Johannesburg - Steelmaker Highveld Steel and Vanadium (HVL) on Wednesday reported headline earnings per share for the nine months ended September increased to 2 082.5c from 967.3c in
2007.
This was its best earnings in any nine-month period.
Headline earnings increased to R2.066bn from R959m in 2007. The group said the improvement was mainly due to significant price
increases on both steel and vanadium products.
Operating profit increased by R1.679bn to R3.067bn after a depreciation charge of R193m.
Net cash inflow for the period was R1.370bn, increasing the cash
on hand to R2.138bn from R768bn at end December 2007.
Subsequent to the reporting date, a further dividend of R1.388bn
was paid in October 2008.
Highveld's gross rolled steel output increased by 1% compared with the previous year, but was 17% lower than the initial plan. The major contributing factors to the decrease were the late start up of the induction furnace and a subsequent burn through of the furnace, a main drive mill motor failure in the
Structural mill business unit and a re-heat furnace failure in the flat products business unit.
Total steel sales volumes for the corporation for the first nine months of 2008 were 7.3% below budget, but 0.9% lower than in the same period last year.
Domestic despatches for the period were 9% better than the same period last year. Export shipments were 53% below budget and 44% lower than the same period last year, indicating the focus and priority to the local market.
The group said vanadium prices have been consistent for a number of months as supply and demand seem to have come into balance.
Operations steadily improving
Vanchem production levels were not at budgeted levels, but operations were steadily improving.
The Hochvanadium joint venture in Austria performed well and sales volumes for the first nine months were in line with budget expectations.
The group added that the steady improvement in safety statistics is noticeable with the lost time injury frequency rate dropping from 0.66 in January 2008 to 0.39 in September 2008.
Capital expenditure incurred during the period amounted to R386m, and the total commitment in respect of future capital expenditure at end September is R468m, compared with R471m at end December 2007.
This committed expenditure has temporarily been reduced due to difficult market conditions and uncertain future cash availability.
Looking ahead the group said since early October 2008, steel sales to the domestic and international markets have decreased significantly, mainly as a result of prior stock build up by merchants in the domestic market as well as the financial crisis, which is particularly affecting the international
markets.
"Since our domestic customers are over-stocked and in view of the pending December closures of the construction and associated industries, the current order book is extremely low. We have therefore decided to reduce production to reflect the new level of demand," it said.
In addition to the reduced production, Highveld has also implemented stringent cost cutting and cash preservation measures.
"The impact of all these unfavourable conditions will make it impossible for the corporation to sustain its earnings for the last quarter of 2008.
"The board recognises and acknowledges its responsibility to keep its stakeholders informed of the situation and will do so in the course of events," it added.
- I-Net Bridge