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BSI Steel ekes out a profit

Despite challenging trading conditions.

CAPE TOWN – Alt-X listed BSI Steel on Thursday reported a 58.8% drop in headline earnings per share for the year to March 31. Although revenues were relatively flat, profit for the year slipped from R36.8 million to R2.3 million.

Cash flows from operating activity were down more than 50% from R93.1 million to R46.5 million. The company also continues to reflect a negative cash position on its balance sheet due to a sizeable bank overdraft, but this did improve marginally over the year.

Conditions in the local steel industry are tough at the moment, with producer Evraz Highveld Steel and Vanadium currently in business rescue. South Africa’s other major steel producer, ArcelorMittal, has reported headline losses of R227 million and R224 million over the last two years.

BSI does not produce any steel itself, but sources, processes and distributes it across most of Southern Africa. It has operations in South Africa, Mauritius, the DRC, Mozambique and Zambia.

“The financial year was characterized by tough trading conditions in South Africa and in export markets, especially Zimbabwe and Zambia,” the company said in a statement. “Protracted violent strikes in the platinum and metal industries during the year, together with electricity blackouts in the second half of the year, severely impacted the demand for steel. This put pressure on margins, although BSI managed to maintain tonnage output, thus increasing market share in a declining market.”

BSI also impaired R10 million on iron ore held in subsidiary Sentinel Bridge.

The business went through a restructuring over the year, which impacted profitability, but reduced operating costs. A number of loss making operations were closed as part of this process, which the company estimates will result in a decrease of R8 million per month in operating expenses.

BSI declared a dividend of two cents per share, to take its total dividends for the year to four cents per share and a yield of close to 10%. No dividends were declared in 2014.

The share did not trade at all on the day, closing at its opening price of 41 cents. It is 29.31% down over the last twelve months, and 25.45% lower year to date.

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