Bounce back to profitability

There will be champagne corks flying all over Vanderbijlpark as Arcelormittal returns to profit after a string of losses that is rivalled only by the performance of the Italian rugby team. There may also be a few sighs of relief in Kensington Palace Gardens, home to Lakshmi Mittal and assorted relatives, who remains in possession of a bean or two but has seen his ranking on the various global rich lists plummet off the podium in recent years.

The return to profitability comes on the back of higher international steel prices, lower costs and higher sales volumes, a punchy trifecta that helped headline profits bounce and come in just shy of R1bn after the R2.5bn loss in the previous year. The group launched into a business transformation programme towards the end of 2017 aimed at addressing cost reduction, improving efficiencies and debottlenecking steel production at all its sites, and the benefits are flowing through to the bottom line, with capacity utilisation up from 81% to

84% as a result of the programme.

In the local market demand was weak despite the government’s drive to attract investment, with low levels of investment and infrastructure spending leading to local consumption dropping by 4%, and this is unlikely to recover ahead of the elections. Imports, largely from China, remain a threat despite attempts to promote local product. West and East Sub-saharan Africa attracted good demand on the back of infrastructure investment largely in rail projects, while global markets started to wobble in the fourth quarter of 2018 on fears of a global trade war and slackening Chinese demand.

The benefits of last year’s changes are flowing through to the bottom line