Slide 1: Financial Results Presentation
FINANCIAL For the year ended 31 December 2014 RESULTS PRESENTATION 24 and 25 February 2015
Slide 2: Presentation Outline
PRESENTATION OUTLINE 1 1. Performance summary 2. Performance drivers analysed 3. Strategic context 4. Results analysed 5. Segmental performance » Property » Explosives » Specialty chemicals 6. Outlook and deliverables
Slide 3: Performance Summary
PERFORMANCE 5 , SUMMARY — OASCI good chemistr:
Slide 4: Performance Summary
PERFORMANCE SUMMARY 3 › Best-ever safety performance with a TRIR of 0,50 › Revenue +6% to R16,9bn » Foreign revenue of R5 417m = 32% of total › Headline earnings +7% to R943m › Profit from operations +14% to R1 596m › EPS +16% to 979c, HEPS +6% to 842c » Notwithstanding 193cps strike impact and 25cp
Slide 5: Performance Summary
PERFORMANCE SUMMARY 4 Positive impacts › Receipt of cash proceeds for property sale › Excellent results from the specialty chemicals segment in a difficult environment » TP of R1bn for the first time » Benefits of acquisitions and strategic portfolio management evident › Internationalisation strateg
Slide 6: Dawn Raid
DAWN RAID 5 › Search and seizure by Competition Commission of SA, on 4 December › At Akulu and a competitor › On-going investigation into collusion in surfactants market » Input materials for detergents › Documents and electronic data seized and being analysed › AECI cooperating fully, in line with
Slide 7: Freedom Supported by a Framework
“FREEDOM SUPPORTED BY A FRAMEWORK” 6 › At the heart of the corporate strategy
Slide 8: Performance Summary: Safety
PERFORMANCE SUMMARY 7 Best-ever safety performance with TRIR of 0,50 All workers TRIR 1,0 Maximum 0,8 tolerable level 0,6 0,4 0,2 0,0 08 09 10 11 12 13 14
Slide 9: Performance Drivers Analysed
PERFORMANCE DRIVERS ANALYSTED
Slide 10: Business Environment
BUSINESS ENVIRONMENT 9 SA mining volumes Jan ’09 – Jan ’15 Source: Stats SA
Slide 11: Business Environment: Mining
BUSINESS ENVIRONMENT 10 Mining › SA » Strikes – R300m impact, mainly in AEL and Senmin » Growth in coal and iron ore exports › Rest of Africa » Mining activity in Central Africa robust » Gold mining volumes in West Africa under pressure » Disruptions due to Ebola threat and socio-political instabili
Slide 12: Business Environment: Gold and Platinum Prices
BUSINESS ENVIRONMENT 11 Two-year historical price performance – gold and platinum
Slide 13: Business Environment: Iron and Coal Prices
BUSINESS ENVIRONMENT 12 Two-year historical price performance – iron and coal
Slide 14: Business Environment: SA Manufacturing Volumes
BUSINESS ENVIRONMENT 13 SA manufacturing volumes Jan ’08 – Jan ’15 Source: Stats SA
Slide 15: Business Environment: SA Manufacturing
BUSINESS ENVIRONMENT 14 SA manufacturing › No change » Sector growth not tracking GDP growth » Energy constraints a serious concern » Weak demand impacts margin and volume growth » No significant improvement in exports by customers, even with weak ZAR » Customers rationalising and reducing productio
Slide 16: Business Environment: ZAR/US$ Exchange Rate
BUSINESS ENVIRONMENT 15 ZAR/US$ exchange rate Jan ’13 – Jan ’15 Source: Standard Bank of SA
Slide 17: Effects of Exchange Rate on Performance
BUSINESS ENVIRONMENT 16 Effects of exchange rate on performance › ZAR/US$ depreciated by 13% y-o-y › 32% of Group revenue predominantly US$ denominated in ’14 » Forex benefits as the Group steps out of SA » Rand weakness assisted revenue but rand margins remained under pressure owing to prevailing t
Slide 18: Business Environment: Brent Oil
BUSINESS ENVIRONMENT 17 Brent oil (US$/bbl) Source: INET Bridge
Slide 19: Strategic Context
STRATEGIC CONTEXT [L OASCI good chemistr:
Slide 20: Strategy Summarised
[ STRATEGY SUMMARISED | 19 | WATER SOLUTIONS ImproChem AECI poRTFOLIO OF SPECIALTY CHEMICALS susNESSES_ Food ADDITIVES OA=CI good chemistry
Slide 21: Strategy and Growth Pillars
STRATEGY AND GROWTH PILLARS 20 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 22: Mining Solutions: International Footprint
MINING SOLUTIONS: INTERNATIONAL FOOTPRINT 21
Slide 23: Mining Solutions: Mining Indaba
MINING SOLUTIONS: MINING INDABA 22 CTIA Transportation Hub
Slide 24: Mining Solutions: Mining Indaba
MINING SOLUTIONS: MINING INDABA 23 CTIA – Domestic Arrivals
Slide 25: Mining Solutions: Strategic Progress
