ArcelorMittal’s South Africa business has agreed to buy steelmaker Highveld Structural Mill (HSM) for R300 million, it said on Thursday, as it seeks to expand its manufacturing capabilities.
The company, majority-owned by ArcelorMittal, had a manufacturing agreement with parent company Highveld Steel, supplying steel products to HSM for processing into heavy structural steel, and an option to purchase HSM.
“The structural mill is the only facility of its kind in Africa with the ability to produce structural steel, including material for railway lines. This is a unique position to supply markets locally and in the African region,” it said in a statement.
ArcelorMittal’s South African unit said it will pay R150 million in cash and a further R150 million after a payment trigger, which it will fund from new borrowings and internal sources.
The company reported an interim headline loss of R638 million compared to interim headline earnings of R54 million for the same period last year as reduction in steel consumption in its home market weighed on profits.
“Locally, the South African steel industry continues to face significant challenges. The domestic economy has remained close to recessionary levels as investment and infrastructural spending in the country remained subdued,” the company said.
Last month it said it planned to cut more than 2 000 jobs as it struggles with cheap imports, rising costs and a flagging local economy.
ArcelorMittal South Africa, which has for some time complained about cheap imports eating into its business, said ongoing challenges in the steel industry as well as a weak South African economy had hit its performance.