bold spirit - ArcelorMittal South Africa

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182 ArcelorMittal South Africa Annual Report 2010 26. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT continued 26.8 Liquidity risk management continued (iii) Derivative financial instruments The following table details the liquidity analysis for derivative financial instruments. The table has been drawn up based on the undiscounted net cash inflows/(outflows) on the derivative instruments that settle on a net cash-settled basis. No derivative financial instruments are settled on a gross basis. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rate and foreign currency forward curves existing at the reporting date. Financial assets/(liabilities) 0 – 6 months Rm 7 – 12 months Rm 1 – 5 years Rm >5 years Rm Discount Rm Carrying amount Rm Group and company For the year ended 31 December 2010 Embedded derivatives 54 63 161 (27) 251 Total 54 63 161 (27) 251 For the year ended 31 December 2009 Embedded derivatives 39 46 180 (32) 233 Total 39 46 180 (32) 233 26.9 Capital risk management The group and company objectives when managing capital are: • to safeguard the ability to continue as a going concern, so as to be able to continue to provide returns for shareholders and benefits for other stakeholders; and • to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The amount of capital is set in proportion to risk. The capital structure is managed and adjusted in light of changes in economic conditions within the domestic and global steel industry and the risk characteristics of the underlying assets. The group and company overall strategy remained unchanged for 2010. Consistent with others in the industry, the group and company monitor capital on a debt-to-total shareholders’ equity basis. Net debt is total interest-bearing borrowings including finance lease obligations less cash and cash equivalents. Total shareholders’ equity is as per the statement of financial position. Group 2010 Rm 2009 Rm 2010 Rm Company 2009 Rm Cash and cash equivalents 3 506 4 348 3 155 4 222 Less: total interest-bearing borrowings and finance lease obligations (604) (655) (434) (467) Net cash and cash equivalents 2 902 3 693 2 721 3 755 Total shareholders’ equity 22 556 21 925 24 837 24 081 Gearing ratio % 0 0 0 0
183 ArcelorMittal South Africa Annual Report 2010 27. RELATED PARTY TRANSACTIONS During the year the company and its subsidiaries, in the ordinary course of business, entered into various sales and purchase transactions with its jointly controlled entities, its associates and other entities within the greater ArcelorMittal Group. These transactions occurred under terms that are no less favourable to the company than those arranged with third parties. Companies within the greater ArcelorMittal Group The company purchased products and services to the value of R3 897 million (2009: R3 045 million) from, and sold goods to the value of R22 million (2009: R31 million) to other companies in the ArcelorMittal Group. The outstanding balances at year-end are as follows: • Included in trade and other receivables, R23 million (December 2009: R15 million). • Included in trade and other payables, R412 million (December 2009: R447 million). ArcelorMittal South Africa paid a corporate service fee of R39 million (2009: R18 million) to ArcelorMittal Group for corporate services rendered and have provided for a research and development fee of R87 million to ArcelorMittal Investigation (2009: R187 million). Jointly controlled entities and associates Interest income from jointly controlled entities of R2 million (2009: R3 million) is included in note 8. The group purchased goods and services to the value of R92 million (2009: R72 million) from, and sold goods to the value of R6 557 million (2009: R5 172 million) to its equity-accounted entities. The outstanding balances at year-end are as follows: • Included in trade and other receivables, R217 million (December 2009: R161 million). • Included in trade and other payables, R12 million (December 2009: Rnil). • Included in the carrying value of jointly controlled entities are long-term loans of R76 million (December 2009: R9 million). Subsidiaries Details of income from investments and indebtedness in subsidiaries are disclosed in notes 8 and 15 respectively, and in Annexure 2. ArcelorMittal South Africa received a management fee of R172 million (2009: R166 million) from Saldanha Steel (Proprietary) Limited for ArcelorMittal South Africa employees employed at Saldanha Works. Directors Executive directors are defined as key senior management. Details relating to directors’ remuneration and shareholdings (including share options) in the company are disclosed in the Directors’ Remuneration Report. Senior employees Details relating to option and share transactions are disclosed in note 29. Shareholders The principal shareholders of the company are detailed in the Analysis of Shareholders schedule on page 198.
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