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REVIEWED GROUP INTERIM RESULTSFor the twelve months ended 30 June 2004
PRESENTATION 2004
HARNESSING THE POWER OF THE EARTH
www.kumbaresources.com
2
CON FAUCONNIERCHIEF EXECUTIVE
HARNESSING THE POWER OF THE EARTH
3
178152
82
207
112 113
FY02 FY03 12M04
1H 2H
KEY FINANCIALS
Revenue R8 454m
Net operating profit
R1 101m
Headline earnings R580m
Headline earnings (cps)
194.6
Interim dividend (cps)
35
Headline EPS (cps)385
264
195
Stronger second half
4
HIGHLIGHTS
• Record safety performance
• Good progress on HIV / AIDS programme
• Solid operating performance from all businesses
• Strong US$ commodity prices… but
Pleasing safety performance
5
RAND IMPACT
Continued Rand strength (24% appreciation y-o-y) mitigated by:
• Strong sales volumes
• Good hedging policy – contributing R81m
• Business improvement programme
Continued impact by strong Rand
4
5
6
7
8
9
10
11
12
13
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
R/US$ AU$/US$
9.01
6.86
(average realised)
2H02 1H03 2H03 1H04 2H04
6
BUSINESS IMPROVEMENT PROGRAMME
• To maintain an attractive return in a prolonged strong rand environment
• R800m EBIT contribution
• Cost and revenue focus
• Shared services optimisation
• Programme
• Detailed planning - 2004
• All improvements implemented during 2005
• Full financial benefits in 2006
Crucial in strong Rand environment
7
MIKE KILBRIDEEXECUTIVE DIRECTOR OPERATIONS
HARNESSING THE POWER OF THE EARTH
8
SAFETY & ENVIRONMENT
Safety
• Fatalities at all time low
• Lost Day Injury Frequency Rate (LDIFR) at record low level
Environment
• Environmental management programmes approved for all operations
ISO Certification
• 4 Business units certified ISO 14001
• 3 Business units certified OSHAS 18001
• All operations by December 2004
Zero tolerance… key focus
Fatalities
LDIFR
64
8
4
1
FY00 FY01 FY02 FY03 12M04
3.47 3.133.55
4.59
2.3
FY00 FY01 FY02 FY03 12M04
9
IRON ORE MARKETS
• Strong growth in global blast furnace output
• Continued growth in Chinese imports of iron ore (148 Mt last year)
• Price increase of 18.6% effective 1 April 2004
Global blast furnace output
Source: AME
0
200
400
600
800
1999 2001 2003 2005f
Mt
EU 15 China Japan Other
Kumba well positioned for blast furnace demand
10
IRON ORE OPERATIONS
• Total production exceeds 30 Mt
• New record at Sishen - 27.5 Mt
• Exports influenced by stock build-up
• Strong domestic sales
Continued growth in iron ore output
Total production and exports
8
10
12
14
16
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Export sales Production
11
0
5
10
15
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Kumba Other
IRON ORE EXPORT CHANNEL
• Record tonnage railed of 21.9 Mt
• Port expansion on track for completion by end of 2005
• Negotiations underway for further 12 Mtpa expansion by 2008
Sishen-Saldanha rail performance
Infrastructure expansion is key to future growth
12
COAL MARKETS
• Total sales to Eskom - 14.4 Mt
• Record sales to Matimba - 13.9 Mt
• Strong domestic and international demand
Thermal coal and coke prices (US$/t)
Sources: SA Coal Report, CRU
20
30
40
50
60
70
80
Ju
l 01
Jan
02
Jul 0
2
Jan
03
Jul 0
3
Jan
04
Jul 0
4
50
150
250
350
450
RBCT thermal coal FOB
Chinese market coke exports
13
COAL OPERATIONS
• Excellent safety results at each coal mine
• Total coal production exceeds 19 Mt
• Annual record production at Grootegeluk and Leeuwpan
Production volumes
5
6
7
8
9
10
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Grootegeluk Leeuwpan
Tshikondeni
Solid operating performance at all mines
14
HEAVY MINERALS MARKETS
• Signs of recovery in pigment market
• Zircon, rutile and pig-iron in strong demand
• Titania slag market over-supplied
• First sales of slag and pig-iron
• Good sales of synthetic rutile
Zircon and pigment prices (US$/t)
Source: TZMI
360
380
400
420
440
460
480
Q4
01
Q2
02
Q4
02
Q2
03
Q4
03
1000
1200
1400
1600
1800
Zircon Pigment
15
• Excellent synthetic rutile and pigment production at Tiwest
• Good growth in slag and pig-iron production from SA operations
• Planned shut of furnace 2 for improvements and repair
Heavy minerals production
Good growth in production of key products
HEAVY MINERALS OPERATIONS
0
10
20
30
40
50
60
70
80
Rut
ile
Pig
men
t
Pig
-iron
Zirc
on
Syn
thet
icru
tile Sla
g
kt
1H 2H
16
ZINC MARKETS
• US$ zinc price recovery
• Depressed Rand price
• Low treatment charges prevail
Zinc metal price
Source: LME
Challenging market conditions persist
700
800
900
1000
1100
1200
1H022H02 1H03 2H031H04 2H04
US$/t
5000
6000
7000
8000
9000
10000R/t
17
BASE METALS OPERATING RESULTS
• Sustained record production at Rosh Pinah
• Chifeng refinery expansion on schedule
• Zincor metal production affected by concentrate quality
Zn metal
(kt)
Zn conc.
