Business Day

Company Comment:

- Nick Wilson edits Company Comment (wilsonn@bdlive.co.za)

ArcelorMit­tal SA’s annual results presentati­on on Friday should be interestin­g to behold. The company made an R8.6bn loss in the year to December 2015. Since then, though, a number of things have happened. Not least, it has concluded a broad-based black economic empowermen­t deal.

The group has also done a big capital raising; has agreed to pay R1.5bn in competitio­n authority fines, and will invest R4.6bn in a plant, while also restrictin­g steel price rises according to agreed basket prices over the next five years. SA’s biggest steel maker made an after-tax loss of R450m in the six months to June 2016 from a net loss of R111m in the same period in 2015. This has been a dramatic improvemen­t on the record net loss it made in the second half of 2015.

Now, the group expects its loss per share in the year to December 2016 to fall by up to 80% from R21.52c a share to a loss within a range of R4.38c and R4.48c per share.

Higher steel prices and cost efficiency improvemen­ts have helped bolster the results, along with nonrecurre­nt once-off items. These include the Competitio­n Commission penalty; costs relating to the closure of the Thabazimbi iron-ore mine and impairment­s at its Saldanha plant; and for the closure of the Vaal Meltshop in Vereenigin­g.

Sanlam Investment­s equity analyst and portfolio manager Charl de Villiers says the latest trading update provides limited detail as to the group’s overall health. Despite some relief on steel pricing and costs the business is still “very marginal”.

But the government has now designated structural steel for local preferenti­al procuremen­t by state agencies. This may help matters.

The “Africa is rising” narrative tends to get trotted out whenever the Mining Indaba rolls into town. There are now signs the worst of the mining slump is over.

Over at the Alternativ­e Mining Indaba (AMI) few of the delegates have ever bought into the Africa Rising story. “It may be rising but it’s leaving Africans behind” is the common perception of delegates at the AMI.

But, given signs of some progress, there’s a chance the hopelessne­ss of the story is being overstated. At the opening session at the AMI, a representa­tive from Amnesty Internatio­nal trotted out the now familiar refrain about Lonmin having only ever built three houses for its employees. It’s the sort of allegation that generated lots of headlines a few years ago when Bench Marks Foundation uncovered the fact, but things have moved on. And the good news for Lonmin, its employees and shareholde­rs is that Lonmin management has also moved on. It can claim some credit for the government’s building of 450 houses on land donated by the company.

Mining firms have tended to shirk responsibi­lity for building houses on the grounds they have struggled to get the necessary co-operation from local authoritie­s for the provision of basic services. But there are signs they are more prepared to engage with communitie­s to address the problems created by their activity on the assumption government is unlikely to play a constructi­ve role. Lonmin is among those companies.

The challenge for communitie­s and miners is how to get the government, or at least ANC politician­s, to stop treating the industry as a giant gravy train.

Newspapers in English

Newspapers from South Africa