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Metmar Limited FY 2012 results
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Metmar Limited FY 2012 results

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Metmar Limited FY 2012 results

Metmar Limited FY 2012 results

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    Metmar Limited FY 2012 results Metmar Limited FY 2012 results Document Transcript

    • Audited abridged financial results for the year ended 29 February 2012 www.metmar.com Revenue up 14% to R2,6 billion Headline earnings per share up 48% to 34,1 cents Audited abridged consolidated statements of financial position 2 Current assets Inventories Trade receivables Other receivables Investment in equity instruments Cash and cash equivalents 3 Non-current net assets held-for-sale Total assets EQUITY AND LIABILITIES Equity and retained earnings Non-current liabilities Financial liabilities Deferred taxation Current liabilities Financial liabilities Trade and other payables Trade finance facilities Bank overdrafts Total equity and liabilities Net asset value per share (cents) Net tangible asset value per share (cents) Number of shares in issue 57 469 155 090 49 398 310 763 3 782 576 502 56 006 61 914 – 243 238 4 331 365 489 339 696 755 295 26 570 27 905 88 313 1 237 779 5 443 1 819 724 269 856 525 877 97 050 – 70 192 962 975 5 443 1 333 907 608 572 608 572 73 400 15 659 89 059 71 384 399 448 526 257 48 765 1 045 854 1 819 724 277,53 210,81 232 440 480 ASSETS Non-current assets Property, plant and equipment Goodwill and intangible assets Investment in associate Other non-current assets Deferred taxation 28 February 2011 R’000 76 437 52 336 128 773 Note 29 February 2012 R’000 645 097 645 097 at 17 581 348 963 247 927 21 805 636 276 1 333 907 261,82 235,18 232 440 480 Audited abridged consolidated statements of comprehensive income Profit for the year attributable to: Equity holders of the Group: Profit for the year from continuing operations (Loss) for the year from discontinued operations Profit for the year attributable to equity holders of the Group Total comprehensive income attributable to: Equity holders of the Group Non-controlling interests 69 795 (23 057) 46 738 4 763 – 51 501 46 746 (8) 46 738 329 (337) (8) 80 205 – 80 205 7 (300) (388) (688) (3 887) – (3 887) 6 2 326 774 (2 144 007) 182 767 56 470 (140 587) 4 232 102 882 – 102 882 (26 467) (6 320) – 70 095 (22 669) 47 426 80 205 (3 887) 76 318 Capital gain on disposal of investment Operating profit Net finance cost Fair value adjustments Income from equity accounted investment Profit before taxation Taxation Profit from continuing operations Discontinued operations (Loss) before taxation Taxation (Loss) from discontinued operations Total Profit before taxation Taxation Profit for the year Other comprehensive income Movement in foreign currency reserves Revaluation of investments Total comprehensive income Profit for the year attributable to: Equity holders of the Group Non-controlling interests Total profit for the year Non-controlling interests (Loss) for the year from continuing operations (Loss) for the year from discontinued operations 2 644 545 (2 358 581) 285 964 36 799 (229 103) 9 431 103 091 4 800 107 891 (29 381) 27 980 1 657 108 147 (31 829) 76 318 (2 312) (12 187) 61 819 4 5 28 February 2011 R’000 108 147 (31 829) 76 318 Note 29 February 2012 R’000 – – – for the years ended Continuing operations Revenue Cost of sales Gross profit Other Income Operating expenses Fair value movements on forward exchange contracts 47 097 (351) 46 746 108 816 (46 997) 61 819 Earnings per share Basic and diluted (cents) 51 509 (8) 51 501 34,5 22,0 8 Audited abridged condensed Group statements of changes in equity Share capital and premium R’000 Balance at 28 February 2010 New share issue Total comprehensive income for the year Share premium distribution to shareholders Purchase of additional non-controlling interest in subsidiaries Balance at 28 February 2011 Total comprehensive income for the year Dividends paid Purchase of additional non-controlling interest in subsidiaries Business combinations Balance at 29 February 2012 METMAR LIMITED Incorporated in the Republic of South Africa (Registration number 1998/007269/06) Share code: MML & ISIN code: ZAE000078747 (“Metmar” or “the Company” or “the Group”) Foreign currency