Afrimat Limited · JSE:AFT
Afrimat — Shareholder Meeting (July 2020)
47 slides from Afrimat's shareholder meeting presentation, Jul 29, 2020
Slide 1: Annual General Meeting
Annual General Meeting 29 July 2020
Slide 2: Core message
Core message Diversification strategy proved its worth Very strong balance sheet enables growth Values based entrepreneurial culture is paying off
Slide 3: What makes Afrimat different?
What makes Afrimat different? Company positioning Strategic Company management culture
Slide 4: Company positioning
Company positioning Primarily focused on mid-tier mining Critical set of criteria used Unique competitive advantage when potential acquisitions are being evaluated Geographic location Unique metallurgy Structural cost advantage Highly entrepreneurial culture Hedged against economic vol
Slide 5: Company culture
Company culture Strong operational efficiency – executing ability The right people in the right positions Synergistic teamwork Customer focus Values based entrepreneurial culture
Slide 6: Strategic management
Strategic management Company-wide understanding of our desired ideal future Fundamental understanding of our market Good understanding of our own abilities Continuous research of the business environment Making the difficult decisions Meticulous strategy execution Financial discipline:
Slide 7: What the diversification strategy is delivering
WHAT THE DIVERSIFICATION STRATEGY IS DELIVERING
Slide 8: Headline earnings per share (HEPS) comparison
Headline earnings per share (HEPS) comparison 8.00 -- Afrimat 6.00 4.00 2.00 -- Raubex * 0.00 -- Sephaku * -- PPC * -- CIL -2.00 * Interim HEPS -4.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 9: Growth through diversification
Growth through diversification Profit history with and without acquisitions 350 Glen Douglas 300 Clinker 250 Infrasors 200 Cape Lime 150 Demaneng 100 50 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Headline earnings per share Reality without strategic acquisitions
Slide 10: Financial review
FINANCIAL REVIEW
Slide 11: Financial overview
Financial overview Exceptional cash generation Strong quality of earnings across group Continued focus on astute capital allocation
Slide 12: Financial overview
Financial overview 11,4% 48,5% 18,2% Group revenue HEPS increased to Operating profit increased to 347,7 cps margin R3,3bn 30,9% 8,2% Net debt:equity Return on net ratio improvement operating assets from 23,8%
Slide 13: Revenue and operating profit
Financial overview Revenue and operating profit Revenue (R’000) Operating profit (R’000) Contribution from operations margin 18,2% (2019: 15,9%) 700 000 27,5% 3 500 000 11,4% 600 000 3 000 000 500 000 282 959 1 584 574 2 500 000 1 531 549 400 000 268 483 1 196 402 203 492 2 000 000 1 074 899 157 294
Slide 14: Contribution from operations
Contribution from operations 23% 31% Revenue 2020 52% 2019 59% 18% 17% Construction Materials Industrial Minerals Bulk Commodities 31% 43% 40% Operating profit 53% 2020 2019 16% 17%
Slide 15: Total dividend
Total dividend Dividend – 2.7x cover 140 120 117 CAGR of 19,7% 100 Cents per share 2016 - 2020 81 80 70 62 60 57 40 Record date: Friday, 4 Sept. 2020 20 Dividend payable: Monday, 7 Sept. 2020 - 2016 2017 2018 2019 2020
Slide 16: Margin improvements
Margin improvements Operating profit margin (%) FY2020 FY2019 Construction Materials 11,2% 10,9% Bulk Commodities 31,0% 29,5% Industrial Minerals 17,3% 14,3% Overall 18,2% 15,9%
Slide 17: Headline earnings per share – full year
Headline earnings per share – full year 400 350 CAGR - 22,05% (2016 – 2020) 300 Cents per share 250 200 347.7 150 234.1 196.4 180.7 100 156.6 50 0 2016 2017 2018 2019 2020
Slide 18: Net cash from operating activities – full year
