ArcelorMittal South Africa Limited (ACL) Earnings Call Transcript & Summary

Ladies and gentlemen, the time is now 10:00. I think we can start, I'd ask you to join us. My name is Tami Didiza, I'm responsible for stakeholder relations and communication within ArcelorMittal South Africa. And I take this opportunity on behalf of the company to welcome all of you who are able to join us and participate and share in the results presentation. We are indeed very delighted that you're able to join us. I think today, there are 2 questions that we need to answer, one of them being has ArcelorMittal South Africa taken off? And the second question would be, have we reached our cruising altitude or are we still in the plane? To answer those questions, we are joined today by our Chief Executive Officer, Kobus Verster, and Desmond Maharaj. Kobus will be able to take us through the overview with focus on operational and market review, and Desmond will [ sort in ] in the financial performance. Kobus will come back and answer the second question, have we reached our cruising altitude in the form of giving us an outlook. After Kobus has finished, he can type your questions and be able to read those questions and answer them. May I take this opportunity to present to you our Chief Executive Officer, Kobus Verster.

Thank you, Tami. Thank you for that introduction. Good morning, ladies and gentlemen, and thank you for joining us this morning as we present our financial results for the first 6 months of the year. A special word of welcome to our Board members and senior management as well as to members of the media and our shareholders. We start with an overview. Stronger sales volumes and the benefit of a robust price cost effect resulted in a very strong start of the year, with ArcelorMittal South Africa recording a first half EBITDA of ZAR 3.2 billion. This was the strongest financial performance of the last 10 years. Cash flow was another highlight. Despite us investing ZAR 1.7 billion in working capital to support the improved market conditions, the company has generated ZAR 1 billion of free cash flow. And as a result, our net debt has reduced to ZAR 2.8 billion against ZAR 3.7 billion a year ago and ZAR 3.6 billion in December. Our liquid steel production was up by 36%, and our sales volume rose by 10%. The Business Transformation Programme realized an incremental saving of ZAR 1 billion. Our headline profit of ZAR 2.5 billion was a major improvement over the ZAR 2.6 billion loss a year ago. The average international dollar steel prices increased by 79% year-on-year, enabling a 42% increase in realized rand prices, indicating that there's a delay in ArcelorMittal South Africa realizing the full benefit of the strong international pricing environment. Although the international raw material basket escalated by 44%, we were able to limit the increase in our basket to only 2%. Looking at safety. With South Africa deep in the third COVID-19 wave, clearly the pandemic is still far from over, having become so much more personalized as inspections increase. We continue to be vigilant in our efforts against the virus, ensuring our employees can protect themselves, strictly implementing the latest guidance and enabling our workforce to follow strict hygiene and social distancing standards at work as we continue to monitor their health. Encouragingly, with the vaccination program now available for those people above 35 years of age, the bulk of our workforce will be eligible for the vaccine. We are also encouraging our employees to participate in this national important process. Our Vanderbijl plant has also been registered as a vaccination site, and we will start vaccination from tomorrow. Now returning to safety, both the lost time injury frequency rate and the total injury frequency rate increased compared to last year. Our Board and management and employees were greatly saddened by the 4 fatalities which happened in the past 6 months, and we sympathize with the families and friends of these colleagues. The company's commitment and resolve to achieve 0 harm has never been stronger. With the assistance of the ArcelorMittal Group, the business has reviewed, refocused and reinvigorated its efforts to eradicate accidents and fatalities across our business. The message behind this phased approach could not be more explicit. ArcelorMittal South Africa is determined to improve its safety performance and eradicate fatalities. One of the priorities of the ArcelorMittal Group is to lead the steel industry globally on sustainability. This is reflected in the XCarb brand, which bring together all ArcelorMittal's reduced, low and 0 carbon products and steelmaking activities as well as the wider initiatives and green innovation projects into a single brand, achieving measurable progress towards carbon-neutral steel and net 0 commitment by 2050. Two weeks ago, it was announced that ArcelorMittal Sestao in Spain would become the world's first full-scale steel plant to manufacture 0 carbon emission steel. Leveraging the relationship with our parent company, we are exploring, in collaboration with various industry parties, [ reeses ] organization and business initiatives, opportunities relating to carbon capturing and