Mittal Steel South Africa reported headline earnings for the quarter ended March 31 of R684-million — a 21% decline on the previous quarter.
The company — formerly Iscor — said this was 57% down on the same period last year.
Headline earnings a share for the quarter were 153, down from 195 cents in the previous quarter.
Turnover for the first three months of the year was R5,8-billion, a 2,5% improvement on the previous quarter, while operating profit fell by 17% to R994-million compared to the previous quarter.
Davinder Chugh, the CEO of Mittal Steel South Africa, said the decline in headline earnings had been exacerbated by a number of once-off items such as provision for voluntary retrenchment packages and production problems at the Vanderbijlpark and Saldanha plants.
”We are however particularly pleased at the improved domestic sales volumes during the quarter driven by the reduction in inventory levels and improved economic conditions.”
Domestic demand improved ”significantly” in the first quarter with local sales volumes 18% higher than the previous quarter and 19% than the corresponding period last year.
This improvement in domestic sales was mainly driven by a return to equilibrium between supply and demand following the 2005 reduction in inventory, and a general economic improvement.
However domestic spot prices for the quarter were below last year, after the two price reductions announced during 2005.
These lower sales prices combined with an increase in costs, lower export volumes and voluntary retrenchment packages provided for during the quarter negatively affected headline earnings.
Liquid steel production declined by 4% from the previous quarter and 10% compared to the corresponding period last year, ”as a result of a number of production problems”.
The Vanderbijlpark plant ”experienced instability on blast furnace D” and Saldanha plant experienced power interruptions, as a result of power outages in the Western Cape.
On the international market, export sales volumes declined by 13% from the previous quarter and 15% compared to the same period last year, due to a higher domestic offtake.
Chugh said there was a decline in international steel prices mainly driven by a softening in demand in China and a ”destocking effect” following an inventory buildup by customers in the first half of last year in anticipation of further price increases.
Mittal Steel South Africa said it expects the local market to remain buoyant driven by strong economic conditions. A moderate improvement in global steel prices is also expected. – Sapa