Amsa could shed more than Macsteel
● ArcelorMittal South Africa, the biggest steel manufacturing company in the country, will probably have to do more than sell its 50% shareholding in the Macsteel shipping and distribution business if it is to help its business survive in the long run and return to profitability.
The company said on Wednesday that it was reviewing its portfolio and looking at asset sales to reduce costs. Amsa suffered a R5.1-billion loss for the year ending in December 2017.
Steel demand has been at its lowest level since 2010 and despite a 10% duty protection from the government, there were still cheap Chinese imports entering the country, Amsa said.
Outgoing CEO Wim de Klerk said the company had yet to decide on its noncore assets, although assets had been identified internally.
The company mentioned that it would probably have to let go of its stake in Macsteel, from which it was hoping to raise R3billion.
A person close to the company, who did not want to be named, said a potential buyer could be Southern Palace Group, a small black-owned industrial company that has investments in steel, manufacturing and infrastructure and which had shown interest in acquiring the whole Macsteel business in the past.
“With a 50% stake on the table, they might be interested in buying it. It’s a lucrative business and makes a lot of money, contributing about R300-million a year to Amsa,” said the source.
CWI is another small producer up for sale. However, the business was not looking to sell its Newcastle Works, which produces long steel, and Vanderbijlpark Works, which manufactures flat steel products, because it would lose its market.
The source said the company was in such distress that Amsa’s parent company, Luxembourg-based ArcelorMittal, was willing to reduce its 69.22% stake to 40% on condition that there was a R3-billion investment in the business.
However, given the weak demand for steel and high operational costs of the business, no investor would find Amsa attractive at the moment.
“The business is in a desperate situation. The shareholders can’t put in money at the moment,” said the source.
The company has 13 000 employees, including contractors, and has managed to cut only about 448 workers in the past three or four years.
The business is in a desperate situation. The shareholders can’t put in money at the moment Anonymous Source close to the company