Interim results presentation · 2014. 11. 6. · Prospects Environment and industry trends ... Trade and other liabilities 273 360 265 376 265 743 Other liabilities / deferred tax

Interim results presentationfor the period ended

31 August 2014Johannesburg road show – 06 November 2014

Cape Town road show – 10 November 2014

WELCOME

2

PRESENTATION COVERAGE

Financialperformance Prospects

Environmentand industry

trends

• Industrialmineralsexcel

• Recovery oftraditionalbusinessescontinues



• Groupdiversification

• Pre-emptmarketchanges andadapt



• Indicatorsare morepositive thanin the past


Afrimatbusinessupdate

Operatingstrategy

Mariëtte Swart D a v i n G i l e s A n d r i e s v a n H e e r d e n

• Consistentdelivery ofprofits

• Balancesheetremainsstrong

• Consistentdelivery ofprofits

• Balancesheetremainsstrong











• Acquisitionsdelivering

• Strategyexecutionunderpinssustainedperformance

• Acquisitionsdelivering

• Strategyexecutionunderpinssustainedperformance

11 44 5522 33

3

Results drivers

Very good improvement in original aggregates andconcrete based products business

Clinker Group improved profits significantly

Good sales price growth on moderate volume growth

Diversification strategy really paying off

Management restructuring of last year is paying off

Very good improvement in original aggregates andconcrete based products business

Clinker Group improved profits significantly

Good sales price growth on moderate volume growth

Diversification strategy really paying off

Management restructuring of last year is paying off

4

1. FINANCIAL PERFORMANCE

5

Financial highlights

RevenueR1.0 billionRevenue

R1.0 billion

10.5%10.5%

Profit after taxR88.8 millionProfit after taxR88.8 million

17.9%17.9%

HEPS61.1 cpsHEPS

61.1 cps

23.9%23.9%

Net asset value594 cps

Net asset value594 cps

10.4%10.4%

Net cash from operating activitiesR74.3 million

Net cash from operating activitiesR74.3 million

(37.6%)(37.6%)

Interim dividend 13cpsInterim dividend 13cps

18.2%18.2%6

Statement of comprehensive income

R’000 UnauditedAug 2014

UnauditedAug 2013 Change Audited

Feb 2014

Revenue 1 030 098 931 871 10.5% 1 901 187Revenue 1 030 098 931 871 10.5% 1 901 187

Contribution from operations 127 349 108 909 16.9% 228 271

Contribution from operations margin 12.4% 11.7% 12.0%

Taxation (35 321) (28 094) 25.7% (58 110)

Profit after tax 88 765 75 272 17.9% 162 966

7

Statement of comprehensive income (continued)

666

236

969

316

1 200 000

1 400 000

1 600 000

1 800 000

119

362

160 000180 000200 000220 000240 000

Revenue (R’000) Contribution from operations (R’000)45

5 87

4

506

717

671

349

931

871

1 03

0 09

8

398

622

489

420 66

6 23

6

969

316

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

2011 2012 2013 2014 2015

1st half 2nd half61

747

61 9

06

75 6

23

108

909

127

349

45 8

68

62 3

34 76 8

60

119

362

020 00040 00060 00080 000

100 000120 000140 000160 000

2011 2012 2013 2014 2015

1st half 2nd half8

Headline earnings per share

49.3

61.1

50.0

60.0

70.0

Interim Period HEPS (cents per share)

CAGR 19.6%2010 - 2014

CAGR 19.6%2010 - 2014

29.9 29.835.0

-

10.0

20.0

30.0

40.0

2010 2011 2012 2013 2014 9

Net cash from operating activitiesR

ands

86 860

119 080

100 000

120 000

140 000 Interim Period

Ran

ds

34 222

52 712

86 860

74 347

0

20 000

40 000

60 000

80 000

2010 2011 2012 2013 201410

Statement of financial position- assets


UnauditedAug 2013

AuditedFeb 2014

Property, plant and equipment 709 070 654 808 662 306

Mining rights and goodwill 154 553 157 423 155 901Mining rights and goodwill 154 553 157 423 155 901