storage, blue and green hydrogen applications in directly reduced iron and improvements in energy efficiencies. our Saldanha plant has been identified in a 2021 study by South African EU Partnership as well as the CSIR as being an ideal site for green direct reduction iron or DRI production. And the company's integrated steelmaking sites are primary candidates for carbon capturing and storage. Along with improving environmental compliance, we will finalize our implementation roadmap for meaningful carbon reductions by the end of 2022. In South Africa, like in other countries, we will need funding support for carbon neutrality initiatives, along with an enabling environment to encourage cross-sector and industry collaboration. Out of the difficult events in 2019 and 2020, the company has committed to improve communication and engagement with our employees and other stakeholders. This will be achieved through initiatives that will address, amongst others, skills development, transformation and diversity. Before reviewing the market context, let me first address the operational context, especially regarding our own operations. The financial performance noted earlier is all the more remarkable against the backdrop of one of the most challenging operating environments in ArcelorMittal South's Africa long history. It was characterized by 2 COVID-19 waves; extreme weather events in the beginning of the year; a highly inconsistent rail service, which led to frequent and costly operational stops; our tragic and painful safety incidents; and the remarkable effort of the entire business to -- in restoring the damaged plants and stabilizing operations; a long maintenance stop at our Newcastle blast furnace to address damage caused as a result of the sudden stop during the hard lockdown last year as well as ramp-up challenges associated with restoring and accelerating production in a complex integrated steelmaking environment. Despite these events, the performance is a testament to the hard work and the resilience demonstrated by the teams across the business. The strong financial performance reflects the real-world benefits of the company's new operating model and improvements made to our structural cost position, notably regarding strategic raw materials and fixed costs. Our Business Transformation Programme has contributed a total of ZAR 4.6 billion worth of improvement since the program has started in the second half of 2018. Contrasting the hard-won and most necessary rescaling of fixed cost in 2020 against the operating challenges mentioned earlier, very serious, though responsible and a well-considered decision, was made to invest in certain key fixed cost areas. Some of these investments reflect the natural consequence of increased operating activities as production levels were restored from the lows of 2020. While others are largely non-reoccurring in nature, such as the temporary additional staffing levels to compensate for the disruptions to shift patterns caused as a result of COVID-19 and restorative maintenance as operations already started. Our philosophy towards fixed costs firmly remains one that is agile and variabilized as far as responsible (sic) [ responsibly ] possible. Now let's turn to the international market context. The recovery in the global steel environment since the second half of 2020 has accelerated in 2021, with activity levels in steel markets continuing to recover. Strong demand and low supply chain inventory, follow significant destocking in the previous period, has combined to support a healthy recovery in the steel spreads. Steel spreads being simply the difference between steel prices and the cost of raw materials. The South African and the regional economy saw increasing inventory levels, albeit at very varying speeds for different products. By half year end, ArcelorMittal South African monthly production levels and market demand were largely in balance. The structural impediment of credit insurance currently available in South Africa for the steel industry is presenting serious constraints to businesses, and we are working closely with our customers to manage deliveries where customers do not have credit cover and funding lines. This position is being aggravated by the arrival of long lead time imported material for those who have chosen this option and are now experiencing a funding squeeze. Looking at the global environment. Global crude steel production increased to just over 1 billion tonnes by 30 June 2021 as economic stimulus packages continue to benefit the mining, manufacturing and infrastructure sectors, while keeping supply chains under pressure. That is 122 million tonnes or 14% higher compared to the previous period. China's crude steel production increased by 11% to 560 million tonnes. With this increase, China maintained its market share of 56%. Europe's crude steel output increased by 19% to 100 million. North America was up by 16% year-on-year to 59 million tonnes. Turkey and Russia managed to increase their production by about 21% and 8%, respectively, while India rose by 31% to 58 million tonnes. Africa's output increased by 28% to 8 million tonnes due to higher production in South Africa and Egypt. The increase in ArcelorMittal South