AECI Ltd HY 2013 financial results presentation

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AECI Ltd HY 2013 financial results presentation

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AECI Ltd HY 2013 financial results presentation

  1. 1. FINANCIAL RESULTS For the half-year ended 30 June 2013 Presentation 24 and 25 July 2013
  2. 2. 1 PRESENTATION Outline › Overview › Business environment and overall performance › AECI results analysed › Specialty chemicals › Explosives › Property › Outlook and focus
  3. 3. overview
  4. 4. 3 PERFORMANCE Highlights › Revenue up 13% to R7 223m › Profit from operations up 28% to R612m › Volumes up 3,7% (excl. sulphur trading) › HEPS up 236% to 356c › Final cash dividend of 105 cps up 35% compared to 78cps in 1H12 › Gearing at 35% from 51% in Jun ’12 (33% in Dec ’12) › BBRI investment progressing well – strategic AN supply for AEL in Indonesia
  5. 5. business environment and overall performance
  6. 6. 5 GROUP AFRICAN FOOTPRINT Explosives Specialty chemicals
  7. 7. 6 BUSINESS ENVIRONMENT AND PERFORMANCE Summary › AECI delivered a good performance in a difficult trading environment › Depressed global growth and challenging SA mining and manufacturing sectors made Group volume growth difficult › Businesses again responded with tight cost management › Weak ZAR/US$ exchange rate helped mining sector but had little impact on manufacturing customers › Prices increased mainly on back of weaker rand, but margins under pressure › Healthy pipeline of acquisitions and growth projects › Industrial relations environment remains sensitive › Chemicals industry wage negotiations concluded successfully
  8. 8. 7 REVENUE SPLIT 1H13 9% 13% 57% 31% 44% 3% 9% Agriculture 31% Manufacturing 3% Property 57% Mining services 44% Explosives 13% Mining chemicals
  9. 9. 8 GROUP MINING REVENUE Revenue by mineral mined 1H13 11% 10% 1% Phosphate 1% Uranium 5% 3% 16% 10% 8% Various other 19% 26% 26% Platinum 19% Coal 16% Gold 11% Copper, cobalt, chrome and nickel 10% Quarry, construction and civil 5% Diamonds 3% Iron ore 10% Other
  10. 10. 9 BUSINESS ENVIRONMENT SA manufacturing volumes Jan ’06 – May ’13 Base: 2005=100 Source: StatsSA Index base year changed in May from 2005 to 2010 Cum y-o-y = 1,7%
  11. 11. 10 BUSINESS ENVIRONMENT SA mining volumes Jan ’08 – May ’13 Base: 2010=100 Source: StatsSA Cum y-o-y= 1,7%
  12. 12. 11 BUSINESS ENVIRONMENT ZAR/US$ exchange rate Close=9,94 Average 1H13 US$/ZAR=9,20 Average 2H12 US$/ZAR=8,47 Average 1H12 US$/ZAR=7,92 Open=8,49
  13. 13. AECI results analysed
  14. 14. 13 SAFETY AND HEALTH Performance ALL WORKERS TRIR 1,2 1,0 Maximum tolerable level 0,8 0,6 0,4 0,2 0,0 08 09 10 11 12 Rolling 12 months
  15. 15. 14 RESTATEMENTS Revised and new accounting standards › Revised IAS 19 and new IFRS 10 and 11 effective 1 Jan ’13 › Applied retrospectively – restated comparatives › Year-on-year impact less than 2% › IAS 19 Employee benefits » Defined-benefit pension funds and PRMA » Actuarial gains and losses to other comprehensive income instead of profit and loss » Actuarial valuations once a year » HEPS ▫ net 2cps reduction 1H12 ▫ net 44cps reduction full-year ’12
  16. 16. 15 RESTATEMENTS Revised and new accounting standards › IFRS 10 Consolidated financial statements » No effect on consolidation for the AECI Group › IFRS 11 Joint arrangements » Changed the definition and accounting for joint arrangements » 3 joint arrangements now equity accounted » Single line in income statement and statement of financial position – not line by line ▫ Investment at our share of NAV at 1 Jan ’12 ▫ Add share of profit after tax each year
  17. 17. 16 RESTATEMENTS Revised and new accounting standards › Joint ventures: Crest, Resinkem, SMSA, Resitec (from ’12 until date sold) › Financial effects: AECI’s share not proportionately consolidated Financial statement area Revenue Profit from operations Non-current assets Current assets Non-controlling interest Non-current liabilities Current liabilities 1H13 Rm 430 27 157 407 13 33 186 1H12 Rm 549 35 206 307 11 1 160 › New disclosure: Investment in Joint Ventures and included in profit from equity accounted investees FY12 Rm 1 089 79 165 355 11 37 153
  18. 18. 17 RESTATEMENTS Industry segment analysis – current estimates Revenue FY12 Restated Rm Explosives Specialty chemicals Property Group services and inter-segment Profit from operations FY12 Restated Rm Net assets FY12 Restated Rm 6 327 7 647 400 (547) 13 827 417 891 33 (144) 1 197 2 837 4 374 808 (94) 7 925 Note: the allocation of primary and other IAS 19 effects to the segments has yet to be finalised. Joint venture restatements only affect the specialty chemicals cluster.
