Aeci Ltd · JSE:AFE
Aeci — Investor Day (November 2018)
69 slides from Aeci's investor day presentation, Nov 6, 2018
Slide 1: Investor Day 6 November 2018
INVESTOR DAY 6 NOVEMBER 2018
Slide 2: Programme
WELCOME AND OVERVIEW MUCH ASPHALT PRESENTATION DEPART FOR MUCH ASPHALT SITE TOUR 11:00 3 BUSES 3 GROUPS — COLOUR CODED RETURN TO EMPERORS PALACE LUNCH 13:30
Slide 3: Introduction
OAE=CI good chemistry INTRODUCTION
Slide 4: Business Drivers: Gold, Platinum and Copper Prices
03 BUSINESS DRIVERS HISTORICAL PRICE PERFORMANCE – GOLD, PLATINUM AND COPPER
Slide 5: Business Drivers: Coal and Iron Ore Prices
04 BUSINESS DRIVERS HISTORICAL PRICE PERFORMANCE – COAL AND IRON ORE
Slide 6: Business Drivers: ZAR/US$ Exchange Rate
05 BUSINESS DRIVERS ZAR/US$ EXCHANGE RATE
Slide 7: Business Drivers: Brent Crude Oil
06 BUSINESS DRIVERS BRENT CRUDE OIL
Slide 8: Business Drivers: SA Mining Volumes
07 BUSINESS DRIVERS SA MINING VOLUMES
Slide 9: Business Drivers: SA Manufacturing Volumes
08 BUSINESS DRIVERS SA MANUFACTURING VOLUMES
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Slide 11: Acquisition of Dinacon Lorena Plant, Brazil
10 ACQUISITION OF DINACON LORENA PLANT, BRAZIL MINING SOLUTIONS: EXPLOSIVES › US$6,3m consideration for » 100% ownership of explosives manufacturing plant, distribution and storage facilities » Explosives operating licences › Acquired in an auction process › Customers mainly in construction and civi
Slide 12: AECI Chemicals
OA=Cl Chemicals ™
Slide 13: 1 Strategic Context
1 STRATEGIC CONTEXT
Slide 14: Context: 1H17 Results Presentation
13 CONTEXT: 1H17 RESULTS PRESENTATION › Global mining activity gaining momentum » Positive for Group’s Mining pillar » New contracts and increased market share » Footprint expanded » Good order book for mining chemicals › No significant improvement in SA manufacturing sector anticipated to year-end
Slide 15: Acquisition: Footprint and Market Expansion
14 ACQUISITION: FOOTPRINT AND MARKET EXPANSION FOUR BROAD INNOVATION THEMES AECI.GO focus areas Market Integrated Green Exponential Expansion Solutions Chemistry Market sector Solutions/offerings Innovative solutions Chemical acquisition through that spans across that result in alternatives, geograp
Slide 16: New Market Segment: Infrastructure
15 NEW MARKET SEGMENT: INFRASTRUCTURE SPECIFICALLY, ROAD SURFACING AND MAINTENANCE
Slide 17: Strategic Considerations: Much Asphalt
16 STRATEGIC CONSIDERATIONS: MUCH ASPHALT Strong growth, healthy Well respected Market leading position Strategic margins and high cash and experienced with national footprint bitumen sourcing conversion management team 1 2 3 4 5 6 7 8 Specialised Independent Leading technology and Diverse customer
Slide 18: Ownership Structure Post Acquisition
17 OWNERSHIP STRUCTURE POST ACQUISITION
Slide 19: Strategic Pillars
18 STRATEGIC PILLARS STANDALONE BUSINESS IN CHEMICALS PILLAR
Slide 20: Investment Summit, 26 October 2018
19 INVESTMENT SUMMIT, 26 OCTOBER ’18
Slide 21: 2 Overview
2 OVERVIEW OA=CI good chemistry
Slide 22: Executive Team
21 EXECUTIVE TEAM › Extensive management experience in sector › Strong focus on internal career growth › Combined Executive management team experience = 72 years › Management are shareholders in business › Active member of various industry bodies
Slide 23: Milestones
1) MILESTONES OA=cI good chemistry 2006 to 1986 5013 First asphalt Developed Murray & Established Established Acquired by Acquired premix supply first wet Roberts operations in East Coast consortium by AECI plant, Peak blend acquired Namibia Asphalt led by Quarry method 100% of Capitalworks bitumen
Slide 24: Much Asphalt: SA Market Leader
23 MUCH ASPHALT: SA MARKET LEADER Leading asphalt Technological producer in SA capability Only independent Proprietary technology asphalt producer with to convert bitumen a national presence grades and produce performance grade specification binders Much Asphalt team Highly experienced management, O
Slide 25: Much Asphalt: SA Market Leader Cont.
