Johannesburg, Jul 31 (PTI) ArcelorMittal South Africa (AMSA), the South African subsidiary of Lakshmi Mittal's global steel empire, has reported a headline loss of R2 613 million for the first six months of the year, compared to a loss of R638 million in the previous year, largely due to the impact of the COVID-19 pandemic.
'On the back of a demanding 2019, the first half of 2020 proved to be incredibly difficult with the widespread health, social and business impact brought about by the global COVID-19 pandemic,' Kobus Verster, Chief Executive Officer of AMSA, said as the company released its results on Wednesday.
'The global threat of the fast-spreading virus had already started reducing demand before COVID-19 hit our shores, while at the same time we anticipated another sovereign downgrade,' he said.
AMSA said that the unprecedented and rapid shutdown of ArcelorMittal South Africa’s assets was done safely and in a manner that would enable a swift but well-controlled restart.
“Taking lessons from other parts of the ArcelorMittal group allowed us to rapidly implement a response plan to protect our people, assets and financial lifelines,” said Verster.
After reassessing its strategic asset footprint, AMSA modified its operational capacity with some parts of the business remaining idle until demand recovers.
Anticipating that steel demand will, for the foreseeable future, remain at between 70 per cent and 75 per cent of levels planned before the lockdown, AMSA also announced a large scale labour reorganisation.
“While we are extremely conscious of the serious unemployment situation facing the country, we must find ways to secure significant cost savings if the business is going to survive,” Verster said.
AMSA also lamented the volatility of the ZAR/USD exchange as well as continued increases in electricity, port and rail tariffs, which added R138 million of additional costs against the comparable period.
But AMSA also cautiously voiced some optimism about the immediate future.
The company said that within the current risk-adjusted approach, it anticipated that sales volumes should improve against a very weak first half but, even so, these levels would be notably below historic levels.
“We have heard repeatedly that infrastructure investment and development will be a key enabler of economic recovery and this must be addressed with urgency if businesses are to deliver inclusive economic growth,” he said.
“We are ensuring that our business is well-positioned to take advantage of the post-Covid-19 economic recovery,” concluded Verster.
AMSA was born out of the state-owned steel manufacturer Iscor that Lakshmi Mittal first rescued from closure and then bought out as he expanded his global steel acquisitions almost two decades ago. PTI FH MKJ