ArcelorMittal South Africa uses part of rights issue proceeds to cut debt - CNBC Africa

ArcelorMittal South Africa uses part of rights issue proceeds to cut debt

Southern Africa

by Reuters 0

ArcelorMittal South Africa uses part of rights issue proceeds to cut debt. PHOTO: ArcelorMittal

ArcelorMittal South Africa plans to use 3.2 billion rand ($199 million) of a 4.5 billion rand rights issue to reduce debt with the remainder used for company operations, the unit of the world's largest steel company said on Thursday.

The Johannesburg-listed company launched the rights issue last November as it battled falling steel demand, rising cheap imports and higher costs..

The company said in a statement it expected to receive about 1.3 billion rand later this month after partially settling ArcelorMittal Group loans from the proceeds of the rights issue.

The firm has announced plans to restructure by clamping down on costs, liquidating excessive stocks, selling assets and cutting back on non-essential capital expenditure.

The company said its board believed the measures it had taken had "a reasonable prospect of returning the company to profitability in the medium term."

ArcelorMittal South Africa's shares were up 3 percent at 1130 GMT following the news.

In the six months to June 2015, the company reported a headline loss, a measure that excludes one-off items, of 109 million rand compared to a loss of 6 million rand a year earlier. The company has not made an annual headline profit since 2010.

Steel companies around the world are grappling with a global supply glut that has sent producers' share prices to their lowest levels in more than a decade.

ArcelorMittal South Africa said local bank short-term borrowing facilities had recently been re-negotiated and reduced, but ArcelorMittal Group loan facilities had been extended to offset the reduction if required.

The company said it was exploring further options for additional funding. Finance chief Dean Subrimanian told Reuters in November the company was considering issuing up to $350 million of bonds.

The group said it was still searching for a replacement for its CEO Paul O'Flaherty since his decision to leave the company after just 18 months at the helm.

Its embattled peer, Evraz Highveld Steel and Vanadium, told the market on Wednesday it was continuing to work on a turnaround plan.