Aeci Ltd · JSE:AFE
Aeci — H1 2019 Earnings Presentation
51 slides from Aeci's earnings presentation, Jul 24, 2019
Slide 1: Financial Results Presentation for the Half-Year Ended 30 June 2019
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Slide 2: Agenda
01 PERFORMANCE SUMMARY 02 BUSINESS DRIVERS 03 EARNINGS ANALYSED 04 PERFORMANCE BY SEGMENT 05 OBJECTIVES AND OUTLOOK
Slide 3: Performance Summary
PERFORMANCE SUMMARY 2 › Revenue +14% to R11 972m » Contribution from acquisitions for 6 months » Growth in all 5 strategic pillars » Foreign and export revenue = 42% of total revenue Weaker ZAR/US$ exchange rate › Profit from operations -9% to R826m » Impacted by strategic business realignment cos
Slide 4: Safety: TRIR
SAFETY: TRIR 3 0,58 0,50 0,51 0,45 0,39 0,35 0,32* 0,27* 14 15 16 17 18 1H19 * Excluding acquisitions
Slide 5: Business Drivers
BUSINESS DRIVERS
Slide 6: Business Drivers: ZAR/US$ Exchange Rate
BUSINESS DRIVERS 5 ZAR/US$ EXCHANGE RATE
Slide 7: Mining Solutions: Business Drivers: Gold
MINING SOLUTIONS: BUSINESS DRIVERS 6 GOLD
Slide 8: Business Drivers: PGMs
BUSINESS DRIVERS OA=Cr PGMs good chemistry US$/oz Source: FitchSolutions 3 100 2700 2300 1900 1500 1100 700 300 2015Q1 Q2 Q3 Q4 2016Q1 Q2 Q3 4 2017Q1 Q2 Q3 a4 2018Q1 Q2 Q3 a4 201991 Q2 —— Platinum (US$/oz) Palladium (US$/o0z) Rhodium (US$/oz)
Slide 9: Business Drivers: Cobalt, Copper and Nickel
BUSINESS DRIVERS 8 COBALT, COPPER AND NICKEL
Slide 10: Business Drivers: Coal and Iron Ore
BUSINESS DRIVERS 9 COAL AND IRON ORE
Slide 11: Business Drivers: SA Mining Volumes
BUSINESS DRIVERS 10 SA MINING VOLUMES
Slide 12: Business Drivers: ZAR and US$ Ammonia Price
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Slide 13: Business Drivers: Brent Crude Oil
BUSINESS DRIVERS 12 BRENT CRUDE OIL
Slide 14: Business Drivers: SA Manufacturing Volumes
BUSINESS DRIVERS 13 SA MANUFACTURING VOLUMES
Slide 15: Earnings Analysed
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Slide 16: Underlying Performance
UNDERLYING PERFORMANCE 15 1H19 1H18 % Change Profit Profit from ops HEPS from ops HEPS Profit Rm cents Rm cents from ops HEPS Reported 826 365 911 458 (9,3) (20,3) Strategic realignment 156 100 – – PPA 23 15 – – IFRS 16 (13) 12 – – Underlying 992 492 911 458 8,9 7,4
Slide 17: Headline Earnings Per Share
HEADLINE EARNINGS PER SHARE 16 500 12 492 100 460 420 cents/share 15 380 365 340 300 1H19 1H19 Reported PPA PPA Strategic Re‐alignment IFRS 16 IFRS 16 1H19 1H19 Underlying reported realignment underlying
Slide 18: Underlying Performance: Income Statement
UNDERLYING PERFORMANCE 17 INCOME STATEMENT Strategic 1H19 R millions % change 1H18 1H19 PPA IFRS 16 realignment underlying Revenue 14,3 10 473 11 972 – – – 11 972 Trading profit (9,3) 911 826 23 (13) 156 992 Trading margin (%) (20,7) 8,7 6,9 0,2 (0,1) 1,3 8,3 Share of profits (11,8) 17 15 – 1 – 16 F
Slide 19: Underlying Performance: Statement of Financial Position
UNDERLYING PERFORMANCE 18 STATEMENT OF FINANCIAL POSITION Strategic 30 Jun 19 R millions 30 Jun 18 30 Jun 19 PPA IFRS 16 realignment underlying Non-current assets 11 493 11 800 23 (574) – 11 249 Property, plant and equipment and intangible assets 5 525 5 671 23 (573) – 5 121 Deferred tax 390 378 – (
Slide 20: Underlying Earnings Analysed
UNDERLYING EARNINGS ANALYSED 19 › Profit from operations +9% to R992m › EBITDA +11% to R1 391m › HEPS +7,4% to 492c › Trading margin = 8,3% (’18: 8,7%) › RONA = 14,8% (’18: 16,0%) › Tax rate 32% (’18: 34%) » Foreign withholding tax » Foreign tax rates › US$8m in cash dividends remitted from foreign
Slide 21: Cash Utilisation
CASH UTILISATION 20 6,000 115 › Capex = R358m 5,409 » R121m for expansion projects » R237m for maintenance projects, 5,000 4,760 95 incl. AEL, Modderfontein No. 9 Nitric Acid shutdown Air emissions abatement projects 4,000 75 › Net WC to revenue of 17,9% (20,8% in ’18) 3,000 55 » Customer terms