Net cash from operation activities – full year CAGR of 20,56% (2016 – 2020) 800 000 676 810 700 000 600 000 500 000 406 046 410 484 R‘000 79 510 400 000 320 339 280 470 300 000 79 510 326 536 200 000 200 960 100 000 0 2016 2017 2018 2019 2020
Slide 19: Statement of financial position – assets
Statement of financial position - assets Audited Audited R’000 Feb 2020 Feb 2019 Property, plant and equipment 1 571 519 1 469 837 Intangible assets 210 226 221 873 Inventories 260 526 261 249 Trade and other receivables 476 356 435 458 Cash 167 533 191 763 Other assets / deferred tax 109 102 106 83
Slide 20: Statement of financial position – equities & liabilities
Statement of financial position – equities & liabilities Audited Audited R’000 Feb 2020 Feb 2019 Total equity 1 688 907 1 409 517 Borrowings 295 832 383 546 Provisions 152 748 141 080 Overdraft 20 134 153 Trade and other liabilities 421 072 390 517 Other liabilities / deferred tax 236 683 228 199 2
Slide 21: Lessons learned
Lessons learned Value determined by the weakest link in value chain Expect the unexpected (e.g. COVID-19) Only the best people are good enough Don’t trust the spreadsheet or the budget Don’t sail too close to the wind Cash is king – make it soon DO NOT OVERPAY FOR ACQUISITIONS
Slide 22: Our market
OUR MARKET
Slide 23: Bulk commodities
Bulk commodities » AFRIMAT: =» lron ore
Slide 24: Iron ore market overview
Iron ore market overview World production of usable ore: 2.5 billion tons World seaborne trade about 1.467 billion tons p.a. China’s imports about 72% of seaborne trade South African production: about 70 million tons p.a. Production of 1 ton of crude steel requires 1.4 ton of iron ore and
Slide 25: Impact of COVID-19
Impact of COVID-19 Hard lockdown in China January/February Increased imports due to domestic travel ban Market tilted towards Construction and Infrastructure Significant impact in Europe Construction and automotive about 50% of steel consumption All major European car manufacturers halte
Slide 26: Iron ore pricing
Iron ore pricing Seaborne pricing driven by Chinese production of pig iron Grew in 2019 from $75/t to $125/t: Average $93/t Currently trending higher: Average for July $107,7 ton against $83,84/t in April Record levels in Rand terms Fitch forecast average of $90/t in 2021 Realized price
Slide 27: Pricing influences
Pricing influences Daily iron ore price (as per the Plats Index) Exchange rate (R/$) Lumpy premium Quality Marketing costs adjustments based (US$) on silica, aluminium and manganese content Logistics cost to Shipping costs harbour
Slide 28: Payment arrangements
Payment arrangements 1. Preliminary payment when delivered to Saldanha 2. Final price determined after 3 months (arrival in China) 3. Difference on final price adjusted to subsequent preliminary payment
Slide 29: Iron ore sales by rail
-10 000 110 000 10 000 30 000 50 000 70 000 90 000 Aug-17 22 715 Sep-17 28 629 Oct-17 26 813 Nov-17 30 643 Dec-17 30 282 Jan-18 45 743 Feb-18 45 392 Mar-18 45 225 Apr-18 45 758 May-18 57 172 Jun-18 65 244 Jul-18 58 463 Aug-18 75 281 Iron ore sales by rail Sep-18 53 395 Oct-18 65 004 Nov-18 64 982 De
Slide 30: Construction materials
Construction materials Aggregates Bricks & blocks Readymix concrete
Slide 31: Afrimat Construction Index – Q1 2020
Afrimat Construction Index – Q1 2020 Index; Q1 2011=100 130 4Q average 125 120 115 110 105 100 95 13 14 15 16 17 18 19 20 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 1' 1' 1' 1' 1' 1' 1' 1' Q
Slide 32: Contribution of construction to GDP
Contribution of construction to GDP (both at 2010 prices) 3.6% 3.6% 3.6% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.4% 3.4% 3.4% 3.4% 3.4% 3.3% 3.3% 3.3% 3.2% 3.2% 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Source: Stats SA, P0441, 5 March 2019 and 3 March 2020).
