The share price of SA’s largest steelmaker, ArcelorMittal SA (Amsa), plunged 43% on Tuesday, closing at R2 on the JSE. This was after the company warned investors its earnings for the six months to end-June are likely to decrease 111%-114%.
The latest share price crash brings the total fall for the year to date to about 58% as the company continues to face weaker demand and higher input costs, worsened by the fallout from load-shedding and disruptions to Transnet’s rail networks.
Tuesday’s fall erased about R1.7bn in shareholder value.
Despite positive signals in the international market, Amsa said in a trading statement that local conditions deteriorated due to “the burden of load-shedding, high inflation and interest rates, and negative growth in key steel-consuming sectors such as manufacturing, autos, mining and construction”.
The poor performance of Eskom’s coal-fired generation fleet so far in 2023 has put SA on track for a record number of load-shedding days. The country experienced 75 days of load-shedding in 2021. This increased to 205 days in 2022. Just more than halfway through the year, load-shedding days in 2023 will soon surpass the 2022 total.
“[T]he unprecedent severity of the electricity load-shedding in the last six month was very much underestimated,” the group said.
This affected the response time with which it could adjust production “in a responsible manner”.
“Building and maintaining any semblance of operating rhythm, which is an absolute necessity in running a continuous, integrated steelmaking process in a cost-aware manner, proved especially problematic,” Amsa said.
Given a weaker pricing environment and faced with cost squeeze challenges, the company said it expects a “substantially weaker financial performance” with headline earnings per share likely to drop from R2.71 to a headline loss of 38c-46c for the period.
“Furthermore, the anticipated release of working capital proved to be much more difficult, resulting in the net borrowings position remaining at elevated levels. Remedial actions are under way to improve the net borrowing position in the wake of the weaker-for-longer steel trading environment,” Amsa said.
On Monday the company announced that its CFO, Siphamandla Mthethwa, has resigned with immediate effect after 16 days in the position. In a statement to shareholders, Amsa said Mthethwa is stepping down as CFO and executive director “for personal reasons” but did not elaborate.
The group will release its financial statements for the six months to end-June on July 27.
With Michelle Gumede
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.