Africa crude steel production of 56% is substantially above the world's average and that of individual regions. Regarding fair trade practices, the European Union is prolonging for 3 additional years the safeguard measures currently in place on imports of certain steel products. And the U.S. Section 232 measures remain in force. China has reduced incentives to export steel by canceling the export VAT rebate, which will have a significant impact on price. Considering the Chinese industry's significance in the global steel market, this development is expected not only to impact on price, but also the origin of export sources. It's therefore disappointing that the South Africa safeguard duties are set to lapse in August 2021. Looking at selling prices. Average benchmark Chinese export hot-rolled coil prices increased by 79% year-on-year, while rebar prices increased by 69%. Input costs, so the international raw material basket cost increased by 65% in dollar terms, driven mainly by 100% and 77% increase in iron ore and scrap prices, respectively. Returning to our home market. Consensus GDP growth forecast for South Africa is around 4.5% for this year, which is positive for steel demand. Apparent steel consumption for the first half of 2021 increased by 9% to 2.2 million tonnes compared to the preceding 6 months. The improvement in steel demand is being driven by a faster recovery in the mining, automotive, manufacturing and energy sector as well as restocking throughout the supply chain. Total steel imports, that consist mainly of hot rolled coil, galvanized sheet and tinplate increased by 25% compared to the previous 6 months. This constitutes some 31% of South Africa apparent steel consumption and is likely to reduce during the remainder of the year as the local supply chain normalize, the cancellation of the export incentives by China, as well as Russia imposing an export tax of 15%. Important to note is that about 40% of imports related to products and profiles that is not manufactured in South Africa. Steel environment for ArcelorMittal South Africa. Our liquid steel production increased by 39% from 1.1 million tonnes to 1.5 million tonnes. Our sales volume increased by 10% to 1.3 million tonnes due to a 21% rise in domestic sales and a 39% fall in exports, and mainly seaborne exports as volumes were redirected to service Africa Overland. Overall, realized fuel prices in dollar terms increased by 57%. In rand terms, prices increased by 42% as the average dollar and exchange rate strengthened by 13%. The company's raw material baskets represent 43% of cash cost per tonne. That was 2% higher in rand terms, which is very pleasing given the 44% increase in the international raw material basket, as I have mentioned earlier. This reflects the work that's been done in diversifying the resource -- the sources of raw material. Consumables and auxiliaries representing approximately 31% of cash cost per tonne remained flat for the period, while electricity tariffs increased by 12%. Fixed costs rose from ZAR 2.6 billion to ZAR 3.4 million -- ZAR 3.4 billion. This is an increase of 19% if measured on a cost per tonne basis. The increase reflects an additional investment of just over ZAR 800 million in restorative maintenance, higher activity levels and additional temporary staff to mitigate the COVID risk. Looking at the operating environment. Excluding Saldanha Works, which was placed in care and maintenance in the first half of 2020, our average capacity utilization increased from 39% in the first half of last year to 59% for H1 2021. And we are currently operating at around 85%. Operationally, the business remained firmly focused on achieving better operational reliability and an improved delivery performance in support of our customer base while also securing cost improvements. Improving the delivery cost of our raw materials, optimizing inventory levels and addressing the cost and reliability associated with electricity and rail will receive ongoing attention. Both the 2 blast furnaces for Vanderbijlpark and the 1 at Newcastle are in full operations at the moment, although the second blast furnace at Vanderbijl, which was successfully restart in December 2020, has experienced some temperature -- low temperature conditions in March, which affected production. This was resolved and the asset is in good operating conditions. Positively, in the first quarter, a long maintenance stop of the Newcastle blast furnace was successfully completed, addressing the substandard performance which plagued the plant in 2020 after the hard lockdown. Preparations for a mini reline of Newcastle blast furnace scheduled to be start towards the end of this year are progressing well, and we are working with our customers to manage stock and supply during this period. The safety incident in the Vanderbijl Works cokemaking environment was the main contributor to the lower commercial coke production, requiring careful management of supply to customers to minimize disruption in their operations. Although commercial market coke production was 22% lower at 91,000 tonnes, sales were supplemented by available inventory, resulting in a sales volume increase of 61%. Desmond will now take us through the financial numbers.

