Slide 1: Financial Results Presentation for the Year Ended 31 December 2019
FINANCIAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019 25 February 2020
Slide 2: Agenda
01. INTRODUCTION 02. PERFORMANCE SUMMARY 03. EARNINGS ANALYSED 04. SEGMENTAL PERFORMANCE 05. OUTLOOK AND FOCUS 06. SUMMARY AND 2020 OBJECTIVES
Slide 3: Non-Executive Directors
NON-EXECUTIVE DIRECTORS 2 Khotso Mokhele Steve Dawson Fikile De Buck Walter Dissinger Godfrey Gomwe Jonathan Molapo Allen Morgan Rams Ramashia Philisiwe Sibiya
Slide 4: Introduction: Executive Team
INTRODUCTION: EXECUTIVE TEAM 3 Mark Dytor – CE Mark Kathan – CFO Edwin Ludick – Executive Dean Mulqueeny – Executive Dean Murray – Executive Candice Watson – Group HC Executive
Slide 5: Performance Summary
02 PERFORMANCE SUMMARY
Slide 6: Performance Summary
PERFORMANCE SUMMARY 5 – Revenue +6% to R24 799m › Foreign and export revenue = 40% of total revenue – EBITDA +26% to R3 326m – Profit from operations growth trend maintained: +2,0% to R2 031m › R156m cost of strategic realignment projects recovered › R147m goodwill impairment at SCP – EPS +30% to 1
Slide 7: Performance Summary Cont.
PERFORMANCE SUMMARY CONT. 6 – Excellent improvement in safety performance › TRIR of 0,38 – Air emissions abatement projects, Modderfontein › R100m spent in ’19 of total R180m investment › On track for completion in 3Q20 – Achieved Level 2 B-BBEE Contributor status in the year – GCR rating upgraded t
Slide 8: Sale of 50% Shareholding in Crest Chemicals
SALE OF 50% SHAREHOLDING IN CREST CHEMICALS 7 R196m R430m Final adjusted purchase price* >10X EBITDA R234m * Incl. initial purchase price consideration of R390m and R40m purchase price adjustment on working capital, received in Feb ’20
Slide 9: Safety: TRIR
SAFETY: TRIR 8 1,0 0,8 0,6 0,58 0,45 0,39 0,38 0,4 0,35 0,2 0,32* 0,22* 0,0 2015 2016 2017 2018 2019 * Excl. acquisitions
Slide 10: Business Drivers
03 BUSINESS DRIVERS
Slide 11: Business Drivers: ZAR/US$ exchange rate
BUSINESS DRIVERS 10 ZAR/US$ exchange rate
Slide 12: Business Drivers
BUSINESS DRIVERS u Source: Bloomberg
Slide 13: Business Drivers: Platinum/palladium
BUSINESS DRIVERS 12 Platinum/ palladium Us$/oz 2000 1800 1600 1400 1200 1000 800 === Rhodium m= Platinum === Palladium Source: Bloomberg
Slide 14: Business Drivers: Cobalt, copper and nickel
BUSINESS DRIVERS 13 Cobalt, copper and nickel
Slide 15: Business Drivers: Coal and iron ore
BUSINESS DRIVERS 14 Coal and iron ore
Slide 16: Business Drivers: SA mining volumes
BUSINESS DRIVERS 15 SA mining volumes
Slide 17: Business Drivers: Brent crude oil
BUSINESS DRIVERS 16 Brent crude oil
Slide 18: Business Drivers: SA manufacturing volumes
BUSINESS DRIVERS 17 SA manufacturing volumes
Slide 19: Earnings Analysed
03 EARNINGS ANALYSED OA=CI
Slide 20: Earnings Analysed
EARNINGS ANALYSED 19 – Profit from operations +2% to R2 031m – Tax rate 28% (’18: 34%) › Normalised: +9% to R2 178m › Lower foreign withholding tax – Trading margin = 8,2% (’18: 8,6%) › Jurisdiction mix – EBITDA +26% to R3 326m – Final ordinary cash dividend of 414c declared › Normalised: +23% to R3
Slide 21: Earnings Analysed: HEPS and Dividend
EARNINGS ANALYSED 20 Dividend HEPS 1 800 561 570 600 515 1 500 478 500 435 385 1 150 1 200 400 1 045 959 894 900 818 300 600 200 300 100 0 0 15 16 17 18 19 FY (cps) FY (dps)
Slide 22: Performance Analysed
PERFORMANCE ANALYSED 21 2019 Profit from ops EBITDA HEPS R millions (Rm) (Rm) (cps) Reported 2 031 3 326 1 150 Impairment of goodwill 147 147 – Sale of Crest – (234) – Normalised 2 178 3 239 1 150 IFRS 16 (28) (249) 24 Normalised, excl. IFRS 16 2 150 2 990 1 174 Growth (%) 7,5 13,6 12,3
