Slide 1: Financial Results for the Half-Year Ended 30 June 2014
FINANCIAL RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2014 PRESENTATION 29 and 30 July 2014
Slide 2: Presentation Outline
PRESENTATION OUTLINE 1 › Performance summary › Performance drivers analysed ◦ External ◦ Internal: strategic delivery › Results analysed › Segmental performance ◦ Property ◦ Explosives ◦ Specialty chemicals › Outlook and progress on deliverables
Slide 3: Performance Summary
L PERFORMANCE SUMMARY OA=SCI good chemistr.
Slide 4: Performance Summary
PERFORMANCE SUMMARY 3 › Safety performance improvement trend maintained – rolling 12-month TRIR of 0,48 › Revenue +11% to R8bn ◦ Growth as result of property transaction and specialty chemicals cluster in SA ◦ Foreign revenue of R2 502m = 31% of total › Profit from operations +33% to R814m › R1 061m
Slide 5: Performance Summary: TRIR
PERFORMANCE SUMMARY 4 12-month rolling average TRIR of 0,48 ALL WORKERS TRIR Maximum tolerable level 1,0 0,8 0,6 0,4 0,2 0,0 10 11 12 13 14
Slide 6: Performance Summary: Positive Impacts and Offsets
PERFORMANCE SUMMARY 5 Positive impacts › Receipt of cash proceeds for property sale › Robust results from the specialty chemicals segment in a difficult environment ◦ Benefits of acquisitions and strategic portfolio management evident › Internationalisation strategy being realised › Weaker rand vs 1
Slide 7: Performance Drivers Analysed
6 2 PERFORMANCE DRIVERS ANALYSED
Slide 8: Business Environment: SA Mining Volumes
BUSINESS ENVIRONMENT 7 SA mining volumes Jan ’09 – May ’14 Base: 2010 = 100 Source: StatsSA y-o-y = -6,5%
Slide 9: External Performance Drivers: Mining Environment
EXTERNAL PERFORMANCE DRIVERS 8 Mining environment › In SA ◦ Strikes ◦ Timing and shape of recovery of SA platinum mining sector uncertain › Mining activity in the rest of Africa remained robust overall, from existing customers and new mining projects › Lower commodity prices driving mining houses’ p
Slide 10: Business Environment: SA Manufacturing Volumes
BUSINESS ENVIRONMENT 9 SA manufacturing volumes Jan ’06 – May ’14 Base: 2010 = 100 Source: StatsSA y-o-y = -3,7%
Slide 11: External Performance Drivers: SA Manufacturing
EXTERNAL PERFORMANCE DRIVERS 10 SA manufacturing › Sector growth not tracking GDP growth › Energy constraints › Weak demand impacts margin and volume growth › No significant improvement in exports by customers › Customers rationalising and reducing production capacity due to cost competitiveness fac
Slide 12: Business Environment: ZAR/US$ Exchange Rate
BUSINESS ENVIRONMENT 11 ZAR/US$ exchange rate Source: INet Bridge Peak = R11,30 Open ’14 = R10,50 Average 1H14 = R10,70 Average 1H13 = R9,20 Average 2H13 = R10,06 Open ’13 = R8,49
Slide 13: External Performance Drivers: Exchange Rate Effects
EXTERNAL PERFORMANCE DRIVERS 12 Effects of the exchange rate on performance › ZAR/US$ depreciated by 16% on average yt-June ’14 vs yt-June ’13 › 31% of Group revenue predominantly US$ denominated in 1H14 ◦ Forex benefits as the Group steps out of SA › Rand weakness boosted revenue but rand margins r
Slide 14: Internal Performance Drivers: Strategic Delivery
INTERNAL PERFORMANCE DRIVERS: STRATEGIC DELIVERY 13 SA-based explosives and specialty chemicals company with regional and international businesses in Africa and SE Asia. Other markets of interest are Australia and Latam Strategy › Focus on: ◦ International mining solutions (explosives and chemicals)
