Ispat Iscor Limited reported record interim headline earnings of R1551 million, up 36% over last year.

The company attributed the boost in earnings to significantly improved global steel prices, a 22% growth in domestic demand and a successful cost reduction drive. The company said that this more than offset the negative impact of the stronger rand and the final remuneration under the Business Assistance Agreement (BAA) with the LNM Group.

On a comparable headline earnings basis, excluding the impact of the non-recurring BAA, earnings increased by 65%.

Speaking at the company's financial results presentation in Johannesburg, Chief Executive, Louis van Niekerk said that despite significant increases in input costs, the company's cash cost per tonne of hot rolled coil was 4% lower than last year. However in US dollar terms, cost per tonne increased by more than 15% as a result of the stronger exchange rate.

"This puts pressure on our international competitiveness since the rand has strengthened significantly more than the currencies of other steel producing countries, resulting in a much greater relative impact on our position on the cost curve."

Van Niekerk said that the company continues to be successful in its cost reduction drive. The planned savings of R200 million per annum on its shared services restructuring program have started to flow through and should be fully effective by year end. The Business Assistance Agreement has realized savings for the six months to December 2003 of R687 million, increasing further to R1,326 million for the six months to June 2004.

"In view of the company's strong cash flow, the Board has decided to review the current distribution policy with a view to making an announcement on a reduction of capital before the end of 2004," said van Niekerk.

Ispat Iscor Limited is South Africa's leading steel producer.