Unable to maintain earnings growth owing to tight market

Highveld Steel & Vanadium, a unit of Russia's Evraz, plans to cut output to reflect a sharp decline in demand, and forecast slower earnings growth in the last quarter sending its shares lower.

Highveld Steel and Vanadium (Hiveld), South Africa's second-biggest steel maker, said since early October this year, steel sales to the domestic and international markets had fallen "significantly", due to stock build up by merchants in the domestic market and the global financial crisis.

"Since our domestic customers are over-stocked and in view of the pending December closures of the construction and associated industries, the current order book is extremely low. We have therefore decided to reduce production to reflect the new level of demand," the company said in a statement.

Hiveld also said it would cut costs and, forecast the tight market conditions would make it "impossible" for the company to sustain its earnings for the last quarter of 2008.

Hiveld's shares lost 2.18 percent to R61.61, against a 0.19 percent fall in the All Share index.

Hiveld said that its headline earnings per share for the nine months to end September more than doubled, soaring to 2 082.5 cents from 967.3 cents in 2007, largely buoyed by huge price increases on both steel and vanadium products.

It declared a dividend of R14 per share. – Business Report