Slide 23: Cash
CASH 22 – Capex of R833m vs depreciation of R736m 4 500 4 177 114 › Expansion: R159m 3 454* 94 › Sustenance: R674m 3 600 » Air emissions abatement: R100m 74 – NWC to revenue of 17,2% (16,0% in ’18) 2 700 › Lower than expected sales in Dec. 54 › Pre-payment to creditor for better prices 1 741 1 800 ›
Slide 24: Net Debt and Cash Utilisation
NET DEBT AND CASH UTILISATION 23 Rm 6 000 g Cash 5 000 4 177 (3 262) 576 4 030 4 000 774 (64) (390) 246 (15) 3 454 3 000 538 544 2 000 509 397 1 000 At 31 Dec Net cash Net Tax paid Net Working Net capex Proceeds Proceeds Lease Other & At 31 Dec Finance At 31 Dec '18 generated interest dividends capi
Slide 25: Net Debt Analysis: Payment Profile
NET DEBT ANALYSIS: PAYMENT PROFILE 24 Rm Dec '18 Dec '19 576 g Finance lease liabilities (IFRS 16) 2 725 g Term debt/repay 2023 2 671 g Term debt/repay 2022 g Term debt/repay 2021 716 710 g Term debt/repay 2020 1 861 g Short-term borrowings 1 856 173 g Cash 283 168 27 (1 581) (1 978)
Slide 26: Performance Analysed: IFRS 16 Impact
PERFORMANCE ANALYSED: IFRS 16 IMPACT 25 Income statement % FY19 Rm change 2018 2019 IFRS 16 underlying Revenue 6,4 23 314 24 799 – 24 799 Trading profit 1,6 1 999 2 031 (28) 2 003 Trading margin (%) (4,5) 8,6 8,2 8,1 Equity-accounted investees, net of tax (438,5) (78) 264 (1) 263 Finance costs 25,2
Slide 27: Performance Analysed: IFRS 16 Impact
PERFORMANCE ANALYSED: IFRS 16 IMPACT 26 Statement of financial position 2019 Rm 2018 2019 IFRS 16 Underlying Non-current assets 11 681 11 884 (597) 11 287 Property, plant and equipment and intangible assets 5 768 5 722 (592) 5 130 Deferred tax 382 234 (6) 228 Other non-current assets 5 531 5 928 1 5
Slide 28: Performance Excl. Acquisitions
PERFORMANCE EXCL. ACQUISITIONS 27 2019 2018 % change Excl. Excl. Excl. Rm acquisitions Acquisitions Reported acquisitions Acquisitions Reported acquisitions Acquisitions Reported Revenue 20 947 3 852 24 799 20 174 3 140 23 314 3,9 2,5 6,4 Profit from ops 1795 236 2 031 1 868 131 1 999 (3,9) 5,5 1,6
Slide 29: Potential Transaction: Treasury Shares
POTENTIAL TRANSACTION: TREASURY SHARES 28 – AECI subsidiary holds 9,755% of AECI’s listed ordinary shares – Limits AECI’s capacity to repurchase shares › 10% limit for subsidiary companies – Investigating a transaction to cancel these treasury shares › Without any negative impact on shareholders › A
Slide 30: Performance by Segment
04 PERFORMANCE BY SEGMENT OAEC I"
Slide 31: Summary by Segment: Reported
SUMMARY BY SEGMENT: REPORTED 30 Segment Revenue EBITDA Profit from ops MINING R11 537m R1 923m R1 305m SOLUTIONS 4,8% 25,6% 2,4% WATER & R1 452m R229m R190m PROCESS 5,5% 38,8% 58,3% PLANT & R4 783m R376m R203m ANIMAL HEALTH 8,1% 51,0% 70,6% FOOD & R1 466m -R46m -R88m BEVERAGE 17,
Slide 32: Mining Solutions
MINING SOLUTIONS “g
Slide 33: Mining Solutions: Revenue by Mineral Mined
MINING SOLUTIONS 32 Revenue by mineral mined (%) 1 4 4 23 Gold 23 9 22 PGMs 19 Coal 18 Copper 18 9 Iron ore 4 Diamond 22 1 Uranium 19 4 Other minerals
Slide 34: Mining Solutions
MINING SOLUTIONS 33 Volume Revenue Profit from ops Margin Trade WC EBITDA R11 537m R1 305m 11,3% 19,3% R1 923m 1,0% 4,8% 2,4% ’18 11,6% ’18 16,0% 25,6% – Revenue growth in both Explosives and – Growth in foreign revenue: 59% of total revenue Mining Chemicals – Profit from operations › Improv
Slide 35: Mining Solutions Cont.
