Afrimat Limited · JSE:AFT

Afrimat — FY2020 Earnings Presentation

56 slides from Afrimat's earnings presentation, February 2020

  1. Slide 1: Consistently Delivering

    CONSISTENTLY DELIVERING ® Audited summary consolidated financial statements for the year ended 29 February 2020

  2. Slide 2: What We Do

    01 WHAT WE DO Notes:

  3. Slide 3: Core message

    Core message  Exceptional results  Consistent delivery from the diversification strategy  Strong culture and balance sheet as hedge against uncertainty Audited summary consolidated financial statements for the year ended 29 February 2020 3 Notes:

  4. Slide 4: Group overview

    Group overview  A supplier of quality materials sourced from our open pit mines and quarries  Strategically diversified through product range, target market and location Bulk Commodities Industrial Minerals Construction Materials Audited summary consolidated financial statements for the year ended

  5. Slide 5: Diversified portfolio and footprint

    Diversified portfolio and footprint which generates a balanced, consistent income stream Operations Markets 25 Commercial quarries • Civil infrastructure 6 Sand & gravel mines • Concrete product manufacturers 4 Clinker sources • Agricultural Mobile crushing & screening Drilling & blasting CONSTRUCTI

  6. Slide 6: Diversified portfolio and footprint

    Diversified portfolio and footprint which generates a balanced, consistent income stream Mozambique 2 CONSTRUCTION MATERIALS Limpopo 1 3 Gauteng 1 3 Mpumalanga 4 INDUSTRIAL MINERALS Free State 7 KwaZulu-Natal 17 Northern Cape 1 1 South Africa BULK COMMODITIES Eastern Cape 1 Western Cape 3 27 Audited

  7. Slide 7: Summary of the year

    Summary of the year Feb 2020 vs Feb 2019 Growth across all businesses at operating profit level Industrial Minerals Construction Materials Bulk Commodities 22,5% 1,2% 59,8% Cash utilised to pay down debt Net cash from operations Net debt:equity ratio 64,9% to R676,8m 8,2%* (Feb 2019: 23,8%) * includ

  8. Slide 8: Balanced portfolio at work

    Balanced portfolio at work Revenue Operating profit 31% 31% 2020 2020 52% 53% 17% 16% Construction Materials Industrial Minerals Bulk Commodities Audited summary consolidated financial statements for the year ended 29 February 2020 8 Notes:

  9. Slide 9: What makes Afrimat different?

    What makes Afrimat different? Company positioning Strategic Company management culture Audited summary consolidated financial statements for the year ended 29 February 2020 9 Notes:

  10. Slide 10: Company positioning

    Company positioning  Primarily focused on mid-tier open pit mining Critical set of criteria used  Unique competitive advantage when potential acquisitions are being evaluated  Geographic location  Unique metallurgy  Structural cost advantage  Highly entrepreneurial culture  Hedged against eco

  11. Slide 11: Company culture

    Company culture  Strong operational efficiency – executing ability  The right people in the right positions  Synergistic teamwork  Customer focus  Values based entrepreneurial culture Audited summary consolidated financial statements for the year ended 29 February 2020 11 Notes:

  12. Slide 12: Strategic management

    Strategic management  Company-wide understanding of desired future  Fundamental understanding of market  Good understanding of own abilities  Continuous research of business environment  Facing the brutal facts  Meticulous strategy execution  Financial discipline: making the returns Audited s

  13. Slide 13: What the diversification strategy is delivering

    02 WHAT THE DIVERSIFICATION STRATEGY IS DELIVERING Notes:

  14. Slide 14: Headline earnings per share (HEPS) comparison

    Headline earnings per share (HEPS) comparison 8.00 -- Afrimat 6.00 4.00 2.00 -- Raubex * 0.00 -- Sephaku * -- PPC * -- CIL -2.00 * Interim HEPS -4.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Audited summary consolidated financial statements for the year ended 29 February 2020 14 Notes:

  15. Slide 15: Growth through diversification

    Growth through diversification Profit history with and without acquisitions 350 Glen Douglas 300 Clinker 250 Infrasors 200 Cape Lime 150 Demaneng 100 50 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Headline earnings per share Reality without strategic acquisitions Audited summary co