Slide 15: Mining Solutions
INTERNAL PERFORMANCE DRIVERS: STRATEGIC DELIVERY 14 Mining solutions
Slide 16: Strategic Delivery: Mining Solutions
INTERNAL PERFORMANCE DRIVERS: STRATEGIC DELIVERY 15 › Mining solutions ◦ AEL and Senmin negatively affected by platinum industry strikes (R250m impact on profit from operations) ◦ Expansion outside SA, across minerals and mining methods has de-risked AEL ◦ New explosives plants in Burkina Faso, DRC
Slide 17: Internal Performance Drivers: Strategic Delivery
INTERNAL PERFORMANCE DRIVERS: STRATEGIC DELIVERY 16 SA-based explosives and specialty chemicals company with regional and international businesses in Africa and SE Asia. Other markets of interest are Australia and Latam Strategy › Focus on: ◦ International mining solutions (explosives and chemicals)
Slide 18: Specialty Chemicals
INTERNAL PERFORMANCE DRIVERS: STRATEGIC DELIVERY 17 Specialty chemicals
Slide 19: Strategic Delivery: Water, Agriculture, Food Additives
INTERNAL PERFORMANCE DRIVERS: STRATEGIC DELIVERY 18 › Water solutions ◦ Excellent 1H14 from ImproChem ◦ GE acquisition delivering ◦ Clariant water treatment acquisition finalised ◦ African footprint enhanced ◦ Leading industrial, effluent and municipal water treatment chemical company in Africa › Ag
Slide 20: Internal Performance Drivers: Strategic Delivery
INTERNAL PERFORMANCE DRIVERS: STRATEGIC DELIVERY 19 SA-based explosives and specialty chemicals company with regional and international businesses in Africa and SE Asia. Other markets of interest are Australia and Latam Strategy › Focus on: ◦ International mining solutions (explosives and chemicals)
Slide 21: Specialty Chemicals Cluster
SPECIALTY CHEMICALS CLUSTER 20 14 businesses, including 3 JVs Akulu Marchon Lake Foods Chemfit Lake Specialties Chemical Initiatives Nulandis Resinkem ChemSystems Senmin Crest Chemicals SANS Technical Fibers ImproChem Specialty Minerals SA Industrial Oleochemical Products
Slide 22: Internal Performance Drivers: Strategic Delivery
INTERNAL PERFORMANCE DRIVERS: STRATEGIC DELIVERY 21 SA-based explosives and specialty chemicals company with regional and international businesses in Africa and SE Asia. Other markets of interest are Australia and Latam Strategy › Focus on: ◦ International mining solutions (explosives and chemicals)
Slide 23: Acquisitions
ACQUISITIONS 22 Summary › R400m acquisition of Clariant’s water treatment business in Africa ◦ Includes 50% of Blendtech (B-BBEE partner in SA) ◦ Revenue about R600m/year; EBITDA about R65m/year ◦ Integrated 1 July ’14 ◦ Will benefit ImproChem in 2H14 › Outlook good for M&A activities
Slide 24: 1H14 Revenue Split
1H14 REVENUE SPLIT IN THIS CONTEXT 23 ▃▃▃ 43% Explosives ▃▃▃ 14% Mining chemicals ▃▃▃ 11% Agriculture ▃▃▃ 24% Manufacturing ▃▃▃ 8% Property
Slide 25: Group Mining Revenue
GROUP MINING REVENUE 24 Revenue by mineral mined 1H14 ▃▃▃ 20% Coal ▃▃▃ 17% Copper, cobalt, chrome, nickel ▃▃▃ 16% Gold ▃▃▃ 15% Platinum ▃▃▃ 8% Quarry, construction, civil ▃▃▃ 6% Diamond ▃▃▃ 5% Iron ore ▃▃▃ 2% Uranium ▃▃▃ 1% Phosphate ▃▃▃ 10% Other
Slide 26: Specialty Chemicals Revenue by Market Sector
SPECIALTY CHEMICALS 25 Revenue by market sector 1H14 ▃▃▃ 29% Mining ▃▃▃ 21% Agriculture 1 2 ▃▃▃ 8% Food and beverage 1 ▃▃▃ 6% Oil and refining ▃▃▃ 6% Chemical industry 1 1 1 ▃▃▃ 5% Textiles and leather ▃▃▃ 5% Detergents ▃▃▃ 4% Toiletries, cosmetics 1% Steel and metals and pharmaceuticals 1% Construc
