ArcelorMittal SA sees slower growth rate - CNBC Africa

ArcelorMittal SA sees slower growth rate

Earnings

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Steel rods. PHOTO: Getty Images

The steel manufacturing company, which released group financial results for the year ended 31 December 2013, reported a 47 million rand loss in operations compared to a 477 million profit in the previous comparative year.

The group also reported a headline earnings loss of 224 million rand from 518 million rand. Headline earnings per share were recorded at a 56 cents loss from 129 cents.

“Trading conditions continued to be challenging for steel producers globally as weak demand continued in the Eurozone,” [DATA ACL:ArcelorMittal South Africa Limited] said in a statement.

“In China, the economy in general experienced a slower rate of growth and a degree of softening in steel demand which led to a decline in international steel prices.”

Local liquid steel sales also declined to 3.1 million tonnes from 3.3 million tonnes, and export liquid steel sales similarly fell to 1.1 million tonnes from 1.2 million tonnes in the previous comparative year.

Commercial coke sales however increased to 590 tonnes for the year ended 31 December 2013 compared to 460 tonnes in the previous comparative year.

“In South Africa, economic growth was below expectations amid weak fixed investment expenditure and subdued global demand for locally produced goods,” ArcelorMittal said.

“More pertinently for the steel industry, slow implementation of infrastructure development projects and the low level of fixed investment in the mining sector, coupled with weak production activity within the manufacturing sector, continued to hamper demand.”

The group added that key steel-consuming sectors in South Africa remain weak, and while the country’s mining sector has made some gains, strike disruptions in 2012 have done little to help more recovery.

The moderate growth in vehicle sales and building plans passed does however add hope for the industry’s recovery. Internationally, steel demand also remains muted.

Steel demand within sub-Saharan Africa has however continued to be stimulated by large infrastructure investments and improved investment activity in the mining sector, especially in countries such as Mozambique.

“Global steel demand remained relatively weak despite a slight recovery from the previous year. China’s steel use improved slightly in 2013 despite a somewhat weaker economic performance,” the group explained.

“In the US, stiff competition from cheaper imports and domestic producers with underutilised facilities contributed to the significant oversupply of steel. However, steel demand in the US market was stimulated by a recovery in the economy, with a pick-up in the housing market and improved market conditions in the automotive and energy sectors.”

Demand from the European market reportedly continued to suffer from the twin challenges of overcapacity and shrinking markets, with demand dropping by almost 30 per cent on average compared to the pre-crisis period.

“We expect higher sales volumes after the seasonal slow-down in the fourth quarter. International prices are expected to improve modestly resulting in a significant improvement in the first quarter [2014] headline earnings,” the group said.

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