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ARCELORMITTAL SOUTH AFRICA LIMITED - ACL - Trading Statement and Business Update for the six months ended 30 June 2020

Release Date: 16/07/2020 16:27
Code(s): ACL     PDF:  
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ACL - Trading Statement and Business Update for the six months ended 30 June 2020

ArcelorMittal South Africa Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1989/002164/06)
Share Code: ACL ISIN: ZAE000134961
(“ArcelorMittal South Africa” or “the Company”)


In terms of the JSE Limited Listings Requirements (“the Listings Requirements”), companies are required to publish
a trading statement as soon as they are satisfied that there is a reasonable degree of certainty that the financial
results for the six month period ended 30 June 2020 (“the period”) being reported are expected to differ by at least
20% from those of the previous corresponding reporting period, released on the Johannesburg Stock Exchange
News Service (“SENS”) on 01 August 2019 ("the comparative period”).

Shareholders are advised that based on the information currently available, the Company expects:
    -   headline loss for the period to increase by at least R2 000 million (headline loss for 2019 was R638 million)
        resulting in an increase in headline loss per share by at least 183 cents.
    -   loss for the period to increase by at least R1 700 million (loss for 2019 was R644 million) resulting i n an
        increase of loss per share by at least 155 cents.

The financial information on which this trading statement is based has not been reviewed and reported on by the
Company’s external auditors. ArcelorMittal South Africa’s interim results for the period may further be affected
during the finalization of the results.

A further trading statement will be released as soon as the Company has reasonable certainty on the ranges of the
expected headline loss per share and loss per share for the period as required by the Listings Requirements.


Following an already demanding 2019, the first half of 2020 proved to be an incredibly difficult period given the
extraordinary and widespread impacts on social and business freedoms wrought by the global COVID-19
pandemic. The impact on economic activity was abrupt and, therefore, the business response thereto needed to
be decisive.

Being part of the international ArcelorMittal group, ArcelorMittal South Africa was able to learn from and participate
in the crafting of a rapid response plan to protect its people, its assets and its financial lifelines.

In addition to the substantial and sustainable cost improvements implemented to date, extraordinary cash
management and cost control measures were implemented to ensure sufficient liquidity in response to disrupted
and seized supply chains due to the pandemic.

With only small volumes of commercial coke sales (to ferro-alloy producers) being possible in the first month of the
lockdown announced on 27 March 2020, reducing the fixed cost structure of the Company became critical while
rescaling cash outflows to the dramatically reduced cash inflows.

The advent of Lockdown Alert Level 4 on 1 May 2020 (and the ability to operate at 50% of normal labour levels)
resulted in the Company being able to commence supply by completing its work-in-process inventories and
dispatching its finished inventories.

On 1 June, Alert Level 3 allowed for a return to unrestricted operations. However, although more customers
returned to operations, the vast majority operate on reduced shift patterns, reflective of the weak economic activity

Considering the high pandemic infection rates currently being experienced within South Africa, whilst prioritising
the safety and well being of our people, we are continuing to match our production utilisation to the evolving demand
situation. This means the need to responsibly restore production levels in order to avoid the risk of a major infection
event within operations.

Although the economic lockdown and its consequences overpoweringly define the first half of the year, and
specifically the second quarter, the first quarter was impacted by (i) weaker than anticipated demand as the news
regarding the spread of the

COVID-19 virus and the anticipated (and now realised) sovereign downgrades depress ing business sentiment; and
(ii) significant production interruptions due to electricity load shedding, and raw material train cancellations and
delays due to a major increase in cable theft. The consequential stop-start impacts of these events are beginning
to materially impact upon the reliability of plant and equipment, and diluting the improved underlying performance
of the business.

ArcelorMittal South Africa remains steadfast in making the difficult decisions to position the business for
sustainability through these future-shaping events. Consequently, having reassessed it strategic asset footprint for
2020, it has been decided to idle Blast Furnace C at Vanderbijlpark, and the Vereeniging Electric Arc Furnace until
demand recovers. With the current asset utilisation, ArcelorMittal South Africa will be able to fully supply the
forecast demand for the second half of the year and will continue to reassess the need to return additional capacity
to production.

The Company anticipates that it will take some time for steel demand to return to historical levels , and taking
cognisance of the asset footprint review, a large scale labour re-organisation in terms of Section 189(3) of the
Labour Relations Act 66 of 1995, was announced on 18 June 2020. The business is firmly committed to
expeditiously securing significant cost savings though, recognizing the dire unemployment situation the country
faces, we remain open to finding a flexible solution to do so.

Compared to the previous year, exchange rates between the South Africa rand and the US dollar weakened
significantly. Ordinarily, a weakening exchange rate has a positive impact on the financial results of the Company.
However, with the severe erosion of revenue during the economic lockdown, and given the large foreign-
denominated payables position, the Company will report realised and unrealised exchange rate losses for the

ArcelorMittal South Africa’s interim results for the six months ended 30 June 2020 will be released on SENS on 30
July 2020, with a virtual presentation on the same day. The presentation will be available for all stakeholders on
the Company’s website at www.

16 July 2020

For further information please contact:
Tami Didiza: Manager: Corporate Communications
Tel: (016) 889 2549

Company Secretary: FluidRock Co Sec (Pty) Ltd

Sponsor to ArcelorMittal South Africa Limited
Absa Bank Limited (acting through its Corporate and Investment Banking division)

Date: 16-07-2020 04:27:00
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