Slide 27: Results Analysed
RESULTS ANALYSED OA=SCI good chemistr
Slide 28: HEPS
HEPS 27 › Profit from operations +33% to R814m HALF-YEAR HEPS › HEPS +10% to 390c 400 › Normalised HEPS +12% 399c 350 › Tax rate: 19,4% (1H13: 27,2%) 300 › Return on net assets: 17% 250 ◦ Target = 20%+ cps › Economic value added remains positive 200 150 100 50 0 09 10 11 12 13 1H14
Slide 29: HEPS Analysed
HEPS ANALYSED 28 Financial impacts of property sale and platinum strikes Cents June June % 2014 2013 change Reported EPS 537 356 51 Property transaction – net capital profit (145) – Other (2) – Reported HEPS 390 356 10 Property transaction – net revenue profit (192) – Platinum strikes 161 – Restruct
Slide 30: Cash Utilisation
CASH UTILISATION 29 ▃▃▃ Borrowings › Capex: R343m – incl. R142m ▃▃▃ Gearing for expansion projects › Acquisitions & investments: R400m + R79m 3 000 80 › NWC to revenue: 19% 70 2 500 (21,8% in June ’13) 60 › Net borrowings: R1 591m 2 000 50 › Gearing at 22% vs 35% in June ’13 Rm % 1 500 40 (25% in De
Slide 31: EBITDA and Volumes
EBITDA AND VOLUMES 30 › EBITDA +23% to R1,1bn HALF-YEAR EBITDA › Chemicals volumes +5% 1200 ◦ Manufactured +0,2% ◦ Traded +11,4% 1000 › Explosives volumes +1% 800 ◦ SA +1% ◦ Rest of Africa +5% 600 ◦ International -7% 400 › Initiating systems -39% 200 0 09 10 11 12 13 14
Slide 32: Segmental Performance
4 SEGMENTAL PERFORMANCE OA=SCI good chemistr
Slide 33: Profit from Operations by Segment
PROFIT FROM OPERATIONS BY SEGMENT (RM) 32 500 ▃▃▃ 13 ▃▃▃ 14 400 300 200 100 Corporate 0 Explosives Specialty chemicals Property (100) (200)
Slide 34: Property: Modderfontein Bulk Sale Proceeds
PROPERTY 33 Cash proceeds of Modderfontein bulk property sale › R1 061m cash proceeds received in full › R421m recognised in profit from operations › R240m revenue profit from sale – included in headline earnings (HEPS: 192c) › Property assets of R207m still to be transferred ◦ Anticipate transfers
Slide 35: Property: 1H14 Performance
PROPERTY 34 1H14 performance Revenue R652m +135% Profit from operations R447m +794% Revenue (excluding property transactions) R190m -10% Profit from operations R26m +53% (excluding property transactions) Trading margin (excluding property transactions) 13,7% (1H13: 8,1%) › No land sales other than t
Slide 36: Property: Modderfontein Remaining Land
PROPERTY 35 › AECI-owned property at Modderfontein post the bulk sale transaction › 216 hectares of surplus land remain ◦ Excluding Modderfontein Reserve
Slide 37: Property: Somerset West Site
PROPERTY 36 Somerset West site › PaardeVlei Properties › 450 hectares available for redevelopment
Slide 38: Explosives: Business Environment
EXPLOSIVES 37 Business environment › Global mining sector remains attractive, although some commodity prices softening › Mining houses seeking productivity and efficiency gains › Volumes in SA surface mining promising on the back of iron ore and coal mining sectors › Growth prospects remain for AEL
Slide 39: Explosives: 1H14 Performance
EXPLOSIVES 38 1H14 performance Revenue R3 553m – Profit from operations R120m -62% Trading margin 3,4% (1H13: 8,8%) Average WC 16,6% (1H13: 17,1%) › SA narrow reef business severely compromised by strikes ◦ R150m impact on profit from operations ◦ Affected ISAP production and increased inventory lev