reserve R’000 Revaluation reserve R’000 Acquisition of shares in subsidiary R’000 Retained earnings R’000 Noncontrolling interests R’000 Total equity R’000 (16 474) 127 641 1 005 – – – – – 501 887 – 755 – 487 173 127 641 – 4 763 – – 46 746 (8) 51 501 (50 531) – – – – – (50 531) – – – (5 704) – (1 508) (7 212) 60 636 5 768 – (5 704) 548 633 (761) 608 572 – – (1 483) – 30 094 – – – 80 205 (25 568) (46 997) (1 000) 61 819 (26 568) – – – – – – (21 843) – – – 533 22 584 (21 310) 22 584 60 636 4 285 30 094 (27 547) 603 270 (25 641) 645 097 Audited abridged condensed Group cash flow statements for the years ended 29 February 2012 R’000 28 February 2011 R’000 129 574 (29 381) (45 918) 54 275 (78 853) 15 739 (8 839) 48 387 39 548 (24 812) (26 467) (2 906) (54 185) (124 192) 128 818 (49 559) 97 946 48 387 Cash flows generated from/(used in) operating activities Cash generated from/(used in) operations Net finance costs Taxation paid Net cash generated from/(used in) operating activities Net cash used in investing activities Net cash generated from financing activities Total cash movement for the year Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Net asset value per share up by 6% to 277,5 cents Commentary Financial performance Metmar achieved a pleasing operating performance for the year ended 29 February 2012, as a result of the strong turnaround in trading results in the second six months of the financial year. Annual revenue grew by 14% to R2,6 billion (2011: R2,3 billion). The gross profit margin showed a substantial improvement to 11% (2011: 8%), underpinned by the strong performance of the trading activities as well as benefits of implementing the new strategy which led to increased volumes and higher margins from Metmar’s investee companies. Operating profit grew 5% to R107,9 million. Increased volumes contributed to this improvement however these were offset mainly by increased costs linked to higher volumes. Operating expenses increased to R229,1 million (2011: R140,6 million) largely as a result of increases in marketing fees for chrome, increased transport costs to move coke from Zimbabwe to South Africa, restructuring and legal costs, debtor discounting costs and impairments and employee costs. The Group recorded a 54% increase in profit before tax to R108,1 million (2011: R70,1 million). This improvement includes the fair value adjustment of R28 million, the majority of which arises from the valuation of the Alphamin shares and options acquired during the year. Attributable profits increased by 63% to R76,3 million (2011: R46,7 million) while headline earnings increased to R79,2 million (2011: R48,6 million). The financial position of the Group remains strong. The net asset value increased by 6% to 277,5 cents per share (2011:  261,8 cents per share). The investments in equity instruments were valued by an independent expert to R253 million. The valuation has considered risks inherent in some of the investments such as funding, regulatory risks in countries such as Zimbabwe and possible delayed commencement of production. Net cash and cash equivalents at the end of the period amounted to R39,5 million (2011: R48,4 million). The Group achieved a positive cash flow from operating activities of R54,3 million (2011: outflow of R54,2 million). A total of R78,9 million was used in investing activities (2011: R124,2 million). Divisional performance and prospects Trading Commodities achieved an operating profit of R45,2 million as trading margins recovered to pre-2008 levels. The weak rand in the second half of the financial year benefited the business. Commodities invested in additional staff to cope with the increased volumes from general trading. The operating margin of the commodities’ segment was similar to the previous year. Prices of certain commodities declined mainly due to the slowing down of the Chinese Economy. Although chrome prices decreased, strong volume growth was achieved for this commodity following the Group’s purchase of Eastern Belt Chrome Mines Proprietary Limited (EBCM) and as a result of general chrome trading activities. In addition reasonable demand for base metals was experienced. In the domestic market, the closure of Zincor, a major domestic zinc producer, at the end of 2011, opened up new opportunities. Polychem Polychem distributes polymers, natural rubber and rubber chemicals