financial results · 26 and 27 february 2013 presentation for the year ended 31 december 2012...
TRANSCRIPT
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26 and 27 February 2013
Presentation
For the year ended 31 December 2012
FINANCIAL RESULTS
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overview
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PRESENTATION 2
› Welcome
› Business environment and performance
› AECI results
› Performance by segment
» Explosives
» Specialty chemicals
› Projects and strategy
› Outlook and underlying growth
Outline
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PERFORMANCE 3
Highlights
› Revenue up 11% to R14,9bn
› EBITDA from operations up 6% to a record R1,8bn
› Headline earnings excluding effects of all B-BBEE transactions up 1%
› Profit optimisation of projects underway
› Best ever safety performance achieved
› Gearing reduced to 32%
› Acquisitions of R420m authorised
› AEL’s strategic position in Indonesia enhanced by AN plant acquisition
› Final cash dividend of 185cps up 2,3% compared to 179cps in ’11
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business environment and performance
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BUSINESS ENVIRONMENT AND PERFORMANCE
› AECI delivered a creditable performance in a difficult trading environment
› Depressed global growth and industrial action in SA made volume growth difficult
› Businesses responded with tight cost management and restructuring
› Strength of the business model, especially in the chemicals cluster, demonstrated in the result
› Looking forward, market growth prospects linked to global economic growth uncertainties
› However, AECI has internal profit optimisation plans that will deliver value independent of external growth scenarios
› AECI also has a healthy pipeline of acquisitions and growth projects
5
Summary
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52%
10%
33%
3% 2%
REVENUE SPLIT 6
52% Mining 10% Agriculture 33% Manufacturing 3% Property 2% Fibres
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BUSINESS ENVIRONMENT 7
SA manufacturing volumes Jan ’07 – Jan ’13
Cum y-o-y = 2,0%
Base: 2005=100 Source: StatsSA
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BUSINESS ENVIRONMENT 8
SA mining volumes Jan ’07 – Jan ’13
Cum y-o-y= -3,1%
Base: 2010=100
Index base year changed in October from 2005 to 2010
Source: StatsSA
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BUSINESS ENVIRONMENT 9
ZAR/US$ exchange rate
Average US$/ZAR=7,25
Average US$/ZAR=8,20
Opening Jan 12 US$/ZAR=8,15
Closing Dec 12 US$/ZAR=8,49
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BUSINESS ENVIRONMENT 10
Ammonia IPP pricing (ZAR/tonne)
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BUSINESS ENVIRONMENT 11
Effect on performance
› Open cast mining volumes in Africa (including South Africa) grew strongly
› Underground mining volumes in SA and Indonesia were negatively impacted by industrial action and other stoppages
› The weaker ZAR/US$ exchange rate helped the mining and manufacturing sectors but failed to lift volumes
› Prices remained high due to high US$ commodity prices and the weaker exchange rate
› The industrial relations environment deteriorated significantly post Marikana and made change management difficult
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AECI results
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0,0
0,2
0,4
0,6
0,8
1,0
1,2
08 09 10 11 12
ALL WORKERS TRIR
Maximum tolerable level
SAFETY AND HEALTH 13
Performance
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ENVIRONMENTAL, B-BBEE AND EE UPDATE 14
Performance and strategy
› Environmental performance
» Formalisation and launch of the Modderfontein Reserve
» Green Gauge – range of environmental improvement projects identified through resource efficiency assessments
» No serious environmental incidents in ’12
» Included in JSE’s Socially Responsible Investment Index for fourth successive year
› B-BBEE ratings improved significantly and nearly all companies are now Level 5 or Level 4 contributors
› EE performance continues to improve
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100
150
200
250
300
350
400
450
500
550
600
650
700
750
800
850
Headline
earnings11:
R772m
Specialty
chemicals:R63m
Explosives:
(R79m)
Property:
(R65m)
Specialty
fibres:(R13m)
Corporate:
R149m
CST
& EST SBP:(R168m)
Finance
costs andtax:
(R54m)
Other:
R6m
Headline
earnings12:
R611m
RESULTS 15
Headline earnings (Rm)
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400
800
1 200
1 600
2 000
08 09 10 11 12
EBITDA (Rm)
RESULTS
› EBITDA +6% to R1,8bn
› Volumes flat overall
› Chemicals volumes -2,9%
» manufactured -1,4%
» traded -4,3%
› Explosives +5,1%
› Foreign revenue +17% to R4 527m
› Market share maintained
16
EBITDA and volumes
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RESULTS
› Operating margin declined from 9,8% to 9,0% mainly due to deterioration at AEL and Heartland
› Favourable impact
» Reduced corporate costs
› Outweighed by
» Nitrates shortages and supplier force majeure
» Negative effect of strikes
» Non-cash B-BBEE transactions IFRS costs
» Restructuring charges
› Therefore, underlying performance is better than reported results
17
Operating margin and volumes
0
2
4
6
8
10
12
08 09 10 11 12
OPERATING MARGIN (%)
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RESULTS
› Excluding the IFRS charges of 151cps
» HEPS at 697cps down 3%
» Return on net assets: 17,1%
» Return on invested capital: 13,2%
» Economic value added remains positive
18
HEPS
0
100
200
300
400
500
600
700
800
08 09 10 11 12