  16. Slide 16: Financial Review

    03 FINANCIAL REVIEW Notes:

  17. Slide 17: Financial overview

    Financial overview Exceptional cash generation Strong quality of earnings across group Continued focus on astute capital allocation Audited summary consolidated financial statements for the year ended 29 February 2020 17 Notes:

  18. Slide 18: Financial overview

    Financial overview 11,4% 48,5% 18,2% Group revenue HEPS increased to Operating profit increased to 347,7 cps margin R3,3bn 30,9% 8,2% Net debt:equity Return on net ratio improvement operating assets from 23,8% Audited summary consolidated financial statements for the year ended 29 February 2020 18 N

  19. Slide 19: Revenue and operating profit

    Financial overview Revenue and operating profit Revenue (R’000) Operating profit (R’000) Contribution from operations margin 18,2% (2019: 15,9%) 700 000 27,5% 3 500 000 11,4% 600 000 3 000 000 500 000 282 959 1 584 574 2 500 000 1 531 549 400 000 268 483 1 196 402 2 000 000 203 492 1 074 899 300 000

  20. Slide 20: Contribution from operations

    Contribution from operations 23% 31% Revenue 2020 52% 2019 59% 18% 17% Construction Materials Industrial Minerals Bulk Commodities 31% 43% 40% Operating profit 53% 2020 2019 16% 17% Audited summary consolidated financial statements for the year ended 29 February 2020 20 Notes:

  21. Slide 21: Margin improvements

    Margin improvements Operating profit margin (%) FY2020 FY2019 Construction Materials 11,2% 10,9% Bulk Commodities 31,0% 29,5% Industrial Minerals 17,3% 14,3% Overall 18,2% 15,9% Audited summary consolidated financial statements for the year ended 29 February 2020 21 Notes:

  22. Slide 22: Headline earnings per share – full year

    Headline earnings per share – full year 400 350 CAGR - 22,05% (2016 – 2020) 300 Cents per share 250 200 347.7 150 234.1 196.4 100 180.7 156.6 50 0 2016 2017 2018 2019 2020 Audited summary consolidated financial statements for the year ended 29 February 2020 22 Notes:

  23. Slide 23: Net cash from operation activities – full year

    Net cash from operation activities – full year CAGR of 20,56% (2016 – 2020) 800 000 676 810 700 000 600 000 500 000 406 046 410 484 R‘000 400 000 79 510 320 339 280 470 300 000 79 510 200 000 326 536 200 960 100 000 0 2016 2017 2018 2019 2020 Audited summary consolidated financial statements for the

  24. Slide 24: Statement of financial position - assets

    Statement of financial position - assets Audited Audited R’000 Feb 2020 Feb 2019 Property, plant and equipment 1 571 519 1 469 837 Intangible assets 210 226 221 873 Inventories 260 526 261 249 Trade and other receivables 476 356 435 458 Cash 167 533 191 763 Other assets / deferred tax 109 102 106 83

  25. Slide 25: Statement of financial position – equities & liabilities

    Statement of financial position – equities & liabilities Audited Audited R’000 Feb 2020 Feb 2019 Total equity 1 688 907 1 409 517 Borrowings 295 832 383 546 Provisions 152 748 141 080 Overdraft 20 134 153 Trade and other liabilities 421 072 390 517 Other liabilities / deferred tax 236 683 228 199 2

  26. Slide 26: Capital expenditure

    Capital expenditure F2020 Planned F2021 H1: R 100,1m H1: R 65,7m H2: R 173,3m H2: R 131,5m R 273,4m R 197,2m  Additional fixed plant at Demaneng of R33,8 million  Includes R26,6 million for rental replacement capital Audited summary consolidated financial statements for the year ended 29 February

  27. Slide 27: Operational Overview

    04 OPERATIONAL OVERVIEW Notes:

  28. Slide 28: Bulk commodities

    Bulk commodities  Iron ore Audited summary consolidated financial statements for the year ended 29 February 2020 28 Notes:

  29. Slide 29: Iron ore: strategic rationale

    Iron ore: strategic rationale  Management expertise  USD exposure  Accessible opportunities  Quality  Excellent operational fit  Logistics  Much higher margins through cycle Audited summary consolidated financial statements for the year ended 29 February 2020 29 Notes:

  30. Slide 30: Bulk commodities

    Bulk commodities Excellent results in favourable market conditions Revenue Operating profit and margin 1 000 500 900 450 800 400 700 350 31,0% 600 R’million 300 R’million 500 1 037 250 29,5% 400 200 300 682 322 150 200 100 201 100 50 - - Feb '19 Feb '20 Feb '19 Feb '20 • Revenue increased by 52,1% •