and again delivered a record performance despite muted market activity. West African Group, a sub-division of Polychem, achieved an operating profit of R43,3 million. While the majority of product lines performed well, the operation showed solid market share gains in its polyethylene, chemical and filler products. It also benefited from a strong uptake among its customers for new products that were launched by its international suppliers. Its success in increasing market share was underpinned by a heightened focus on customer service, in depth knowledge of its products and the overall quality of its product range. Investments The revaluation of each investment was completed during the year, enabling Metmar Investments and Resources Proprietary Limited (Investments) to identify its ongoing core assets. The division is now focused on implementing its strategic objective of taking controlling stakes in key investments, focusing on chrome, manganese, tin, tantalite, coke and coal opportunities. For the year under review, Investments achieved an operating profit of R21,1 million. On 29 February 2012, Metmar announced related party transactions in respect of Metmar Industrial Proprietary Limited (Metmar Industrial) which took place during the period under review. The fairness review in respect of these transactions is ongoing and shareholders will be advised in due course of the outcome of this process. Progress for each of the major investments is as follows: >> The Group acquired the remaining 20% stake in Metmar Industrial for a consideration of R17,7 million. During the year, Metmar Industrial supplied in excess of 100 000 metric tons of metallurgical coke to the South African, Zimbabwean and Zambian markets. Metmar Industrial also processes dumps from chemical and metallurigical industries. >> During the year Metmar made a stepped acquisition of EBCM, buying an additional 80% equity stake bringing its total holding to 100%. EBCM owns 51% of Steelpoort Chrome Mines Proprietary Limited (Goudmyn) and 49,9% of Bolepu Holdings Proprietary Limited (Bolepu). Bolepu in turn owns 40% of Sefateng Chrome Mines Proprietary Limited (Sefateng). Goudmyn has 700 000 tons of open cast minable high quality LG6 material and Sefateng has 2,5 million metric tons of open cast minable LG6 and a further 37 million metric tons to be mined underground. Metmar Trading secured the off-take for 200 000 metric tons of chrome ore from the mining operations at Sefateng’s Zwartkoppies mine and a further 200 000 tons from its Waterkop mine. Sefateng supplied a total of 196 940 metric tons of chrome ore to Metmar Trading during the period under review. Metmar Trading acquired the entire off-take for chrome ore from the mining operations at Goudmyn. >> Metmar owns 11,66% of Kalahari Resources Proprietary Limited (Kalahari Resources), which owns 40% of Kalagadi Manganese Proprietary Limited (Kalagadi). Kalagadi continues to make good progress with the development of its manganese mine in the Northern Cape which will produce 3 million tons of ore per annum. Construction of the sinter plant to produce 2,4 million tons of beneficiated sintered ore is more than 70% complete with the engineering components nearing completion. A smelter will also be built at Coega to produce 320 000 tons of manganese alloys per annum. The smelter will consume 700 000 tons of sinter, leaving 1,7 million tons for export. A new trading entity has been formed between Metmar and Kalahari Resources. Metmar is finalising an off-take agreement with Kalagadi for part of the manganese sinter, as well as part of the alloy production. The mine and the sinter plant are anticipated to be completed in the second half of 2012, with the smelter in Coega completed in the second half of 2013. The marketing of the Kalagadi products represents such a unique opportunity for Metmar that the CEO, Mr David Ellwood, will take personal management of this project. >> The terms of the transaction to acquire Metmar Speciality Metals Proprietary Limited (MSM) were restructured during the year, resulting in Metmar increasing its stake to a controlling interest of 80% in MSM. The project involves processing vanadium slag dumps to recover product with 40% vanadium content, all of which is marketed by Metmar Trading. Metmar has appointed a new management team which will enable it to exercise