HEPS (cps)
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0
10
20
30
40
50
60
70
0
500
1 000
1 500
2 000
2 500
08 09 10 11 12
AT 31 DECEMBER
Borrowings
Gearing
Target range
RESULTS
› Capex: R557m – incl. R265m for expansion projects
› NWC to revenue: 18,0% (’11: 17,7%)
› Net borrowings: R1 841m
› Gearing at 32% vs 50% in 1H12
› Cash interest cover: 8,2x
› Final cash dividend: 185cps
19
Cash utilisation
Rm
%
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performance by segment
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(250)
(150)
(50)
50
150
250
350
450
550
650
750
850
950
Specialtychemicals
Explosives Specialty fibres Property EST SBP
11 12
Corporate
RESULTS 21
Profit from operations (Rm)
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SPECIALTY CHEMICALS 22
Business environment
› Firm but volatile commodity prices in US$ terms and weaker R/$ supported prices
› SA manufacturing sector still pedestrian
› However, stronger growth in food and beverage, agricultural and personal care sectors
› Platinum mining sector strikes and closures had negative impact (R45m)
› International competition remains intense
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SPECIALTY CHEMICALS
› Volumes -2,9%
» Manufactured -1,4%
» Traded -4,3%
› Prices +14,0%
› Excellent performances from Akulu, CI, IOP, Lake, Nulandis
› Solid performance from Senmin in difficult market
› Restructuring charge of R30m offset by capital profits from Resitec
and CSL HO disposals
› Successful integration of all acquisitions
23
Performance
Revenue R8 397m +11%
TP R944m +7%
Trading margin (%) 11,2 (’11: 11,7)
Average WC (%) 17 (’11: 16)
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SPECIALTY CHEMICALS
6 800
7 000
7 200
7 400
7 600
7 800
8 000
8 200
8 400
8 600
Revenue Dec 11 Volumes -2,9% Price +14% Revenue Dec 12+11,1%
24
Price and volume analysis (Rm)
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EXPLOSIVES
› Global mining sector is under pressure, but remains attractive
› Strong mining volume growth in Africa (outside SA)
› SA mining: surface volumes grew significantly, narrow reef declined
› Prospects in Africa remain good
› Indonesian mining also affected by industrial relations issues and weakening thermal coal prices
25
Business environment
AEL MANUFACTURING SITES
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EXPLOSIVES
› Disappointing performance in difficult circumstances
› Ammonia and AN supply chain interruptions (R50m)
› Mining strikes (R62m)
› Cost reduction exercise underway
26
Performance
Revenue R6 327m +15%
TP R431m -15%
Trading margin (%) 6,8 (’11: 9,3)
Average WC (%) 19 (’11: 17)
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350
400
450
500
550
600
650
700
750
R510m: Actualtrading margin
Dec 11
R212m: Materialmargin
(R153m): Fixedcost inflation &depreciation
(R53m):Business
expansion costs
R57m: ReductionISAP / ISCP costs
(R61m): Foreigngain in 2011
(R81m): Supplychain and strike
events
R431m: Actualtrading margin
Dec 12
EXPLOSIVES 27
Performance
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PROPERTY
› A disappointing result
› Revenue of R47m from land sales
» Westlake – industrial use
› R66m development expenditure
» Roads and electrical infrastructure
› Outlook for industrial end use improving
28
Performance
Revenue R400m -16%
TP R34m -66%
Trading margin (%) 8,5 (’11: 20,8)
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0
20
40
60
80
100
120
Trading profit 2011:
R99m
Development
activities: (R52m)
Leasing activities:
(R22m)
Services: R2m Environmental
charge: R7m
Trading profit 2012:
R34m
PROPERTY 29
Performance
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SPECIALTY FIBRES
› Acceptable result in difficult market conditions
› Exports to Europe and Asia under pressure
› US auto volumes improved in 2H12
› Capital investment of US$10m on single-stage process underway
› STF will be included in chemicals cluster in future
30
Performance
Revenue R339m +2%
TP R40m -25%
Trading margin (%) 11,8 (’11: 15,9)
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(240)
(220)
(200)
(180)
(160)
(140)
(120)
(100)
(80)
(60)
Corporate
11:(R227m)
Legacy
costs:R71m
Long-term
incentives:R47m
Captive
insurance:R31m
Other:
R0m
Corporate 12:
(R78m)
CORPORATE 31
Sustainable level = (170)
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240
260
280
300
320
340
360
Tax charge IFRS 2 charge STC Other PBT tax @ 28%
RESULTS 32
Tax rate (Rm)
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projects and strategy
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EXPLOSIVES 34
Investments
Total R409m
Expansion capital spend R163m
» SA – Xstrata, Sishen R31m
» Africa – bulk plants for Burkina, Egypt and DRC R63m
» International – new contracts R14m
Sustenance capital R204m
» Nitrates statutory maintenance R64m
BBRI R42m
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EXPLOSIVES
› Detonator volumes = 2011 due to lower local demand
› Machines capable of much higher production rates
› Quality and first time pass rates greatly improved
› Machines stable, more uptime achieved via better process and people management systems
35
Initiating systems profit improvement
0
20
40
60
80
100
08 09 10 11 12
ISAP DETONATORS (millions)
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EXPLOSIVES
› Automatic assemblies significantly higher than ’11
› Powder development on track for completion in June ’13
› Rest of range to be qualified during ’13
› Cost savings of R57m achieved in 2012 and a further R70m expected in 2013
› Section 189 notices issued
36
Initiating systems profit improvement cont.
