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ARCELORMITTAL SOUTH AFRICA LIMITED

ACL JSE Listed

Investment Analysis: ArcelorMittal South Africa Limited (ACL)

Date: 12 January 2026 Analyst Role: Senior Equity Analyst, JSE Desk Subject: Deep Value / Distressed Asset Review

Step 1: Data Gathering & Source Verification

The analysis is based on the most recent financial data available as of January 2026, specifically the 2024 full-year audited results and the interim results for the first half of 2025.

  • Reporting Period 1 (Interim): Reviewed Condensed Consolidated Results for the six months ended 30 June 2025.

  • Source: ArcelorMittal SA Interim Results

  • Reporting Period 2 (Annual): Integrated Annual Report for the year ended 31 December 2024.

  • Source: ArcelorMittal SA Annual Financial Statements

  • Key SENS Announcement (Strategic): "Update on Wind Down of Longs Business" (September 2025).

  • Context: This announcement confirmed the commencement of the closure of the Long Steel Products business (Newcastle Works) after funding discussions with the government failed to yield a sufficient rescue package.

Step 2: Metric Extraction

| Metric | Value | Notes | | --- | --- | --- | | Market Cap | ~R1.48 Billion | Small-cap territory; significantly shrunken from historical highs. | | Current Price | ~130 cents | Trading near all-time lows. | | Dividend Yield | N/A (0%) | Company is loss-making and cash-preservation is paramount. No dividends declared in the last 12 months. | | Liquidity Check | Medium/High Risk | Average daily volume fluctuates between 400k - 700k shares. While not completely illiquid, the low rand value of trades makes it difficult for institutional exits without moving the price. | | P/E Ratio | N/A | The company is in a deep loss position (Negative Earnings Per Share). Traditional earnings multiples are not useful here. | | NAV per Share | ~176 cents | Critical Metric. Based on Dec 2024 Audited figures. The stock trades at a ~26% discount to this NAV, but this book value is likely under severe pressure due to the write-downs associated with the Longs Business closure in late 2025. |

Step 3: Operational & Strategic Analysis

Business Overview

ArcelorMittal South Africa (ACL) is the largest steel producer in sub-Saharan Africa. Historically, it operated two main divisions:

  1. Flat Steel Products (Vanderbijlpark): Plates, coils, and sheets used in automotive, appliances, and heavy engineering.
  2. Long Steel Products (Newcastle): Bars, wire, and rods used in construction and fencing. Critical Pivot: As of late 2025, the company is in the process of shutting down the Long Steel division to focus exclusively on the Flat Steel business.

Performance Trend: Contraction & Survival

The trend is deeply negative, characterized by a "shrink to survive" strategy.

  • Revenue: Contracting significantly. The loss of the Longs division removes a massive chunk of top-line revenue, although it was loss-making.
  • Margins: Negative. The cost base (electricity, logistics, raw materials) has risen faster than steel prices.
  • Balance Sheet: The Dec 2024 NAV collapse (from ~700c in 2023 to ~176c in 2024) reflects massive impairments. The 2025 closure costs (retrenchments, environmental remediation) will further strain cash reserves.

Sector Context: The "Perfect Storm"

The SA steel sector is battling three simultaneous macro headwinds:

  1. China Overcapacity: Domestic demand is weak, and global markets are flooded with cheap Chinese steel exports, suppressing prices below ACL's cost of production.
  2. Infrastructure Collapse: The collapse of Transnet (rail) forces ACL to use expensive road transport, destroying margins.
  3. Weak Local Demand: The lack of large-scale government infrastructure projects (construction) has decimated the market for Long products.

Step 4: The Verdict

Bull Case (The "Phoenix" Scenario)

  • Reason to Buy: Post-Restructuring Profitability. If ACL successfully sheds the bleeding Longs business and the associated fixed costs, the remaining Flat Steel business could return to profitability. It serves the automotive sector (which is relatively stable). Buying at ~130c is a bet that the remaining "smaller but better" company is worth more than the current market cap.

Bear Case (The "Value Trap" Scenario)

  • Reason to Sell: Execution & Remediation Risk. Shutting down a massive integrated steel plant (Newcastle) is incredibly expensive. Retrenchment packages (Section 189), environmental cleanups, and contract cancellations could burn through the remaining cash. There is a real risk of a rights issue (dilution) or business rescue if the closure costs exceed estimates.

Fair Value Estimate

  • Range: R1.00 – R1.50
  • Logic: The stock is trading at a discount to its accounting NAV (176c), but its tangible/realizable NAV is likely lower due to closure costs. The current price (130c) fairly prices in the uncertainty.

Final Rating: SPECULATIVE HOLD

  • Analysis: This is no longer an "investment" in the traditional sense; it is a turnaround option.
  • Existing Holders: Selling now locks in a massive loss at the bottom. If you can stomach the volatility, it is worth holding to see if the "Flat Steel only" strategy stabilizes cash flow in H1 2026.
  • New Buyers: Only suitable for high-risk, contrarian portfolios. The risk of capital loss remains very high.
AI Generated Analysis Last Updated: 2026-01-14