Slide 33: Growth rate of GDP and growth rate of Construction
Growth rate of GDP and the growth rate of Construction (both at 2010 prices) 5.00% 4.57% 4.00% 3.49% 3.00% 2.58% 1.84% 2.49% 2.21% 1.85% 2.00% 1.41% 1.19% 1.18% 1.00% 0.79% 0.40% 0.15% 0.00% 2012 2013 2014 2015 2016 2017 2018 2019 -1.00% -0.58% -1.23% -2.00% -3.00% -3.26% -4.00% GDP) Construction (S
Slide 34: Construction materials: COVID-19 impact
Construction materials: COVID-19 impact Complete lockdown under level 5 – no revenue for April 2020 (painful) Partial re-opening under level 4 – sales volumes around 40% of previous year (still painful) Gradual recovery under level 3 – activity levels approaching F2020 levels Demand spike in
Slide 35: Presidential Infrastructure Coordinating Commission Council
Presidential Infrastructure Coordinating Commission Council Strategic Integrated Projects Gazetted: 24 July 2020 – projects identified: Water and sanitation (R106bn) Energy (R58bn) Roads (R47bn) Human settlements (R138bn) “…recovery should be led by infrastructure development and maintenance
Slide 36: Industrial minerals
Industrial minerals Limestone Dolomite
Slide 37: Industrial minerals: COVID-19 impact
Industrial minerals: COVID-19 impact Minimal activity under level 5 – only water purification and fire retardant markets (painful) Partial re-opening under level 4 – sales volumes remained disappointing Gradual recovery under level 3 – activity levels remain below F2020 levels Glass bottle m
Slide 38: Industrial minerals: Prospects
Industrial minerals: Prospects Specialised and niche applications are gaining traction (lime based paint, resin lime, fluid lime, fillers) Increased demand for oxide and hydrated materials (e.g. fluid lime for heavy minerals industry) Steel, chemical and plate glass markets expected to return
Slide 39: Sustainability
SUSTAINABILITY
Slide 40: Human resource development
Human resource development Categorization spend (R’000) R 907 R 774 R 2 574 R 2 995 R 5 826 R 14 818 R 4 318 R 13 191 FY 2020 FY 2019 R 11 303 R 6 117 Bursary/study loans Bursary/study loans Training costs Training costs Skills development department cost Learnerships Skills development department c
Slide 41: Community development
Community development Categorization spend (R’000) FY 2020 FY 2019 R7 R616 R142 R172 R442 R356 R1 703 R1 275 R1 205 R2 243 Art, Sports & Culture (12,5%) Basic Needs (7,2%) Art, Sports & Culture (5,3%) Basic Needs (13,7%) Education projects (45,5%) Uplifting community (34,6%) Education projects (37,2
Slide 42: Afrimat culture
Afrimat culture AX a CARING ENVIRONMENT HN IMPORTANT RELATIONSHIPS Al RESULTS DRIVEN Sq% Teamwork co | SKILLS AND COMPETENCE y EMPOWERING -@- _ ENTREPRENEURIAL DRIVE I WINNING ATTITUDE J e HUMILITY AND BELIEF
Slide 43: The future
THE FUTURE
Slide 44: Unicorn Capital Partners
Unicorn Capital Partners Conditional final offer made for remaining 73% Short term focus to meet conditions in terms of approvals and agreements Implementation expected by Q3 of F2021 Medium term focus to turn business around: Nkomati ramp-up to reliably sell 40 000 tpm Evaluate other bu
Slide 45: Prospects
Prospects Iron Ore expect to remain good contributor Average iron ore price expected around $85/t for H2, good quality premiums expected Construction Materials expect good volumes for H2 Industrial Minerals expect marginally lower volumes in H2 compared to H2 F2020 Strong cash Implementa
Slide 46: Core message
Core message Diversification strategy proved its worth Very strong balance sheet enables growth Values based entrepreneurial culture is paying off
Slide 47: Q&A
Q&A Thank you for your attendance and participation For any further Investor Relations questions please contact: Andries van Heerden (CEO) 021 917 8840 Vanessa Rech (Keyter Rech Investor Solutions) 087 351 3814