Thank you, Kobus, and good morning, ladies and gentlemen. Compared to the corresponding period, revenue was up 55% to ZAR 18.6 billion. This was supported by improved sales volumes of 10% and improved realized sales prices of 22%. At the same time, it should be appreciated that the comparative period ending June 2020 represents the most challenging trading environment in the history of the company. This was propagated by a national lockdown, which in the first half -- which for the first time in the history of the company required us to shut down all productive capacity of AMSA, testing operational and financial resolve and the resiliency of the AMSA business model. We reported EBITDA profit of ZAR 3.2 billion, representing a ZAR 4.5 billion improvement over the first half of 2020. This consists mainly of ZAR 3.1 billion EBITDA from our steel operations, which reported a loss of ZAR 1.4 billion in the corresponding period and ZAR 351 million EBITDA profit from our nonsteel operations compared to a profit of ZAR 108 million in the corresponding period. We also refined our operating and reporting segments, in line with our one organization structures communicated previously. The waterfall graph tracks the evolution of EBITDA profitability, with total shipments increasing by 116,000 tonnes, driven by increased domestic shipments and product mix, which positively impacted EBITDA by ZAR 1.4 billion. The improved average net sales prices in rand terms increased by just under ZAR 4,000. Local prices increased by just over ZAR 3,900 and exports by just above ZAR 2,200, impacting profitability by ZAR 3.8 billion. This includes the impact of exchange rate movements. Higher raw material prices and other factor costs had a negative impact of ZAR 768 million, driven by higher scrap or coke and electricity prices, partially offset by a stronger exchange rate. Other than the uncontrollable, higher-than-inflation price increases of rail and electricity, other price increases, specifically raw materials, have been managed better than the international raw material basket price increases. The non-reoccurrence of hard lockdown nonproductive related variable costs positively contributed ZAR 328 million. These costs related to the period during which the plants were shut down, but had to be safeguarded using external gases and electricity. Overall, fixed costs increased by ZAR 807 million, largely impacted by higher activity levels, additional temporary staff to mitigate COVID-19 impacts and sustained production, as well as investments in restorative maintenance. This was partly offset by business transformation cost savings. Cost savings in the Business Transformation Programme contributed ZAR 338 million, with H1 2021 realizing savings of ZAR 1 billion against the corresponding period savings of ZAR 663 million. Our non-steel operations segment reported an EBITDA of ZAR 351 million, better by ZAR 243 million when compared to the corresponding period. Sales and volumes of market coke increased by 73,000 tonnes, supplemented by available inventory, while prices increased by 12%. Over and above the improved EBITDA, an improvement in the exchange rate resulted in reduced interest and finance charges related to foreign denominated creditors. Consequently, this resulted in us recording a headline profit of ZAR 2.5 billion, an improvement of ZAR 5.1 billion when compared against the previously reported headline loss of ZAR 2.6 billion. Our condensed consolidated statement of profit and losses also reflects a fair value adjustment to investment property of ZAR 224 million. This is as a result of various properties that have deteriorated in value due to macroeconomic factors and is driven by an external property valuation. On the back of free cash flow of ZAR 985 million, net borrowings reduced by just over ZAR 800 million to ZAR 2.8 billion from ZAR 3.6 billion over the 6-month period ending June 2021. We generated ZAR 3.2 billion from operations during the first 6 months. ZAR 1.6 billion was invested in working capital driven by increased business activities, which is segmented as follows: Inventories increased by just over ZAR 600 million. This was mainly due to increased stock levels from just over 270,000 tonnes to just under 350,000 tonnes. Receivables were higher by ZAR 2.4 billion, driven higher by increased volumes and prices, partly offset by higher payables of ZAR 1.4 billion. We incurred ZAR 130 million in finance costs, which is in line with ZAR 136 million we incurred during the corresponding period, while ZAR 350 million in cash was utilized on capital projects. Cash and liquidity management will continue to remain a key priority. Cash generated will be applied to reduce debt and strengthen the balance sheet. Further, AMSA is at an advanced stage in renewing its borrowing base facility with a consortium of local and international banks. Capital expenditure of ZAR 338 million is ZAR 200 million higher than the corresponding period, with around 88% being spent on sustaining operations, 4% on the environment and the balance on projects to enhance quality and improve our product portfolio. Key investments to preserve and increase the asset capacity include the Newcastle Works blast furnace mini reline, the coke battery [ through morg ] repairs and [ mill roll ] replacements. The coke oven gas cleaning project has been restarted after a delay in the construction process due to COVID-19 challenges, both locally and abroad. New products manufactured include a rolling of heavy plate material to support the wind tower construction in the renewable energy segment; production of high-strength steel, allowing us to service the heavy mobile equipment and transportation industry while adhering to international standards and the production of new grades of grinding media to support the mining industry as well as rail to rebuild the rail capacity. On this point, let me hand you back to Kobus, who will elaborate further on our focus areas and priorities for the remainder of 2021.

