[miningmx.com] — ARCELORMITTAL South Africa, a unit of the world’s top steelmaker, on Wednesday reported a sharp drop in first-quarter profit, but said it expected improvement in the next three months.
The company said diluted headline earnings per share for the three months to the end of March fell to 49c, compared with 186c the previous year.
“(The drop) was due to a 7% decrease in liquid steel production, a 3% decrease in sales volumes and a 20% increase in the cash cost per tonne of steel sales,” the company said in a statement.
The unit said the higher costs were mainly driven by significant increases in the prices of imported coking coals, iron ore, local metallurgical coals and alloys.
Total sales for the quarter were at 1.29 million tonnes, down from 1.33 million the previous year.
The unit said it expects to report a “significant improvement” in earnings for the second quarter from the previous three months on the back of higher sales and prices, but added that higher input costs and electricity tariffs will have an impact on the results.
“Movements in the rand/US dollar exchange rate will have an important bearing on earnings,” it added.
ArcelorMittal said global steel consumption rebounded strongly during the quarter on the back of a continued global economic recovery. Emerging economies are accounting for an increased share of global consumption, while demand in developed countries remained sluggish, it said.
ArcelorMittal has been at loggerheads with Kumba Iron Ore, a unit of Anglo American, over iron ore prices since February last year and said on Wednesday that the arbitration hearing has been set for May next year.
The unit is also attempting to buy little-known mining firm Imperial Crown Trading (ICT) after that company won a prospecting right to a stake in Kumba’s Sishen mine over which ArcelorMittal previously held a mining right, although it has yet to fulfill several conditions attached to the deal.
As part of that deal, ArcelorMittal South Africa has said it would transfer about a quarter of its shares to black investors, including ICT and an investment group led by the son of South African President Jacob Zuma.
Several minority shareholders of ArcelorMittal have opposed the proposed deal, citing lack of transparency and ethical issues.