MINING SOLUTIONS CONT. 34 – Capex › On track to complete air emissions abatement compliance projects in 3Q20 » R100m spent to date – Disappointing working capital performance › Inventory increased ahead of air emissions shutdown › Unexpected slowdown in demand in 4Q19 in SA (especially in Dec.) » Po
Slide 36: Business Drivers: Ammonia
35 BUSINESS DRIVERS Ammonia Source: AEL - Average USS a ea gl aad g 5 SLNVE = wy ee 7 a BET ZAR 4534,42 fs) C) = < » Average ZAR ZAR 7000 6 000
Slide 37: Mining Solutions: Explosives
MINING SOLUTIONS: EXPLOSIVES 36 – Best-ever safety performance – Initiating systems volumes -7,2% – Excellent improvement in underlying › Protracted strike action in SA gold mining sector profit from operations early in the year › Additional shaft closures, particularly in SA – Overall bulk explosiv
Slide 38: Mining Solutions: Explosives Cont.
MINING SOLUTIONS: EXPLOSIVES CONT. 37 LatAm – Dinacon acquisition, Brazil › All key licences transferred in Jan ’20 › Operations to commence on completion of final judicial process – Chile › Capex approved for establishment of bulk emulsion production facility › Potential sites being assessed
Slide 39: Mining Solutions: Mining Chemicals
MINING SOLUTIONS: MINING CHEMICALS 38 – Growth momentum in specialty collector sales maintained – Export volumes +12% and revenue +22% › Improved utilisation of production facilities › Higher volumes sold to customers on African continent, Eastern Europe and South America – Local liquid xanthates sa
Slide 40: Water & Process
WATER & PROCESS
Slide 41: Water & Process
WATER & PROCESS 40 Volume Revenue Profit from ops Margin Trade WC EBITDA R1 452m R190m 13,1% 19,1% R229m 1,1% 5,5% 58,3% ’18 8,7% ’18 20,7% 38,8% – Very pleasing turnaround – Profit from operations +58% Exports › Improved quality of business with lower cost to serve – Volume growth >10% › Co
Slide 42: Water & Process Cont.
WATER & PROCESS CONT. 41 South Africa – Good performance overall › Market share gains › Volume recovery as drought effects dissipated › Water security – support for drought-stricken areas, such as Hammanskraal
Slide 43: Plant & Animal Health
PLANT & ANIMAL HEALTH <$
Slide 44: Plant & Animal Health
PLANT & ANIMAL HEALTH 43 Volume Revenue Profit from ops Margin Trade WC EBITDA R4 783m R203m 4,2% 14,8% R376m 4,0% 8,1% 70,6% ’18 2,7% ’18 16,3% 51,0% Nulandis – Significantly better performance – Local sales of in-house products +14% › Good winter rainfall in Western Cape › Assisted profita
Slide 45: Plant & Animal Health
PLANT & ANIMAL HEALTH 44 Schirm – Good improvement in safety – Investment case delivery delayed › Lower demand for agrochemicals in Germany › Insourcing of production in Russia » Import duties imposed on imports from EU › Once-off costs › Underutilisation of new synthesis plant – New synthesis facil
Slide 46: Food & Beverage
FOOD & BEVERAGE
Slide 47: Food & Beverage
FOOD & BEVERAGE 46 Volume Revenue Profit from ops Margin Trade WC EBITDA R1 466m -R88m -6,0% 20,2% -R46m 27,0% 17,5% -218,9% ’18 5,9% ’18 23,2% -15,1% * Excl. impairment and once-offs R68m* R110m* 4,6%* -8,1% 22,2% – Good revenue and volume improvement – Focus › Juice-based products › St
Slide 48: Chemicals
CHEMICALS
Slide 49: Chemicals
CHEMICALS 48 Volume Revenue Profit from ops Margin Trade WC EBITDA R5 567m R512m 9,1% 11,5% R903m 25,8% 5,7% -8,4% ’18 10,6% ’18 13,0% 30,9% * Excl. Crest sale R669m* -3,0% Base business – Manufacturing sector under severe pressure – Revenue -3% – Poor market sentiment/investment and – Pro
Slide 50: Chemicals Cont.
