for the year ended 31 December 2014
1. Segmental report
Segment information is presented only at group level, where it is most meaningful. Operating segments are identified on the basis of internal reports about components of the group that are regularly reviewed by the chief operating decision-maker (the executive committee) in order to allocate resources to the segment and to assess its performance.
The group’s reportable segments are as follows:
- Flat steel products consisting of the Vanderbijlpark Works, Saldanha Works and ArcelorMittal South Africa Distribution.
- Long steel products consisting of the Newcastle Works, Vereeniging Works and decommissioned Maputo Works.
- Coke and Chemicals undertaking the processing and marketing of by-products and the production and marketing of commercial-grade coking coal.
- Corporate and Other, housing sales and marketing functions, procurement and logistics activities, shared services, centres of excellence, the decommissioned Pretoria Works site, available-for-sale investments and the results of the non-trading consolidated subsidiaries and special purpose entities.
Segment profit from operations represents the profit earned by each segment without the allocation of after-tax profits of equityaccounted investments, net interest income, income from investments and income tax expenses.
All assets and liabilities are allocated to the operating segments, other than for the following items that are exclusively housed in the corporate and other segment, reflecting the manner in which resource allocation is measured:
- Assets not allocated to operating segments:
— results of consolidated subsidiaries and special purpose entities, other than for Saldanha Works which is a subsidiary housed within the flat steel products segment;
— investments in equity-accounted entities;
— available-for-sale investments;
— cash and cash equivalents; and
— income tax, capital gains tax and value added tax-related assets, as applicable.
- Liabilities not allocated to operating segments are income tax, capital gains tax and value added tax-related liabilities, as applicable.
2. Loss per share
4. Change in accounting estimates
The useful lives of certain items of property, plant and equipment were reassessed and revised to reflect the current estimated life over which the group has the ability and intention to use such assets. The effect of these changes on the actual depreciation expense for the year ended 31 December 2014 is a reduction of approximately R109 million, of which R53 million relates to the first six months ended 30 June 2014. In addition, the company revised the method of estimation of net realisable value relating to general spare parts from that based on age to that based on the actual observed condition of the spares. This change resulted in the reversal of the previous write-down of inventory of R120 million.
5. Fair value estimates
Some of the group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined, particularly the valuation techniques and inputs used.
6. Contingent liabilities
As reported in prior periods, and dating back to 2007, the Competition Commission (the Commission) has referred five cases against ArcelorMittal South Africa Ltd (ArcelorMittal South Africa) to the Competition Tribunal for prosecution. ArcelorMittal South Africa rejects the allegations made in each of these cases and is accordingly defending itself.
In addition, the Commission is formally investigating one further complaint against ArcelorMittal South Africa relating to alleged excessive pricing of tinplate and flat steel in general. Joined to this investigation is an investigation into alleged excessive pricing arising from the iron ore surcharge introduced by ArcelorMittal South Africa for the period May 2010 to July 2010. ArcelorMittal South Africa is cooperating fully with the Commission in this investigation and continues to deliver all information and documentation as and when called upon to do so.
7. Subsequent events
The directors are not aware of any matters or circumstances arising since the end of December 2014 to the date of this report that would significantly affect the operations, the results and the financial position of the group.