Thank you, Desmond. Looking at our strategy. ArcelorMittal South Africa started its current strategic journey in 2018 with the aim of transforming the company for sustainable growth. Our first objective was to restore our cost competitiveness, which was key for our longer-term sustainability as well as to participate in future profitable growth. For the rest of 2021 and the foreseeable future, this strategy aim will be realized through 3 priorities: Repositioning, Restructuring and Revitalize. Repositioning the company as the champion of the South Africa manufacturing sector, continue to restructure and optimize the organization to ensure it remains internationally cost-competitive, revitalize our balance sheet to improve long-term sustainability and enhance our ability to participate in growth opportunities once the domestic market starts to grow. We are a proud signatory to the Steel Industry Master Plan, and we are committing senior resources to this ambitious but critically important initiative. Along with the infrastructure investment program, which I believe need far more national attention allocated to it, as well as the African Continental Free Trade Agreement, there are real opportunities for the steel industry to start growing again. And we and many other businesses in the industry are really eager to participate and contribute. Our business transformation initiatives continue into the second half of the year with a focus firmly on strategic raw material, energy, customer-centric activities as well as logistics. Now let us look at the outlook for the second half of the financial year. During the civil unrest in the second week of July, we were able to effectively protect both our workforce and our physical assets, but we have lost some production and shipments during the period. Given the current status of the pandemic, our health and wellness -- the health and wellness of our employees will continue to be a priority to us. Conditional upon the extent of the current economic lockdown and any damage to the overall business sentiment, the impact of the healthier market and improved operating environment should be more fully reflected in the company's financial performance in the second half of the year. Over the medium term, with crude steel production capacity of 6.4 million tonnes, that include Saldanha Steel, and an estimated annual apparent steel consumption in South Africa of around 4.6 million tonnes, ArcelorMittal South Africa as well the other local producers are well placed to fully service the South African as well as the regional steel demand and also growth in those areas. Given ArcelorMittal Group leadership position, advancement and commitment towards CO2 reduction and carbon net neutrality, ArcelorMittal South Africa's plans will be accelerated and the roadmap would be published by the end of 2022. Ladies and gentlemen, thank you, and I will now take questions.