  19. 19. 18 RESULTS 1H13 Headline earnings (Rm) 420 390 360 330 300 270 240 210 180 150 120 90 Headline earnings '12: R118m CST SBP: R138m Specialty Explosives: Property: Corporate: Finance chemicals: R134m R29m (R22m) costs: (R6m) R17m Share of equity accounted profits: (R3m) Tax: (R22m) Other: R16m Headline earnings '13: R399m
  20. 20. 19 RESULTS 1H13 Operating profit › Operating profit up 28% to R612m OPERATING PROFIT (Rm) › Volumes declined by 6% (+3,7% excl. sulphur) › Chemicals volumes -14,5% (+5% excl. sulphur) » Manufactured +5,1% » Traded -31,6% 700 › Bulk explosives +3% 400 › Foreign revenue +25,4% to R2 348m 300 600 500 200 100 0 09 10 11 12 13
  21. 21. 20 RESULTS 1H13 HEPS › HEPS at 356cps up 236% » Excluding B-BBEE charges up 55% » Economic value added remains positive » Operating margin improved from 7,5% to 8,5% ▫ Explosives 8,8% (1H12: 6,1%) ▫ Specialty chemicals 10,6% (1H12: 11,0%) ▫ Improvement in Property HALF- AND FULL-YEAR HEPS (cps) 800 700 600 500 400 300 200 100 0 09 10 11 12 13
  22. 22. 21 RESULTS 1H13 Cash utilisation › Capex: R216m – no major projects for expansion projects AS AT JUNE 2013 Borrowings › NWC to revenue: 21,8% (’12: 21,2%) Gearing 60% 2 500 › Net borrowings: R2 169m › Cash interest cover: 9,3x › Interim cash dividend: 105 cps 50% Rm › Gearing at 35% vs 51% (Dec ’12: 33%) Target range 2 000 40% 1 500 30% 1 000 20% 500 10% 0 0% 09 10 11 12 13
  23. 23. 22 RESULTS 1H13 Corporate Corporate '12: (R117m) (80) (90) (100) (110) (120) (130) (140) (150) Legacy costs: (R7m) Long-term incentives: (R22m) Other: R7m Corporate '13: (R139m)
  24. 24. 23 RESULTS 1H13 Profit from operations (Rm) 650 630 610 590 570 550 530 510 490 470 450 Profit from operations '12: R477m Specialty chemicals: (R6m) Explosives: R134m Property: R29m Corporate: (R22m) Profit from operations '13: R612m
  25. 25. 24 specialty chemicals
  26. 26. 25 SPECIALTY CHEMICALS African footprint Specialty chemicals
  27. 27. 26 SPECIALTY CHEMICALS CLUSTER 15 businesses Akulu Marchon Lake Chemicals Chemfit Lake Foods Chemical Initiatives Nulandis Chemisphere Technologies Resinkem ChemSystems Senmin Crest Chemicals SANS Technical Fibers ImproChem Specialty Minerals SA Industrial Oleochemical Products
  28. 28. 27 SPECIALTY CHEMICALS Strategy › Diverse South African specialty chemicals cluster is key to Group strategy › African specialty chemicals business focused on » Mining chemicals » Water, oil, energy and gas » Agriculture » Food additives » Personal and home care
  29. 29. 28 SPECIALTY CHEMICALS CLUSTER Sales by market sector 1H13 5% 5% 5% 5% 5% 4% 4% 1% 1% 1% 1% 1% 3% 6% 9% 8% Appliances and furniture Steel and metals Construction Automotive Engineering and foundry 4% Various other 16% 24% 24% Mining 5% Oil and refining 16% Agriculture 5% Explosives 8% Food and beverage 5% Paper and packaging 6% Chemical industry 5% Textiles and leather 5% Detergents 4% Toiletries, cosmetics and pharmaceuticals 4% Coatings, ink and adhesives 3% Plastics and rubber 9% Other
  30. 30. 29 SPECIALTY CHEMICALS Business environment › Firm commodity prices in US$ terms and weak ZAR/US$ supported prices › SA manufacturing sector still pedestrian › However, stronger growth in food and beverage, agricultural and mining chemicals sectors › Competition from international entrants remains intense
