Salungano Group Limited · JSE:SLG
Salungano — FY2020 Earnings Presentation
45 slides from Salungano's earnings presentation, March 2020
Slide 1: Results Presentation for the Year Ended 31 March 2020
RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2020 LAYING THE FOUNDATION TO GROW SUSTAINABLY
Slide 2: Disclaimer and Contents
DISCLAIMER AND CONTENTS 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 Ref Title Slide taken from sources considered by
Slide 3: Wescoal Overview
WESCOAL OVERVIEW
Slide 4: FY20 Operational and Financial Overview
FY20 OPERATIONAL AND FINANCIAL OVERVIEW COAL MINED COAL SALES REVENUE CAPEX 6.0Mt 6.3Mt R3.8 billion R433 million (FY19: 5.9Mt) (FY19: 6.0Mt) (FY19: R3.9 billion) EBITDA NET LOSS CASH GENERATED INVESTORS R332 million R136 million 43 cents Share buy back (FY19: R456 million) (FY19: NPAT R88 million)
Slide 5: FY20 Strategy Update
FY20 STRATEGY UPDATE Sweat current operations, manage business well • 6Mt ROM in FY20 to maintain steady state • FY20 Q4 ROM annualised – 7.3Mt TARGET: 8Mt ROM FY20 • FY21 Q1 ROM annualised – 8.1Mt STABILITY • 65% Eskom sales backed by CSA’s Customer-centric; balance between Eskom, domestic and expo
Slide 6: Current Market Conditions
CURRENT MARKET CONDITIONS COVID-19 IMPACTS • 7.5 - 9.0GW drop in power usage on national lockdown • Force Majeure notices issued to coal suppliers, incl. Wescoal ESKOM • Sales to Eskom slightly down but still within contractual volumes • Electricity demand returning as lockdown eases • Exporters for
Slide 7: Wescoal's Effective Response to COVID-19
WESCOAL’S EFFECTIVE RESPONSE TO COVID-19 “ESSENTIAL SERVICE PROVIDER’’ WORKPLACE MEASURES ACROSS ALL OPERATIONS COMMUNITY SUPPORT • Operate from 10 sites across the group • Refocused SLP's for COVID-19 relief interventions - Corporate offices – 2 - Victor Khanye Municipality (Delmas) - Mining – 3 mi
Slide 8: FY21 Strategic Priorities
FY21 STRATEGIC PRIORITIES LAYING THE FOUNDATION TO GROW SUSTAINABLY Stability Sustainability Scalability Navigate through COVID-19 Continue to nurture a strong working relationship Effective organic growth through current greenfield • Health and wellbeing of employees, communities with Eskom and bro
Slide 9: Delmas Area Map
DELMAS AREA MAP Wescoal mines/projects 9
Slide 10: Mining Segment
MINING SEGMENT
Slide 11: Health and Safety
HEALTH AND SAFETY Lost Time Injury (LTI) Performance Total Recordable Injury Frequency Rate (TRIFR) Performance 2 3 2 1 1 0 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 19 19 19 19 19 19 19 19 19 20 20 20 19 19 19 19 19 19 19 19 19 20 20 20 LTI LT
Slide 12: Vanggatfontein ROM & Sales Performance Trend
VANGGATFONTEIN ROM & SALES PERFORMANCE TREND RAMP-UP PROGRESSING WELL ROM Production - Kt Sales – Kt 945 828 587** 621 382 269 41 529 220 164 550 350 434 171 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 Own sales Buy-ins* Factors impacting production Key focus area
Slide 13: Elandspruit ROM & Sales Performance Trend
ELANDSPRUIT ROM & SALES PERFORMANCE TREND STEADY ROM PRODUCTION ROM Production - Kt Sales – Kt * 505 513 785 777 446 697 424 439 590 621 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 Factors impacting production Key focus areas Q3 • Manage COVID-19 risks • Unprecede
Slide 14: Khanyisa ROM & Sales Performance Trend
KHANYISA ROM & SALES PERFORMANCE TREND RAMP-UP GAINING TRACTION AGAIN ROM Production - Kt Sales – Kt * 370 325 343 323 323 307 233 213 223 195 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 Factors impacting production Key focus areas • Q3 - Unprecedented rainfall •
Slide 15: Mining Segment ROM and Sales Performance
MINING SEGMENT ROM AND SALES PERFORMANCE ROM Production (Kt) Mining Sales (Kt) 730 6 015 5 881 5 748 178 5 554 697 27 304 (133) 4 895 4 716 (490) (180) (341) FY19 Intibane FY19 VGF Elandspruit Khanyisa FY20 FY19 Intibane Total VGF* Elandspruit Khanyisa Neosho FY20 ROM Comparable ROM Sales Sales Inti
Slide 16: FY20 Major Capex Projects
FY20 MAJOR CAPEX PROJECTS LAYING THE FOUNDATION FOR GROWING SUSTAINABLY FY20 Major CAPEX Projects (Rm) . 433 Vanggatfontein Elandspruit Khanyisa Moabsvelden R319 million R46 million R25 million R24 million 16
Slide 17: FY20 Life Extension (LIFEX) Projects
FY20 LIFE EXTENSION (LIFEX) PROJECTS ALREADY DELIVERING COAL VG5 – VANGATTFONTEIN T2 – KHANYISA • 17.8Mt of reserves • 2Mt of reserves • 8 years LOM • 2 years LOM • Steady state ROM production of 150Ktpm • Steady state ROM production of 100Ktpm • Planned CAPEX spend of R11 million for FY21 • Planned
Slide 18: Moabsvelden Key Highlights
MOABSVELDEN KEY HIGHLIGHTS RESERVES LOM ROM 29.0Mt 10-year 2.4Mtpa ESKOM CSA PHASE I & II CAPEX FIRST COAL 10-year R464 million H2 2020 • Project commenced in June 2020 • Offers attractive returns well above our cost of capital • Further optimisation work to reduce CAPEX spend underway • Significant
Slide 19: Moabsvelden Continued: Project Development Phases and Key Dates
MOABSVELDEN | CONTINUED PROJECT DEVELOPMENT PHASES AND KEY DATES PHASE PHASE PHASE 1 2 3 Box cut and mine development Reach steady state Development of VG6 UG project • Contractor mobilisation and site establishment • Achieve steady state of 200Ktpm ROM • VG6 UG project to reach the full Eskom contr
Slide 20: Moabsvelden Continued: Progress Images from Site
MOABSVELDEN | CONTINUED PROGRESS IMAGES FROM SITE – JULY 2020 Access road Hard Park Box cut topsoil removal Mining contractor office 20
Slide 21: Pipeline LIFEX Projects
PIPELINE LIFEX PROJECTS VG6 - VANGATTFONTEIN UG - ELANDSPRUIT • 3.6Mt of reserves • 1.0Mt of reserves • 3 years LOM • 4 years LOM • Steady state ROM production of 80Ktpm • Steady state ROM production of 20Ktpm • First coal in 2023 • First coal in calendar H2 2020 21
Slide 22: Arnot
ARNOT ‘FIRST OF ITS KIND’ EMPOWERMENT DISPOSAL RESOURCES LOM EQUITY 210Mt 7-year (Phase I) 50% 23-year (Lifex) ESKOM CSA FY21F CAPEX FIRST COAL Negotiations R80 -100 H2 2021 commenced million • Resources increased from 190Mt to 210Mt • Well-positioned to supply Eskom Arnot power station primarily vi
Slide 23: Production and Sales Target
PRODUCTION AND SALES TARGET . OPERATION ROM SALES Mt ROM Mt Sales FY20A FY21 – Q1A FY21F FY22F FY20A FY21 – Q1A FY21F FY22F VANGGATFONTEIN 2.2 0.9 3.2 - 4.4 3.5 – 4.0 2.4 0.6 2.2 - 2.7 2.4 - 2.8 ELANDSPRUIT 2.7 0.8 2.5 – 3.2 2.5 – 3.0 1.8 0.5 1.8 – 2.3 2.0 - 2.4 KHANYISA 1.1 0.3 0.8 – 1.0 0.9 – 1.2
Slide 24: Trading Segment
TRADING SEGMENT
Slide 25: Trading Overview
OVERVIEW • No reportable HSEC incidents • Performance affected by strong local headwinds prior to COVID-19 • Major customer reduced coal consumption in H2 FY20 • Reduced pricing and extra coal availability depressed overall margins • Continued focus on debtors’ book • Sustained regional footprint •
Slide 26: Volumes and Revenue Performance Trend
VOLUMES AND REVENUE PERFORMANCE TREND Volumes – Kt Revenue – Rm 349 358 271 246 187 140 156 134 103 104 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 • Reduced sales volumes and revenue • FY20 sales volumes decreased by 29.2% to 759Kt (FY19: 1,072Kt) - 43% reduction
Slide 27: Financials
WESCOAL FINANCIALS
Slide 28: Financial Salient Features
FINANCIAL SALIENT FEATURES REVENUE GROSS PROFIT • Many challenges at VGF = R75 million impact R3.8 billion R333 million yoy (FY19: R3.9 billion) (FY19: R462 million) • Elandspruit incurred additional stripping costs yoy of R61 million EBITDA CASH GENERATED • Projects to grow production output delive
Slide 29: Statement of Comprehensive Income – Extracts
STATEMENT OF COMPREHENSIVE INCOME – EXTRACTS FY20 FY19 Rm Rm • Revenue largely maintained - 4% reduction Revenue 3 810 3 965 as increased sales volumes in Mining offset by lower volumes of higher priced products in Trading Gross profit 333 462 • Profits impacted by cost pressures and lower productio
Slide 30: Segmental Contributions and Revenue Diversity
SEGMENTAL CONTRIBUTIONS AND REVENUE DIVERSITY Segmental contribution FY20 Revenue Operational EBITDA FY20 FY20 26% 13% Mining Trading 87% 74% FY20 Rev enue div ersity yoy FY19 35% Eskom 53% Other 47% 65% 30
Slide 31: Mining Unit Cost
MINING UNIT COST Unit cost (excluding buy-ins and delivery) R/t 0% 403 404 400 367 10% 57 49 45 30 27 300 27 77 77 71 13 15 14 41 45 200 41 100 189 185 170 0 FY19 FY20 FY21F Mining Fuel Mining Transport Beneficiation Other Operating expenses 31
Slide 32: NPAT Variance Group: 2019 to 2020
. Actual 2019 Rm 88.1 Mining Volume (excl Khanyisa) (15.0) NPAT – YoY 2019 to 2020 Mining cost other (excl Khanyisa) (14.7) NPAT VARIANCE GROUP Sales price Mine 46.2 (excl Khanyisa) Khanyisa operation 18.1 Intibane (disposed) (26.9) Strip Ratio (77.0) Cost inflation (83.5) Fixed cost absorption (25.
Slide 33: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Audited Audited 31 Mar 2020 31 Mar 2019 Rm Rm Non-current assets 2 703 2 168 • PPE increased as a result of recapitalization mainly at VGF Property, plant and equipment 2 205 1 954 • Other assets include finance lease Investments - - receivable in terms of VGF fleet G
Slide 34: Statement of Financial Position | Continued
STATEMENT OF FINANCIAL POSITION | CONTINUED Audited Audited Pro-forma* 31 Mar 2020 31 Mar 2019 31 Mar 2020 Rm Rm Rm Total shareholders’ funds 883 1 092 883 • Debt balance of R813 million under Term Loan Non-current liabilities 1 218 1 050 2 031 and revolving credit facilities classified as current (
Slide 35: EBITDA Target
EBITDA TARGET OPERATION EBITDA /Sales tonne R/t FY18A FY19A FY20A FY21 – Q1A FY21F range 130.7 80.1 51.1 114 – 126 100 - 116 VANGGATFONTEIN (34%) (20%) (12%) (26 - 28%) (24 - 26%) 89.8 65.2 31.7 66 – 73 65 – 76 ELANDSPRUIT (23%) (15%) (7%) (15 - 17%) (15 - 17%) 111.5 144 – 159 146 – 169 KHANYISA - -
Slide 36: Capital Expenditure
CAPITAL EXPENDITURE FY21 Major CAPEX Projects (Rm) FY21F FY20A FY19A Operation Rm Rm Rm Operation Project Rm Moabsvelden 250 - 290 23 8 Moabsvelden Phase I and II 250 - 290 VGF 56 336 170 Khanyisa 20 25 209 Khanyisa T2 15 Elandspruit 16 40 16 Wescoal Trading 5 2 - Elandspruit Western pit 10 Processi
Slide 37: Capex Spend Benefit
CAPEX SPEND BENEFIT VGF ROM - Kt 945 828 CAPEX ROM ROM EBITDA 674 increase margin benefit 529 621 Rm Ktpa R/t Rmpa 220 336 750 - 830 90 - 110 67 – 91 FY19 FY20 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY21 Q1 VG4 • Bench separation to enable access to multiple coal faces, enabling improving optionality of product
Slide 38: Capex Spend Benefit | Continued
CAPEX SPEND BENEFIT | CONTINUED ELANDSPRUIT KHANYISA CAPEX ROM ROM margin EBITDA CAPEX ROM ROM margin EBITDA increase benefit increase benefit Rm Ktpa R/t Rmpa Rm Ktpm R/t Rmpm 41 160 - 240 65 - 75 10 – 18 46 90 -100 110 -130 10 – 14 ROM - Kt ROM - Kt 370 785 777 325 666 697 307 590 621 233 195 FY19
Slide 39: Capital Allocation
CAPITAL ALLOCATION 269 1 220 433 28 15 35 22 951 (11) (269) (153) 620 82 66 (184) Net debt Cash Tax paid Net interest CAPEX Proceeds Investment Purchase Withdrawal Share Minority Finance Net debt Less Finance Adj net debt 31 March generated on disposal in JV rehab of acquisition buy-back interest le
Slide 40: Lending Structure
LENDING STRUCTURE DEBT PROFILE OF CURRENT FACILITIES Debt profile Rm 1,600 1,400 1,200 1,000 800 600 400 200 0 Sep 2020 Sep 2021 Sep 2022 Sep 2023 May 2020 Jul 2020 Nov 2020 Jan 2021 May 2021 Jul 2021 Nov 2021 Jan 2022 May 2022 Jul 2022 Nov 2022 Jan 2023 May 2023 Jul 2023 Nov 2023 Jan 2024 May 2024
Slide 41: Looking Ahead
LOOKING AHEAD
Slide 42: Structured Cost Reduction Programme
STRUCTURED COST REDUCTION PROGRAMME APPROACH Drive EBITDA improvement of R102 million – R136 million by FY21 Mining optimisation Trading optimisation Strategic sourcing Cash clearance office Organisation • Execute optimisation ‘’quick • Execute cost-saving • Analyse all spend for • Improve spend tra
Slide 43: Structured Cost Reduction Programme | Continued
STRUCTURED COST REDUCTION PROGRAMME | CONTINUED TIMELINES AND BENEFITS Estimated value of initiatives Rm 34-54 213-299 77-109 57-72 45-64 Strategic cooperation Quick Wins Focus Backlog Total Number 7 16 10 17 50 of initiatives Estimated benefit realisation over time Rm Q2 Q3 Q4 Jul-20 Aug-20 Sep-20
Slide 44: Looking Ahead: Focus Points
LOOKING AHEAD FOCUS POINTS Risk management General costs and overheads Trading business review Strategy and growth • COVID-19 • Reap savings from cost • Potential re-structuring options • Sweat current assets • Debt and liquidity reduction programme being investigated • LOM extensions management - C
Slide 45: Q&A
Q&A LAYING THE FOUNDATION TO GROW SUSTAINABLY