Thank you very much, Kobus and Desmond. Oh, by the way, indeed, it's Desmond's birthday today. Happy birthday, Desmond.

Thank you, Tami.

[Operator Instructions] I know it's going to take time to type those questions. But fortunately, we've got 2 questions already. I will read the first question from Richard. Do you anticipate further investment into working capital in the second half or a release of working capital?

So I would answer this question in 2 ways. From a stock perspective point of view, I don't see any further investment in the stock perspective for at least the first -- the third quarter, maybe a little bit into the fourth quarter as we plan our mini reline on Newcastle blast furnace. So nothing significant on stock. On the debtor side, with the prices increasing and us going into a high seasonality period, in the third quarter, I would see a little investment in the working capital on the debtor side.

Thanks, Desmond. The second question from [ Shellcose ]. Could you please expand product expectation for steel prices, given the impact of these 3 factors: SA duties falling away, Russian export duties and Chinese export duties announced today.

I think in terms of international prices, we still see strong prices for the remainder of the year. I think as I mentioned earlier, if you look at the percentage increases internationally versus our own realized prices, it is obvious that due to our backlog, we are sort of lagging the price increases. So there's actually some upside potential in terms of realizing the current announced prices, if I can say that. It's only the 8% duties safeguards that will lapse in August. 10% duties on all steel products for ourselves and our competitors, that will remain in place. The impact would be relative low because certain countries like Russia and Taiwan was excluded from the safeguard countries. And it's actually those countries where some of the imports were coming from. I think in terms of the question about China and Russia is that the whole world, if you see, Europe has extended safeguards, the U.S. is retaining Section 232, Russia is imposing a 15% tax on exports and China is reducing the incentive to export. So all countries are starting to protect more and more their domestic markets. And I think that will necessarily support stronger price environment globally going forward.

Thank you, Kobus. A question from Ralf, please indicate what you expect to produce in the second half.

Our production volumes would definitely, I mean, be higher than the first half. We're not going to give a specific percentage. But I think it's well published that we had some production interruptions. But we will balance always our production volumes in accordance to real demand. If you look at -- on the long side of the business, our Newcastle operations, it's actually not operating at full capacity because the real demand is not fully there to utilize that furnace at a 1.8 million tonne capacity. It's running around at 1.1 million tonnes. So it will always be dependent on market demand. I think given our backlog, our order book, it will be reasonably better than the first half. But we'll be very careful not to produce to stock.

Thanks, Kobus. Another question, can you give an update on where ArcelorMittal South Africa currently stands on cost competitiveness on a per tonne basis compared to imports, specifically excluding any subsidies or duties, so purely on an operating level.

Well, if you look at on a relative cost competitive basis, you don't include any duties or benefits, because there's actually, from an asset perspective, no benefits, our production cost is, I think, very competitive versus international peers. And we do that by internally benchmarking ourselves to other operating units. Our relative competitiveness is also something that we do not publish. But I can tell you that we are competitive in terms of both fixed and variable costs, we're in a substantially better position than we were 3, 4 years ago. Yes.

Thank you, Kobus. Another question. Please provide commentary on ArcelorMittal South Africa's view of the sustainability of the current high steel prices. Is it foreseen that this will remain throughout the second half?

Yes, I think if I were able to forecast the steel price, it's probably another job. I think the -- I think there's 2 things. One is the international trend and the other thing is where is ArcelorMittal South Africa in terms of our pricing. As you are aware, we follow the basket pricing model agreed with government. And up to this point, we have been lagging that basket. And at this point, we have been lagging international prices. So I would assume that for the immediate short term our prices to be fairly stable. Longer-term prices, difficult to call.

Thank you, Kobus. From Richard. First half 2021 EBITDA run rate was ZAR 500 million a month on average. Could this run rate exceed ZAR 1 billion per month at current prices and volumes?

Nice try, Richard. I think we've indicated the positive outlook for the second half. Being that specific in forecast, we prefer not to do.

Thank you, Kobus. From James, may you please elaborate on the sustainability [ of ] profitability and benefits from tax losses as [ they are not there ] in the figures.

I think, James, if you look at the strategy on becoming internationally cost competitive, which we think we have done a reasonable job on, that is to be able be sustainable through the cycle. We still have some work to do on that, to be honest. But I think we've reached a point where the business is a sustainable business. At what profitable levels? That will depend on the cycle where we are and stuff like that. And then obviously, one would have the benefit of utilizing that assessed tax loss for years to come.

Thank you, Kobus. Quintin, may I take only this question from you as [ your reporter will ] have the opportunity during the media round table to ask further questions. But I read your question nevertheless. Will Newcastle Works be expanding on the local job market in the upcoming months? And how will Newcastle Works be investing in the local community?

I think Newcastle Works, from a manpower productivity perspective, is almost there. I think we still have a bit of work to do in terms of Newcastle, but not substantial. So expansion in job creation, not necessarily. And in terms of investing in the local community as well, I mean, we have our programs. We will continue with that. We have run -- continue to run our social investment programs even in difficult times in 2020. And we will continue to play a responsible role wherever we operate.

Thanks, Kobus. From [ Arthur from Synch ]. Thank you for the presentation. Could you give us an idea of how your production costs benchmark on the international markets.

