ArcelorMittal South Africa (AMSA) will no longer wind down its Longs Business, saving potentially 3,500 jobs.
In November 2023, the group said winding down the Longs Business was necessary amid a challenging steel environment, characterised by low demand in all markets and pressure on prices.
Steel and Engineering Industries of Southern Africa (SEIFSA) said that the closure would result in 3,500 job losses.
In February, the group decided to defer the wind-down, allowing the Longs Business to operate for up to six months to identify and execute short-, medium-, and long-term interventions.
The Longs Business remains fully operational, with all its facilities continuing to operate and ably servicing its markets and customers.
In the short term, the group has benefitted from the export ban on steel scrap not being extended, which allows for greater fairness in input cost structures, improved port and rail efficiency at Transnet and an additional 12-month secured working capital facility of R1 billion to support ongoing initiatives.
However, discussions with organised labour have run into several issues.
“Disappointingly, discussions with organised labour to reduce the costs structure of the Longs Business were unsuccessful, as the trade unions rejected all reasonable efforts to find a solution which would have assisted the competitiveness of the Company and especially that of the Longs Business.”
“This does not diminish the need to find structural solutions to address the cost competitiveness of that business, which would include a resolution of the high labour cost.”
These short-term initiatives detailed above only slightly address the structural sustainability of the Longs Business. Still, the group said that progress is being made on the medium- and longer-term interventions.
“Work is advancing through various workstreams regarding local mineral beneficiation policies enabling iron ore beneficiation to supply regional demand, and advancing local supply for local demand in both key economic sectors and by State-owned Enterprises,” said the group.
“The Board and Management are acutely mindful of the impact that the closure of the Longs Business would have on the beneficiation and manufacturing value chain, and the overall industrialisation in the country, notwithstanding the impact on jobs and the local economy, especially in KwaZulu Natal.”
“The immediate impact on the Unemployment Insurance Fund alone could run into the billions.”
Thus, although progress has been slower than anticipated, the group’s Board and Management have decided that the Longs Business will continue to operate, allowing an opportunity to fully explore the short-, medium-, and longer-term initiatives.
“Management is committed to working closely with all customers, suppliers, and stakeholders to ensure the sustainability of Long steel products supply in the Southern African region.”
Money problem
Nevertheless, the group is still operating at a loss.
The group said that there is a reasonable degree of certainty that the financial results for the six months ended 30 June 2024 are expected to differ by at least 20% or more compared to the corresponding reporting period.
With the information currently available, the group expects that the following:
- Earnings per share will decline from a R0.32 loss per share (comparable period) to a loss within a range of R1.04 and R1.10 loss per share for the period.
- Headline earnings per share will decline from a R0.40 loss per share (comparable period) to a loss within a range of R0.96 and R1.04 loss per share for the period.
AMSA’s reviewed condensed consolidated financial statements for the six months ended 30 June 2024 are expected to be released on Thursday, 1 August 2024.
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