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

Good morning and welcome, ladies and gentlemen. I'm Tami Didiza, responsible for stakeholder management and communication at ArcelorMittal South Africa and I will be facilitating at least the proceedings this morning. Thank you for taking the time to join us today as we announce our interim financial results for the period ending 30 June, 2022. We really appreciate your interest in our company. Ladies and gentlemen, the recording of this event will be accessible at our website, www.arcelormittalsa.com. You can also find the presentation now in the same website. Without further ado, let me introduce to you our presentation panel, which will be led by our CEO, who will take us through the overview of operational and market review. The CEO will be followed by a Acting Chief Financial Officer; Suretha van Wyk, who will zoom in the figures and the cutdown allocation. The CEO will come back and take us through the outlook for the year. We'll then take your questions. You may make your question in the Q&A platform, where we'll read that and respond. Ladies and gentlemen, let me 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 taking the time to join us in this virtual presentation of our interim results for the 6 months ending 30 June. A special word of welcome to some of our Board members and senior management who's also joining the presentation and also for the media and shareholders. On 10 February, 2022, at the announcement of our full year results, the outlook for the upcoming 6 months was overall positive, though demand was expected to return to more normal levels, and short-term steel prices were supported by raw material pricing trends. Central Bank's response to rising inflation was flagged as a risk. Broadly it says, the company has successfully delivered against its guidance and in some instances, outperform expectations. That said, the specifics of the delivery were far more complicated and a particular word of thanks to the ArcelorMittal South Africa loyal staff, our customers and suppliers who enabled the company to manage through some difficult events. Stronger headline earnings of ZAR 3 billion was supported by a higher EBITDA of ZAR 3.6 billion and a notable lower net finance charge of ZAR 255 million. The net debt position was 61% lower than last year at ZAR 1.1 billion and 14% below the December 2021. Our average steel price, prices increased by 30% in rand term, while our raw material basket increased by 41%. In absolute terms, coking coal increased by 91%, scrapped by 8% and iron ore by 4%. As anticipated, the higher maintenance activity that we undertake in the latter part of last year, started to wind down in 2022, contributing to the fixed cost reduction of ZAR 604 million or 15% below the immediately preceding 6 months. Free cash flow of ZAR 177 million, that was after CapEx of ZAR 693 million. The final settlement of a U.S. dollar-dominated trade payable with extended credit terms to the value of ZAR 628 million and a temporary investment in working capital of ZAR 2 billion. The company's more growth-orientated value plan program realized an improvement of ZAR 577 million in the 6 months, being commercial-related initiatives of ZAR 343 million and cost base initiatives of ZAR 234 million. This result was notable given the disruptive events, which led to a 30% drop in crude steel production. We will look into those topics a bit later in the presentation. It was possible to limit our sales volumes to 8% through effective inventory rebalancing. Looking at key commodity price trends, against the first half of 2021, average international rebar prices increased by 13%, while hot rolled coil prices were up 6%. Hard coking coal fly up by a staggering 250% in context of the energy crisis whilst scrap rose by 17%. These were in contrast to lump iron ore, which fell by 27% after a number of years of increases. Safety is the company's highest priority, and we will remain committed to zero harm. Substantial time has been invested in, firstly, behavioral interventions to change our safety culture. We now have a clear safety culture road map, firmly based on the recognition that we depend on one another for our collective safety. And secondly, refreshed 7 focus areas. Some of the initiatives included in these focus areas are leadership visibility, putting underperforming plants in quarantine and leadership training. Weekly safety stops have been implemented to reach each and every employee and contractor to emphasize the importance of safety. Pleasingly, the company's lost time injury frequency rate and total injury frequency rate improved substantially in the first half of the year. ESG. Later this year, we will present our decarbonization road map, which will describe how we plan to achieve our carbon reduction targets through the application of energy efficiency initiatives, renewable energy sources, carbon capture and use, green hydrogen application and electric steelmaking. In addition to these initiatives, close collaboration with the ArcelorMittal Group and local and international first-mover participants will be vital. Joint development agreement has been or are in process of being concluded on these initiatives. With the appropriate support the restart of Saldanha Works as an early supplier of DRI to the international market is a very exciting medium-term prospect. Special joint collaboration programs with provincial economic departments in Gauteng, KZN and the Western Cape have been established to pursue initiatives of common interest. Before we get into the market and operating realities, allow me to set the context. In the first quarter of 2022, the global steel environment reflect the impact on supply from the Russian-Ukraine conflict with stronger-than-anticipated steel prices because of a tighter supply-demand dynamics. The second quarter saw an increase in uncertainty and risk including the length of the Russia-Ukraine conflict, implications of higher energy prices and inflation on economic activity and consumer confidence. The slowdown in China and the risk of recession in the U.S. and EU due to tighter monetary conditions. Delivery on the company's financial performance was complicated by a month-long shutdown of Vanderbijlpark blast furnaces and the incremental stoppage of the remaining fleet from time to time to avoid the risk of uncontrolled stops due to insufficient raw material, mainly iron ore. And that was all a result of the unavailability of the required rail services. The impact on customers halted devastating flooding in KwaZulu-Natal and an unnecessary 2-week labor strike and the associated violence and intimidation. Severe electricity load shedding, which was particularly disruptive to suppliers and customers. These load-shedding events had a limited impact on our own production volumes. And finally, softer steel trading conditions. It is worthwhile stressing that the rail and labor events mentioned above, represents lost opportunities which is regrettable for a country that so desperately need to take advantage of every economic opportunity to rebuild after a destructive pandemic. In the next slide, I will explore these things a little further. Firstly, to rail. Having maximize road transport opportunities, the company and TFR launched a CEO-led initiative to collaborate on aspects of security and technical assistance. We are supporting technical security initiative to supplement those of TFR initiatives has a reasonable level of success. Although locomotive availability has improved, it remains far below the contracted service levels and is still very volatile. Presuming the successful implementation of the department of transport draft