(Reuters) – ArcelorMittal South Africa swung to a half-year loss on Thursday, blaming the country’s electricity crisis, high inflation and weak demand from key steel-consuming sectors.
The South African unit of the world’s No.2 steelmaker ArcelorMittal said it made a headline loss per share of 0.40 rand ($0.0227) in the six months to June 30, from headline earnings per share of 2.71 rand the previous year.
But its Luxembourg-based parent company exceeded expectations when it reported a second-quarter core profit of $2.6 billion on Thursday, half of what it achieved a year ago.
ArcelorMittal South Africa said frequent power cuts, known as loadshedding in the nation, disrupted its business.
South Africa is on course to see its highest number of blackout days in history this year with daily power cuts extending to almost 10 hours a day.
“Building and maintaining any semblance of operating rhythm, which is an absolute necessity in running a continuous, integrated steel making process in a cost-aware manner, proved especially problematic,” ArcelorMittal South Africa said.
High inflation and interest rates, as well as weak growth in key steel-consuming sectors such as manufacturing and mining also impacted its performance, the company continued, with only the automotive sector registering significant growth.
Although sales volumes increased 3% to 1.2 million tonnes during the first half, ArcelorMittal South Africa’s realised average steel prices decreased by 8% in rand terms.
Its raw material costs rose by 2%, driven by increases in the cost of imported coking coal and iron ore.
Electricity tariffs also went up by 14%.
($1 = 17.5990 rand)
(Reporting by Nelson Banya; Editing by Emma Rumney)
