Merafe Resources Limited · JSE:MRF
Merafe Resources — FY2020 Earnings Presentation
32 slides from Merafe Resources's earnings presentation, March 2021
Slide 1: Annual Results presentation for the year ended 31 December 2020
Annual Results presentation for the year ended 31 December 2020 Merafe Resources Annual Results presentation for the year ended 31 December 2020 0
Slide 2: Legal notice/disclaimer
Legal notice/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 Merafe Resource
Slide 3: Agenda
Agenda KEY FEATURES 1 MARKET REVIEW 2 OPERATIONAL REVIEW 3 FINANCIAL REVIEW 4 DIVIDEND AND SHARE BUY-BACK 5 OUTLOOK 6 Merafe Resources Annual Results presentation for the year ended 31 December 2020 2
Slide 4: Key features
Key features • COVID-19 - a running theme for the year Merafe Resources Annual Results presentation for the year ended 31 December 2020 3
Slide 5: Health and safety, operational, market and financial highlights
HEALTH AND SAFETY OPERATIONAL • 1 fatality • Lower ferrochrome and chrome ore production • TRIFR deteriorated by 52% (from December 2019) impacted by COVID-19 • COVID-19 protocols introduced: • Costs under pressures especially from electricity tariffs - Screening and testing • S189 consultation proc
Slide 6: Market review
Market review Merafe Resources Annual Results presentation for the year ended 31 December 2020 5
Slide 7: Decline in stainless steel production and ferrochrome demand
Decline in stainless steel production and ferrochrome demand Global stainless steel production (mt) Global ferrochrome demand (mt) 60 15 13,8 53,2 13,4 13,2 52,0 50,6 2,5 10,3 2,7 2,3 11,0 9,0 40 10 27,6 30,6 30,7 8,1 9,0 8,8 20 5 3,2 3,0 2,4 0,7 0,7 0,5 7,4 6,8 6,2 1,3 1,2 1,1 0 2,8 2,5 2,2 0 0,5 0
Slide 8: China remains a dominant force
China remains a dominant force Global stainless steel production (%) Global ferrochrome demand (%) 17,9 19,4 17,7 18,2 4,3 4,7 2,7 3,4 FY FY FY FY 12,4 12,8 8,6 8,9 2020 2019 2020 2019 4,8 5,6 4,1 4,8 66,9 64,7 60,7 57,5 USA Western Europe Japan China Other Source for all charts: CRU Merafe Resource
Slide 9: Ferrochrome production responds to demand; ore imports into China also decreased
Ferrochrome production responds to demand; Ore imports into China also decreased Global ferrochrome production (mt) Chrome ore imports into China (mt) 16 18 14,0 15,9 13,6 0,9 12,4 15 14,3 1,5 14,3 1,0 0,7 0,7 0,7 1,2 12 1,3 0,8 1,4 0,3 1,3 0,6 0,9 0,6 0,7 0,2 1,4 1,0 12 0,3 0,6 1,3 1,0 1,5 8 3,6 9
Slide 10: 2020 prices under pressure
2020 prices under pressure UG2 Merchant prices Ferrochrome Merchant prices 49% - 70% European benchmark ferrochrome price (USD/t) (USc/lb) (USc/lb) 250 100 150 90 200 80 120 70 150 60 90 50 100 40 60 30 50 20 30 10 0 0 0 Jul Jul Jul Jul Mar Mar Sep Sep Sep Sep Jun Jun Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q
Slide 11: Operational review
Operational review • COVID-19 impact • Health and safety • Production • Cost control Merafe Resources Annual Results presentation for the year ended 31 December 2020 10
Slide 12: COVID-19 impact
COVID-19 impact • Slowdown in global economy: negative growth in demand for SS, FeCr and Cr • PSV operations scaled down: full year production at 55% of installed capacity • Increased standing charges • Investment in health protocols • Cash preservation a key focus area • Inventory destocking • Cons
Slide 13: Employees' health and safety our prime focus
Employees’ health and safety our prime focus Total Recordable Injury Frequency Rate (TRIFR) • Regrettably one fatality in 2020 4 • TRIFR deteriorated to 3.89 from 2.56 in December 2019 3 • Safety of our employees remains a critical focus area with the goal of achieving zero harm 2 • Safety campaigns
Slide 14: Production cutbacks
Production cutbacks Ferrochrome production (kt) • Ferrochrome production reduced to 265kt 500 - Installed capacity utilisation of 55% • Response to South Africa’s nationwide lockdown 400 to assist contain the spread of COVID-19 • Cutbacks also influenced by Eskom tariffs 300 and market conditions 20
Slide 15: Cost control guards competitiveness
Cost control guards competitiveness • Total production costs per ton increased by 8.4% Breakdown of C3 production costs (from December 2019), influenced by: 17% - Inflation FY 34% - Increase in electricity prices, effective 15% 2019 1 April 2020 14% - Increases in ore price 20% - Lower production vo
Slide 16: Financial review
Financial review • Restatement • Revenue • Earnings • EBITDA • Financial overview Merafe Resources Annual Results presentation for the year ended 31 December 2020 15