rail policy, we have the appetite to progress a commercially sensible train investment program to supplement the volumes which TFR does not have the capacity to move. With regards to labor, it's a well-known industry fact that our bargaining category pay scales are the highest in the sector. Although we were satisfied with the outcome of the wage negotiations, which ended after an unnecessary and disruptive 2-week strike, much work remains to reset the relationship with organized labor, while addressing the unsustainable increases in pay base that impact on our long-term competitiveness. The steel industry is highly cost-sensitive and all parties need to agree on ways to address this vulnerability. We condemn in the strongest possible terms, the violence, intimidation, criminality and misconduct displayed during the strike, which led to a disciplinary action and criminal charges. Such behavior had no place within the culture of our company, which is in the process of being refreshed following the difficult but necessary restructuring initiatives. As we are all aware, South Africa experienced its worst period of electricity load shedding in June. Where we operate, the situation is aggravated by a highly unreliable municipality infrastructure. As a sign of confidence in the country, ArcelorMittal South Africa with the support of ArcelorMittal Group have started the environmental impact assessment and project development process to construct 2 100-megawatt renewable energy facilities with the objective of getting real -- cost benefits by 2024, 2025. If the regulations are relaxed, not only will we be able to accelerate these projects, but hopefully, we can also make them larger. Regarding energy diversity and supply like many major manufacturers, we are dependent on a ready supply of competitive priced natural gas, with the dwindling supply of natural gas from the current source in Mozambique, the company is working closely with the Industrial Gas Users Association of South Africa to find a solution to this challenge. Progressing the South Africa's gas master plan is vital to ensure that South Africa has secured long-term supply of this vital commodity. With regards to production, global crude steel production decreased to 949 million tonnes, largely due to plants idling because of pandemic-related lockdowns, high inventories and weak order levels in China. This performance of 54 million tonnes or 5% lower than the same period last year. China's crude steel production decreased by 6% to 526 million tonnes, maintaining its market share at 55%. Europe's crude steel output decreased by 6% to 99 million tonnes. North America was down by 2% to 56 million tonnes. The trend continued in Russia and Turkey as production fell by 7% and 4%, respectively, while India succeeded in increasing production by 8% to 63 million tonnes. Africa's output decreased by 9% to 7 million tonnes due to lower production at home and in Egypt, South African crude steel production decreased by 16% and to 2.1 million tonnes. Turning to sales prices. International hot rolled coil prices increased by 6% year-on-year, while rebar prices increased by 13%. Input costs for the international raw material basket cost increased by 31% in dollar term, driven mainly by the increase of 250% of coking coal prices. Returning to our home market. The GDP growth forecast is 2.3% for 2022 and that of the near and sub-Sahara African market is between 3.4% and 3.7% with a potential for downward revisions. In SA, apparent steel consumption for the first half of the year decreased by 14%, reflecting higher steel inventory levels, slowing market activities in key steel consuming sectors, slow realization of infrastructure projects and the inflation and rising interest rates affecting disposable income in the retail sector. Apparent steel consumption decreased by 9% compared to the immediately preceding 6 months. As predicted, total steel imports of primary hot-rolled coil, galvanized sheet and plates decreased by 41% in response to a better improved reliability from our sales, but also softer market conditions. This volume constitutes around 23% of South Africa's apparent steel consumption. Additionally, imports decreased by substantial 23% compared to the immediately preceding 6 months. Imports could have been reduced even further if we were not impacted by the rail and labor disruptions. Our total sales volumes decreased by 8% to 1.2 million tonnes compared to last year due to a 10% fall in domestic sales while exports increased by 12%. The regional mix of exports weakened as Africa Overland sales dropped by 26%. Our realized steel prices in dollar terms increased by 23%, 30% in rand terms after the average dollar and exchange rate weakened by 6%. As you are now familiar, this trends reflect the lack effect of steel price movement we characterize our order intakes. The higher international steel prices early in the year contributed to this positive movement. By the same measure as steel prices came off recently, our prices will follow that trend. We are the only primary steel producer in South Africa, which support the downstream industry through a formal support program. This industry support saw a 19% increase to ZAR 126 million in both value-added export and strategic rebate assistance. The company's raw material basket representing 43% of the cash cost per tonne was up 41% in rand terms against a 39% increase in the international raw material basket. This represents a fly-up in imported coking coal prices along with lower, more stable local iron ore prices against the higher but falling international annual price trend. Consumables and auxiliaries, representing approximately 31% of the cash cost per tonne increased by 46%. Electricity tariffs increased by 12% and while dollar-denominated commodity index consumables increased by 61%. Fixed cost decreased to ZAR 3.4 billion compared to EUR 4.1 billion in the immediately preceding 6 months, a response to the lower maintenance activities. Our average capacity utilization decreased from 59% last year to 42% in 2022. This reduction reflects the impact of the interruptions as a result of the rail and labor disruptions. Utilization should improve to 76% once the Newcastle blast furnace returned to operations after a 84 days restoration campaign. The focus on maintenance and reliability restoration, which started in 2021, continued into the new year. Particular attention continues to be given to the coke battery restoration program, lowering fuel rates in iron making, reducing energy consumption, improve yields in steel making and rolling and increased scrap melting and utilization. For 2022, commercial coke production was 34% lower at 60,000 tonnes with sales volume down by 38% to 120,000 tonnes. The result reflects the need for intense inventory balancing due to the continued restoration of coke batteries and the use of more coke internally due to production interruptions for reasons mentioned earlier. The ZAR 464 million 3-months Newcastle blast furnace restoration project has been completed yesterday. We were able to do this project with more than 40,000 hours worked without a single lost time injury, real achievement by the team. The major benefits of the project include extending the life of the plant, improved cost competitiveness, lower energy consumption and reduced carbon footprint. Some interesting factor around this project. We've used around 50 tonnes of steel more than 5,000 carbon blocks. Some of these carbon blocks weigh more than 3 tonnes. We've used more than 14,000 refractory bricks, and we have employed 1,030 temporary jobs from 28 contracting companies. I will now hand over to Suretha to take us through the financial numbers.