CHEMICALS CONT. 49 Much Asphalt – Good overall performance in current market conditions › Significant contribution from bitumen emulsion business (SprayPave) › Benefits of geographic footprint – Upturn in DoT and metropolitan authorities work › Albeit with some pressure on margins – SANRAL: delays i
Slide 51: Outlook and Focus
05 OUTLOOK AND FOCUS
Slide 52: Outlook: Mining Solutions – Pre-Operational Mining Projects
OUTLOOK: MINING SOLUTIONS – PRE-OPERATIONAL MINING PROJECTS 51 Development stage Rest of Africa South Africa Indonesia LATAM Australia Exploration 1 494 301 231 2 253 3 645 Prefeasibility 73 40 6 142 142 Feasibility 173 77 37 167 295 Construction 40 10 19 51 33 Total 1 780 428 293 2 613 4 115 * Extr
Slide 53: Emulsion Explosive: Surface Receiving
EMULSION EXPLOSIVE: SURFACE RECEIVING 52 Surface silo Control room Delivery of emulsion explosives.
Slide 54: Emulsion Explosive: Underground Loading Stations
EMULSION EXPLOSIVE: UNDERGROUND LOADING STATIONS 53 Underground silo – Successful drop to 680m and then to 980m – Delivered into MCUs – Successful blasts at both levels Control room
Slide 55: Emulsion Explosive: Underground Mining Conversion
EMULSION EXPLOSIVE: UNDERGROUND MINING CONVERSION 54 UBS growth in ’19 – >300% volume growth in emulsion – 746 PCU pumps deployed since Jan ’19 and another 300 to be deployed in next 3 months – Conversion from Anfex to underground bulk emulsion › Customer commitment to safety and performance – Some
Slide 56: Outlook: Water & Process
OUTLOOK: WATER & PROCESS 55 – R100m annualised benefit of realignment project – Continue to enhance go-to-market model › Capabilities and service delivery – 100% flocculant supply to major water board – Sales to rest of the continent › Investigating local blending/manufacturing opportunities in cert
Slide 57: Plant & Animal Health Outlook
PLANT & ANIMAL HEALTH 56 Nulandis – Further growth in in-house product sales – Further expansion of strategic agent network – Continue roll-out of SupPlant technology – Permits for Biocult obtained for Canadian market › Trials in progress – Collaboration/investment in disruptive digital farming plat
Slide 58: Outlook: Much Asphalt
OUTLOOK: MUCH ASPHALT 57 – Increased activity in SANRAL contracts – DoT and metropolitan authorities › Mostly light rehabilitation holding action work › Good levels of activity in some provinces at this time – Namibia » Bitumen emulsions › Upturn in general rehabilitation work for City › Eastern Cap
Slide 59: Outlook: Chemicals Base Business
OUTLOOK: CHEMICALS BASE BUSINESS 58 – No significant short-term improvement expected in SA manufacturing sector – Portfolio strategic realignment project initiated › Chemicals base business and Food & Beverage affected › Costs and internal processes in finalisation › Cash costs of realignment to be
Slide 60: Innovation Update: Business of Today
INNOVATION UPDATE: BUSINESS OF TODAY 59 The BIGGER Idea – 55 Business of Today (internally generated) ideas launched to date – 25 implemented in ’19 › R48m profit/savings to be realised in ’20
Slide 61: Innovation Update: Project Purpose
INNOVATION UPDATE: PROJECT PURPOSE 60 – Lead in quest for Sustainable Water and Food Security solutions in Africa – Active participation in Private Public Partnerships – Supportive of localisation and community upliftment – Commitment to local investment and co-investment – “Stronger Together” › Ski
Slide 62: Hammanskraal: Before and After
HAMMANSKRAAL: BEFORE AND AFTER 61
Slide 63: Summary and 2020 Objectives
06 SUMMARY AND 2020 OBJECTIVES
Slide 64: Outlook: Environment
OUTLOOK: ENVIRONMENT 63 Global SA – Uncertainty created by shifts in world – Reliability of electricity supply trading relationships – Service delivery – Effects of COVID-19 – Low GDP growth and investment levels – Effects of extreme weather events – Depressed manufacturing sector – Socio-political
Slide 65: Objectives for 2020
OBJECTIVES FOR 2020 64 – Improve safety performance further and continue implementing Zero Harm strategy – Progress further the achievement of the investment case objectives of Schirm and Much Asphalt – Ensure delivery of expected annualised benefits from strategic realignment projects in Mining Sol
Slide 66: Objectives for 2020 Cont.
OBJECTIVES FOR 2020 CONT. 65 – Continue to leverage existing geographic footprint – Continue to explore and pursue growth opportunities identified through AECI’s Growth and Innovation office – Develop Water and Food security strategy further – Diligent management of cash
Slide 67: Thank You
OA=CI THANK YOU