Slide 22: Net Debt and Cash Utilisation
NET DEBT AND CASH UTILISATION 21 Cash Non-cash 5,500 538 5,298 5,000 109 4,760 344 (5) 4,500 772 4,177 R millions 4,000 354 3,500 254 3,000 209 (1,454) 2,500 At 31 Dec '18 Cash Net interest Tax paid Net dividends Working Net Capex Lease Other & At 30 Jun '19 Finance lease At 30 Jun '19 generated pai
Slide 23: Net Debt Analysis FY18 vs 1H19
NET DEBT ANALYSIS 22 FY18 VS 1H19 › Term debt repayable over 4 years (’20 – ’23) 538 › Group loan covenants: » Net debt to EBITDA ≤ 2,5 2,725 2,698 1,8 R millions » EBITDA to net financing cost ≥ 3 6,3 Lease liabilities (IFRS 16) Term debt / Repay 2023 » Consolidated tangible net worth ≥ R2,5bn
Slide 24: Performance by Segment
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Slide 25: Strategic Pillars
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Slide 26: Summary by Segment
SUMMARY BY SEGMENT A=CFr good chemistry WATER & PROCESS REVENUE R707m A 43% PROFIT FROM OPS R49m V 38,8% UNDERLYING R101im A 26,3% PLANT & ANIMAL HEALTH REVENUE R2 189m A 16,3% PROFIT FROM OPS R103m Vv 10,4% UNDERLYING R119m A 35% CHEMICALS REVENUE R2 832m A 21,1% PROFIT FROM OPS R234m Vv 2,9% UNDER
Slide 27: Underlying Contribution Analysis by Segment (%)
UNDERLYING CONTRIBUTION ANALYSIS BY SEGMENT (%) 26 Revenue (%) Profit/(loss) from operations (%) 1 (8) 24 2 (8) 24 21 26 46 48 57 5 60 5 2 3 18 13 12 9 6 18 1H19 Outer circle 1H18 Inner circle 10 6
Slide 28: Mining Solutions
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Slide 29: Mining Solutions
MINING SOLUTIONS 28 Revenue by mineral mined (%) › Strong commodity prices overall » Highest-ever gold price in ZAR terms 5 1 › Higher ammonia price in ZAR terms 4 22 › Volume decline continues in SA mining sector 1 5 › Benefits of portfolio and geographic diversity 8 4 21 8 17 22 18 22 20 20 1H19 O
Slide 30: Mining Solutions
MINING SOLUTIONS 29 › Good safety performance › Revenue increase in Explosives and Chemicals » Growth on African continent, especially in West Africa » Improved plant utilisation rates and sales in Chemicals › Growth in foreign revenue » 59% of total revenue › Profit from operations » Good cost cont
Slide 31: Mining Solutions: Explosives
MINING SOLUTIONS 30 EXPLOSIVES › Excellent underlying trading profit improvement › Overall bulk explosives volumes -3% » SA -7,6% » Rest of Africa +14,7% New contracts serviced Investment returns to expectations » Asia Pacific -7,7% Lower opportunistic sales in Australia However, secured fix
Slide 32: Explosives Strategic Realignment Project
MINING SOLUTIONS 31 EXPLOSIVES STRATEGIC REALIGNMENT PROJECT › Review of SA narrow reef mining market undertaken › Objective: AEL to remain a sustainable and responsible local supplier to the SA mining industry and aligned to new Mining Charter › “Get Healthy”, “Get Strong” and “Get Business” phases
Slide 33: Mining Solutions: Chemicals
MINING SOLUTIONS 32 CHEMICALS › Marked improvement in specialty collector sales › Increases also in flocculants » Benefits of direct exports strategy (Ghana and Zambia) » Sales to Madagascar resumed › Local sales of liquid xanthate declined » Reduced demand » Electricity supply constraints in 1Q › X
Slide 34: Strategic Positioning: Mining Charter
MINING SOLUTIONS 33 STRATEGIC POSITIONING: MINING CHARTER MINING CHARTER AECI SCORE REQUIREMENTS Level 4 Contributor Level 2 Contributor HDP Owned and HDP Owned and Controlled 51% Controlled 53,95% Local Content 60% Local Content >60% (verification underway)
Slide 35: Plant & Animal Health
Slide 36: Plant & Animal Health
PLANT & ANIMAL HEALTH 35 › Performance included 6 months of Schirm (’18: 5 months) › Amortisation of intangible assets » PPA = R17m (’18: nil) Nulandis › Improvements in both revenue and profit » Late onset of summer rains boosted performance in 1Q » Higher sales of in-house products improved profit
Slide 37: Plant & Animal Health Cont.