Thank you, Kobus. Good morning, ladies and gentlemen. Our revenue increased by 19% to ZAR 22.2 billion compared to the corresponding period. This was due to improve the realized sales prices of 30% in rand terms, while shipments decreased by 8%. We report an EBITDA profit of ZAR 3.6 billion representing a ZAR 373 million improvement over the corresponding period. This consists of the ZAR 3.5 billion EBITDA profit from our steel operations and ZAR 443 million EBITDA profit from our nonsteel operations. The waterfall graph drives the evolution of the EBITDA. Overall, shipments decreased by 104,000 tonnes, impacted by the rail service unavailability affecting our raw material supply and the unnecessary 2-week labor disruption. Without these negative impacts, overall shipments would have been higher. The lower shipments negatively impacted EBITDA by ZAR 895 million. Average net sales prices increased by 24% in rand terms excluding the impact of exchange rate movements, of which local prices increased by 24% and export prices increased by 5%, positively impacting EBITDA by ZAR 3 billion. Higher raw material prices and other factor costs, excluding the impact of exchange rate movements had a negative impact of ZAR 2.4 billion, mainly driven by higher import coking coal, coal, alloys, electricity and rail prices. Our value plan program, the successor to the business transformation program realized improvements of ZAR 577 million, of which commercial related initiatives were ZAR 343 million and cost base initiatives of ZAR 234 million. Efficiencies and operating costs were negatively impacted by higher cost of energy and gases, while overall fixed costs were managed well and increased by 2%. As mentioned, our nonsteel operations segment reported an EBITDA profit of ZAR 443 million, an improvement of ZAR 92 million compared to the corresponding period. Sales volumes of market coke declined to 120,000 tonnes, while sales prices increased by 73%. Consequently, this resulted in us recording a headline profit of ZAR 3 billion, an improvement of ZAR 543 million being measured against a headline profit of ZAR 2.5 billion reported at the end of the corresponding period. Net financing cost of ZAR 250 million is ZAR 195 million lower than the corresponding period mainly due to higher foreign exchange gain of ZAR 140 million and lower finance costs on bank loans of ZAR 96 million. On the back of free cash flow of ZAR 177 million, net borrowings decreased by ZAR 171 million to ZAR 1.1 billion at the end of June 2022. The free cash flow performance was after the final payment of ZAR 628 million to a dollar-denominated trade payable with extended payment terms. We generated ZAR 3.7 billion from operations during the first 6 months of this year. ZAR 2.6 billion was invested in working capital driven by our business activities, which were as follows: Receivables were higher by ZAR 1.5 billion due to higher sales volume and prices. Payables were lower by ZAR 934 million and inventories were higher by ZAR 87 million, of which metal stocks decreased by 242,000 tonnes, and iron stock increased by 396,000 tonnes to a level of 618,000 tonnes. We paid ZAR 232 million in net finance costs while ZAR 693 million cash was utilized on capital projects. Cash and liquidity management will continue to remain one of our key priorities. While cash generated by operations will be applied to further reduce our debt and strengthen our balance sheet. Capital expenditure of ZAR 855 million is ZAR 570 million higher than the corresponding period, with around 46% being spent on sustaining operations, 20% on the mid-life campaign restoration of the Newcastle blast furnace, 21% on environment and the balance on projects to enhance quality the product portfolio and the replenishment of more rolled stock. Key ongoing investments include the coke battery rebuild and repairs, the main drive upgrade at the plate mill and the upgrade of the coating equipment on the galvanizing line. The coke oven gas clean plant project is on track, with the focus now on civil works and equipment deliveries, the mechanical and electrical construction orders are in the evaluation process. Our future product development pipelines will focus on the new corrosion protection coatings, we will use Optigal and Magnelis. Upgrades on the galvanization lines for products for the automotive industry and various other product development projects. On that point, let me hand back to Kobus, who will elaborate further on our focus areas and outlook of the second half of 2022.

