ArcelorMittal SA (Amsa) CEO Kobus Verster has over the past two decades held two of the most difficult jobs in corporate SA: CEO of Aveng, followed by heading SA’s largest but deeply troubled steel producer.
Having presided over declining fortunes for both companies it’s hard not to see his tenure as a disaster.
Verster, whose qualifications include a BCom from the University of Potchefstroom and an MBL from the University of SA (Unisa), was at the helm of Aveng from February 2014 until September 2017.
In 2014 the engineering-led contractor experienced a decline in sales and profitability, prompting it to reduce the size of its workforce as a drop in sales volumes meant some of its assets were underutilised.
While the group reduced the cash burn in its 2014 financial year, outflows from operations remained significant and deteriorated further in the first half of the 2024 financial year. That prompted ratings agency Fitch to downgrade Aveng’s national long-term and short-term ratings and revise its outlook to negative in April 2015. Simultaneously it withdrew the ratings “as they are no longer considered to be relevant to the agency’s coverage”.
In the year ended June 2016 Aveng reported a 23% decline in revenue and a loss of R299m, albeit an improvement from the previous year’s R578m loss.
But matters worsened in financial 2017, with the JSE-listed group reporting an annual net loss of R6.7bn, prompting Verster to resign with immediate effect. The 2017 loss included impairments and writedowns of long-outstanding uncertified revenue of R5.1bn and resultant deferred tax asset writedowns of R531m.
The loss saw the group initiate a “robust strategic review, in conjunction with an independent adviser, to evaluate Aveng’s financial and operational structure”. It was left to then-executive chair, Eric Diack, to announce the results after Vester’s abrupt departure, less than four years in the role, leaving behind a company on its knees.
Months later Verster would resurface as CEO at Amsa, returning to the company he had served as CFO from 2006 to 2010. He officially took over the reins in February 2018.
Verster’s tenure started on the front foot. In the year ended December 2018, the company reported its first full-year profit — R968m — since 2010, supported by a 12% increase in prices and a 21% surge in export sales.
But the wheels started to come off in the 2019 financial year, with the group posting a loss of R3.3bn as average international steel prices fell by 15% in the year. The results were also marked by a 6% reduction in apparent steel consumption in SA to 4.5-million tonnes. That translated into a 27% reduction in apparent steel consumption since 2008, just before the global financial crisis.
It would be mostly downhill from then on; financial year 2020 was marred by the outbreak of Covid-19, which saw production of all products declining sharply, to 2.3-million tonnes, with export sales plunging 72%. The combination of these factors saw the group report an annual loss of R2bn.
The 2021 financial year breathed some life into Amsa, with the group swinging to a profit of R6.8bn, slashing its debt from R3.5bn to R1.3bn in the process.
The 2022 financial year saw a 62% collapse in profit to R2.6bn, while the net borrowing position worsened to R2.8bn. The group posted a further R1.9bn loss in 2023, and it warned on Monday it would report a bigger loss when it published its financial statements for 2024 next month.
It also announced it would proceed with the closure of its long steel plants in Newcastle, Vereeniging and Mpumalanga with the loss of 3,500 jobs.
The past decade has certainly been a torrid one for Verster and his fate remains uncertain as the group’s headwinds are unlikely to ease any time soon. That is further evidenced by the performance of its shares, which have plunged 90% on the JSE over the past three years — devastating shareholder value destruction by any measure.
What is certain is that Amsa desperately requires resuscitation — and that process is all but certain to take some time.
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.