(kt)37 38 37
54 5467
1H02 2H02 1H03 2H03 1H04 2H04
Rosh Pinah
54 51 58 57 55 52
10 22
1H02 2H02 1H03 2H03 1H04 2H04
Zincor Chifeng
Refinery in China contributes to zinc metal output
18
INDUSTRIAL MINERALS
Dolomite sales
(Mt)
FeSi production
(t)• Good production levels maintained
• Solid financial contribution
0.66 0.650.67 0.65 0.66 0.67
1H02 2H02 1H03 2H03 1H04 2H04
19182415
2647 2671 28112703
1H02 2H02 1H03 2H03 1H04 2H04
19
DIRK VAN STADENEXECUTIVE DIRECTOR FINANCE
HARNESSING THE POWER OF THE EARTH
20
REVENUE
R million 12M04 FY03 % Change
Iron Ore 3 934 4 234 (7)
Coal 1 747 1 638 7)
Heavy Minerals - Ticor SA - Ticor Ltd
4021 189
312275
29)
Base Metals 1 087 892 22)
Industrial Minerals 87 78 12)
Other 8 40 (80)
Total 8 454 7 469 13)
R/US$ exchange rate realised 6.86 9.01
21
EBIT / MARGIN
12M04 FY03 % Change
Rm) (%) Rm) (%) (in Rand)
Iron Ore 673) 17 882) 21 (24)
Coal 310) 18 279) 17 11)
Heavy Minerals - Ticor SA - Ticor Ltd
(25)75) 6
24)38)
814 97)
Base Metals (45) (9)
Industrial Minerals 20) 23 21) 27 (5)
Other 93) (46)
Total EBIT 1 101) 13 1 189) 16 (7)
Total EBITDA 1 865) 1 744) 7)
22
EBIT COMPARISON
R million
Production cost
Sales growth and cost focus
1101251189 (67)192169(166)
262
975 (1082)
(240)(156)
1168
FY
03 E
BIT
Sal
es
Pric
e
Exc
hang
e ra
te
Infla
tion
Vol
ume
Dis
trib
utio
n co
st
Tic
or L
td
Cos
t sa
ving
s
Goo
dwill
"Cor
e" E
BIT
Non
-rec
urrin
g ite
ms
12M
04 E
BIT
23
CURRENCY IMPACT
R million 12M04 FY03
EBIT 1 101) 1 189)
Adjusted for:
Asset disposals (122) -)
Non-recurring items 189) -)
Price increases (809)
Unrealised translation loss/(gain) (7) 73)
Realised exchange rate impact 1 162)
Comparable EBIT 1514) 1 262)
Comparable EBIT margin 17) 17)
Rand appreciation reduces margin
24
EARNINGS
R million 12M04 FY03 % Change
EBIT 1 101) 1 189) (7)
Net financing cost (268) (244) (10)
Equity (loss)/income (29) 2)
Taxation (253) (229) (10)
Profit after taxation 551) 718) (23)
Minority interest (23)
Attributable earnings 528) 718) (26)
Attributable earnings per share (cents)
177) 242) (27)
Total dividend for the period 55 cps
25
HEADLINE EARNINGS
R million 12M04 FY03 % Change
Attributable earnings 528) 718) (26)
Post tax adjustments:
Impairment charges 98) 2)
Net surplus on asset disposals (103) (2)
Closure cost 24) -)
Goodwill and exceptionals 33) 66)
Headline earnings 580) 784) (26)
Headline earnings per share (cents) 195) 264) (26)
Average number of shares in issue (million)
298) 297)
HEPS 195 cps
26
CASHFLOW
R million 12M04 FY03
Opening net debt 2 374) 1 143)
Net cashflow from operating activities 818) 780
Net cash used in investing activities
New capacity (759) (1 122)
Other capital expenditure (314) (264)
Net impact of Ticor Ltd consolidation -) (559)
Asset disposals 208) 44)
Share issue 133) -)
Non cashflow movements 36) (110)
(Increase)/decrease in net debt 122) (1 231)
Closing net debt 2 252) 2 374)
Positive operational cashflow
27
RATIOS
12M04 FY03
Margin excluding captive arrangements
EBIT (%) 17 22
EBITDA (%) 25 28
Net financing cost cover
EBIT (times) 4.1 4.9
EBITDA (times) 7.0 7.1
Return on equity - attributable income (%) 11 15