better financial and operational control of the vanadium slag operation to ensure that the project delivers the expected returns. >> Kivu Resources Limited (Kivu) is 8,98% owned by Metmar and its main activity is mining exploration in both the Democratic Republic of Congo (DRC) and Rwanda. During the year, Kivu distributed pro rata to its shareholders 70% of the shares in its DRC-based subsidiary which holds the DRC assets. The shareholders in turn exchanged these shares for Toronto Stock Exchange-listed Alphamin Resources Corp (Alphamin) shares. Metmar received 2 733 260 Alphamin shares with a current value of R15,7 million. Alphamin also has a call option and Kivu shareholders a put option on an additional 20% of the DRC subsidiary at C$0,80 per Alphamin share, or approximately 18,4 million shares in Alphamin at the election of Kivu shareholders for a period of three years. Metmar’s portion of this option amounts to 2 069 606 Alphamin shares. This was valued at R11,9 million at financial year-end, based on closing share price of C$0,76. Alphamin recently raised finance required to carry out exploration work through a convertible note and has sufficient working capital to complete the geological work on the DRC tin deposit. Metmar acquired management control of the Rwandan operation in the last quarter with immediate benefits. Kivu, with the largest mineral concessions in Rwanda by land coverage, has three tin mining concessions which are owned in conjunction with the government of Rwanda. >> Metmar owns 20% of Pering Base Metals Proprietary Limited (PBM) which in turn owns 100% of Pering Mine Proprietary Limited (Pering Mine). Pering Mine holds a combined in-pit and stockpiled reserve of 51 smillion metric tons from which PBM plans to produce 1,2 billion pounds of zinc and lead over a 13-year life-of-mine using DMS technology. With the bankable feasibility study completed, the process of raising equity and bank finance to recommission the Pering Mine is ongoing. >> Metmar owns a 20% share of SA Metals Equity Proprietary Limited, whose objective is to build a plant to extract pig iron from calcine. The pre-feasibility study showed excellent returns and the final bankable feasibility, engineering studies and environmental impact assessment are in process. Production is planned to commence earliest in 2014. Metmar will have the marketing rights for the pig iron production. >> Zimbabwe Alloys Chrome (Private) Limited (ZAC), in which Metmar has a 7,7% effective shareholding, is the largest chrome resource in Zimbabwe, containing 30 million tons of high-grade chrome. Despite the challenges imposed by the Zimbabwean political environment and delays in completing the competent person’s report (CPR), the Group is fully committed to the project. Further exploration of the chrome concessions commenced in December 2011 and a new SAMREC and JORC-compliant CPR is in progress. As a result of the ban on exports of non-beneficiated chrome ore from Zimbabwe, the operations have been placed on care and maintenance. The current priority is to raise the required funding to refurbish the furnaces in order to comply with legislation, allowing ZAC to produce and export its ferrochrome alloy production. Dispute The dispute with Ruukki South Africa Limited (Ruukki) regarding the outstanding payments of the proceeds to the Mogale Vendors is ongoing. Metmar is a minor vendor in this dispute. The arbitration relating to Furnace 4 was awarded in favour of the vendors in December 2011, however Ruukki subsequently issued a notice of review on this matter. Metmar understands that the Mogale Vendors will continue to vigorously pursue their rights; however final resolution is unlikely to occur quickly. Directorate The following changes to Metmar’s board of directors took effect during the year under review: >> Mrs Molleen de Wet stood down as CFO of the Company with effect from 1 October 2011 to focus on her responsibility as CFO of Metmar Trading, which has shown extensive growth since the listing of Metmar in 2006. >> Mr Glen Forsdyke retired from Metmar and resigned from the board with effect from 31 October 2011. >> Mr Sizwe Nkosi was appointed as the new CFO of Metmar with effect from 1 October 2011. He is a CA(SA), holds an MBA and has in excess of 15 years’ experience including financial management and commodity marketing in