We've covered that one, right?

I've covered that. But I mean, as I said, I can with confidence say that we are cost competitive versus our international peers. The size levels established is not something that we like to discuss.

Okay, Kobus. [ An essay for Thabang ] Hi, Kobus and gentlemen. Thanks for the presentation. Well done, the good earnings. A few questions. Question one. Can you remind us what caused the 4 fatalities? He wants us to deal with them individually.

Okay. Let me deal with the first 2. The first was 3 fatalities at the coke making operations in Saldanha Park during February. As a result of a mechanical failure, there was a gas combustion. And one of the stacks' towers exploded and fall down. And we've lost 3 of our colleagues. Last month, also at the coke batteries in Newcastle, there was an incident where a colleague was struck by a car at the coke making operations. What we have done in terms of safety is, as I said earlier, we -- in ArcelorMittal, we have the same safety protocols, systems in place that are in all the other operations in the world. But some operations are performing a lot better. Specifically, Brazil. And Brazil has got the same site of environment that we have. We started to do that poor safety performance. But for the last 10 years or so, an excellent safety performance. Some plants, injury-free. Some old plants, fatality-free. So we are cloning with them and see how we can transform the safety culture that's currently in that operations and embed that into our DNA in South Africa. So we've got a very structured program to address these issues. And we are making progress in that regard, and we are very committed on that journey.

Thank you, Kobus. The second question that has already been responded to was, what measures have you put in place to make sure the incident does not occur again? That has been covered. The third question. Once again, the accident at Vanderbijlpark and challenges at Newcastle, where ask the question around the quality and reliability of your infrastructure. Are you spending the required minimum CapEx to keep your operations safe?

Well, I think it's really important to understand that the incident at Vanderbijlpark wasn't infrastructure-related. It was a mechanical failure. The stack that collapsed was as a result of a few events. But the stack's integrity was never questioned and was actually proven to be strong enough. We don't compromise on safety. So we will not, not spend money if it's safety-related. I think even despite our period where we have cost constraints, 2 areas we don't compromise is safety and our environmental obligations.

Thank you, Kobus. The fourth question. What would it take to get to the point where there are no blowups or incidents at any of your operations?

I think that's ultimately what we say our objective of Zero Harm is. And it will take a mindset, a cultural shift being -- in all our people. And that's why it will not be a quick journey. And that's why we are copying and working with our Brazilian colleagues to see what they have done in terms of embedding that culture in the organization.

Thank you, Kobus. The fifth question, what was your [ coverage received ] price for flat and for long?

The -- I mean the -- in terms of your question around the prices as well as the split of sales and revenue, I mean, those details are all in our financial and our sales announcement.

Thank you, Kobus. The sixth one. Can we get a breakdown of your ZAR 15.4 billion in operation costs and your ZAR 1 billion [ FCF ]generation.

In the [ sense ] document, that's covered in detail.

It's in the [ sense ] document, Thabang, which is covered in detail. Question seven, can you give us a split of production, sales, revenues, costs and profit for flats, longs and [ C and C ]

Yes, so just to understand and answer that one. So the segmental reporting going forward is broken down between steel and nonsteel, and that's how we will be disclosing the information going forward, Thabang. It is covered in the sense document.

Thanks, Des. Eighth question. Can you give us production and sales volumes guidance for the year?

I think we've given an outlook statement.

Thank you, Kobus. Can you give us an update on the Competition Commission filings now that ArcelorMittal South Africa is profitable?

I mean we have almost ZAR 1 billion outstanding to the Competition Commission. We've agreed with them a grace until next year, and we're now starting discussions or will start discussions with them on the profile of that repayment. In terms of could we get additional safeguard measures in place, it's not something that we have applied for at the moment. This will be subject to us doing an economic evaluation. And if that support safeguards for any product, we will apply for that within the rules. In terms of the reason, the next question, the reason for us not -- no longer will publish segment information, I mean I think it's probably important to understand what we've done in terms of our restructuring and our one organization. So currently, we don't have a management team for Vanderbijlpark, Newcastle, flat or long. Those structures have all been collapsed. We manage the business in terms of coke making for South Africa, ironmaking for the whole of South Africa, flat rolling and long rolling. So our disclosure will follow the manner in which we operate and manage the business.

