Slide 1: Results Presentation
RESULTS PRESENTATION For the six months ended 30 June 2016 Presented by Zanele Matlala and Kajal Bissessor
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: Key Agenda
KEY AGENDA 1. Key features 2. Operational review 3. Market review 4. Financial review 5. Outlook Annexures 3 Merafe Resources Ltd | Results presentation for six months ended 30 June 2016
Slide 4: Key features
1 Key features 4 Merafe Resources Ltd | Results presentation for six months ended 30 June 2016
Slide 5: Key features
Key features OPERATIONAL MARKET • TRIFR of 4.00 • 2.5% increase in global stainless steel • Ferrochrome production of 196kt production • Production costs contained • 8.0% decrease in global ferrochrome demand • 3.9% decrease in global ferrochrome production • 6% reduction in chrome ore imports into
Slide 6: Operational review
2 Operational review 6 Merafe Resources Ltd | Results presentation for six months ended 30 June 2016
Slide 7: Operational review
Operational review – Marginal increase in ferrochrome production • optimisation of stock levels – Production costs contained – Reduction in TRIFR to 4.00 – Electricity • Supply (no significant impact) • Pricing (increase of 9.4% effective 1 April 2016) – Labour • Implementation of 3 year agreements
Slide 8: Market review
3 Market review 8 Merafe Resources Ltd | Results presentation for six months ended 30 June 2016
Slide 9: Global market review (H1 2016/H1 2015)
Global market review (H1 2016/H1 2015) GLOBAL STAINLESS STEEL Sales GLOBAL FERROCHROME GLOBAL FERROCHROME PRODUCTION DEMAND PRODUCTION 2.5% increase to 21.8mt 8.0% decrease to 5.1mt 3.9% decrease to 5.2mt 0.5% NAFTA 1.8% NAFTA 1.6% South Africa 3.9% Japan 7.5% EU 17.9% EU 5.5% China 12.7% China 16.7
Slide 10: Ferrochrome market review
Ferrochrome market review Sales ferrochrome prices European benchmark 2015 Usc/lb 2016 Usc/lb Change Q1 108 92 (15%) Q2 108 82 (24%) Q3 108 98 (9%) Average 108.0 90.7 (16%) Average Rand/Dollar exchange rate 2015 H1 2016 H1 Change 11.9 15.4 +29% 10 Merafe Resources Ltd | Results presentation for six
Slide 11: Chrome ore imports into China
Chrome ore imports into China Change 2014 FY 2015 FY H1 2015 H1 2016 (H1 2016 vs H1 2015) ‘000 t ‘000 t ‘000 t ‘000 t % South Africa 5748 7579 3540 3559 1% Turkey 1280 1037 432 282 -35% Oman 489 337 231 55 -76% Iran 494 392 238 193 -19% Albania 555 486 203 194 -4% Pakistan 339 302 163 104 -36% Madag
Slide 12: Financial review
4 Financial review 12 Merafe Resources Ltd | Results presentation for six months ended 30 June 2016
Slide 13: Key financial features
Key financial features • Revenue up by 9% • EBITDA down by 24% • HEPS down by 54% • Healthy cash flows from operating activities of R372m effective working capital management • Reduced ABSA and Standard Bank debt R410m balance post reporting period 13 Merafe Resources Ltd | Results presentation
Slide 14: Revenue
Revenue 14% 19% 29% 9% 5% Average European Average Ferrochrome Ferrochrome Chrome ore benchmark Rand/US$ sales tonnes revenue revenue ferrochrome price exchange rate Revenue R‘m 3000 2413 2500 2223 1991 2000 1469 1500 1230 1000 500 0 H1 2012 H1 2013 H1 2014 H1 2015 H1 2016 14 Merafe Resources Ltd |
Slide 15: Production costs contained
Production costs* contained Key contributors • Cost saving initiatives • Lion II • Electricity increases • Labour increases Other expense items • Standing charges – R49.2m • Foreign exchange losses – R28.8m *per tonne of ferrochrome 15 Merafe Resources Ltd | Results presentation for six months ended
