ArcelorMittal South Africa reported a turnaround on Wednesday as

it released its interim financial results for the six months ended

June 30, 2010.

 

"It's pleasing to stand here and say we see a marked departure

from what we saw in 2009," CEO Nonkululeko Nyembezi-Heita told a

presentation in Johannesburg following the release of the results.

The steel manufacturer said it had posted headline earnings of

R1.804 million for the first six months of 2010 compared to a loss

of R844 million during the corresponding period last year and a

profit of R404 million in the preceding six months.

 

"The turnaround in sales volumes and prices was achieved on the

back of an improvement in market conditions and I am pleased that

this, together with better operating efficiencies, has translated

back to our bottom line," Nyembezi-Heita said.

 

However, the rand had strengthened considerably since the first

six months of 2009, limiting the improvement in the results.

The company's total steel sales for the first half of 2010 were

2.7 million tons, 31 percent higher than the corresponding period

last year and 12 percent higher than the preceding six months.

Nyembezi-Heita warned that the positive growth in sales had been

boosted by the 2010 Fifa World Cup with increased consumer spending and the infrastructural development initiatives that took effect.

 

"Merchants are now, however, experiencing a slowdown in

activities and we expect a decline during the second half of this

year," she said. Referring to an interim pricing agreement reached between the steel manufacturer and Kumba Iron ore on pricing, Nyembezi-Heita said this had been "good" for the company as it had fixed prices.

 

ArcelorMittal SA would continue to purchase its annual 6.25

million tons of iron ore from Kumba's Sishen mine at a fixed price

of US50 per ton for material supplied to the Saldanha plant, and

US70 per ton for both material delivered to ArcelorMittal's inland

plants.

 

"Importantly, there will be no escalation in the prices agreed

for the duration of the interim period," Nyembezi-Heita said.

The interim deal had resulted in the cancellation of

ArcelorMittal SA's surcharge on domestic sales to compensate for

the iron ore cost increases.

 

The charge would have been reimbursed to customers if the

steelmaker was successful in its bid to stop Kumba cancelling the

contract, "In view of the interim agreement being settled, changes will now be effected to ArcelorMittal's commercial policy, which will

result in a single all-in price being invoiced, reflecting the

higher cost of iron ore rather than a separate surcharge,"

Nyembezi-Heita said.

 

The company's customers had been informed that the surcharge

will be dropped with effect from August 1, 2010, and the new

pricing structure had also been announced. ArcelorMittal SA had introduced the charge from the beginning of May after Kumba cancelled a nine-year-old agreement that sold the steel manufacturer iron ore at a price three percent higher than production costs.