Thank you, Suretha. Our transformation for sustainable growth strategy is being actioned through 3 focus areas: repositioning, restructure and revitalize. Let me turn to some of the key actions which underpin these priorities. Firstly, the value plan program. No part of our business remains untouched by this program. Commercial, strategic raw materials, production, procurement, energy and logistics. All of these areas have improvement and saving targets, which have been set for a period of 5 years. Due to the economic headwinds, intensifying and accelerating some of these initiatives will be required. Customers. We are eager to get the benefits of the Newcastle blast furnace and be able to service our long customers better. We will prioritize with our customers the key products in that area, supporting the renewable energy build program along with other similar programs is vital, especially in a more difficult trading environment. Cost reduction. Cost control is paramount important for us. Rebasing and rescoping our variable costs with a focus on areas in procurement. Fixed cost reduction with focus on discretionary spend over time, subcontractors and vacancy management, all of this intensifying within the next half year. Asset capacity. Improving our asset productivity or putting differently, sweating our assets. Necessitate better utilization, production yield and overall improvement in reliability. This is particularly important in the coke-making and long steel businesses. Furthermore, we need to ensure that we get a credible return for the higher maintenance spend incurred. Strategic raw materials, the next phase of the Thabazimbi iron ore mine stockpile beneficiation project will be operational in the second half of the year. We will also undertake a feasibility study into the long-term mining opportunities at the Thabazimbi mine. We will continue to explore opportunities to accelerate the regionalization of hard coking coal opportunities to replace as far as possible, imported coking coal. Energy. Significant scope exists to improve our energy efficiency. Beyond that, as mentioned earlier, we are progressing the 2 renewable energy projects, and we will also explore other power purchasing agreement opportunities. Logistics, we began to implement an integrated platform for the improvement of road logistics around rail availability and capacity. And we will continue to explore opportunities to participate in third-party rail access programs. Finally, management system. We're in line with our culture refresh. We are rebuilding our management system to ensure that responsibility, accountability, performance and consequent management is wired into our organization from top to bottom. This will be a multiyear program. Well, let's look at the outlook for the next 6 months. Building on the current year's improved safety performance remains a priority. International prices have corrected and also the softer domestic market will have an impact on the results for the second half. Managing through a challenging business environment or to familiar territory for ArcelorMittal South Africa, its employees, customers and suppliers. Against this backdrop, our focus areas are the preservation of hard-won gains over the past few years, intensifying the delivery of the value plan initiatives, agile management of asset and cost base and cash preservation in a downward price cycle. The dollar/rand exchange rate will continue to have an impact on our results, whether positive or negative. Finally, it remains worthwhile to reemphasize that despite the current challenges, the long-term investment case for steel remains. On that note, a reminder that we will publish our carbon footprint road map later this year. Thank you, ladies and gentlemen. We will now take questions.

