Salungano Group Limited · JSE:SLG
Salungano — FY2019 Earnings Presentation
43 slides from Salungano's earnings presentation, Jun 25, 2019
Slide 1: Results Presentation for the Year Ended 31 March 2019
RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2019 25 June 2019 LAYING THE FOUNDATION TO GROW SUSTAINABLY
Slide 2: Disclaimer
DISCLAIMER This presentation is published solely for informational purposes and does not constitute investment, legal, tax or other advice nor is it to be relied upon in making an investment decision. Information contained herein has been taken from sources considered by Wescoal Holdings Limited to
Slide 3: Contents
CONTENTS 1. Overview of Results and Strategy 2. Mining Segment 3. Trading Segment 4. Financials 5. Outlook 6. Q&A 3
Slide 4: Overview of Results and Strategy
OVERVIEW OF RESULTS AND STRATEGY
Slide 5: Operational and Financial Overview
OPERATIONAL AND FINANCIAL OVERVIEW COAL MINED (-13%) SALES (-10%) REVENUE (+12%) EBITDA (-15%) 5.9Mt 4.9Mt R3 965 million R456 million (FY18: 6.8Mt) (FY18: 5.4Mt) (FY18: R3 527 million) (FY18: R538 million) SHARE BUYBACK INTENT* NPAT (-56%) EPS (-58%) CASH GENERATED (+23%) REFINANCE R88 million
Slide 6: Laying the Foundation to Grow Sustainably
LAYING THE FOUNDATION TO GROW SUSTAINABLY CORE VALUES STRATEGIC PILLARS STRATEGIC PRIORITIES Sweat current operations, manage business Safety well to maintain steady state TARGET: 8Mt ROM FY20 Customer-centric, balance between Eskom, domestic and export coal Delivery TARGET: 60% Eskom Stability
Slide 7: Strengthening Leadership
STRENGTHENING LEADERSHIP Management appointments • Mr Reginald Demana : Group CEO (April 2019) • Mr Enos Lentsoane : Executive Head: Commercial and Investment (May 2019) • Ms Zanele Sibisi : COO: Mining (May 2019) • Mr Takalani Ndou : Group Mine Planning Manager (June 2019) • Ms Sharon Ramoetlo : Co
Slide 8: M&A Update
M&A UPDATE Arnot mine Khanyisa Complex • Acquired 50% indirect interest from Exxaro Resources • Group best performer following100% Aztolinx take-out transaction • Remaining 50% owned by previously retrenched mine employees • Pursuing LoM extension initiatives – access resources under the • DMR a
Slide 9: Mining Segment
WESCOAL NING GMENT
Slide 10: Overview
OVERVIEW MINING PRODUCTION (-13%) SALES (-10%) OPERATIONAL EBITDA (-14%) 5.9Mt 4.9Mt R418 million (FY18: 6.8Mt) (FY18: 5.4Mt) (FY18: R488 million) Safety and Health Environmental • Subcontractor fatality (post year-end) – vehicle accident Integration of ISO140001:2015 underway • LTIFR 0.35 (F
Slide 11: Operating Assets Summary
OPERATING ASSETS SUMMARY ELANDSPRUIT PROCESSING 19 358 2.7Mt 16.4Mt 9 392 2.2Mt permanent contractors coal mined reserves permanent contractors coal sales Key • ROM production 2.7Mt (FY18: 3.1Mt) • Sales volume 2.2Mt (FY18: 2.2Mt) • Sales volumes 2.2Mt (FY18: 2.2Mt) • Plant feed derived from Elandsp
Slide 12: Operating Assets Summary (Continued)
OPERATING ASSETS SUMMARY (CONTINUED) KHANYISA COMPLEX VANGGATFONTEIN 18 352 0.4Mt 3.5Mt 17 615 2.7Mt 27.2Mt permanent contractors coal mined reserves permanent contractors coal mined reserves Key • ROM production 395kt (FY18: 468kt) • ROM production 2.7Mt (FY18: 2.4Mt) • Sales volumes 505kt • Sales
Slide 13: LoM Extension Initiatives
LoM EXTENSION INITIATIVES VG5 common box-cut Khanyisa Complex • Wescoal to benefit from mining barrier pillar coal • Best performing asset in Group following 100% Aztolinx take-out • Partner to develop joint box-cut – Wescoal to develop own section • Exploring opportunities to extend LoM by acce
Slide 14: Projects Update
PROJECTS UPDATE Moabsvelden/VG6 Arnot Mine • Progressing long-term offtake agreement options • c.2.0Mtpa ROM production mine • Mine development plan optimisation, incl. synergies with • DMR awarded Section 11 (1 May 2019), subject to remaining Vanggatfontein processing approvals • 29.0Mt reserve
Slide 15: Trading Segment
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Slide 16: Overview
OVERVIEW • Strong performance despite tough economic environment • Maintained profitability • Improved debtors’ book • Continued focus on strict cost management • Sustained operational footprint • No reportable HSEC incidents • Maintained B-BEEE Level 4 • Experienced team, systems and controls provi