Slide 17: Restatement
Restatement The 2019 financial results have been restated with no impact on the reported loss Details are provided in the annual financial statements Merafe Resources Annual Results presentation for the year ended 31 December 2020 16
Slide 18: Revenue
Revenue Year-on-year (YoY) decrease in total revenue by 11% • Ferrochrome revenue decreased by 10% YoY to R4.002 • Chrome ore revenue decreased by 15% YoY to R777 million • Sales volumes markedly impacted by the COVID-19 lockdowns and weaker demand • Lower ferrochrome and chrome ore prices • Cushion
Slide 19: Revenue
Revenue Ferrochrome revenue (R’m) Chrome ore revenue (R’m) 6 000 1 000 5 000 800 4 000 600 3 000 400 2 000 200 1 000 4 923 5 163 4 849 4 455 4 002 778 726 747 910 777 0 0 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Merafe Resources Annual Results presentation for
Slide 20: Losses
Losses • Headline loss per share of 0.8c for the year • Key contributors to the loss were sales prices and volumes HEPS (cents) 40 36,0 36,0 27,0 27,0 21,0 21,0 20 0 (3,4) (0,8) (20) * (40) (40,0) (60) (54,2) FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 HEPS Basic EPS * Restated Merafe Resources Annual R
Slide 21: EBITDA under pressure
EBITDA under pressure Reconciliation of EBITDA from the Venture: 2020 vs 2019 (%) 150 100 (226) 122 (59) 100 43 (23) (23) 241 (65) 4 48 50 0 (50) (100) (67) (150) (200) EBITDA Revenue Revenue pri ces Cost Inflation Foreign Standing Provisional Inv entory Retrenchment Other EBITDA 2019 * volumes volu
Slide 22: EBITDA reconciliation to loss
EBITDA reconciliation to loss Merafe’s EBITDA reconciliation to loss after tax (R’m) 300 198 (30) (153) (1 366) (1 003) 0 (300) (600) (900) 344 (1 200) 5 1 (1) (1 500) Merafe 's share Corporate costs Depreciation Impairment Net financing Income from Current Defe rred Loss of PSV EBITDA and amortisat
Slide 23: Financial performance overview
Financial performance overview For the year ended Ferrochrome revenue Restated • Driven by lower prices and sales volumes 31 Dec 2020 31 Dec 2019 Chrome ore revenue R’m R’m • Driven by lower prices and sales volumes Ferrochrome revenue 4 002 4 455 Foreign exchange loss Chrome ore revenue 777 910 • A
Slide 24: Financial position influenced by working capital movements
Financial position influenced by working capital movements As at Non-current assets Include property, plant and equipment, intangible assets and 31 Dec 2020 31 Dec 2019 deferred tax asset R’m R’m Inventories Total non-current assets 504 1 502 Decrease due to: Current assets • Inventory drawdown for
Slide 25: Reconciliation of cash
Reconciliation of cash Reconciliation of cash (R’m) 900 (9) 495 (334) 600 (33) (100) (8) (88) 354 300 278 0 Opening Net cash from Expansionary Sustaining Acquisition of Dividend Repayment Foreign Closing cash operating capex capex Unicorn Chrome of loans exchange cash activities Merafe Resources Ann
Slide 26: Significant headroom on facilities
Significant headroom on facilities Venture Merafe Merafe (Merafe’s share) head office total As at 31 December 2020 R’m R’m R’m Closing cash 126 152 278 Interest bearing Venture facilities debt1 Total As at 31 December 2020 R’m R’m (R’m) Total facilities in place Unspecified 300 300 Total facilities
Slide 27: Dividend & Share buy-back
Dividend & Share buy-back Merafe Resources Annual Results presentation for the year ended 31 December 2020 26
Slide 28: Dividend
Dividend • The Board has decided not to declare a final ordinary dividend considering market uncertainty Merafe Resources Annual Results presentation for the year ended 31 December 2020 27
Slide 29: Share buy-back
Share buy-back • A share repurchase programme was initiated on 4 January 2021, in accordance with the JSE Listings Requirements • Buy-back within the general authority approved by shareholders • As at 28 February 2021, 0.418% of the Company’s issued shares had been repurchased • Ceiling price for th
Slide 30: Outlook
Outlook Merafe Resources Annual Results presentation for the year ended 31 December 2020 29
Slide 31: Outlook
Outlook • Economic recovery dependent on COVID-19 trajectory • Vaccine rollout is expected to boost confidence and lead to economic recovery • There are signs of a recovery which is expected to be slow • Focus continues to be on: - Efficient operations - Cash preservation - Cost control - Efficient
Slide 32: Thank you
Thank you Merafe Resources Annual Results presentation for the year ended 31 December 2020 31