  31. Slide 31: Pricing influences

    Pricing influences Daily iron ore price (as per the Plats Index) Exchange rate (R/$) Lumpy premium Quality Marketing costs adjustments based (US$) on silica, aluminium and manganese content Logistics cost to Shipping costs harbour Audited summary consolidated financial statements for the year ended

  32. Slide 32: Payment arrangements

    Payment arrangements 1. Preliminary payment when delivered to Saldanha 2. Final price determined after 3 months (arrival in China) 3. Difference on final price adjusted to subsequent preliminary payment Audited summary consolidated financial statements for the year ended 29 February 2020 32 Notes:

  33. Slide 33: Pricing trends

    100 120 140 0 20 40 60 80 Notes: 16 Jun 16 15 Jul 16 12 Aug 16 9 Sep 16 10 Oct 16 7 Nov 16 5 Dec 16 4 Jan 17 2 Feb 17 2 Mar 17 30 Mar 17 28 Apr 17 30 May 17 28 Jun 17 Pricing trends 26 Jul 17 24 Aug 17 22 Sep 17 23 Oct 17 20 Nov 17 62% Fe avg 18 Dec 17 17 Jan 18 14 Feb 18 15 Mar 18 13 Apr 18 11 May

  34. Slide 34: Lump premium

    0.05 0.15 0.25 0.35 0.45 0 0.1 0.2 0.3 0.4 0.5 Notes: 16 Jun 16 15 Jul 16 12 Aug 16 9 Sep 16 10 Oct 16 7 Nov 16 5 Dec 16 4 Jan 17 2 Feb 17 2 Mar 17 30 Mar 17 28 Apr 17 30 May 17 28 Jun 17 Lump premium 26 Jul 17 24 Aug 17 22 Sep 17 23 Oct 17 20 Nov 17 18 Dec 17 17 Jan 18 14 Feb 18 15 Mar 18 13 Apr 18

  35. Slide 35: On-mine sales price (ZAR)

    On-mine sales price (ZAR) 1 600.00 1 400.00 1 200.00 1 000.00 800.00 600.00 400.00 200.00 - LUMP FOB /R Fines FOB /R Audited summary consolidated financial statements for the year ended 29 February 2020 35 Notes:

  36. Slide 36: Iron ore sales by rail

    Notes: 100 000 120 000 0 20 000 40 000 60 000 80 000 Aug-17 22 715 Sep-17 28 629 Oct-17 26 813 Nov-17 30 643 Dec-17 30 282 Jan-18 45 743 Feb-18 45 392 Mar-18 45 225 Apr-18 45 758 May-18 57 172 Jun-18 65 244 58 463 Iron ore sales by rail Jul-18 Aug-18 75 281 Sep-18 53 395 65 004 Oct-18 Stable monthly

  37. Slide 37: Industrial minerals

    Industrial minerals  Lime  Metallurgical dolomite Audited summary consolidated financial statements for the year ended 29 February 2020 37 Notes:

  38. Slide 38: Industrial minerals: major markets

    Industrial minerals: major markets 1. Chemical 2. Water treatment (drinking, acid mine drainage) 3. Glass (bottles, windscreens, plate glass) 4. Agriculture (animal hygiene, soil pH) 5. Metallurgical (FeCr, steel) 6. Powders & fillers (fire retardants, tiles, adhesives) Audited summary consolidated

  39. Slide 39: Notes:

    Notes:

  40. Slide 40: Industrial minerals

    Industrial minerals Strong results across all regions, entering new markets Revenue Operating profit and margin 1 000 200 900 180 800 160 700 140 120 17,3% R’million 600 R’million 500 100 14,3% 400 80 300 60 544 552 96 200 40 78 100 20 - - Feb '19 Feb '20 Feb '19 Feb '20 • Revenue increased by 1,5%

  41. Slide 41: Construction materials

    Construction materials  Aggregates  Bricks & blocks  Readymix concrete Audited summary consolidated financial statements for the year ended 29 February 2020 40 Notes:

  42. Slide 42: Construction materials

    Construction materials Solid results in a tough environment Revenue Operating profit and margin 2 000 250 1 800 10,9% 11,2% 1 600 200 1 400 1 200 R’million 150 R’million 1 000 800 1 739 1 714 100 190 193 600 400 50 200 - - Feb '19 Feb '20 Feb '19 Feb '20 • Revenue declined marginally • Operating pro

  43. Slide 43: Afrimat Construction Index – Q4 2019

    Afrimat Construction Index – Q4 2019 Index; Q1 2011=100 130 4Q average 125 120 115 110 105 100 95 11 12 13 14 15 16 17 18 19 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 Q 4 2 3 4 1' 1' 1' 1' 1' 1' 1' 1' 1' Q Audited summary consolidated financial statements for the year ended 29 Febr

  44. Slide 44: Contribution of construction to GDP

    Contribution of construction to GDP (both at 2010 prices) 3.6% 3.6% 3.6% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.4% 3.4% 3.4% 3.4% 3.4% 3.3% 3.3% 3.3% 3.2% 3.2% 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Source: Stats SA, P0441, 5 March 2019 and 3 March 2020). Audited summary consolidated financial state

  45. Slide 45: Growth rate of GDP and the growth rate of Construction

    Growth rate of GDP and the growth rate of Construction (both at 2010 prices) 5.00% 4.57% 4.00% 3.49% 3.00% 2.58% 1.84% 2.49% 2.21% 1.85% 2.00% 1.41% 1.19% 1.18% 1.00% 0.79% 0.40% 0.15% 0.00% 2012 2013 2014 2015 2016 2017 2018 2019 -1.00% -0.58% -1.23% -2.00% -3.00% -3.26% -4.00% GDP) Construction (S

  46. Slide 46: Real value of recorded building plans passed by larger municipalities

    Real value of recorded building plans passed by larger municipalities Audited summary consolidated financial statements for the year ended 29 February 2020 45 Notes:

  47. Slide 47: Sustainability

    05 SUSTAINABILITY Notes:

  48. Slide 48: Human resource development

    Human resource development Categorisation spend (R’000) R 907 R 774 R 2 574 R 2 995 R 5 826 R 14 818 R 4 318 R 13 191 FY 2020 FY 2019 R 11 303 R 6 117 Bursary/study loans Bursary/study loans Training costs Training costs Skills development department cost Learnerships Skills development department c

  49. Slide 49: Community development

    Community development Categorisation spend (R’000) FY 2020 FY 2019 R7 R616 R142 R172 R442 R356 R1 703 R1 275 R1 205 R2 243 Art, Sports & Culture (12,5%) Basic Needs (7,2%) Art, Sports & Culture (5,3%) Basic Needs (13,7%) Education projects (45,5%) Uplifting community (34,6%) Education projects (37,2

  50. Slide 50: Afrimat culture

    Afrimat culture Audited summary consolidated financial statements for the year ended 29 February 2020 49 Notes:

  51. Slide 51: The Future

    05 THE FUTURE Notes:

  52. Slide 52: How to assess Afrimat

    How to assess Afrimat Cash generative | free cash flow Strength of management focus Track record of good capital Operational diversification (hedge against volatility) allocation Moat Scalability reduces cyclicality (geographic locations, unique metallurgy & structural cost (protects against commodi

  53. Slide 53: Covid-19

    Covid-19 During lockdown (Level 5)  Demaneng produced with 50% staff  Demaneng sales at reduced rate  Limited lime sales  All other SA operations ceased activities During lockdown (Level 4)  Demaneng at 100%  Other mines and quarries according to market requirements  Much improved revenue Wag

  54. Slide 54: Looking ahead

    Looking ahead  Covid-19 impact aggressively management  Iron ore business to continue to perform well  Industrial Minerals range expansion  Construction Materials to continue to look for new opportunities  Good cash flow  LNG in Mozambique set to start ramp-up  Remain true to expertise with e

  55. Slide 55: Core message

    Core message  Exceptional results  Consistent delivery from the diversification strategy  Strong culture and balance sheet as hedge against uncertainty Audited summary consolidated financial statements for the year ended 29 February 2020 54 Notes:

  56. Slide 56: Q&A

    Q&A Thank you for your attendance and participation For any further Investor Relations questions please contact: Andries van Heerden (CEO) 021 917 8840 Vanessa Rech (Keyter Rech Investor Solutions) 087 351 3814 Audited summary consolidated financial statements for the year ended 29 February 2020 55

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