Evraz Highveld’s output raises eyebrows about price
Share trading at R17.51 while bid for 85% of company stands at R35
IN THE midst of a surprise takeover bid, the disappointing quarterly production figures steel manufacturer Evraz Highveld Steel and Vanadium released on Friday will raise even more questions about the price being offered for the company. The share price of Evraz Highveld, which is part-owned by Russian steel giant Evraz, also tumbled 11.3% to R17.51 on Friday, the worst move of any listing on the JSE on the day.
IN THE midst of a surprise takeover bid, the disappointing quarterly production figures that steel manufacturer Evraz Highveld Steel and Vanadium released on Friday will raise even more questions about the price being offered for the company.
The share price of Evraz Highveld, which is part-owned by Russian steel giant Evraz, also tumbled 11.3% to R17.51 on Friday, the worst move of any listing on the JSE on the day.
At the end of last month, it was announced that Evraz was selling its 85% stake in Evraz Highveld to a black empowerment consortium called Nemascore for $320m (about R2.9bn) in cash. The offer for the 85% stake was equivalent to about R35 a share, depending on the exchange rate.
Yesterday, Business Times reported that the state-owned Industrial Development Corporation seemed set to back Nemascore, whose directors include Linda Makatini, a close associate of President Jacob Zuma and his son Duduzane.
Peter Major, head of mining at Cadiz Corporate Solutions, said yesterday that “on the surface the offer does look overpriced”.
“So I would start asking other questions like ‘Who is buying this asset’ and ‘Where is the money coming from?’ Once you answer those two questions it helps you understand why the price being offered is what it is.
“Worldwide the resources industry is under huge pressure and really battling to find investors. So one would really like to understand how the bidders had arrived at the price quoted.”
Evraz, which is part-owned by Chelsea FC owner Roman Abramovich, said last week it would not pay a final dividend.
The company made a $106m loss last year. Its profit in 2011 was $873m. Evraz Highveld’s production figures for the quarter to last month showed that hot metal steel
Worldwide the resources sector is under pressure and battling to find investors
was down 11%, compared with the same period last year. Tons of steel produced fell 25%, while coil output was up 14%.
Vanadium slag production fell 24%, and Ferrovanadium 30%.
Evraz Highveld’s headline loss exceeded R1bn in the year ended December, from a loss of R15m the year before.
The group said industrial action in SA had pushed it to an operating loss for the period of R854m compared with a loss of R49m the previous year.
“The industrial action in the third quarter and subsequent ramp-up problems mainly contributed to the poor results,” it said when it released its year-end results last month.
The most significant negative effect on output was a four-week strike by the National Union of Metalworkers of SA, stemming from the introduction of costsaving measures which included a shortening of the number of overtime hours. After the work stoppage, production was increased gradually over 10 weeks because of complications with iron-making furnaces.
Output of long steel products fell 9% on insufficient steel availability. The production of flat products fell 16% on the reduced availability of cast steel, and a reheat furnace breakdown at the end of last year.
Kiln upgrades and maintenance have been carried out, and a project for reducing electrical energy consumption in the ironmaking furnaces is under way.
Global crude steel production reached a record 1.55-billion tons last year as a result of growth in Asia and North America. But South African crude steel output fell about 6% last year compared with the year before.