36
ArcelorMittal South Africa
Annual Report 2008
Finance report
This report should be read in conjunction with the
financial statements presented on page 56 to
197 of this annual report.
net export prices were 45% higher year-on-year
in US dollar terms and 70% in Rand terms. Sales
volumes were down 13% compared to 2007 as
domestic and export volumes declined by 1% and
49% respectively.
Basis of preparation
The group financial results have been prepared
on the historical cost basis, except for the
revaluation of financial instruments. The group
has adopted all of the new and revised standards
and interpretations issued by the International
Accounting Standards Board (IASB) and the
International Financial Reporting Interpretations
Committee (IFRIC) of the IASB that are relevant to
its operations and effective from 1 January 2008.
Included in profit from operations is an impairment
charge of R121 million. This represents the write
down of the plant and equipment at the Maputo
Works of R93 million and R28 million at the
Dunswart Direct Reduction facility in Benoni after
production was temporarily stopped at both plants.
A decision on whether to reopen the facilities will
depend on future market conditions.
The principal accounting policies and methods of
calculation are consistent with those applied in
2007 except for the early adoption of new and
revised standards and interpretations as set out in
our accounting policies. The new standards did not
have a significant impact on our financial results.
Gains on foreign exchange and financial
instruments of R637 million represents a profit
on the revaluation of our US Dollar cash balance
and receivables after the Rand weakened by
38% during the year from R6.81 to R9.39/USD.
Interest income decreased by 28% after the capital
reduction of R6 352 million in the latter part of
2007 led to a lower average cash balance last year.
Headline earnings
Headline earnings for 2008 increased by 65% to
R9 484 million from R5 741 million in the previous
year. This substantial increase was driven by higher
global steel prices, a significantly improved income
contribution from our Coke and Chemicals business,
as well as higher gains on foreign exchange
transactions and financial instruments. Lower sales
volumes and escalating costs partially offset these
gains.
Finance costs increased from R117 million to
R238 million due mainly to the increase in the
provision for environmental rehabilitation. The
average discount rate used at the end of December
2008 was 10.75% compared to an average rate
of 11.25% at the end of 2007. The decrease of
50 basis points led to a R8 million finance charge
for 2008. In 2007 a 195 basis point rise in the
discount rate resulted in finance cost credits of
R79 million.
Revenue increased by 36% to R39 914 million
due to higher global steel prices, while average
Headline earnings per share, dividends
per share and HRC export prices
EBITDA and EBITDA margin
cents
USD/tonne
Rm
%
14 000
35
2 200
1 000
11 200
28
1 650
750
8 400
21
1 100
500
5 600
14
550
250
2 800
7
0
0
0
0
2004
2005
2006
2007
2008
2004
2005
2006
2007
2008
■
Headline earnings per share
■
Dividends per share
■
HRC export prices
■
EBITDA
■
EBITDA margin