resources and financial services companies in South Africa. Mr Nkosi took on the additional responsibility as CFO for Investments. >> Mrs Dawn Earp was appointed as an independent non-executive director of the Company and a member of its audit and risk committee and chairperson of the social and ethics committee with effect from 1 October 2011. Mrs Earp is a CA(SA) and has held executive finance positions in several Anglo American companies and other top mining groups for more than 20 years. Outlook The USA is showing early signs of recovery, but the expectation for the Chinese economy is of slower growth in the year ahead, while Europe will at best remain at current depressed economic levels. High oil prices could result in higher inflation leading to increased interest rates and lower economic growth. These factors have led to pressure on some commodity prices which could persist in the next financial year. A sustained global economic recovery will depend on a continued improvement in consumer demand in Western economies and sustained high growth rates in China. While Metmar has maintained its cautious stance against this economic scenario, the Group is well positioned from a strategic perspective with its focused business units. The reorganisation of the business has been fully implemented to ensure that the benefits of any upturn in the commodity cycle flow through. Investments has identified its strategic investments and will leverage the strategic progress made in the 2012 financial year to continue streamlining its portfolio to unlock value. Metmar Trading, with its strong trade finance lines, has the capacity to maintain its growth, especially as the Group’s investments deliver increasing volumes. Directors: CB Brayshaw* (Chairman), DJ Ellwood (Chief Executive Officer), PP Boshoff, D Earp*, GP Lotis, D Mashile-Nkosi*, L Matteucci*, SMS Nkosi (Chief Financial Officer) *Non-executive Company Secretary: MRD Boyns (British) Sponsor: One Capital Dividend of 16,5 cents per share declared Acquired controlling interest in Eastern Belt Chrome Mines Proprietary Limited Notes to the audited abridged financial results 1. Basis of preparation The audited abridged financial results have been prepared in accordance with, and contain the information required by IAS 34 Interim Financial Reporting, International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board or its successor, the Companies Act 71 of 2008 and the JSE Limited Listings Requirements. The accounting policies used in the preparation of the financial results for the period ended 29 February 2012 are in terms of IFRS and are consistent with those applied for the year ended 28 February 2011. 2. Other non-current assets 29 February 2012 At fair value R’000 28 February 2011 At fair value R’000 108 800 9 333 28 500 46 728 60 000 – 253 361 57 402 310 763 20 000 11 745 8 000 116 293 80 000 7 200 243 238 – 243 238 29 February 2012 R’000 28 February 2011 R’000 16 601 18 133 2 065 36 799 27 288 28 402 780 56 470 46 520 4 664 68 506 4 479 3 488 7 164 30 761 63 521 229 103 18 393 6 368 55 053 1 945 1 842 3 680 2 047 51 259 140 587 17 587 5 711 13 037 17 888 (28 741) 29 381 12 262 7 715 3 904 23 067 (20 481) 26 467 33 700 (1 871) 31 829 25 603 (2 934) 22 669 80 205 46 746 Investments in equity instruments Kalahari Resources Proprietary Limited Kivu Resources Limited SA Metals Equity Proprietary Limited Zimbabwe Alloys Chrome (Private) Limited Pering Base Metals Proprietary Limited Eastern Belt Chrome Mines Proprietary Limited Other non-current receivables 3. 4. 5. 6. 7. 8. Cash and cash equivalents Cash and cash equivalents comprise cash balances with banks. Trade finance facilities are accounted for separately. Other income Includes: Profit on foreign exchange differences Commissions and fees received Other Total other income Operating expenses Marketing fees Consulting and professional fees Employment costs Legal fees Operating lease charges Repairs and maintenance Impairments Other Total operating expenses Net finance cost Contract interest Bank overdrafts and loans Discounting of deferred payment PGR17/Ruukki Financing effect on payables and receivables Interest income Taxation Normal taxation Deferred taxation Reconciliation of headline earnings Profit for the period Adjustments for: – Impairments and losses on disposal of property, plant and equipment – Capital gain on disposal of investment Headline earnings Headline earnings per share (cents) Basic and diluted earnings per share (cents) Weighted average number of shares in issue 1 828 – 48 574 23,1 22,2 210 511 611 3 759 (4 800) 79 164 34,1 34,5 232 440 480* *  eighted average number of shares is equal to the number of shares W in issue at 29 February 2012. 