ArcelorMittal SA reports half-year loss as steel demand falls
Steel producer ArcelorMittal South Africa has reported an interim headline loss of R2.6 million due to the decrease in demand for steel and a complete shutdown of operations during lock-down, and some parts of its business will continue to remain closed until demand picks up. The company announced last month that large scale retrenchments will be taking place as a result of cost cutting strategies. ArcelorMittal South Africa CEO, Kobus Verster joins CNBC Africa for more.
Thu, 30 Jul 2020 11:34:33 GMT
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AI Generated Summary
- ArcelorMittal South Africa reports interim headline loss due to steel demand decrease and operational challenges
- Cost-cutting initiatives and restructuring efforts underway to address fixed costs and ensure sustainability
- Job cuts planned as part of cost-saving measures, with consultations ongoing with unions and employee representatives
Steel producer ArcelorMittal South Africa has reported an interim headline loss of R2.6 million due to the decrease in demand for steel and a complete shutdown of operations during lockdown. The company has been facing significant challenges amidst the current economic climate, with a decrease in steel demand and operational constraints impacting its financial performance. The company's market cap has been severely affected, with the recent loss reported being five times its market cap, leading to a sharp decline in share prices. CEO of ArcelorMittal South Africa, Kobus Verster, acknowledges the challenges faced by the company and discusses the strategies being implemented to navigate through these tough times. Despite the difficulties, Verster remains optimistic about the business's performance and the steps being taken to address the issues at hand.
Verster highlights the ongoing turnaround process that the company has been undertaking over the last two years, which has started to show results. Despite facing challenges such as load shedding and raw material supply constraints, the company demonstrated underlying profitability in the first quarter. Verster attributes this success to the efficiency of cost reduction programs that have been implemented. However, operational challenges such as electricity shortages and cable theft have continued to impact the company's financial performance, with costs amounting to over R200 million in the quarter.
In response to the shrinking domestic market and the need to adjust the fixed cost base, ArcelorMittal South Africa has focused on cost-cutting initiatives, including the closure of certain operations and restructuring of the workforce. Verster emphasizes the importance of addressing fixed costs to align with reduced production volumes and ensure the long-term sustainability of the business. He points out that actions taken last year, including section 189 consultations and the closure of Saldana operations, have already reduced fixed costs significantly.
The company is also confronting the challenge of job cuts, with large-scale retrenchments on the horizon as part of cost-saving measures. Verster acknowledges the opposition from unions regarding the planned job cuts but emphasizes the need for a collaborative approach to finding sustainable solutions. He states that the exact number of job losses is still uncertain, as the consultation process with unions and employee representatives is ongoing. Various options, such as salary reductions, flexible working hours, and in-sourcing, are being considered to minimize the impact on employees.
Despite the current difficulties, Verster remains hopeful that the business is on the right track and performing better on a normalized basis. He underscores the importance of addressing both fixed and variable costs, as well as collaborating with stakeholders to navigate through the challenges and secure the future of ArcelorMittal South Africa.