PLANT & ANIMAL HEALTH CONT. 36 Schirm › Lower demand for fungicides and herbicides from major customers in Europe › Higher costs » New plant not adequately loaded - delayed registration of key product and customer › Equivalence report/registration received from EU authority in June » Registrations i
Slide 38: Water & Process
Slide 39: Water & Process
WATER & PROCESS 38 Underlying performance › TP up 26% » Improved quality of business with lower cost to serve » Cost control initiatives » Realignment project benefits » Recovery of outstanding debt South Africa › Overall good performance » Market share gains » Volume recovery as drought effects dis
Slide 40: Water & Process Business Realignment Project
WATER & PROCESS 39 BUSINESS REALIGNMENT PROJECT › Objective: realign go-to-market model to enhance capabilities and improve service delivery and efficiencies › “Get Healthy”, “Get Strong” and “Get Business” phases » Total impact of R52m on TP in 1H19 Cost neutral for FY19 » Market optimisation N
Slide 41: Food & Beverage
Slide 42: Food & Beverage
FOOD & BEVERAGE 41 › Revenue growth in commodities, juice concentrates, bakery, sauces and dairy categories » Notwithstanding very weak consumer trading environment › Margins under pressure as competition to maintain volumes increased › Export sales negatively impacted by hard currency availability
Slide 43: Chemicals
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Slide 44: Chemicals
CHEMICALS 43 Base business › Poor market sentiment and production rationalisation/closures at customers › Volumes flat » Lower sulphur sales and sulphuric acid exports › Revenue +2% › TP -11,7% » Margins under pressure » Less favourable product and customer mix › Significant improvement in working c
Slide 45: Objectives and Outlook
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Slide 46: Progress Against 2019 Objectives
PROGRESS AGAINST 2019 OBJECTIVES 45 Zero Harm » Rolled out Group-wide and progress made against 2020 milestones » Improved performances at Schirm and Much Asphalt Delivery of Schirm and Much Asphalt to expectations » Much Asphalt ahead of expectations in 1H19 » Product registrations at Schirm Integr
Slide 47: Progress Against 2019 Objectives Cont.
PROGRESS AGAINST 2019 OBJECTIVES CONT. 46 Delivery of capex projects » Explosives (incl. compliance-related): on track for completion per schedule » Mining chemicals: xanthate production nearing capacity » SANS single stage polyester fibre plant: ramping up and commercial production commenced in Jul
Slide 48: Outlook to Year-End
OUTLOOK TO YEAR-END 47 Mining Solutions » Good performance expected to be sustained in Explosives and Chemicals » Value creation from realignment project » Stronger sales of xanthate pellets anticipated Water & Process » Outlook more positive, including benefits of business realignment » Good moment
Slide 49: Outlook to Year-End Cont.
OUTLOOK TO YEAR-END CONT. 48 Food & Beverage » Trading environment, including retail sector, expected to remain difficult » Agreements signed with major customer for significant volume offtake Chemicals » Growth in SA’s manufacturing sector remains subdued and customers are under pressure » Outlook
Slide 50: Disclaimer
DISCLAIMER 49 This document has been prepared and issued by and is the sole responsibility of the management of AECI Ltd (the “Company”) and its subsidiaries. This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or s
Slide 51: OA=Cr
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