Change in fortunes for Mittal SA

Johannesburg - Steel manufacturer ArcelorMittal [JSE:ACL] South Africa on Thursday reported headline earnings per share of 186c for the quarter ended March 2010, compared with 117c for the quarter ended December 2009, and a major turnaround from the loss of 53c reported for the quarter ended March 2009.

The group's revenue increased by 22% to R7.5bn, while a headline profit of R748m for quarter was reported from R469m at the December quarter and a loss of R237m at the corresponding quarter of 2009.

The company said this was achieved as a result of an improvement in trading conditions, good cost containment and lower raw material prices compared to the first quarter last year. 

The company's total steel sales for first quarter 2010 were 1.3 million tonnes, 30% higher than the corresponding period last year, and 15% higher than the previous quarter.

Net realised selling prices were on average 1% higher than the preceding quarter but 12% lower than the corresponding period last year. In US Dollar terms however, prices were up 11% compared to the first quarter last year due to the strengthening of the Rand from an average rand/dollar exchange rate of 9.96 during the first quarter of 2009 to an average of 7.52 during the first quarter of 2010.

The cash cost of steel sales for the quarter decreased by 27% compared to the corresponding period last year driven largely by a sharp decline in the cost of coal, scrap and alloys as well as an increase in production volumes. Compared to the preceding quarter, the cash cost of steel sales decreased by 3%.

International apparent steel demand increased above fourth quarter 2009 levels supported by restocking outside China and rapidly rising steel prices in almost all regions, driven by increasing raw materials costs.

Underlying demand is rising strongly in emerging markets, but remains weaker in developed markets, it said.  Developing regions continue to rebound given stronger domestic demand underpinned by better fundamentals and less indebted governments and consumers.

Demand in China remains strong on the back of an expected real GDP growth rate of 10% for 2010, up from an already impressive 8.7% in 2009. ArcelorMittal South Africa's exports increased by 33% compared to the preceding quarter.

Sales to the domestic market during the first quarter of 2010 increased by 8% compared to the fourth quarter 2009 with a further improvement expected during the second quarter, supported by lower interest rates.

Looking ahead, the group said financial results for the second quarter of 2010 are expected to show some improvement on the first quarter mainly due to higher expected sales volumes and prices offset by higher raw material input costs as well as electricity and rail tariffs.

The movements in the rand/dollar exchange rate will always have an important impact, it said.

 - I-Net Bridge