‘small talk’ – small and medium market cap conference 26 february 2013
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‘Small Talk’ – Small and Medium Market Cap Conference26 February 2013
Presentation coverage
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• Diversified open cast miner and materials supplier
• “Delivering consistent growth”
• Focus on smaller sized projects adds to Afrimat’s sustainability
• Excellent cash conversion
• Strong balance sheet
• Consistent dividend payer
• Acquisitions paying off
• Market remains under pressure
• Diversification underpins sustained performance
Who we are and what we
do
• Strategy & rationale• Clinker• Infrasors• BEE
Corporate activity
What is happening in
our environment
How are we performing financially
The future and what lies
ahead
Leading black empowered open cast miner and materials supplier
Strategically diversified through location and product range
Group overview
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Afrimat’s products
Products from mines:
Aggregates (crushed stone)
Metallurgical dolomite
Metallurgical quartzite
Agricultural lime
Clinker
Products from factories:
Concrete blocks
Concrete bricks
Pavers
4
Products from readymix batch plants:
Readymix concrete
Readymix mortar
Services by the contracting team:
Contract crushing
Mobile screening
Drilling
Blasting
Afrimat’s products (cont’d)
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Supply market segments
Transport infrastructure:
Road building materials
Materials for railroads (e.g. ballast)
Industrial minerals:
Metallurgical dolomite
Quartzite
Energy infrastructure:
Materials for power stations (e.g. Medupi)
Materials for renewable energy projects
Materials for distribution network
6
Supply market segments (cont’d)
Building materials:
Affordable housing (Government funded)
Commercial building
Residential (Privately funded)
Agriculture:
Agricultural lime
Drainage stone
Paving
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… portfolio … and footprint
CONCRETE PRODUCTSConcrete brick & block
factories (9)READYMIX
Batching sites (17)
MINING & AGGREGATESCommercial quarries (24)
Sand and gravel mines (8)
Dolomite mine (1)
Clinker (1)
… which generates a balanced consistent income stream
CONTRACTING Mobile Crushing
Drilling and Blasting
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Our diversification
Strategic principles
Diversified:
Wide product range
Across wide geographic markets
Effective hedge against market volatility
Competitive advantage:
Geographic location
Unique and scarce products or
Operations with structural cost advantage
Innovation and creativity
Operational expertise
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Corporate Activity
10
Acquisitions: The underlying strategy
The goal
Enhance sustainability, profitability and robustness
Targets
Acquisition purchase consideration below 15% of Afrimat market cap
In our space of expertise
High upside
Compensate for our weaknesses
Must fit strategically into our master plan
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Infrasors transaction
Acquired 50.4% (control) at 35 cps amounting to R32 million
Competition Commission approved transaction
Infrasors:
Listed resources group involved in mining and beneficiation of minerals used in the industrial, metallurgical, mining and construction sectors
Lyttelton Centurion Mine – opencast mining and beneficiation of a dolomite ore-body
Marble Hall Mine – opencast mining and beneficiation of a limestone (metamorphosed dolomite) ore-body
Delf Sand – sand extraction and beneficiation of alluvial silica sand
Delf Silica Coastal – sand extraction and beneficiation of alluvial silica sand
Conditions precedent
ABSA (ring fenced) – no material changed to debt facilities, pricing or repayment terms
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Infrasors transaction (cont’d)
13
Rationale (product and assets)
Augment Afrimat’s industrial minerals diversification strategy
Add to the aggregates product offering
Expand geographic footprint
Operational involvement
Afrimat manager appointed to oversee operations
Take control of board
Implement Afrimat’s proven management, marketing, product development and pricing strategies
Implement a proper BEE scheme
Clinker Group acquisition
Effective 1 March 2012
Purchase consideration R121 million (R95 million in cash and R26 million shares)
F2012 PAT = R35.1 million
Business with unique competitive advantage
Already well integrated into Afrimat
Life expectation of operation is 10 years
Marketing and research drive shows possibility of extending life of mine
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Clinker Group
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Clinker Group (cont’d)
Impact of acquisitions
17
Open pit dolomite mine in Gauteng (metallurgical dolomite, aggregates, agricultural lime)R35 million purchase consideration
Defensive product diversificationIndustrial minerals with vast applicationsAttractive margins and strong profitabilityLife of mine: >30 years
Glen Douglas
Clinker Supplies and SA Block (brick & block manufacturing) in GautengProcessor of clinker material – used in manufacture of concrete productsR121 million purchase consideration
Product diversification which adds to current product line with geographic diversificationVast applicationsAttractive margins and strong profitabilityLife of project: 10 years +
