Annual Report 2012 EUROPE BELGIUM BULGARIA ... - Duferco

Duferco Steel Processing
Republic of South Africa
Production (mt)
(01/10/11 - 30/09/12)
292,000 267
Employees
as of 30/09/12
Whilst DSP’s HRC
supply continues
to be sourced locally,
zinc is no longer
produced in
South Africa and
during FY2012,
DSA assisted in
the negotiation of
a long-term supply
agreement for DSP
at very competitive
rates.
DSP endured another difficult year in 2012
that presented significant operational and
commercial challenges.
The first quarter was marred by a national
shortage of Liquid Petroleum Gas (LPG) in
South Africa which affected not only DSP
but the majority of the country’s industry,
sparking the Government to launch a
much-needed study into the national
supply of LPG for the future. A fire within
the plant was well contained, but added
to the loss of production time caused
by a separate incident that resulted in a
major failure in the electricity sub-station.
Whilst DSP’s HRC supply continues
to be sourced locally, zinc is no longer
produced in South Africa and during
FY2012, DSA assisted in the negotiation
of a long-term supply agreement for DSP
at very competitive rates. These added
operational difficulties were exacerbated
by extremely tough market conditions
internationally, which forced a major shift
in DSP’s commercial focus from export
to domestic in a bid to maximise both
margins and also throughput in the facility.
When analysed numerically, 2012 saw a
marked downturn on 2011 with a drop in
both turnover and deltas. The increasing
competitiveness of Asian pricing,
coupled with flat demand and global
oversupply, saw an overall year-on-year
decrease of 51% of export sales; however,
encouragingly this was countered by a
48% increase in domestic sales. DSP’s
cost of production remains highly
competitive regionally, but the increasing
utility costs in South Africa remain a
cause for real concern as we continue to
compete with Asian producers. Electricity
tariffs increased 16% during FY2012, with
a further 8% uplift per year tabled over
the next 5 years. Despite this, DSP’s full
production costs / MT for HDG and CRFIN
decreased year-on-year, due largely to the
weaker ZAR, reductions in yield loss and
effective re-negotiation of major supply
contracts.
Manpower issues have been prevalent
during the year as we have weathered
a draw on resources from external
companies outside of the steel sector.
Whilst difficult to manage, these
circumstances have not detracted from
DSP’s efficiency which is testament to
the outstanding levels of team-work and
dedication amongst the entire workforce.
Management is confident that DSP has
the human resource capital to meet the
challenges facing it in the future.
As we look to 2013, many of the same
issues faced this year will remain extant,
particularly when viewed against the
backdrop of continuing uncertainty at
the macro-economic level and when
coupled with increasing socio-economic
and political challenges domestically.
External issues aside, the focus for
DSP’s Management is to continue to
contain costs, improve overall efficiencies
and grow sales. Capital projects are
planned to reduce LPG consumption
and also further reduce yield loss, whilst
concurrently wider trials and studies will
be conducted into streamlining domestic
transport options and also expanding
DSP’s product range. This latter
development will be a key building block
in the evolution of DSP as we seek to
develop a wider sales portfolio and higher
margins.
32 | Duferco Annual Report 2012