Bid to save ArcelorMittal SA Newcastle Works takes a blow following plunge in earnings
A further announcement regarding the fate of Amsa’s longs business would now be made shortly, the company said.
Attempts to save ArcelorMittal South Africa (Amsa) Newcastle works from closing took another blow when the company reported an expected plunge in headline earnings of around 166% for the year to December 2023.
Amsa said in a statement that headline profit per share dropped from R2,34 per share in the previous period to a loss of between R1.55 and R1.85 per share.
“Included within the above range of the earnings per share guidance, is the recognition of an impairment charge of R2.1 billion primarily relating to the company’s longs steel operations,” Amsa said in a trading update.
The company announced to the stunned public in November that it was closing its longs business in Newcastle and Vereeniging. Around 2351 workers will be retrenched at the Newcastle longs steel works.
The outcry that met the announcement forced the company to hold engagements with stakeholders including government representatives.
AMSA noted that ‘it did not want preferential treatment but three fundamentals’ need to be addressed (if the Newcastle works is to be saved).
These were an R250 discount per ton on delivered AMSA goods to the harbour and at all other areas under Transnet. A 15% discount on AMSA’s Eskom tariffs and an urgent intervention on the scrap metal ban are also critical.
Johan Pieters of the Newcastle Growth Coalition Chapter told the Advertiser previously that having made a general calculation of the loss, if those retrenched earned an average salary of R15 000 per person, the town would suffer a loss of at least R428 180 000 a year.
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“It is not only the people who work at Mittal who will be affected but also smaller companies that supply goods and services to Mittal. I read that people might be absorbed into other plants but that means people will be leaving Newcastle and we don’t want that – especially our qualified and skilled workers,” Pieters warned.
In their latest statement, AMSA said there had been talks with ‘various stakeholders, including government departments Transnet, the IDC, numerous industry associations and institutions, organised labour, affected and interested customers, suppliers, and community forums, amongst others.’
“The closure of the longs steel business units had been a result of “a slow economy and difficult trading environment including low demand”, as well as “national constraints in particular high transport and logistics costs” as well as energy prices.
“While AMSA has been requested to consider support to change the closure decision what is needed is for the government to create “a level playing field” for South Africa’s primary steel producers.
“Although engagements had progressed and been constructive, finding solutions to the company and industry’s concerns and constraints have been complex and inconclusive.”
“Reversing the closure decision holds substantial risks and requires the commitment of, at a minimum, the company, its customers and suppliers, the government, state-owned enterprises, and our employees,” Amsa said.
In the second-half period to December, market conditions for Amsa continued to be extremely challenging, with the anticipated improvement in steel demand not materialising.
The South African steel market was now experiencing “real demand weakness”, with business confidence deteriorating and key steel-consuming sectors remaining weak, with low to no growth.
“The market is impacted by higher imports from China which is further negatively disrupting the supply/demand equilibrium. As a result of this challenging trading environment, earnings levels for Amsa had become under severe pressure.”
However, no closure-related or retrenchment costs were instituted into this as a result of the ongoing consultation process regarding the future of the longs steel businesses.
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