Annual Report 2012 EUROPE BELGIUM BULGARIA ... - Duferco

Trading
As mentioned in previous
communiqués we have, over
the past 6 years, developed a
substantially more balanced
business portfolio supported by a
geographically diverse operating
base.
We added to this strategy in
December 2012 with the acquisition
of another service centre in Perù to
further complement our processing
and distribution coverage in South
America.
Whilst our overall steel tonnages
remained flat year on year, this
does not reflect our long-standing
push in value-added products
sectors; this was perhaps best
evidenced in our automotive steels
business.
This initiative has started producing
dividends with successful trials
and annual contracts agreed with
a number of major global car
producers for 2013.
In the new financial year, we have
acquired a small service centre
catering to this market which will
assist us in providing a sustainable
service to our key automotive
accounts.
Another leg to our value-added
push has been to establish
stocking and distribution hubs in
Turkey and South Africa which will
focus on engineering and mining
related steel products.
It will take some time to produce
satisfactory results from these
endeavours, but we will start
building market share from 2013
onward.
We are particularly pleased with
our raw materials diversification
programme which saw a volume
gain of circa 50% year on year,
largely driven by coking coal.
Margins are thin whilst we build
our market share, but the risk is
well managed and we feel this is
an excellent platform to continue
raw materials growth in 2013 and
onward.
Our industrial assets performed
in line with the market and as
such had a negative impact on
our overall results. In addition to
the divestment of Duferco Danish
Steel A/S, we have taken further
steps in Duferco Steel Processing
(Pty) Ltd and Makstil AD to improve
the industrial results through new
commercial strategic initiatives
coupled with cost reduction
measures.
In the overall scheme of our
business, the industrial assets
do not present a major challenge
to our results going forward, but
nonetheless no loss should be
acceptable.
From a finance perspective,
liquidity remains healthy with
increased levels of cash reserves.
All our bank facility financial
covenants are in full compliance
and well exceed the test
thresholds. Trade credit line
utilisation on aggregate averages
about 60% and with our strong
balance sheet we feel well placed
to cope with the frankly marginal
18 | Duferco Annual Report 2012