Thank you, Thabang, for all the questions, at least I obliged and read them individually. The next question from James. What is the operating status of Saldanha? Is it on care and maintenance or partial operating?

It's fully on care and maintenance. So we have a small contingent of people that make sure that the assets remain in good shape. So on the good care and maintenance philosophy, you make sure that you start the motors, you grease the pumps and you do all of those things to keep the asset in a state that if it becomes longer term commercially sensible, that we can restart it and the place has not been vandalized. So that's the one. I think the other aspect in terms of Saldanha is how do we, in terms of local ambitions for green hydrogen as well as our own ambitions for green steel, revisit the longer-term green opportunities for a plant like Saldanha steel.

Thank you, Kobus. From Ralf again. With debt reducing, do you anticipate the resumption in dividends at year-end?

So I think there is still a long way to strengthen our balance sheet. Once we think the balance sheet is strong enough and resilient enough to handle the various deal cycles, then we'll be in a position to have a discussion on dividend payments.

Thanks, Des. From Peter. You mentioned lack of credit insurance capacity as an inhibitor for growth. In your opinion, why should insurance free up more capacity for the steel sector?

Well, I think it's 2 things. There should be more insurance from a competitive perspective, not only one. Secondly, in a certain point in the cycle where steel prices are higher, logically, the risk is lower because most of the steel companies is actually very profitable. So from that perspective, it should be easier. But I mean they should look at their own risk profile and deal with it accordingly.

Thanks, Kobus. James, your question, I think, was asked by Thabang and was addressed by the panel. May we skip that question? From Sean, can you please provide some guidance on the expected tax charge for FY 2021 and beyond?

So we still have a significant assessed loss situation, which will take us a little while to eat into. I would say 2 to 3 years before we are in a position to pay tax because we need to eat into that assessed loss position. So that would be my guidance for that. For the financial year 2021, we will be still eating into the assessed loss position.

The next question, from anonymous. Is there any specific target for net gearing in FY '21 and onwards? When are you looking to operate at 95% capacity? Can we expect the high investment in receivables to unwind in the second half? To which extent has COVID-19 induced supply chain backlogs affected GP margins?

Well, I think we don't have a specific net debt target. But personally, I think a company like ourselves, net debt should be 0. I also think that we're in a position to better allocate capital in the future to potential growth opportunities. And I think one should be also sympathetic that we come after 10 years of having substantial losses and massive negative cash flow. So we have to prove our sustainability. And we have to prove our credibility in terms of cash generation throughout the cycle before one can consider dividends and those type of things. I mean, from a capacity perspective, there's 2 things that one should consider. The first one is, is the demand there? I think at 85%, we are of the view that we pretty much will service the domestic demand available. And if you want to increase your capacity to 95%, you have to make sure that your raw material costs and your input costs come in the same type of benefits that your incremental tonnes is not loss-making. So I think that's sort of a philosophy change that in the past we believe that by adding volume, you do a dilution of fixed cost, even at marginal income. We have a different philosophy and say that incremental tonnes should come at, at least the same, if not better profitability. And for that, you need to make sure that you have, firstly, raw materials available and, secondly, available at the right price. Currently, at 85%, we battle from a transit perspective to get adequate raw materials to operate at this level.

The question on accounts receivable we covered already.

I think this one is from [ Sonny Makakula ]. I'm sure he's introducing himself. Nice meeting you, [ Makakul ]. The next one, anonymous, what is your comment following the decision to suspend the safeguard duties on hot rolled coil for 2 years? I think that one has been addressed as well.

Yes, I think I can reiterate. It's disappointing that South Africa follow a different route than the rest of the world. And from an impact perspective, and as I said, many of the imported countries, Taiwan and Russia is excluded from that. So we already had to deal with that from an importer's perspective. I think...

I think that was the last question. On that note, thank you very much, ladies and gentlemen, for joining. And please remain safe. Bye-bye.

Thank you. Bye-bye.