Slide 17: 5YR Trend: Volumes and Revenue
5YR TREND: VOLUMES AND REVENUE 1600 • Increased sales revenue, steady sales 1400 volumes 1 153 1 120 • FY19 tonnes sold increased by 2.8% to 1200 1 072 1 045 1 042 1 072kt (FY18: 1 042kt) 1000 • FY19 revenue increased by 21% to R1.47 billion (FY18: R1.22 billion) reflecting 800 an increase in commod
Slide 18: Financials
WESCOAL FINANCIALS
Slide 19: Financial Salient Features
FINANCIAL SALIENT FEATURES REVENUE up12% to R3 965 million (FY18: R3 527 million) GROSS PROFIT down 18% to R462 million (FY18: R565 million) CASH GENERATED from operations up 29% to R462 million (FY18: R359 million) NET DEBT down 41% to R269 million (prior to committing R335 million to acqui
Slide 20: Year-on-Year Volumes
YEAR-ON-YEAR VOLUMES ROM production (kt) Mining sales volumes (kt) FY18 ROM Vanggat- FY18 Vanggat- Intibane Elandspruit Khanyisa FY19 ROM FY18 Sales Vanggat- Total Intibane Khanyisa Elandspruit Vanggat- Buy-in FY19 Sales fontein comparable fontein fontein fontein Q1 Q2 - 4 Q1 Q2 - 4 Production and s
Slide 21: Revenue and Operating Profit
REVENUE AND OPERATING PROFIT 5-YR TRACK RECORD Revenue Operating profit Rm Rm 5 000 400 344 3 965 4 000 3 527 300 3 000 224 2 118 200 2 000 1 674 1 590 123 101 HY19 HY19 100 1 000 197 46 2 064 0 0 FY15 FY16 FY17 FY18 FY19 Revenue Operating profit 21
Slide 22: Segmental Report
SEGMENTAL REPORT Other Total (and inter-segment (after inter-segment Mining Trading eliminations) eliminations) Rm Rm Rm Rm 31 March 2019 Total segment revenue 2 639 672 1 466 658 (141 757) 3 964 573 Inter-segment revenue 136 825 5 927 (142 752) - External revenues 2 502 847 1 460 731 995 3 964 573
Slide 23: Segmental Contributions and Revenue Diversity
SEGMENTAL CONTRIBUTIONS AND REVENUE DIVERSITY Segmental contribution (FY19) Revenue Operational EBITDA 14% 37% Mining 63% Trading 86% Rev enue div ersity 53% 44% 56% Eskom 47% Other FY18 FY19 23
Slide 24: Mining Division
MINING DIVISION 5-YR TRACK RECORD Revenue EBITDA Rm Rm 3 000 600 2 502 488 2 500 2 309 500 418 2 000 400 1 500 300 249 1 023 1 000 200 596 627 125 HY19 HY19 94 500 100 248 1 017 0 0 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 24
Slide 25: Profitability
PROFITABILITY 5-YR TRACK RECORD NPAT/EBITDA year-on-year/period-on-period Rm 600 538 NPAT decline of R114 million (56%) 500 EBITDA down R82 million (15%) 456 400 Operation impact: - Vanggatfontein contractor transition 296 300 - Elandspruit underground stoppage - Khanyisa Triangle dispute and acquis
Slide 26: NPAT Variance
NPAT VARIANCE Mining Segment FY18 Price- Price- Volume Cost Amortisation Cost Khanyisa Finance Other Sub-total Non- FY19 NPAT sales sales mix variance inflation (Strip ratio) Triangle cost recurring NPAT inflation events1 Unit cost FY19 FY18 Delta Delta Non-recurring items include: ROM R/t kt kt kt
Slide 27: EPS
EPS 5-YR TRACK RECORD Cps 60 438 53.8* 435 50 350 48.1 40 225 30 26.2 184 HY19 25.2 20 15.7 11.6 10 20.2 0 FY15 FY16 FY17 FY18 FY19 EPS (FY) EPS normalised (FY) Weighted average number of shares (million) * Excluding B-BBEE discount and associated share volume dilution and transaction cost associate
Slide 28: Cash Flow Generation
CASH FLOW GENERATION 5-YR TRACK RECORD Cash generated from operations Rm Cps 500 462 200 400 359 300 106.3 254 240 100 200 95 HY19 100 206 HY19 52.5 0 0 FY15 FY16 FY17 FY18 FY19 Cash flow generated from operations Cash flow generated per share 28
Slide 29: Statement of Comprehensive Income - Extracts
STATEMENT OF COMPREHENSIVE INCOME - EXTRACTS FY19 FY18 Rm Rm % change Revenue 3 965 3 527 12% Gross profit 462 565 (18%) Operating profit 224 344 (35%) Net finance cost 77 61 (26%) Taxation 59 90 34% Total comprehensive income 88 202 (56%) EPS (cents per share) 20.2 48.1 (58%) 29
Slide 30: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Audited Audited 31 Mar 2019 31 Mar 2018 Rm Rm • PPE includes Khanyisa Triangle Non-current assets 2 168 2 180 • Decrease in inventory due to net impact of Property, plant and equipment 1 954 1 950 decrease in stock piles at Vanggatfontein - Investments - 8 production
Slide 31: Statement of Financial Position (Cont.)