Clinker
BEE update
BEE ownerships is 26.1% (including 6.4 million shares purchased)
Mega Oil SPV’s 7-year lock-in period expires November 2013
Afrimat BEE Trust purchased 6.4 million shares from Mega Oils
Afrimat provided funding (R40 million)
Purchased shares prior to expiry date to eliminate any BEE risk to mining rights
21.25% owned by black employees
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Business Environment
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Macro environment
Slower growth:
European economic woes continue
China and India showing signs of slower growth
USA – slow growth at best
In South Africa:
Increasingly exposed to a more uncertain China
Internal growth dynamic is fragile
Downgraded by credit agencies
Government’s focus on infrastructure backlog will act as economic stimulus when implemented
Excellent opportunities continue to present themselves
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Trends in Afrimat’s markets
Difficult time for aggregates business
Western Cape slow and under pressure
Diversification strategy has assisted Afrimat performance
Strong increase in tender activity in most market segments
Industrial markets stable, not as competitive as construction
Action against incompetent government departments (e.g. Provincial roads to SANRAL)
Strong pipeline, specifically government infrastructure (small to medium sized projects)
Exciting opportunities
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GDP by sector
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-15
-10
-5
0
5
10
15
20
Mining Manufacturing Construction Wholesale and retail trade Transport, storage and communication
Finance, insurance and real estate
% y/y
Source: SARB, Standard Bank
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Financial Overview
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Financial highlights
Operating profitRevenue
2010 2011 2012 2013 -
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
392
,517
455
,874
506
,717
671
,349
385
,499
398
,622
489 420
1st half 2nd half
2010 2011 2012 20130
20,000
40,000
60,000
80,000
100,000
120,000
140,000
66,5
88
64,3
29
65,5
21
75,6
23
42,3
36
45,2
68 64 609
1st half 2nd half
15.4%
32.5%
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Segmental contributions to revenue
Mining & Ag-gregates
Readymix Concrete Products0%
10%
20%
30%
40%
50%
60%
70%
80%71%
17%12%
67%
14%19%
HY2011HY2012
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Returning to previous levels
Headline earnings per share
Cen
ts p
er s
har
e
2008 2009 2010 2011 2012 -
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
24.5
29.6 29.9 29.8
35.0
HEPS for the six months
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17.4%
Rand
s
2007 2008 2009 2010 2011 20120
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
77,378
39,337
51,305
34,222
52,712
86,860 64.8%
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Net cash from operating activities
Net cash at end of period: R106.4m (2011: R63.7m)
Dividends
Afrimat remains a consistent dividend
payer
Cen
ts p
er s
har
e
2008 2009 2010 2011 2012 20134.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
7
5
6 6 6
8
Interim dividend
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What differentiates us?
Strong financial position:
Healthy cash flow
Strong balance sheet
Industry leading margins throughout economic cycle
Active innovative strategic positioning:
Good market intelligence and expertise
Continuously identifying and evaluating opportunities
Track record of successful acquisitions
Successful greenfield projects
Operational competence:
Flexible
Reliable quality supplier
Superior reaction time
Operating margin 13,2% vs. industry average 6,4%
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Risk mitigation
Risk Mitigating action
Slow delivery on Government infrastructure projects
Widely diversified over markets, products and locations
Actively seeking and exploiting opportunities
Construction companies under financial pressure
No single dominant debtor, all less than 4%
Strict efficient credit control
Macro-economic threats Constant strategic management (avoiding threats, exploiting opportunities)
Entrepreneurial culture and creative innovative solutions
Strong balance sheet
Country risk in South Africa Seeking opportunities outside South Africa
What does the future hold?
Prospects
Short term outlook:
Clinker group exciting
Glen Douglas a real gem
Remainder of the market conditions remain under pressure
Integration of Infrasors acquisition
Momentum drivers:
Power stations
Low cost housing
Roads – SANRAL, provinces
Renewable energy
Industrial minerals
Afrimat will pursue a conservative growth strategy preserving the status of the balance sheet
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Take away
Afrimat will pursue a conservative but strategic diversified growth strategy
Preserve the status of the balance sheet
Continue to deliver high cash conversion rates
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Final results due to be released during week of 6 May 2013
Q & A
Thank you for your attendance and participation
www.afrimat.co.za
For any further Investor Relations questions please contact:
Andries van Heerden (CEO): 021-917-8840 or
Vanessa Rech (Keyter Rech Investor Solutions): 011-447-8656
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