Load shedding continues to hit companies’ performance relatively hard and steel giant Arcelor Mittal is no exception.
The steel company attributes its R448 million loss to load curtailment coupled with high inflation, high interest rates and low growth.
The company released its financial results for the first half of the year today citing difficulties faced by the steel industry characterised by stagnant domestic, export demand and weaker prices.
Load curtailment is when Eskom asks large energy users to reduce their power usage, and it is one of the major issues that affected Arcelor Mittal’s performance.
In the first half of this year, the company was asked to cut production 41 times.
CEO at Arcelor Mittal South Africa Kobus Verster says, “The impact of that is very because on the one hand you disrupt your cost base. You’ll stop/start, you’ll have higher fixed costs, you’ll have disruptions in your operations and you can’t achieve your KPI’s or yields or your operational efficiencies and then secondly you lose volumes and you have to look at these two in context. Once you affect your cost base that additional volumes are actually expensive. So, if you have normal operations, you can actually export those. So, that’s the impact around load shedding.”
Another issue facing Arcelor Mittal and other companies is cable theft where companies have to increase their spending on beefing up security.
Verster says, “From a security perspective. I think we spent about R200 million a year on security. It used to be 50. So, firstly we have like every other company we’ve got a tax on our premises from a cable theft perspective on a daily basis every day. So, the additional security for that then in addition to that we spent quite an amount on drones for Transnet Rail, for our routes to support them from cable theft.”
The company reported a headline loss of R448 million and its fixed costs were up 3% to R3.5-billion and is attributed to the salaries they pay which they say is something they need to change.
Verster adds, “Within the steel industry domestically we are paying substantially more than others and it’s something that cannot continue especially in a high inflation period and where your wage bill is R3.5 billion a year. So, what we plan to do in there is over time gradually reduce some of the issues that crept up in a long time. We paying scarcity allowance for people that’s not scarce that’s 1% of your wage bill and so on. So, we’ve got a three year programme to address all of that and in a responsible manner as possible.”
Arcelor Mittal is in the process of finding a new CFO as the previous one resigned after only 16 days in office.
The board has placed Gavin Griffiths to act as CFO until a new candidate is chosen.