Slide 40: Explosives: Initiating Systems Rationalisation
EXPLOSIVES 39 Initiating systems rationalisation project SF2 Assembly › Operational footprint will reduce in 3Q14 as closure of old plants is completed › Relocation of remaining shock tube and electronic detonator assembly plants into SF2 in 3Q14, with an investment of R65m › 391 employees exited en
Slide 41: Explosives: AEL Head Office Restructuring
EXPLOSIVES 40 AEL’S head office restructuring project › Project commenced mid-’13: review and redesign back office structures to support front-end businesses › New capabilities being introduced › s189 notices issued early May ’14 › R62m net severance charge recognised June ’14 ◦ Planned annualised s
Slide 42: Explosives: Major Capital Projects
EXPLOSIVES 41 Major capital projects › Nitrates Plant: extended shutdown, while maintaining supply › Improved reliability and production efficiency of No. 11 Nitric Acid Plant ◦ Replacement of key boiler ◦ Statutory shutdown ◦ Replacement of digital control systems in progress, including ANS Plant ›
Slide 43: BBRI Investment
BBRI INVESTMENT 42 › US$23m investment for 42,6% equity share in BBRI complete › Plant commissioned successfully and production commenced Feb. ’14 › Run-rate of 87% of capacity achieved › ANS successfully converted to explosives
Slide 44: Australia Entry
AUSTRALIA ENTRY 43 › AECI office established in Brisbane › AEL invited by existing customers › Operating site secured at Bajool, Queensland › Bulk emulsion explosives plant being shipped from SA › Anticipate trial blasts by year-end
Slide 45: Specialty Chemicals: Business Environment
SPECIALTY CHEMICALS 44 Business environment › Agricultural sector in SA and the rest of Africa remained strong › Good growth also in water treatment market on the continent › Overall, SA manufacturing sector remained unexciting › Strike effects › Volume constraints in SA put margins under pressure ›
Slide 46: Specialty Chemicals: Performance 1H14
SPECIALTY CHEMICALS 45 Performance 1H14 Revenue R4 062m +11% Profit from operations R397m +2% Trading margin 9,8% (1H13: 10,6%) Average WC 19,5% (1H13: 18,9%) › 17% of revenue US$-denominated › Senmin’s results adversely impacted › Volumes +5% ◦ Volumes -20,5% and WC higher ◦ Manufactured +0,2% ◦ Bu
Slide 47: Outlook and Progress on Deliverables
46 5 OUTLOOK AND PROGRESS ON DELIVERABLES
Slide 48: Outlook
OUTLOOK 47 › Outlook in Africa for the Group’s strategic growth areas of mining solutions, agriculture and water solutions is positive › Promising growth prospects for mining solutions in SA’s iron ore and coal sectors › AECI will continue to diversify geographically and build on progress in Austral
Slide 49: Progress Report: Deliverables (per February '14)
PROGRESS REPORT: DELIVERABLES (PER FEBRUARY ’14) 48 Good Achieved progress Expand AECI’s geographical footprint in Africa and in Australia and Latam Drive the Group’s holistic approach to its mining solutions strategy Ramp up BBRI AN plant to capacity Maintain focus on improving AEL’s performance to
Slide 50: Investors' Calendar
INVESTORS’ CALENDAR 49 Investor day: AECI’s strategy unpacked (Woodmead) 28 October ’14 Financial year-end 31 December ’14 2014 results released and JHB presentation TBC CT presentation TBC
Slide 51: Thank You
THANK YOU No si OA=CI’ YEARS good chemistry of goad chemistry