9. 10. Cash generated from/(utilised in) operations Profit before taxation Adjustments for: – Non-cash items – Net finance costs Changes in working capital: – Inventories (outflows) – Trade and other receivables (outflows) – Trade and other payables 108 147 69 407 (33 240) 29 381 12 086 26 467 (69 840) (229 418) 324 544 129 574 (43 558) (134 384) 45 169 (24 813) Segment report Following the reorganisation of the Group with effect from 1 March 2011, management identified two separately managed segments, being Trading and Investments. Trading includes trading in non-ferrous alloys, ferro alloys, carbons, plastic raw materials (polymer), rubber, rubber chemicals and food chemicals; and Investments includes  investment in resource based commodities. Each of these operations has separate accounting and reporting structures. There are no comparative figures for 28 February 2011. Audited abridged segmental analysis for the year ended Investment Limited and activities eliminations R’000 R’000 Commodities Polychem R’000 R’000 Total trading R’000 431 146 43 287 – – (9 768) 33 519 2 632 798 88 476 179 – (8 435) 80 220 253 157 21 124 27 801 1 657 (5 654) 44 928 (241 410) (1 709) – – (15 292) (17 001) 2 644 545 107 891 27 980 1 657 (29 381) 108 147 24 133 57 759 31 562 (13 003) 76 318 296 164 274 157 1 285 334 905 081 819 145 796 894 (284 755) (527 348) 1 819 724 1 174 627 Segments 29 February 2012 2 201 652 Segment revenues Segment operating profit 45 189 Fair value adjustments 179 Income from associate – Net finance cost 1 333 Profit/(loss) for the year before tax 46 701 Profit/(loss) for the year after tax 33 626 Assets and liabilities Segment assets 989 170 Segment liabilities 630 924 Total R’000 11. Related party transactions During the period the Company and its subsidiaries in the ordinary course of business entered into various transactions with their associates. These transactions were subject to terms that are no less favourable than those arranged with third parties. 12. Corporate governance The Metmar Group is committed to applying the King Code of Governance Principles (King III) incorporated in the King Report on Governance for South Africa. 13. Post-balance sheet events No material events have occurred between the balance sheet date and the date of these audited abridged financial results that would have a material effect on the financial statements of the Metmar group. 14. Audit opinion The Group annual financial statements have been audited by Grant Thornton. Their unqualified audit opinion is available for inspection at the registered offices of the Company. Dividend On 30 March 2012, the Company declared a dividend of 16,5 cents per ordinary share for the 12-month period ended 29 February 2012, totalling R38 373 499. The dividend is in line with Metmar’s policy to pay approximately half the attributable earnings earned as a dividend. The important dates relating to the dividend are set out below: Last date to trade in order to participate in the dividend Friday, 15 June 2012 Metmar shares commence trading ex dividend Monday, 18 June 2012 Record date for the dividend Friday, 22 June 2012 Payment date for the dividend Monday, 25 June 2012 Metmar share certificates may not be dematerialised or rematerialised between Monday, 18 June 2012 and Friday, 22 June 2012 both dates inclusive. Annual general meeting The Company’s annual general meeting of shareholders will be held at Metmar’s registered office at 24 Sloane Street, Bryanston on 1 August 2012. A separate notice convening the meeting will be sent to shareholders enclosed in the 2012 Integrated Report in due course. CB Brayshaw DJ Ellwood Chairman Chief Executive Officer 26 April 2012 Registered office: 24 Sloane Street, Bryanston, 2191 (PO Box 98549, Sloane Park, 2152) Transfer Secretaries: Computershare Investor Services Proprietary Limited (PO Box 61051, Marshalltown, 2107) Auditors: Grant Thornton These results may be viewed on the internet on http://www.metmarlimited.com Bastion graphics