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ArcelorMittal South Africa to buy steel manufacturer, swings into H1 loss

Credit: REUTERS/Francois Lenoir

ArcelorMittal's South Africa business has agreed to buy steelmaker Highveld Structural Mill (HSM) for 300 million rand ($20.9 million), it said on Thursday, as it seeks to expand its manufacturing capabilities.

JOHANNESBURG, Aug 1 (Reuters) - ArcelorMittal's South Africa business ACLJ.J has agreed to buy steelmaker Highveld Structural Mill (HSM) for 300 million rand ($20.9 million), it said on Thursday, as it seeks to expand its manufacturing capabilities.

The company, majority-owned by ArcelorMittal MT.AS, had a manufacturing agreement with parent company Highveld Steel, supplying steel products to HSM for processing into heavy structural steel, and an option to purchase HSM.

"The structural mill is the only facility of its kind in Africa with the ability to produce structural steel, including material for railway lines. This is a unique position to supply markets locally and in the African region," it said in a statement.

ArcelorMittal's South African unit said it will pay 150 million rand in cash and a further 150 million rand after a payment trigger, which it will fund from new borrowings and internal sources.

The company reported an interim headline loss of 638 million rand compared to interim headline earnings of 54 million rand for the same period last year as reduction in steel consumption in its home market weighed on profits.

"Locally, the South African steel industry continues to face significant challenges. The domestic economy has remained close to recessionary levels as investment and infrastructural spending in the country remained subdued," the company said.

Last month it said it planned to cut more than 2,000 jobs as it struggles with cheap imports, rising costs and a flagging local economy.

ArcelorMittal South Africa, which has for some time complained about cheap imports eating into its business, said ongoing challenges in the steel industry as well as a weak South African economy had hit its performance.

($1 = 14.3667 rand)

(Reporting by Tanisha Heiberg; editing by David Evans)

((Tanisha.Heiberg@thomsonreuters.com; +27117753034; Reuters Messaging: tanisha.heiberg.thomsonreuters.com@reuters.net))

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