Thank you very much, Kobus and Suretha for the presentation. I can see that this gentleman already posted some questions in the live Q&A platform. I'll read the first 3 questions which are all anonymous.

The question reads given as rated year, how should we think about your capital allocation priorities in the short to medium term? The second question. How would you rank CapEx, sustaining and expansion, better debt reduction, dividends? And the last question. Do you have any catch-up maintenance CapEx in the near term?

I think in terms of capital and balance sheet structure, I think we've been clear that we believe that this type of organization needs to be run on the cash positive scenario. So we will continue to focus on eliminating debt. From a CapEx perspective, our normal CapEx level is around ZAR 1.5 billion, which includes your normal CapEx as well as strategic CapEx. I think the complexity around CapEx and talking about CapEx going forward, is how will that fit into the decarbonization road map. So there's a lot of uncertainties that we still need to verify in delivering on the planned publish decarbonization road map for later in this year. We have built into our business plan catch-up maintenance which we are affecting as we speak. So even within that reduced fixed cost spend, there's more maintenance in the budget. And we will continue to execute that in the second half of the year, but it's not mind-boggling numbers.

Thank you, Kobus. The question from Peter. The acting Chief Financial Officer mentioned that the company intends to further reduce borrowing. What is the targeted level of borrowing? Are there any financing requirements in the next 12 months?

I think always -- I mean, you can see in our working capital numbers. There was a ZAR 2 billion build up. So normally, what will happen next quarter, we'll see a negative and then you'll see a release of working capital for the latter part of the year. I don't see an additional requirement for funding or capital. And I think in terms of the first question around debt reduction. I think I answered that in my first response.