Net debt / equity (%) 36 39
Solid financial metrics
28
CON FAUCONNIERCHIEF EXECUTIVE
HARNESSING THE POWER OF THE EARTH
29
STRATEGY
• Empowerment
• MPRDA - effective 1 May 2004 - Kumba well placed to conform
• Coordinating with Anglo on empowerment ownership process
• Iron ore growth
• Hope Downs
• Northern Cape expansion projects
• Coal growth
• Inyanda Coal JV
• Leeuwpan expansion
• Grootegeluk market coke project
• Heavy minerals: Fairbreeze
• Longer term potential
• Iron ore – Faleme (Senegal)
• Heavy minerals – Toliara Sands (Madagascar)
• Coking coal - Moranbah South (Australia)
Robust project pipeline
30
OUTLOOK
Positive factors
• Strong commodity markets
• Sustained excellent operating performance
• Business improvement initiatives
BUT: Rand strength and volatility poses major risk to the resource sector
• Strain on cash flow from operations
• Impact on new projects
Therefore, if the Rand stays at recent levels, we are unlikely to improve on earnings
THANK YOU.
HARNESSING THE POWER OF THE EARTH
www.kumbaresources.com
32
ADDITIONAL SLIDES
33
REVENUE CONTRIBUTION
FY0312M04
56%
1%1%12%
8%
22%
46%
21%
19%
13% 1%
Iron oreCoalHeavy mineralsBase metals
Industrial mineralsOther
34
EBIT CONTRIBUTION
FY0312M04
59%
8%2%
4%
27%
Iron oreCoalHeavy mineralsBase metals
Industrial mineralsOther
71%
2%5%
22%
35
IRON ORE PHYSICAL INFORMATION
Production volumes Sales volumes
0
2
4
68
10
12
14
16
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Sishen Thabazimbi
0
2
4
6
8
10
12
14
16
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Exports Local
36
COAL PHYSICAL INFORMATION
Production volumes Sales volumes
0
2
4
6
8
10
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Eskom Domestic Export
0
2
4
6
8
10
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Thermal Coal Coking Coal
Other
37
HEAVY MINERALS INFORMATION
Production volumes Sales volumes
0
100
200
300
400
500
Ilmen
ite
Zirc
on
Rut
ile
Pig
-iron
Chl
orid
e sl
ag
Sul
phat
e sl
ag
Syn
thet
ic r
utile
Pig
men
t
Ticor SA Ticor Ltd
0
20
40
60
80
100
Ilmen
ite
Zirc
on
Rut
ile
Pig
-iron
Chl
orid
e sl
ag
Sul
phat
e sl
ag
Syn
thet
ic r
utile
Ticor SA Ticor Ltd
38
DEPRECIATION PER SEGMENT
R million 12M04 FY03
Iron Ore 248 235
Coal 148 137
Heavy Minerals 191 92
Base Metals 45 41
Industrial Minerals 6 6
Corporate 6 21
Total 644 532
39
CAPITAL EXPENDITURE
R million 12M04 FY03
Sustaining and environmental 314 264
Expansion
• Ticor SA 485 923
• Group (other) 274 199
1 073 1 386
40
DEBT STRUCTURE
R million Drawn Undrawn Maturity profile
Long term 2004 472
Corporate 1 734) 319 2005 813
Ticor SA project finance 1 126) 92 2006 556
Ticor Ltd 630) 2007 1 023
3 490)
Short term -) 2 188 After 2007 626
Total debt 3 490) 3 490
Cash and cash equivalents (1 238)
Net debt 2 252)
41
PROJECT CAPITAL EXPENDITURE
ProjectImplementation
date (start)Estimated
capital cost
Hope Downs 2007 AU$1.7bn
Sishen Expansion Project (SEP) 2007 R2.4bn
Sishen South 2005 R2.0bn
Faleme 2010 US$950m
Leeuwpan expansion 2005 R91m
Inyanda Coal JV (50%) 2007 R186m
Grootegeluk market coke project
2005 R344m
Fairbreeze 2007 R516m