MINING SOLUTIONS: STRATEGIC PROGRESS 24 › Expansion outside SA, across minerals and mining methods » Has de-risked AEL and Senmin › AECI offices in Australia and Brazil well established » In support of internationalisation › Manufacturing site established in Bajool, Queensland › Senmin expanding int
Slide 26: Strategy and Growth Pillars
STRATEGY AND GROWTH PILLARS 25 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) » Water solutions, a
Slide 27: Specialty Chemicals: African Footprint
SPECIALTY CHEMICALS: AFRICAN FOOTPRINT 26
Slide 28: Growth Pillars: Strategic Progress
GROWTH PILLARS: STRATEGIC PROGRESS 27 › Water solutions » GE and Clariant acquisitions delivering » African footprint enhanced » North African opportunities being evaluated » Leading industrial, effluent and municipal water treatment chemical company in Africa › Agrochemicals » SA footprint enhanced
Slide 29: Portfolio Management
PORTFOLIO MANAGEMENT 28 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) » Water solutions, agrochem
Slide 30: Specialty Chemicals Cluster
SPECIALTY CHEMICALS CLUSTER 29 Akulu Marchon Lake Foods Chemfit Experse Surfactant Technologies Chemical Initiatives Nulandis Resinkem ChemSystems Senmin Crest Chemicals SANS Technical Fibers ImproChem Specialty Minerals SA Industrial Oleochemical Products
Slide 31: Portfolio Management: Specialty Chemicals
PORTFOLIO MANAGEMENT: SPECIALTY CHEMICALS 30 › Akulu restructuring » PJ business closed; assets being sold » White oils business moved to IOP » Surfactants business will be divisionalised into CI in 2Q15 » Personal care division will move to ChemSystems in 2Q15 › Pigments portfolio moved from Expers
Slide 32: Revenue Split in This Context
REVENUE SPLIT IN THIS CONTEXT (%) 31 Mining solutions = 56% of revenue
Slide 33: Group Mining Revenue
GROUP MINING REVENUE 32 Revenue by mineral mined 2014 (%)
Slide 34: Specialty Chemicals
SPECIALTY CHEMICALS 33 Revenue by market sector (%) – water solutions = 12%
Slide 35: Results Analysed
RESULTS ANALYSED OASCI good chemistr:
Slide 36: Cash Utilisation
CASH UTILISATION 35 › Capex: R745m – incl. R335m Borrowings for expansion projects Gearing › NWC to revenue: 15,4% (19,6% in ’13) 2 500 60 › Net borrowings: R666m 50 › Gearing at 9% vs 22% in June ’14 2 000 (25% in Dec. ’13) 40 › Cash interest cover: 14,6x 1 500 › Final ordinary cash dividend: 30 22
Slide 37: HEPS
HEPS 36 › Profit from operations +14% HEPS (cps) to R1 596m › EBITDA +10% to R2,2bn 1 000 › HEPS = 6% to 842c » 218c lost (strikes, restructuring) 800 › Tax rate: 24,9% (’13: 24,7%) › Return on net assets: 17,8% 600 (16,4% in ’13) › Target = 20%+ 400 › EVA remains positive 200 0 09 10 11 12 13 14
Slide 38: Post-Retirement Benefit Obligations De-risking
STRATEGIC PROJECTS: POST-RETIREMENT BENEFIT OBLIGATIONS DE-RISKING 37 › Pensioner obligations hedged with Sanlam › DC Fund established and operating for new employees › All active/contributing members will transfer to the new DC Fund › FSB s14 application will be submitted in 1Q15 › Anticipate compl
Slide 39: Post-Retirement Benefit Obligations De-risking Cont
STRATEGIC PROJECTS: POST-RETIREMENT BENEFIT OBLIGATIONS DE-RISKING CONT 38 › PRMA process well advanced » 65% of qualifying pensioners have accepted generous Company offer to transfer their obligation to Momentum » Offer to active contributing members being prepared › Complex accounting implications
Slide 40: Segmental Performance
PERFORMANCE (ec Oy OASCI good chemistr:
Slide 41: Profit from Operations by Segment
PROFIT FROM OPERATIONS BY SEGMENT (RM) 40 1 000 800 600 400 200 Corporate 0 Explosives Specialty Property -200 chemicals -400 13 14
Slide 42: Corporate Charges
CORPORATE CHARGES 41 Dec Dec Change 2014 2013 Rm AECI Captive Insurance Company – net profit 8 8 – Profit on disposal of SANS Bellville site – 35 (35) Corporate office costs net of corporate fees recovered (74) (86) 12 Defined-benefit costs (124) (134) 10 LTI and share-based payment expense (65) (97
Slide 43: Property
PROPERTY 42 Profit from Profit from Revenue Revenue operations operations Rm 2014 2013 2014 2013 Land sales 517 306 433 174 Shanghai Zendai transaction 462 421 Somerset West 55 12 Rental and services 354 366 57 45 871 672 490 219 › Modderfontein » 216ha of surplus land remains (excl. Modderfontein R
Slide 44: Explosives: Business Environment