24 MUCH ASPHALT: SA MARKET LEADER CONT. Production c. 2m tonnes hot mix asphalt c. 20m litres binders Facilities 18 static asphalt facilities Accreditations B-BBEE 3 static emulsion and ISO 9001:2000 Level 3 Contributor and modified binder factories OHSAS 18001:2007 targeting Level 2 4 mobile asphal
Slide 26: Key Product Categories
25 KEY PRODUCT CATEGORIES FULL SPECTRUM OF ROAD BITUMEN BUILDING MATERIALS Generic asphalt solutions: wide variety of generic solutions incl. various asphalt grades, mixes and courses Specialist/proprietary solutions: modified asphalts, proprietary products and other specialised surfacing ranges War
Slide 27: 3 The Market
3 THE MARKET
Slide 28: Industry Drivers
27 INDUSTRY DRIVERS Road infrastructure investment is key Public spend: new and rehabilitation Private spend: commercial and residential Public/private partnerships (e.g. toll concessions) Government Infrastructure Plan
Slide 29: Industry Drivers Cont.: Expenditure on Economic Development
28 INDUSTRY DRIVERS CONT. EXPENDITURE ON ECONOMIC DEVELOPMENT Revised Medium-term Total Average estimate estimates MTEF annual MTEF allocation growth R million 2017/18 2018/19 2019/20 2020/21 (%) (%) Economic regulation and infrastructure 87 347 97 925 102 465 111 420 57,0 8,5 of which: Water resour
Slide 30: Industry Drivers Cont.: Estimates of Expenditure
29 INDUSTRY DRIVERS CONT. ESTIMATES OF EXPENDITURE Average Average: Average Average: Revised growth rate expenditure/ Medium-term growth rate expenditure/ Programme estimate (%) total (%) expenditure estimate (%) total (%) R million 2017/18 2014/15 to 2017/18 2018/19 2019/20 2020/21 2017/18 to 2020/
Slide 31: Industry Drivers Cont.: Expenditure on Road Transport
30 INDUSTRY DRIVERS CONT. ESTIMATES OF EXPENDITURE ON ROAD TRANSPORT Expenditure trends and estimates Expenditure trends and estimates – Road Transport Programme by sub-programme Average: Average: Adjusted Average expendi- Average expendi- Audited appro- growth ture/total Medium-term growth ture/tot
Slide 32: 4 Supply Chain
4 SUPPLY CHAIN Cr good chemistry — — x ww
Slide 33: Supply Chain Overview
32 SUPPLY CHAIN OVERVIEW ASPHALT MANUFACTURERS KEY SUPPLIERS BITUMEN AGGREGATES MODIFIED BINDERS
Slide 34: Supply Chain Overview
33 SUPPLY CHAIN OVERVIEW END USERS/SPECIFIERS CUSTOMERS/CONTRACTORS Private SMMEs Pavers › Plan and drive infrastructure spend › Contract with end users › Determine timeframe and letting of projects › Deliver on project via contractors and suppliers › Technical and commercial outcomes › Assume const
Slide 35: Supply Chain Overview Cont.
34 SUPPLY CHAIN OVERVIEW CONT. CUSTOMERS/CONTRACTORS ASPHALT MANUFACTURERS SMMEs Pavers › Contract with end users/specifiers › Generic asphalt solutions › Specialist/proprietary technology › Deliver on project via contractors and suppliers › Warm/cold asphalt › Assume construction and contractual ri
Slide 36: Supply Chain Overview
35 SUPPLY CHAIN OVERVIEW TECHNICAL ADVISORY EXPERTISE END USERS CUSTOMERS/CONTRACTORS Private SMMEs Pavers
Slide 37: 5 Differentiators
5 DIFFERENTIATORS
Slide 38: Differentiators
37 DIFFERENTIATORS Geographic footprint Leading technical and R&D capability Unique bitumen converter Leader in use of recycled asphalt Commercial model People
Slide 39: Geographical Footprint
38 GEOGRAPHICAL FOOTPRINT 17 static production facilities across SA and 1 in Namibia 3 static emulsion and modified binder factories 4 mobile asphalt plants Much Asphalt SprayPave 1 bitumen converter
Slide 40: Located Strategically
39 LOCATED STRATEGICALLY SA ROAD CURRENT AND FUTURE NETWORK 1 Benoni 2 Pomona Roads still to be incorporated (km) 3 Eikenhof 5 4 Roodepoort – SANRAL roads 5 Polokwane – Primary roads 6 Witbank still to incorporate 6 7 Bloemfontein – Strategic roads 3 4 1 2 8 Coedmore still to incorporate 9 Pietermar
Slide 41: Leading Technical and R&D Capability
40 LEADING TECHNICAL AND R&D CAPABILITY › Highly skilled and experienced R&D, technical and quality teams › Create new products in line with customer requirements › Investment in specialised road technology gives further access to R&D › Product development – own laboratories in Cape Town and Benoni
Slide 42: Leading Technical and R&D Capability
41 LEADING TECHNICAL AND R&D CAPABILITY › Asphalt performance material tester (AMPT) – flow number and dynamic modulus testing › Universal testing system (UTS) – dynamic creep testing and flexural stiffness › Double wheel tracking tester – permanent deformation and moisture sensitivity testing › Aut
Slide 43: Unique Bitumen Converter
42 UNIQUE BITUMEN CONVERTER Bitumen converter – 2nd of its kind in the world Multigrading unit Rearrange chemical structures Loop columns
Slide 44: Recycled Asphalt
43 RECYCLED ASPHALT › Leader in processing, screening and use of recycled asphalt » Maximise yield, economic benefits › 4 dedicated mobile RA processing plants › RA utilisation 5% – 50% in asphalt blends › Fractionated and utilised 254 000t recycled material in asphalt last 2 years » Significant env
Slide 45: Commercial Model
44 COMMERCIAL MODEL › Much Asphalt has acted exclusively as an asphalt supplier since its establishment in 1965 › SA’s only commercial asphalt supplier independent of any downstream activity and hence does not compete with customers/contractors » Maintain neutral position in the supply chain » Highe
Slide 46: Governance Framework
45 GOVERNANCE FRAMEWORK Current applicable legislation Health and Safety policy Environmental policy Risk and Compliance Audit
Slide 47: 6 Operations
6 OPERATIONS OA=CI’ good chemistry
Slide 48: Operations: Much Asphalt
47 OPERATIONS: MUCH ASPHALT Load bitumen at refinery Offload bitumen Manufacture 1 7 1 asphalt 0 4 4 Test all incoming Mill material from Process mill material 2 8 material Test asphalt road 9 Deliver asphalt Stockpile aggregate Load aggregate 3 6 at the quarry 1 5 Pave asphalt
Slide 49: Operations: SprayPave
48 OPERATIONS: SPRAYPAVE Modified binder solutions and emulsions facilities SprayPave converter Offload bitumen and 4 Test bitumen heat to blending temperature Load 1 bitumen at refinery Allow product to mature Test modified product Blending process Once approved. released for despatch › Multigradin
Slide 50: Some Current Projects
49 SOME CURRENT PROJECTS ASPHALT PAVING NEAR JEFFREYS BAY INTERCHANGE, N2
Slide 51: Some Current Projects Cont.: Black Base, Sandton
50 SOME CURRENT PROJECTS CONT. BLACK BASE, SANDTON
Slide 52: Some Current Projects Cont.: Compaction near Uitenhage
51 SOME CURRENT PROJECTS CONT. COMPACTION NEAR UITENHAGE ON R75
Slide 53: Some Current Projects Cont.: Ultra-Thin Porous Surfacing Mix
52 SOME CURRENT PROJECTS CONT. ULTRA-THIN POROUS SURFACING MIX – NEW CRUMB RUBBER TECHNOLOGY N5 resurfacing Harrismith
Slide 54: Current Contracts
53 CURRENT CONTRACTS › N7 sections between Atlantis and Malmesbury › N2 sections between CTIA and Houwhoek › N2 sections between Houwhoek and Swellendam › N2 sections between Mossel Bay and George › R75 sections between PE and Despatch › R23 sections between Standerton and Greylingstad › N3 sections
Slide 55: 7 Outlook
7 OUTLOOK OA=CI’ good chemistry
Slide 56: Industry Outlook
55 INDUSTRY OUTLOOK LOCAL Current hiatus in expenditure driven by good governance considerations Strong project pipeline Market dynamic more supportive of growth Government Infrastructure Plan
Slide 57: Road Infrastructure Network
56 ROAD INFRASTRUCTURE NETWORK 1 Benoni 2 Pomona Roads still to be incorporated (km) 3 Eikenhof 5 4 Roodepoort – SANRAL roads 5 Polokwane – Primary roads 6 Witbank still to incorporate 6 7 Bloemfontein – Strategic roads 3 4 1 2 8 Coedmore still to incorporate 9 Pietermaritzburg 10 Empangeni 11 Georg
Slide 58: Pipeline of Projects
57 PIPELINE OF PROJECTS Source: SANRAL, 2018
Slide 59: Market Drivers More Supportive of Growth
58 MARKET DRIVERS MORE SUPPORTIVE OF GROWTH
Slide 60: Infrastructure Plan
5 9 INFRASTRUCTURE PLAN OA=cI good chemistry BustvessReporr COMPANIES ECONOMY ENERGY MARKETS ENTREPRENEURS TEC #StimulusPackage: Infrastructure fund in the pipeline ECONOMY / 21 SEPTEMBER 2018, 12:05PM / SIPHELELE DLUDLA 000¢
Slide 61: Much Asphalt: Growth Opportunities
60 MUCH ASPHALT: GROWTH OPPORTUNITIES SA geographic footprint Expanded product offering Develop distribution channels with emerging partners Opportunities in rest of Africa
Slide 62: Some Short-Term Opportunities
61 SOME SHORT-TERM OPPORTUNITIES Eastern Cape, Buffalo City Municipality › Municipalities jointly account for 30% of sales › 1 230km gravel roads – Mdansane Urban Renewal programme › 1 502km surfaced roads – 61% in fair to very poor condition › Spatial Development Framework – demand for housing and
Slide 63: Significant Short-Term Opportunities
62 SIGNIFICANT SHORT-TERM OPPORTUNITIES MR385 Hammarsdale upgrade R82 Walkerville to De Deur ORTIA Major rehab of runway 03L/21R R63 Buffalo River to Dimbaza N2 Breidbach I/C upgrade Wild Coast Toll Concession
Slide 64: Significant Medium-Term Opportunities
63 SIGNIFICANT MEDIUM-TERM OPPORTUNITIES N3 Packages between CTIA construction Durban and Pietermaritzburg of new runway
Slide 65: Longer-Term Growth Opportunities
64 LONGER-TERM GROWTH OPPORTUNITIES WILD COAST › Securing a site between Msikaba Bridge and Lusikisiki › Bypass construction projects in towns along N2 (Butterworth, Idutywa, Mthatha) › 112km green fields Port St Johns to Mtamvuna River › 5 road phases (potentially c. 800 000t) › R61 and N2 provide
Slide 66: Opportunities in Rest of Africa
65 OPPORTUNITIES IN REST OF AFRICA › Assessing 3 significant contracts in East Africa › Good potential also identified in SADC region › Partnerships are key › Robust risk assessment processes in place › Benefits of leveraging AECI Group footprint › Benefits of leveraging AECI brand and history
Slide 67: 8 Safety Induction
8 SAFETY INDUCTION BENONI SITE VISIT
Slide 68: Safety Induction
67 SAFETY INDUCTION THREE GROUPS MOVING VEHICLES STAY IN GROUP CLOSED SHOES HOT SURFACES
Slide 69: Thank You
OAE=CI good chemistry THANK YOU