  31. 31. 30 SPECIALTY CHEMICALS Performance Revenue Operating profit Operating margin (%) Average WC (%) R3 667m R389m 10,6 24 › Volumes -14,5% » Manufactured Traded Excl. sulphur: +4,9% +5,1% » +3% -2% (’12: 11,1) (’12: 20) -31,6% › Prices +17,1% › Excellent results from Chemfit, Lake Foods, Lake Specialties, Nulandis, Senmin › R24m profit from sale of Bryanston office in ’12 not repeated › No sulphur sales into Central Africa › Margins under pressure as price attempt to keep up with weak ZAR
  32. 32. 31 SPECIALTY CHEMICALS Acquisitions update › Numerous evaluations undertaken › SA Premix acquired » Animal health and nutrition » Competition Commission approval awaited › Promising possibilities in Africa, for agricultural markets › Disappointment in Brazil – “seller’s remorse” › Alternatives being evaluated
  33. 33. explosives
  34. 34. 33 EXPLOSIVES Expansion and growth in Africa Botswana (5) Burkina Faso (7) Congo (1) DRC (6) Egypt (2) Ethiopia (1) Ghana (8) Guinea (3) Mali (2) Mauritius (1) Mozambique (2) Namibia (1) Tanzania (5) Zambia (4) Zimbabwe (4) Sites (41) Plants (11)
  35. 35. 34 EXPLOSIVES Revenue split › Portfolio has been diversified – decrease in dependence on SA narrow reef sought 100% › AEL has deliberately grown its share of the SA surface open-cast mining market substantially in past 5 years 60% › Business outside SA strategically grown to constitute almost 50% of current revenue 80% 49 67 40% 20% 51 33 0% 2007 2008 2009 2010 2011 2012 2013 SA Underground SA Surface › Strategic alignment with SA’s narrow reef sector continues 100% 80% 60% 40% 20% 32 49 33 34 35 17 0% 2007 2008 2009 2010 2011 2012 2013 SA Underground SA Surface Outside SA
  36. 36. 35 EXPLOSIVES Africa expansion EXXARO DRC SITE › Construction by mine underway › Container magazines and MMU delivered to enable issuing of explosives permits to mine › Human resource mobilisation underway › First explosives delivery expected in Aug ’13 SUKARI EGYPT SITE › Expansion completed › Operational
  37. 37. 36 EXPLOSIVES Africa expansion BURKINA FASO BISA SITE › Security report by government complete and licence expected in 2 weeks › Commissioning to resume in Aug ’13 DRC KANSUKI SITE › Dry run commissioning complete › Official commissioning during Aug ’13
  38. 38. 37 EXPLOSIVES Indonesian update › KPC: Contract extension until ’18 and ANS supply from BBRI » Shock tube assembly plant in progress » New prospects during 2H13 » Plant construction complete › Commissioning in progress › ANS supply to KPC in 4Q13 Compressor house (Jun ’13) Boiler and demin plant (Jun ’13) ANS plant level 3 (Jun ’13)
  39. 39. 38 EXPLOSIVES Business environment › Weaker commodity prices, pressurising the viability of certain mines globally › SA mining: good demand in coal and iron ore › Fewer instances of industrial action in the platinum sector resulted in higher volumes mined › Continued growth in the rest of Africa, tempered by strike action in West Africa and power supply issues in DRC › Indonesia continued strong growth even if some projects were put on hold due to weaker thermal coal prices
  40. 40. 39 EXPLOSIVES Performance Revenue Operating profit Operating margin (%) Average WC (%) R3 551m R312m 8,8 20 +22% +75% (’12: 6,1) (’12: 21) › Best first-half results delivered › Bulk explosives volume growth of 3% » SA’s Surface and Massive market grew by 7% » Africa flat, power issues in DRC and labour strike in Ghana » Indonesian volumes grew by 14%, mainly at KPC › Initiating systems volumes down » Narrow reef gold and platinum mining under pressure › Ammonia price increased by 44% on average › Net positive forex impact of R27m in 1H13