EXPLOSIVES: BUSINESS ENVIRONMENT 43 › Global mining sector challenged by the collapse of commodity prices » Gold mining in West Africa and coal mining in Indonesia badly affected › Mining houses seeking cost reductions and efficiency gains » Some tender process brought forward unexpectedly › Ebola o
Slide 45: Explosives
EXPLOSIVES 44 Performance Revenue R7 256m -2% Profit from operations R372m -35% Trading margin 5,1% (’13: 7,7%) Average trade WC 19% (’13: 20%) › Overall explosives volumes -4%; › Overall explosives volumes in Africa +1% initiating systems volumes -19% » West African explosives volumes -18% – reduce
Slide 46: Explosives: Performance
Rm 200 600 800 400 0 TP 2013 act R572 MM growth R156 Platinum strike -R170 EXPLOSIVES: PERFORMANCE ISAP R142 Indonesia -R73 West Africa -R84 Inflation -R149 Severence R56 DRC risk mitigation -R37 Hedging/other -R41 TP FY act 2014 R372 45
Slide 47: Explosives: Strategic Progress
EXPLOSIVES: STRATEGIC PROGRESS 46 Initiating systems rationalisation project › Operational footprint reduced › Manual shock tube assembly relocated to SF2 – R65m SF2 Assembly › More than 550 employees affected in ’13 and ’14 › ISAP produces all narrow reef detonators › Development of rest of range p
Slide 48: Explosives: Strategic Progress Cont
EXPLOSIVES: STRATEGIC PROGRESS CONT 47 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 progre
Slide 49: BBRI Investment
BBRI INVESTMENT 48 › US$23m investment for 42,6% equity share in BBRI complete › Plant commissioned successfully and production commenced Feb ’14 › Run-rate of 87% of capacity achieved › ANS successfully converted to explosives
Slide 50: Strategic Progress: Australian Entry
STRATEGIC PROGRESS: AUSTRALIAN ENTRY 49 › Plant erect and commissioned in Bajool, Queensland › Supply agreement signed with Thiess and supply has commenced › Supply of emulsion and initiating systems to four mines in Queensland » About 55 kt/a › Explosives licence received for New South Wales › Entr
Slide 51: Specialty Chemicals: Business Environment
SPECIALTY CHEMICALS: BUSINESS ENVIRONMENT 50 › Overall, SA manufacturing sector remained subdued › Margins under pressure due to pedestrian demand › Strike effects › Agricultural sector in SA and the rest of Africa remained strong › Good growth also in water treatment market on the continent, especi
Slide 52: Specialty Chemicals
SPECIALTY CHEMICALS 51 Performance Revenue R9 368m +12% Profit from operations R1 000m +8,5% Trading margin 10,7% (’13: 11,0%) Average trade WC 21% (’13: 22%) › 18% of revenue US$-denominated › Senmin’s results adversely impacted › Volumes +4% » Volumes -10,6% » Good recovery in 4Q14 and progress in
Slide 53: Specialty Chemicals: Performance Drivers
SPECIALTY CHEMICALS: PERFORMANCE DRIVERS 52 › Benefits of acquisitions › Active portfolio management » Disinvestment from poor performing activities » Investment for growth › Excellent cost management › Aggressive working capital reduction and margin improvement initiatives › Collaboration drive › E
Slide 54: Senmin: New Technical and R&D Centre
SENMIN: NEW TECHNICAL AND R&D CENTRE 53
Slide 55: Senmin: R&D Centre Completion Expected May '15
SENMIN: R&D CENTRE COMPLETION EXPECTED MAY ’15 54
Slide 56: Outlook and Deliverables
OUTLOOK AND DELIVERABLES | ||@ E] OASCI good chemistr:
Slide 57: Outlook '15
OUTLOOK ’15 56 Global › The overall global environment is likely to remain challenging overall › Uncertainly over Chinese growth, in particular, and the future of commodity prices › If the oil price remains at current levels, chemical prices could be impacted SA › Electricity supply is a serious con
Slide 58: Outlook '15 Cont
OUTLOOK ’15 CONT 57 › Due to strategic positioning, the outlook in Africa for the Group’s growth areas of mining solutions, agrochemicals and water solutions remains positive overall › Food additive strategy will remain a focus in SA › Acquisitions will remain a priority for growth › Mining solution
Slide 59: Deliverables for '15
DELIVERABLES FOR ’15 58 › Consolidate Australian entry and leverage this platform › Return AEL to ˃10% margin in a challenging environment › Continue to drive cost control and working capital management › Contain capex to depreciation levels › Conclude acquisitions being negotiated › Realise value f
Slide 60: Investors' Calendar '15
INVESTORS’ CALENDAR ’15 59 AGM 1 June Half-year 30 June Interim results released and JHB presentation 28 July CT presentation 29 July
Slide 61: Thank You
THANK YOU OASCI good chemistr: