Metair Investments Limited · JSE:MTA
Metair Investments — H1 2022 Earnings Presentation
40 slides from Metair Investments's earnings presentation, Sep 15, 2022
Slide 1: 2022 Interim Results Presentation
2022 INTERIM RESULTS PRESENTATION 15 SEPTEMBER 2022
Slide 2: Safety Message
SAFETY MESSAGE “SAFETY IS PRESENCE OF MIND” 2
Slide 3: Agenda
AGENDA Welcome and opening observations Salient features Financial and operational review Outlook and prospects Q&A Appendices 3
Slide 4: Welcome and Opening Observations
WELCOME AND OPENING OBSERVATIONS
Slide 5: Top of Mind Matters
TOP OF MIND MATTERS ▪ Delivery of key projects in Automotive Components Operational Excellence ▪ Supply chain normalisation ▪ Post-flooding recovery and production readiness ▪ Monitoring & mitigating events in Eastern Europe (incl. high energy costs) ▪ South African economic recovery prospects Finan
Slide 6: Successfully Navigating a Challenging Operating Environment
SUCCESSFULLY NAVIGATING A CHALLENGING OPERATING ENVIRONMENT Conflict in Ukraine Lead and energy prices in Romania and Europe KZN floods and stoppage at major customer Toyota Onset of hyperinflation in Türkiye Mutlu 10 day strike in June Toyota start-up and readiness preparations 6
Slide 7: Salient Features
SALIENT FEATURES
Slide 8: Salient Features at Group Level
SALIENT FEATURES AT GROUP LEVEL NORMALISATION FREE CASH EBITDA EBIT ADJUSTMENTS FLOW UTILISED REVENUE NET DEBT decreased 2% to decreased 57% to decreased 73% to increased to excludes non-cash R5.8bn R300m R144m R2.4bn impact of R567m (R743m normalised**) (R557m normalised**) (R2bn normalised**) hype
Slide 9: Financial and Operational Review
FINANCIAL AND OPERATIONAL REVIEW
Slide 10: Financial Overview
METAI FINANCIAL OVERVIEW
Slide 11: H1 2022 Group Results at a Glance
H1 2022 GROUP RESULTS AT A GLANCE Another unprecedented year, but outlook remains positive. Main impacts and disruptions to our businesses were: HEADLINE EARNINGS PER SHARE decreased 74% to Energy Storage 45cps (normalised 152cps*) (H1’21: 170cps) • Hyperinflation accounting for Türkiye impacted Mut
Slide 12: Financial Highlights: Income Statement
FINANCIAL HIGHLIGHTS : INCOME STATEMENT Normalised EBITDA amounted to R743m R'million Dec 2021 Jun 2021 Jun 2022 % Change R'million Dec 2021 Jun 2021 Jun 2022 % Change Revenue 12 621 5 934 5 822 (2%) Attributable profit 675 327 80 (76%) EBITDA (incl. share of assoc.) 1 409 701 290 (59%) Headline ear
Slide 13: Financial Highlights: Balance Sheet & Working Capital
FINANCIAL HIGHLIGHTS : BALANCE SHEET & WORKING CAPITAL High net debt and working capital levels will unwind by year end. Non-current assets increased significantly, strong Mutlu non- monetary asset base protects against hyperinflation and a positive gain from a net asset point of view R'million Dec
Slide 14: Capital and Debt Structure
CAPITAL AND DEBT STRUCTURE We received strong support from our funders during the year. Net debt has increased, but FY’22 is the peak year of funding. Net debt levels will reduce post new model launches % Dec 2021 Jun 2021 Jun 2022 Debt* : Equity 61% 58% 60% Net debt** : Equity 35% 30% 49% Dec 2021
Slide 15: Energy Storage Main Impact: IAS 29, Hyperinflation Accounting in Türkiye
ENERGY STORAGE MAIN IMPACT: IAS 29, HYPERINFLATION ACCOUNTING IN TÜRKIYE In theory, IAS 29 is meant to improve comparability of hyperinflation results. However Mutlu’s operating results are significantly adjusted (represented) even though the business is largely dollarised. >80% of inputs and >50% s
Slide 16: Hyperinflation Accounting Adopted by Mutlu in H1'22
IAS 29 - HYPERINFLATION ACCOUNTING ADOPTED BY MUTLU IN H1’22 Why hyperinflation accounting is applied? 4 impacts: Türkiye's inflation rate rose to 78.6% in June 2022, 1) Restatement of Mutlu opening balance sheet; 2) Re-indexing of non-monetary items YTD; accelerating dramatically in recent months.
Slide 17: Restatement of Inventory and Cost of Goods Sold Causes a Timing Mismatch
INCOME STATEMENT: RESTATEMENT OF INVENTORY AND COST OF GOODS SOLD CAUSES A TIMING MISMATCH FOR LONG LEAD TIME MANUFACTURERS Simply applying average indexing on cost of sales for the period is not correct. Cost of sales is restated from the date of production and not date of sale. Restatement of inve
Slide 18: Non-Cash Hyperinflation Impact of R95m to Net Profit After Tax
NON-CASH HYPERINFLATION IMPACT OF R95M TO NET PROFIT AFTER TAX Hyperinflation accounting increases Mutlu’s non-monetary assets by c. 18% (R1.7bn), by indexing up using CPI tables published by Turkish Statistics. A foreign currency translation gain of c. R1.5bn arises through other comprehensive inco
Slide 19: Operational Overview
METAIR OPERATIONAL OVERVIEW
Slide 20: SA Auto Components Main Focus
SA AUTO COMPONENTS MAIN FOCUS: KZN flooding, business interruption insurance claim and recovery to normal production
Slide 21: Main AC Focus: Business Interruption and Return to Production Readiness
MAIN AC FOCUS: BUSINESS INTERRUPTION AND RETURN TO PRODUCTION READINESS Various measures implemented to responsibly manage the business and ensure continuity of existing business, especially major new model launch obligations. We successfully navigated through the production loss and anticipate norm
Slide 22: H1 2022 Business Vertical Overview – As Reported
H1 2022 BUSINESS VERTICAL OVERVIEW – AS REPORTED ENERGY AUTOMOTIVE STORAGE Energy COMPONENTS METAIR VERTICAL VERTICAL Storage vertical H1 2021 H1 2022 H1 2021 H1 2022 H1 2021 H1 2022 R3,3bn R3,7bn R3,5bn R2,7bn R5,9bn R5,8bn Revenue 48% 58% 52% 42% contribution contribution contribution contribution
Slide 23: H1 2022 Business Vertical Overview – Pre Hyperinflation Adjusted
H1 2022 BUSINESS VERTICAL OVERVIEW – ‘PRE HYPERINFLATION’ ADJUSTED ENERGY AUTOMOTIVE STORAGE Energy COMPONENTS METAIR VERTICAL VERTICAL Storage vertical H1 2021 H1 2022 H1 2021 H1 2022 H1 2021 H1 2022 R3,3bn R3,6bn R3,5bn R2,7bn R5,9bn R5,7bn Revenue 48% 57% 52% 43% contribution contribution contrib
Slide 24: Automotive Components
AUTOMOTIVE COMPONENTS Market volumes contracted by 10% but key customers contracted 23% due to production issues at Ford and flood impact on Toyota. Volume variability and instability also impacted OEM output overall Revenue PBIT EBITDA 24% 28% 13% R2,7bn R183m R293m Free cash PBIT % ROIC flow 0.4pp
Slide 25: Energy Storage
ENERGY STORAGE Auto battery volumes benefitted from higher exports (up 43%) and OEM (up 11%) units at Mutlu Revenue PBIT EBITDA 14% 113% 86% R3.7bn R44m R59m Free cash PBIT % ROIC flow 11.3ppt 9.0ppt Sales channel '000s Dec 2021 Jun 2021 Jun 2022 Change % -R491m -1.2% 14.5% Mutlu 4 682 1 830 2 091 2
Slide 26: Capital Expenditure and Commitments (Including Hesto)
CAPITAL EXPENDITURE AND COMMITMENTS (INCLUDING HESTO) R1.4bn allocated for FY’22 (FY’21: R1.3bn), includes carry over and new technology investments at Mutlu • Investments for secured new model launches continues: Capital expenditure spend › All major projects remain on track per plan Vertical Maint
Slide 27: Energy Storage Segment Analysis
ENERGY STORAGE SEGMENT ANALYSIS Reported Pre Hyperinflation 330 330 273 350 (11.1%) 350 (11.1%) (8.3%) 250 R’million 250 R’million PBIT -3 -29 -15 -3 0 150 150 (-1.0%) (-0.8%) (-5.4%) (-1.0%) (-0.1%) 50 50 -50 -50 H1 2021 H1 2022 H1 2021 H1 2022 Automotive Industrial Automotive Industrial PBIT (H1)
Slide 28: Assessing Underlying Performance: Normalising the Result
ASSESSING UNDERLYING PERFORMANCE: NORMALISING THE RESULT
Slide 29: Understanding Underlying Results and Debt Covenants
UNDERSTANDING UNDERLYING RESULTS AND DEBT COVENANTS Hyperinflation in Türkiye as well as the impact of one-off items, impacted results. We adjusted key performance measures such as EBITDA, operating profit and HEPs on the following basis: • Pre-hyperinflation basis, adjusted for non-cash impact of h
Slide 30: On a Normalised Basis EBITDA Increases to R743m and Net Debt Decreases to R2bn
ON A NORMALISED BASIS EBITDA INCREASES TO R743M AND NET DEBT DECREASES TO R2BN EBITDA perspective at H1'22 Mutlu: H1'22 hyperinflation impact on ZAR in millions EBITDA Metair Investments Limited consolidated results Reported for the period (incl. equity earnings but excl. impairments) 300 ZAR in mil
Slide 31: LTM Normalised EBITDA Increases to R1.4bn, Net Debt Decreases to R2.5bn
LTM NORMALISED EBITDA INCREASES TO R1.4BN NET DEBT DECREASES TO R2.5BN Covenants on a reported basis are not in compliance, except for dividend and interest cover ratio. We comply with covenants on a normalised basis and have discussed with all our funders. Our funders have shown great appreciation
Slide 32: Conclusion on Results: Normalised Earnings and HEPS
CONCLUSION ON RESULTS: NORMALISED EARNINGS AND HEPS After normalisation adjustments, HEPS increases to 152cps, 11% down from H1’21. This decline in “core” earnings is mainly driven by Rombat’s challenging environment combined with increased interest changes in the group 32
Slide 33: Ford New Business Progress Update
FORD NEW BUSINESS PROGRESS UPDATE
Slide 34: Project Is Tracking Within Plan, Despite Industry Disruptions
PROJECT IS TRACKING WITHIN PLAN, DESPITE INDUSTRY DISRUPTIONS Project and capital spend still within budget, and further business secured for wire localisation OVERVIEW (INCLUDES SOUTH HESTO) AFRICA Category of spend (R'm) Group Hesto (74.9% associate) Other subsidiaries Capital investment Total Tot
Slide 35: Outlook and Prospects
OUTLOOK AND PROSPECTS
Slide 36: Key Takeaways and Outlook
KEY TAKEAWAYS AND OUTLOOK ▪ Toyota recovery post flooding on track and closely managed Recovery ▪ Hyperinflation management (again) ▪ Europe energy crisis will intensify ▪ Projects on track ▪ Energy Storage volume outlook remains positive with increased demand for AGM batteries across all channels P
Slide 37: Q&A
Q&A
Slide 38: Appendices
APPENDICES
Slide 39: Energy Storage Volumes (Last Twelve Months)
ENERGY STORAGE VOLUMES (LAST TWELVE MONTHS) (ROUNDED) 1. Total volumes by operation (including 2. Automotive volumes by market 3. Mutlu automotive volumes industrial) 4. Rombat automotive volumes 5. First National Battery automotive 6. Industrial volumes volumes 39
Slide 40: Disclaimer
DISCLAIMER The information supplied herewith is believed to be correct but the accuracy thereof at the time of going to print is not guaranteed. The company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided. Provision of this data does