  41. 41. R312m: Operating profit 1H13 (R12m): Optimisation project R11m: Reduction ISAP costs R27m: Foreign exchange (R 31m): Depreciation (R37m): Business expansioncCosts (R111m): Fixed cost inflation R252m: Material margin R36m: 2012 supply chain events R178m: Operating profit 1H12 40 EXPLOSIVES Half-year comparison 500 450 400 350 300 250 200 150
  42. 42. 41 EXPLOSIVES Project update: initiating systems › ISAP’s operating performance on target ASSEMBLIES/DETONATORS (millions) › Quality issues resolved › All underground narrow reef units produced on ISAP › All pyrotechnic powder development for surface markets complete; scale-up to commercial production in progress › ISAP savings for ’13 anticipated to be R30m » Closure of old plants and ISAP restructuring hampered 90 Assemblies Detonators 80 70 60 50 40 30 20 10 0 09 10 11 12 13
  43. 43. property
  44. 44. 43 PROPERTY Performance Revenue Operating profit R278m R50m +58% +138% › Industrial vacancies decreased – encourages new development › House price growth improving and better access to finance is promoting sales › Surplus remains in office accommodation › Leasing and services portfolio » R82m revenue » Vacancy rate unchanged at 20%
  45. 45. 44 PROPERTY Longlake sales: current phase › Extension 1: 31,5ha › Extension 12: 2,5ha Longlake Extension 1 Longlake Extension 12
  46. 46. 45 PROPERTY Longlake: next infrastructure phase › Phase A: 64ha Longlake Extensions 2 to 6 › Phase B: 84ha › Phase C and D: 86ha 45 MVA substation K113 N3 Longmeadow
  47. 47. 46 PROPERTY Westlake: next phase for sale › Commercial: 16,9ha › Residential: 12,4ha (future, not serviced) Westlake Commercial Westlake Residential
  48. 48. 47 PROPERTY Somerset West › Planning in response to market demand » Industrial: 18ha, in 3 phases » Mixed use to follow in phases as regional commercial market improves ▫ 308 000m2 of bulk ▫ Beach front residential in pre-planning » 100 single residential units » 350 apartment-type units
  49. 49. focus and outlook
  50. 50. CAUTIONARY ANNOUNCEMENT › Strategy: optimise the realisation of real estate assets surplus to operational requirements by selling land and selectively investing in top structures › Continue to evaluate all options in respect of surplus real estate assets in Modderfontein and Somerset West › Have entered into discussions for the disposal of a large proportion of the surplus property assets at Modderfontein › Intention is to have finality on the proposed transaction by 4Q13 › Further details will be announced when appropriate
  51. 51. 50 OUTLOOK AND FOCUS › SA manufacturing volumes expected to track GDP growth › Further sales of land for industrial end uses are expected › Strong focus on operational excellence in AEL » Cost reduction » Continue to improve AEL’s profitability › Sales to the mining sector in Africa and Indonesia expected to grow on the back of new projects and contracts › SA narrow reef – platinum and gold mining – expected to remain challenging › Potential for growth in sales of mining chemicals › Strong focus on strategic pillars in specialty chemicals cluster for growth in Africa › Acquisition activity expected locally and in Africa and South America
  52. 52. 51 INVESTORS’ CALENDAR › AEL Mining Services presentation and update 6 Nov ’13 › Financial year-end 31 Dec ’13 › 2013 results released 25 Feb ’14 » JHB presentation 25 Feb ’14 » CT presentation 26 Feb ’14
  53. 53. thank you

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