Slide 16: EBITDA Reconciliation to profit
EBITDA Reconciliation to profit 300 275 250 (18) 200 R'm 150 100 (147) 57 (32) 50 (2) (19) 0 Merafe's 20.5% of Corporate costs Depreciation and Net financing Current tax Deferred tax Profit EBITDA from the impairment costs expense expense Venture 16 Merafe Resources Ltd | Results presentation for si
Slide 17: Balance sheet
Balance sheet As at As at 30 June 2016 31 December 2015 Reviewed R’000 Audited R’000 Total non-current assets 3 239 668 3 258 365 Property, plant and equipment 3 220 116 3 240 370 Deferred tax assets 19 552 17 995 Total current assets 2 188 496 2 099 240 Inventories 1 222 397 1 445 887 Trade and oth
Slide 18: Balance sheet (continued)
Balance sheet (continued) As at As at 30 June 2016 31 December 2015 Reviewed R’000 Audited R’000 Total non-current liabilities 1 327 066 1 378 977 Loans and borrowings 392 246 472 755 Provision for close down and restoration costs 146 757 139 351 Share based payment liability 4 121 3 147 Deferred ta
Slide 19: Cash and cash equivalents
Cash and cash equivalents 800 372 700 600 (125) 500 (30) 412 (81) R'm 400 310 (34) 300 200 100 0 Net cash at 31 Dec Cash flows from Capex Dividends Decrease in Other Net cash at 30 June 2015 operating activities borrowings 2016 19 Merafe Resources Ltd | Results presentation for six months ended 30 J
Slide 20: Facilities
Facilities 30 June 2016 31 December 2015 Utilised facility Headroom Utilised facility Headroom R'm R'm R'm R'm ABSA / Standard 480 220 559 191 Bank Loan Overdraft facilities - 467 16 562 Debtors facility 543 1 411 97 Total 1 023 688 986 850 20 Merafe Resources Ltd | Results presentation for six mont
Slide 21: Outlook
5 Outlook 21 Merafe Resources Ltd | Results presentation for six months ended 30 June 2016
Slide 22: Conclusion
Conclusion • Well positioned to take advantage of growth in global stainless steel production • On track to achieving strategy Short term • Reducing Merafe debt • Paying stable to increasing dividends 2018 onwards • Free cash flow applied mainly to returning cash to shareholders 22 Merafe Resources
Slide 23: Annexures
Annexures 23 Merafe Resources Ltd | Results presentation for six months ended 30 June 2016
Slide 24: China chrome ore import prices
China chrome ore import prices 400.0 400.0 350.0 350.0 Weighted Albania Turkey Average 310 300.0 300.0 250.0 250.0 289 in US$ / t in US$ / t 200.0 200.0 150.0 150.0 100.0 Oman 100.0 105 Others 50.0 50.0 S. Africa © Heinz H. Pariser © Heinz H. Pariser 0.0 0.0 2011 2012 2013 2014 2015 2016 2011 2012 2
Slide 25: Market Share in %
80 Japan China 70 EU USA 60 Market Share in % 50 40 30 20 10 © Heinz H. Pariser 0 1950 1960 1970 1980 1990 2000 2010 2020 25 Merafe Resources Ltd | Results presentation for six months ended 30 June 2016
Slide 26: Ferrochrome supply and demand balance
Ferrochrome supply and demand balance 2013 2014 2015 2016 e 2017 f G.R. ´000 t in % Stainless Steel Production 38,665 41,836 41,531 42,679 44,001 2.8 Real FeCr Demand 10,211 10,978 10,722 10,984 11,018 1.5 Apparent Consumption 10,061 10,922 10,735 10,581 10,971 1.4 Production - Cr Product ion 10,356
Slide 27: Ferrochrome prices differ from region to region
Ferrochrome prices differ from region to region 1.50 1.50 Charge Cr Charge Cr HC Spot Prices & China Tender Price 1.40 Benchmark (Japan) Benchmark (EU) 1.40 Charge Cr Prices (quarterly) in US$ / lb 1.30 1.30 (monthly) in US $ / Ib 1.20 1.20 1.10 1.10 1.00 1.00 0.90 0.90 0.80 0.80 Europe USA 6-8%C, 6