0
5
10
15
20
25
30
08 09 10 11 12
ISAP ASSEMBLIES (millions)
Target=31
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EXPLOSIVES
› US$23m investment for 42,6% equity share in BBRI in three phases
› In Kalimantan – heart of mining activity and close to KPC, AEL’s largest customer in the region
› ANS capacity of 60ktpa back-integrated into major ammonia source adjacent to the plant
› Construction close to completion and beneficial production expected in 3Q13
BBRI
37
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SPECIALTY CHEMICALS
› General Electric’s Chemical and Monitoring Solutions business
» African footprint with excellent people
» specialised equipment for water processing
» continued support and technology from a world-class partner
» in line with water, oil, gas, energy strategy roll-out
› Senmin PAM plant
» exit of BASF as a partner finalised
» allows AECI to compete in all global mining chemical markets with PAM
› Cellulose Derivatives
» Competition Tribunal approval obtained
› Bolt on acquisition for Lake Foods: Afoodable
› Brazilian country investment still seen as attractive
38
Acquisitions update
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SPECIALTY CHEMICALS CLUSTER 39
Restructuring 2012
Chemiphos incorporated into Chemical Initiatives and ChemSystems
Industrial Urethanes incorporated into Lake Chemicals and Chemfit
Duco divisions were sold
Resitec sold
Lake Chemicals new business formed Jan ’13
Lake Foods new business formed Jan ’13
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SPECIALTY CHEMICALS CLUSTER
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
40
Now 15 businesses in the Cluster
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SPECIALTY CHEMICALS CLUSTER
› African specialty chemicals business focused on
» Mining chemicals Senmin
» Water, oil, gas and energy ImproChem
» Agriculture Nulandis
» Food additives Lake Foods
» Personal and home care Akulu Marchon
› South African diverse specialty chemicals cluster
41
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outlook and underlying growth
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22% 19%
15%
15% 9%
5%
4%
1%
1%
9% 11%
Phosphate
Uranium
Other
GROUP MINING REVENUE 43
Revenue by mineral mined 2012
22% Platinum
19% Coal
15% Copper, cobalt,
chrome and nickel
15% Gold
9% Quarry, construction
and civil
5% Diamond
4% Iron ore
11% Other
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21% 18%
8%
7%
6%
5% 5% 4%
4% 4%
4%
3%
1%
1%
1% 1% 1%
6%
11%
Appliances and furniture
Construction
Steel and metals
Engineering and foundry Textiles and leather
Various other
SPECIALTY CHEMICALS 44
Revenue by market sector 2012
21% Mining
18% Agriculture
8% Food and beverage
7% Paper and packaging
6% Chemical industry
5% Detergents
5% Explosives
4% Toiletries, cosmetics
and pharmaceuticals
4% Coatings, ink and adhesives
4% Plastics and rubber
3% Automotive
11% Other
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OUTLOOK AND FOCUS 45
› SA manufacturing volumes expected to track GDP growth
› Property sales for industrial end uses expected in 2013
› Strong focus on operational excellence in AEL
» cost reduction
» return AEL to acceptable profitability
» restructuring costs are expected
› AECI mining volumes 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
» significant potential for increased sales and profits from mining chemicals
› Strong focus on the strategic pillars in chemicals cluster for growth in Africa
› Acquisition activity expected locally and internationally
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INVESTORS’ CALENDAR 46
› Graham Edwards retires from the Board 28 February
› Mark Dytor succeeds him as Chief Executive 1 March
› AGM 27 May
› Half-year ends 30 June
› Interim results released and JHB presentation 24 July
› CT presentation 25 July
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thank you