom-line loss resulted from currency translations and reduced interest income. Most of ArcelorMittal SA's R3,7bn cash is held in dollars, so interest earnings were affected by rand strength.
The group operated at 60% of production capacity in the first half because of weak market conditions but stepped up activity to 70% in the third quarter. This week Blast Furnace C at the Vanderbijlpark works was restarted, bringing Vanderbijlpark up to 90% of operating capacity.
Nyembezi-Heita said the business rebounded in the third quarter, with sales volumes rising 19% on the June quarter and modest price improvements. However, this year's prices were still about half of last year's level. Costs benefited from cheaper coal and higher volumes, with costs per ton of hot rolled coil 8,7% below those of the previous quarter while costs of billets were 12,3% lower.
ArcelorMittal expected the fourth quarter's operating performance would be a substantial improvement on last year's. For the full year the group was likely to break even at operating level, although the fluctuating exchange rate made the level of headline earnings hard to forecast.
Management said it was reviewing its price list for December but had not yet decided to hike or reduce prices to take into account traditionally weak first- quarter demand and fluctuations in the rand-dollar exchange rate.
Nyembezi-Heita said the group was re-activating a number of capital projects that had been postponed in the first half because of adverse economic conditions.
Apart from projects to improve the group's environmental footprint, it would spend R40m repairing its tinning line at Vanderbijlpark, was reconsidering the R430m project to build a sinter plant at Vanderbijlpark and had restarted the R80m desulphurising plant project at Newcastle.
ArcelorMittal SA and Kumba Iron Ore confirmed yesterday that arbitrators considering ArcelorMittal's right to participate in Kumba's Sishen South expansion project had ruled that ArcelorMittal did not have a right to participate. ArcelorMittal SA said it would examine its options.
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