Slide 1: Annual Results Presentation
ANNUAL RESULTS PRESENTATION For the year ended 31 December 2009
Slide 2: An Abnormal Year 2009
An Abnormal Year 2009 Weakest global demand in decades Actions and improvements in second half undermined by unplanned hot mill shutdown Aluminium price volatility BHP Billiton signal major change in local strategy Rolled Products expansion project successfully completed Fourth quarter s
Slide 3: Income Statement
Income Statement R'million 2009 2008 Average exchange rate 8.42 8.27 Revenue 4 500 7 120 Operating profit 244 465 Finance costs (113) (118) Share of profits of associates and joint ventures - 1 Profit before tax 131 348 Tax (41) (79) Net profit 90 269 Basic headline earnings per share (cents) 42 124
Slide 4: Operating Profit
Operating Profit R million 2003 2004 2005 2006 2007 2008 2009 Ave R/$ 7.56 6.45 6.37 6.77 7.05 8.26 8.44 4
Slide 5: Year-on-Year EBIT Comparison
Year-on-Year EBIT Comparison R million 5
Slide 6: Balance Sheet
Balance Sheet R'million 2009 2008 Non-current assets 5 034 4 815 Current assets 1 745 2 473 Inventories 1 015 1 325 Trade and other receivables 695 1 060 Net derivatives, held for sale and other 35 88 TOTAL ASSETS (excluding cash) 6 779 7 288 Total equity 3 744 3 760 Total net borrowings 1 409 1 747
Slide 7: Cash Flow
Cash Flow R million 2009 2008 EBITDA 442 642 Changes in working capital 599 (486) Inventories 346 (397) Debtors 365 (46) Creditors (112) (43) Changes in derivatives (125) 95 Tax payments (67) (137) Non-cash items 46 41 Cash flow from operations 895 155 Capital expenditure – normal and start-up costs
Slide 8: Rolled Products Sales Volumes
Rolled Products Sales Volumes Tons (‘000) 8
Slide 9: Mix and Margins
Mix and Margins Percentage Index 9
Slide 10: Manufacturing Performance
Manufacturing Performance Q4 production 180 000 tons (annualised) Hot Mill breakdown affected Q3 production by 10 000 tons Skills complement maintained – Normal working arrangements re-established Costs reduced by 7% Project assets fully integrated with existing operations Sustainable im
Slide 11: Capital Management
Capital Management Working capital reduced by R599 million (36%) – Inventory reduced by 15 days (20%) – Export debtors reduced by 9 days (15%) – Impact of DDP shipping terms – Metal price reduced by approx. 20% Capital expenditure – Project expenditure of R261 million, which includes capitalised
Slide 12: Rolled Products Expansion Project
Rolled Products Expansion Project Completed on schedule and officially opened in November 2009 Final cost of R970 million was 2% over budget Capacity increase 20% from twin roll casters and mill upgrades Scope for mix improvement – Foil, plate and surface critical, light gauge products 12
Slide 13: Rolled Products Expansion Project
Rolled Products Expansion Project 13
Slide 14: Hulamin Extrusions
Hulamin Extrusions Sales reduced by 17% despite increased market share Good recovery after difficult first quarter Exports discontinued as a consequence of BHP Billiton billet supply being terminated 14
Slide 15: Hulamin Extrusions (continued)
Hulamin Extrusions (continued) Local import duty reduced to 0%, while Canada, EU and Australia implement anti-dumping duties against China Automotive, transport and solar energy opportunities while construction lags 15
Slide 16: Global Industry Developments
Global Industry Developments Long-term demand fundamentals remain positive Western world demand 17% below 2008 and 25% below 2007 Chinese demand up 20% – Consumption increase > Supply increase Several producers incurring losses Reduced capacity utilisation and reluctance to restart Incre
Slide 17: Key Actions to Achieve 16% ROCE
Key Actions to Achieve 16% ROCE 1. Security of competitive slab and billet supply 2. Rebuilding an optimum sales mix 3. Exploiting increased capacity 4. Accelerating sustainable cost and efficiency improvements 5. Manage increased aluminium price volatility 6. Optimise capital structure 17
Slide 18: Current Metal Supply
Current Metal Supply 600 000 tons melting ingot export sales Hillside 90 000 tons slab 110 000 tons melting ingot Bayside 210 000 tons slab Rolling Slab Hulamin 300 000 tons Rolling Mill Sales 200 000 tons 100 000 tons scrap Hulamin Remelt 18
Slide 19: Slab and Billet Supply
Slab and Billet Supply 65% of extrusion billet imported – Hulamin produces balance Rolling slab from BHP-B to be discontinued end 2010 Actions to replace slab supply – Expansion of in-house facilities – Interim import arrangements – Solutions to longer-term growth requirements 19
Slide 20: Current Slab Supply Actions
Current Slab Supply Actions Actions to increase own slab capacity by 2011 – Furnace improvements at Camps Drift site – Re-commission facilities at Edendale site – Combined increase 60 000 tons Import requirements being negotiated for 2011 Further actions to support 250 000 tons sales 20
Slide 21: Rebuilding the Product Mix
Rebuilding the Product Mix Heat Treated Plate - sales 65% below 2007 levels – General engineering/aircraft manufacturing – Increased global capacity on stream – Hulamin quality premium – Expect approximately 50% increase from 2009 to 2010 21
Slide 22: Rebuilding the Product Mix (continued)
Rebuilding the Product Mix (continued) Brazing sheet – sales 42% below 2007 levels – Sign of recovery in global automotive and transport sectors – Expect 2010 sales to be approx. 40% above 2009 Foil – Capacity increase by 23 000 tons – Migration to thinner gauges – Market opportunities 22
Slide 23: Rebuilding the Product Mix (continued)
Rebuilding the Product Mix (continued) Can Stock – 14% below 2007 levels – Supply and demand finely balanced – Strong growth in developing world – Several niche markets – Expect record sales in 2010 Regional markets – Uncertain outlook for SA economy – Opportunities mainly in transport and packa
Slide 24: Exploiting Increased Capacity
Exploiting Increased Capacity Market opportunities clearly identified 2011 sales may be constrained by slab availability Sustainable improvement projects focused on bottlenecks Foil capacity proven – Light gauge commissioning approaching completion Dual constraints being addressed: – Marke
Slide 25: Accelerating Cost and Efficiency Improvements
Accelerating Cost and Efficiency Improvements Kick-off in 2008 with cost focus Cumulative verifiable benefits approaching R80 million annualised Scope expanded to include all efficiency projects 2009 focus on programme infrastructure and training – Increasing payback from 2010 25
Slide 26: 30-Year Aluminium Price History
30-Year Aluminium Price History 26
Slide 27: Managing Aluminium Price Volatility
Managing Aluminium Price Volatility US Dollar aluminium price – Hedge yields contango benefit but introduces cash flow risk – Limiting hedge to 50% limits cash flow risk Rand / US Dollar exchange rate – Capturing forward rates – Reduces earnings volatility – Limited cash flow effect – 100% hedge
Slide 28: Structuring the Balance Sheet for Growth
Structuring the Balance Sheet for Growth Negative cash flow effect of 2008/9 recession exceeds R300 million Aluminium price volatility impact on working capital ($100 equates to R40 million) Capital requirements for slab capacity and mix improvement Rolled Products volumes expected to reach
Slide 29: Prospects
Prospects Hulamin well positioned for: Sales volume growth Mix improvement Cost improvements Improvement rate will be influenced by: Global economic recovery Rates of exchange Resolution of rolling slab issues 29