STATEMENT OF FINANCIAL POSITION (CONT.) Audited Audited 31 Mar 2019 31 Mar 2018 Rm Rm • Increase in closure and rehabilitation Total shareholders’ funds 1 092 1 047 provision due to life stage of mines Non-current liabilities 1 050 1 060 (R130 million) Interest-bearing loans 148 194 • Bank overdraft
Slide 32: Funding Profile
FUNDING PROFILE Full facility Utilised Available (Rm) (Rm) (Rm) Maturity FY19 FY18 Loans 222 214 8 Nedbank CIB – RCF 215 207 8 Three years, equal instalments Debt service cover ratio 2.98 2.10 Guvnor SA 7 7 - Last instalment June 2019 Vitol SA - - - Settled in October 2018 Facilities 412 360 52 EBIT
Slide 33: Pro-forma Funding Profile – Post FY20 Refinance
PRO-FORMA FUNDING PROFILE – POST FY20 REFINANCE Pro-forma Audited Full facility Utilised* Available 31 Mar 2019 31 Mar 2019 (Rm) (Rm) (Rm) Rm Rm Loans 500 451 49 Total assets 3 352 3 352 Nedbank – term loan 250 225 25 Non-current assets equipment 2 168 2 168 Standard Bank – term loan 250 226 24 Curr
Slide 34: Net Debt Movement
NET DEBT MOVEMENT Net debt Cash flows Taxation paid Capex Proceeds from Other Total Khanyisa Net debt – Net interest 31 March 2018 from operations disposal of assets Triangle 31 March 2019 acquisition 34
Slide 35: Statement of Cash Flows
STATEMENT OF CASH FLOWS Audited Audited 31 Mar 2019 31 Mar 2018 Rm Rm Net cash flows from operating activities 323 213 • Consistent strong cash generation Cash generated from operating activities 462 359 • Cash generated initially applied to reduce borrowings and subsequently reinvested Net interest
Slide 36: Capital Expenditure
CAPITAL EXPENDITURE FY19 FY18 Mining 105 976 72 220 Moabsvelden 7 643 3 529 Corporate 1 572 3 554 Other - 688 115 191 79 991 FY19 expenditure R’000 Low-grade study 6 481 Deferred stripping capitalisation 49 422 Vanggatfontein site establishment costs 11 552 Moabsvelden 7 643 PCD dam 11 872 Graspan b
Slide 37: Outlook
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Slide 38: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Managing existing debt Ongoing capital expenditure • Ensure timeous interest and capital repayments on all • Ensure adequate sustaining and ongoing capital facilities to support operations • Optimise balance sheet to create operational and • Explore bolt-on brownfiel
Slide 39: Looking Ahead
LOOKING AHEAD • New strategy roll-out commenced • Stability of operations to reach steady state an immediate priority • Strategic targets LoM Monthly Annual Operation (yrs) (ktpm) (Mtpa) Notes Vanggatfontein (VG3 & 4) 7 340 4.0 VG5 replacement pit – H1 2020 Elandspruit 6 240 2.9 Capacity from openca
Slide 40: Q&A
Q&A LAYING THE FOUNDATION TO GROW SUSTAINABLY
Slide 41: Appendices
APPENDICES
Slide 42: Group Operations
GROUP OPERATIONS Part of Wescoal’s strategy is to consolidate FY19 ROM the junior mining sector LoM production MINING Employees Contractors (years) (kt) Wescoal Trading areas of activity Elandspruit 19 358 6 2 665 Wescoal Mining Intibane - - - 133 1. Elandspruit 2. Intibane 3. Khanyisa Complex Khany
Slide 43: Mineral Resource and Reserves
MINERAL RESOURCE AND RESERVES MARCH 2019 Measured resource Indicated resource Inferred resource Total resource Total reserve (Mt) (Mt) (Mt) (Mt) (Mt) Operating Elandspruit 16.71 - - 16.71 16.41 Khanyisa Complex 3.84 0.12 - 3.96 3.48 Vanggatfontein 29.13 1.64 0.34 31.11 27.23 Subtotal 49.68 1.76 0.34