The full year ended March 2016 has largely been a continuation of the tough trading environment experienced in the prior year.

Scaw recognised the need to adapt the business in line with a changing and increasingly competitive world. As such, we embarked on a group-wide restructuring process in August 2015, while continuing to invest in the future sustainability of the business.

As advances in production efficiency remain a priority, we commissioned a new R160 million high-volume moulding line. This investment boosts Scaw’s position as a global competitive manufacturer, particularly for foundry products.

The restructuring exercise is now complete. With a leaner structure, the business is better equipped to meet the challenges of a changing world.

Our industry

Commodity prices have remained at unprecedented lows, impacting industries beyond the commodity producers. Slowing growth from China has dampened demand for all major commodities. With Chinese demand fading, the competitive dynamics of steel products have increased significantly, as Chinese producers upped their focus on exports. The turmoil of FY16 has certainly taken its toll on the industry.

Scaw’s business divisions reflected a mixed performance given the company’s diverse products and markets. Locally, private and public sector demand remained subdued, with few significant infrastructure projects coming into the market. The dire situation in the mining industry witnessed the curtailment of spend to the essentials.

Despite intense competition, Scaw has managed to retain its market share for the majority of its product range by offering a competitive combination of price and service levels to compete against imported products. While demand in South Africa proved to be erratic, export initiatives absorbed surplus volumes.

Scaw’s stability and growth strategy provided a cushion; however, not enough to negate a subdued financial performance.

Safety, health and environment

Once again, Scaw is pleased to have achieved a full year of operation without a single fatality. We are proud of our strong safety ethic and I am grateful to every employee for making this possible.

Scaw’s TRIFR improved to 1,18 against 1,20 in the prior year.

The business continues to provide all employees with access to medical clinics across the group. Medical surveillances, hygiene surveys and voluntary counselling and testing for HIV continued unabated and witnessed increased participation. The group has a well-established HIV wellness programme and provides employees with antiretroviral treatment (read more here).

Reducing our impact on the environment remains a priority for Scaw. In FY17, a new fume extraction system will be commissioned at Scaw’s Union Junction site. The new system improves emission standards in line with future stricter standards and represents an investment of R210 million.

Scaw has made significant progress reducing its waste streams while benefiting from recovery of metal. Furthermore, as an energy intensive user, substantial progress continues to be made in reducing our energy consumption and accordingly our carbon footprint.

Transformation

Transformation is one of the strategic pillars Scaw has identified as essential in developing a sustainable business.

The introduction of the stricter revised B-BBEE codes has seen many businesses regress from their level rating as they embraced the new requirements. Conversely, Scaw’s strong resolve and commitment has seen Scaw leap to an outstanding level 2 rating under the new codes.

Scaw’s training school and programmes continue to impart vital skills to our employees while additionally providing much needed skills and experience in the form of apprenticeship, learnerships and internships to some 482 youngsters.

In the broader social context, Scaw is committed to making a change. Our enterprise and supplier development programmes are of the highest quality and our improved B-BBEE level 2 rating bears testament to this achievement.

Scaw’s commitment to advancing women in the workplace has taken shape with the formal launch of the Scaw women’s forum. See here for more details on this exciting initiative which will benefit current and future female employees of our group.

Strategic actions

Scaw’s strategy is reinforced by the desire to have businesses that are stable, agile, flexible, best in class, profitable, self-sufficient, sustainable, responsible, continuously improving, innovative, caring and respectful of all stakeholders and offering customers quality, value and satisfaction.

Measurable progress combined with robust initiatives currently under way indicate that management is already well advanced in stabilising the business in line with the strategic plan.

Scaw is more than just a producer of primary steel products. Beneficiation of local raw materials combined with meaningful value addition is a core objective. Given the challenging local economic climate, Scaw strives to maximise local content.

While the critical review of Scaw’s businesses yielded the restructuring exercise, the group continues to review the business to ensure that optimal value is being derived and that growth opportunities are pursued.

Outlook

We expect the global steel manufacturing market to remain subdued for the medium term. Domestic GDP forecasts combined with market intelligence point to a difficult period ahead.

Scaw management remains confident that although a difficult restructuring process was undertaken last year, the group is now in a stronger position to defend its markets and pursue opportunities beyond its historical market to diversify and mitigate market vagaries.

Appreciation

I wish to express my sincere appreciation to all of Scaw’s employees for their commitment and contribution through what has proved to be a challenging year. I am also grateful to our Board and Chairman for their unwavering support and guidance.

Finally, I also wish to thank our business partners, suppliers and customers for their invaluable support.

Markus Hannemann
CEO

13 June 2016