ArcelorMittal SA's business rebounded in the third quarter of the year, the steel company said on Wednesday.

Revenue increased to R6.9-billion from R5.8-billion in the second quarter of 2009 while operating profit was at R30-million, following a loss of R177-million in the previous quarter, the company said in a statement.

While a headline loss of R65-million was reported for the third quarter, this was a marked improvement on the R607-million loss reported in the previous quarter, ArcelorMittal SA said.

Its improved operating performance was the result of an increase in sales volumes — up 19 percent on the previous quarter — moderately higher steel prices and significantly reduced costs, lead by lower raw material input prices.

"A significant improvement in demand from the ferro-alloy industry also resulted in higher profits for the coke and chemicals business," the company said.

Commenting on the results, ArcelorMittal SA CEO Nonkululeko Nyembezi-Heita said she was pleased with the rebound in the company's business during the third quarter.

"The performance is not only due to higher sales volumes and reduced raw material prices, but also reflects improved operational efficiencies and the impact of the cost-cutting measures we have instituted since September last year," she said.

"While domestic steel prices showed modest rises during the quarter they did not mirror the more robust price increases of overseas markets because of the continued strengthening of the rand/US dollar exchange rate," Nyembezi-Heita said.

Lower coal prices and higher production volumes had a marked impact on cash costs, the company said.

Costs per ton of hot rolled coil were down by 8.7 percent compared to the previous quarter and by 10.9 percent compared to the corresponding period last year, while the cash costs of billets dropped by 12.3 percent, and 17.8 percent respectively.

"Cash flow for the quarter was a positive R684-million and boosted the company's cash balance to R3697-million."

Turning to operations, the company said liquid steel production rose by 12 percent to 1 365 000 tons from the second quarter, but was still 26 percent lower than the corresponding period in 2008.

Blast Furnace C at Vanderbijlpark Works was being prepared for a restart should market conditions justify an increase in volumes, while both Newcastle Works and Saldanha Works were already operating at full production.

"Production levels in the first six months of 2009 were at about 60 percent of total capacity but increased to over 70 percent in quarter three," the company said.

Nyembezi-Heita said results were expected to strengthen further as improved domestic demand drove higher sales and the impact of lower raw material prices was felt for a full three month period.

"However, the rand's performance remains a critical variable in our outlook for the quarter," she said.

ArcelorMittal SA confirmed that settlement was reached with Harmony Gold and DRD Gold in a Competition Commission case of excessive pricing brought against the company in 2004.

"This was concluded without any admission of guilt by ArcelorMittal South Africa and is in the best interests of both companies."

Nyembezi-Heita said the company continued to co-operate with the Competition Commission to resolve cases still under investigation.

It was also announced that Khotso Mokhele had informed the board of directors that he would resign as chairman with effect from close of business on 4 December 2009.

"The board thanks Dr Mokhele for his leadership over the past 10 years," the company said.

Sapa

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