Could you please expand on what your participation in train actually access program would look like?

I think it's -- if you look at our routes are normally outside the large bulk routes. So typically, what we have discussed and said to Transnet, we are happy to participate, I mean adding locals or adding wagons. We don't -- there's no legislated model for that yet. But we are working with experts to see what proposals we can put forward in trying to convince them to give third parties like ourselves access with -- hopefully, with joining some form of rail expert company.

A question from David. Are you expecting a smooth restart in Newcastle post the reline? Can you confirm that you are satisfied with the execution of the project to date?

David, I think 2 things. I think firstly, if you look at the quality of the work being done, I mean, that must be testimony to the ability of South Africans to deliver on an exceptionally large project. So the quality of work is exceptional, and it's mostly done by local people, own people and local contractors. And the ZAR 464 million pertained to the work being done on the blast furnace. There's also a lot of other work being done on the peripherals. So we're comfortable on quality of work being delivered. And we think the restart, we are well placed to do that. And we had a discussion this morning. We're actually going to start effectively later today -- tonight with the blowing process.

A question from David again. How much is still outstanding to your current comeback relating to the extended credit facility?

It's nothing, David, that has been settled. We still have -- I think it's on the balance sheet. We still have a 4.7.

Yes, 4.7.

4.7 term loan. But the creditor part has been dealt with.

Thank you very much, Kobus. Series of questions from [ Thabang ]. Congratulations on the great results and more importantly, on the significant improvement in our safety performance. The first question, what is the capacity of the Newcastle plant post the mid-life reline? You can take them one by one, Kobus.

Firstly, thank you for safety, and I must say it's an enormous effort by the broader organization to make a step change in our safety performance. But as I said in the presentation, [ Jack ] and the team's got a process there that's planned for multiyears to really make a permanent difference in that performance. Newcastle, it will be around 1.8 million tonnes capacity. But I think as you know, the market in South Africa is rather small. So we target normally production around 1 million tonnes. I think 65% is sort of the minimum level at which you can run that operation. Above that, maybe in the future, depend on your cost base, whether there's exports opportunities. But for the short term, our capacity target is 1 million of the 1.8 million tonnes.

The second question, what does your order book look like?

Well, our order book is shorter than normal, but longer than most people -- companies in the world. I mean, so it's always a 2-, 3-month type of environment. What we try to do is balance the order book to our delivery capability instead of a large order book and run with backlogs, we try to balance that. .

What were the volume losses from the strike and for the blast furnace ?

It was quite roughly -- lost sales, lost production, was 124,000 tonnes. And the rail was 235,000 tonnes roughly. So the impacts were big. I think -- remember if you stop a blast furnace, for 2 weeks due to a strike, effective loss of production is closer to a month. That's how long it take to restart those facilities safely and then it takes another 2 weeks to get material through the rolling shops.

Can you give us 2022 balance on the following: cruising production in volumes, sales volumes, coproduction and sales volumes, CapEx, and then with regards to regional sourcing of hard coking coal. What areas are you looking at? Is it Mozambique? What progress have you made with regards to this?

In terms of production numbers, I think it's quite evident that the second half volumes would be better than first half. So one can, I think, likely strip out or add these interruptions we had of largely 350,000 tonnes, and you get to a good proximity of the second half volumes, also given that December is normally half a month. CapEx, I mean, I think we spent just over ZAR 800,000 with a lot of CapEx supposed to be the back end of this year. I don't think we give guidance of CapEx, but one should expect that number for second half to be at least around ZAR 1 billion to ZAR 1.3 billion because we had quite a chunky number in our business plan. But execution becomes a bit problematic. I mean, there's much more supply delays in the world than people are aware of. So many of our projects are delayed due to inavailability of either space, products expertise from overseas. In terms of our coking coal, I mean, we're looking everywhere. Mozambique is one of those areas. That's all I want to say about that.

Question from [ Neste ]. How much did poor rate performance caused the company during the first half in [indiscernible].

ZAR 650 million...

ZAR 650 million.

