Steel producer ArcelorMittal South Africa posted "disappointing results" for the year ended December 31 2009.

"2009 was undoubtedly one of the toughest years experienced by the company and our disappointing financial results for the year reflect the poor trading conditions," CEO Nonkululeko Nyembezi-Heita said in a statement on Wednesday.

"But we are encouraged by the gradual improvement in our business during the second half of the year," Nyembezi-Heita added.

She said both the recession and the strength of the rand/US dollar exchange rate had severely impacted the domestic steel industry.

'Pronounced turnaround'

ArcelorMittal South Africa posted a headline loss of R440-million for 2009 compared to a profit of R9484-million in the previous financial year.

However, the company's financial performance improved as the year progressed.

A headline loss of R844-million during the first half was followed by a profit of R404-million in the second half.

"This turnaround was even more pronounced in the fourth quarter with headline earnings of R469-million compared to an average quarterly loss of R303-million during the first three quarters," the group said.

The better performance in the latter part of 2009 was driven by higher sales volumes and improved prices following the slight recovery in the global economy as well as a lower cost base, led by cheaper coal contracts, the company said.

Following the headline loss of R440-million for the year, no dividend would be paid.

"However, our dividend policy of declaring one third of headline earnings remains," ArcelorMittal South Africa said.

Looking ahead, the company expected its performance to continue to improve during 2010.

Improving demand for steel

This was as a result of the forecast economic recovery, continued re-stocking among merchants and steadily improving demand for steel.

"We anticipate a gradual recovery this year in line with an upturn in many of the markets we service.

"While domestic steel prices remain subdued, we are cautiously optimistic that global demand will continue to show steady improvement during the year," Nyembezi-Heita said.

A further rise in headline earnings on the fourth quarter's R469-million profit was forecast, with the extent of the increase depending on a number of variables, notably the rand/US dollar exchange rate, she added.