ZAR 650 million. It's in our presentation on the EBITDA bridge.

Thank you, Kobus. With the Solar Energy projects will likely be funded on or off balance sheet, what is the anticipated capital spend? And when is the company likely to fund the energy projects?

The likely off balance sheet, that's the intention. I must probably have to ask, but I think it's around most probably to 1.4 billion per hundred megawatts is a good estimate of these projects. I think they are all fairly mature in costing them. So for every 100, that should be about the price. So 200 should be just below 3%, maybe 2.7%, they're around about. And what was the rest of the question? Okay. So it will be off balance sheet. If it comes to the rest of the funding of additional renewable or energy projects or decarbonization project, that is something that we work on because you have to align it with your future status quo CapEx program. As you will -- if you look, for instance, at the relining of the blast furnace, replacing a blast furnace with a large electric arc furnace will coincide with the envisage or the planned reline period. And the CapEx for the [ peer ] part of that, say, replacement should be roughly in line. I think the uncertainty around CapEx and complexity will come more to start producing green DRI or hydrogen. So I think that upfront energy part is still a lot of work to be done.

Thank you, Kobus. From [ Thabang ]. You are looking into carbon reduction projects, even potential reopening Saldanha, is it not time to start considering your loyal shareholders and reward them a with a small dividend?

I think the reopening of Saldanha is -- the status is still the same. To the extent that we can get scrap delivered in Saldanha on a competitive basis. And that, once again, is a rail issue. It can be a restart on a scrap basis. Longer term, Saldanha is sort of configured that the metrics can be converted to a hydrogen fueled asset at a reasonable CapEx. But to get there, you need either interim gas or hydrogen. So those are the things that the teams are working on with various stakeholders to see what can be done and why when. I think the dividend issue is related to my first response around getting the balance sheet less vulnerable.

Another question from [ Thabang ]. Why was the Africa Overland markets so weak?

I think it's a twofold. A bit of lower demand. But firstly, I think we are servicing our local market first. I think once we look at the product profile in terms of export, which parts go into Africa Overland and which are real exports, the real exports are not necessarily overlapping products for Africa Overland. So I think as soon as we, I mean after the strike, the 2 blast furnaces, Vanderbijlpark is operating at planned levels, very stable. Hopefully, we can say the same about Newcastle next week this time. And then we should have product available to increase Africa Overland dispatches.

Thank you, Kobus. I thought it was the last question. A question from Nick. Since 2018, ACL has spent ZAR 8 billion on assets, ZAR 5 billion on working capital and ZAR 3 billion on CapEx, enterprise value is only ZAR 7.5 billion. The current strategy has not been good for the share price. Do you think there should be a greater emphasis on running the business to generate a dividend for shareholders?

I think if -- thanks for the question. I think if you take in 2008 to now in context, remember it was preceded by 10, 15 years of loss-making. So I think, firstly, we were able to stop the negative cash flow that incurred in the business over many years. The ZAR 3 billion CapEx spend over the period is low in comparison to what asset base like this require. So we have underspent. There's opportunities to invest more in our business. In terms of working capital, I think working capital almost largely, as I said, unwind. We are running the organization at substantially lower stock levels, both on the outbound and inbound with the exception of at the moment due to the risk of rail performance. We have substantially built up iron ore stocks while our furnaces were down to ensure that we have lesser risk of disruptions in the latter part of the year. I think you're right in the company should get to a credibility and reliability that a dividend to shareholders can be expected on a more regular basis. I don't think we're there yet. And I think back to David's question earlier, about dealing with some of the trade creditors that was on the balance sheet for a long time overdue. That has also been dealt with and with big numbers. Thank you, Nick.

Thank you very much, Kobus. I think that was the last question. Ladies and gentlemen, please to remind you that the recording will be available on our website so is the presentation. On that note, let me ask, please, the CEO for his parting shots.

No, I think once again, thank you to all of you for taking the time to join us. I think as you are mostly aware, we are in a cyclical business, we had the benefits of a good cycle. And as a normal commodity business, we need to make sure that we are well prepared for a down cycle. Thank you once again.