Inventories 138 036 103 404 112 965

Trade and other receivables 335 305 309 064 305 967

Cash 36 947 94 278 92 328

Other assets / BEE funding 171 029 147 408 149 950

1 544 940 1 466 385 1 479 417

Increased inventory to meet customer demand and enable lower manufacturing costsUsed own cash for asset financing 11

Statement of financial position- equities & liabilities


UnauditedAug 2013

AuditedFeb 2014

Total equity 864 072 795 518 837 963

Borrowings 152 907 187 873 171 038

Provisions 63 530 60 416 55 860Provisions 63 530 60 416 55 860

Overdraft 85 353 57 856 51 451

Trade and other liabilities 273 360 265 376 265 743

Other liabilities / deferred tax 105 718 99 346 97 362

1 544 940 1 466 385 1 479 417

Reduced borrowings by financing assets with surplus cash

12

Net debt and funding

Total borrowingsTotal borrowings 152 907152 907 187 873187 873 171 038171 038

Overdraft less cash and cashequivalentsOverdraft less cash and cashequivalents 48 40648 406 (36 422)(36 422) (40 877)(40 877)

Aug. 2014R’000

Aug. 2014R’000

Aug. 2013R’000

Aug. 2013R’000

Feb. 2014R’000

Feb. 2014R’000

Increased inventory to meet customer demand and enable lower manufacturing costs

Brought forward capital expenditures in first half to reduce maintenance costs and to getproductivity benefits early in year

Financed most capital expenditure with own cash, maximising return on cash

Cash generation improved considerably from September 13

Net debtNet debt 201 313201 313 151 451151 451 130 161130 161

Net debt : equity ratioNet debt : equity ratio 23,3%23,3% 19,0%19,0% 15,5%15,5%

Capital expenditure

H1: R50,5 millionH2: R70,8 millionH1: R50,5 millionH2: R70,8 million


F2014F2014 Plannedfor F2015Planned

for F2015



Capex carefully managed to optimise returns

Maintenance replacement capital limited to available cash

Infrasors acquisition R81,1 million in F2014 (excluded above):

14

Interim dividend

11

13

10

12

14

6 6

8

0

2

4

6

8

2010 2011 2012 2013 201415

Share repurchase update

10 187 083

6 000 000

7 000 000

8 000 000

9 000 000

10 000 000

No.

of s

hare

s

1 751 230995 664 1 108 337

2 808 578

353 323

0

1 000 000

2 000 000

3 000 000

4 000 000

5 000 000

6 000 000

F2011 F2012 F2013 F2014 F2015 Cumulative

No.

of s

hare

s

16

Segmental contribution from operations

100 000

120 000

140 000

Mill

ions

79%79%

100 648

29 683-2 982

127 349

-20 000

0

20 000

40 000

60 000

80 000

Mining &Aggregates

Concrete BasedProducts

Other Total

Mill

ions

(2%)(2%)

23%23%

17

Mining & Aggregates



Feb 2014

External revenue 721 197 650 061 10.9% 1 346 029



Small volume growth

Infrasors turnaround in line with management objectives and plans

Increased capacity at Glen Douglas

Contracting impacted by customer strikes

Kwazulu-Natal recovering

:

18

Concrete Based Products



Feb 2014

External revenue 308 901 281 810 9.6% 555 158



Successful initiatives to reduce costsIncreased sales prices but volumes declinedMargin growth returning to normalised value

:

19

2. AFRIMAT BUSINESS UPDATE

20

Original business:Aggregates and Concrete Based Products

22 Quarries8 Sand/Gravel Mines14 Batch Plants8 Block Factories


OPERATIONSOPERATIONS GEOGRAPHICSGEOGRAPHICS

GautengWestern CapeKwaZulu-NatalEastern CapeFree state


Mostly unique locationsMostly unique locations





21

Industrial Minerals and Niche Products

Clinker Group:

Glen Douglas Dolomite MineGlen Douglas Dolomite Mine

• SA Block• Vaal Clinker• Vierfontein Clinker


Products with mostly chemical or physical propertiesProducts with mostly chemical or physical properties

Clinker Group:Clinker Group:

Infrasors:Infrasors:



• Lyttelton Dolomite Mine• Marble Hall Limestone Mine• Delf Silica (Alluvial Silica)

• Lyttelton Dolomite Mine• Marble Hall Limestone Mine• Delf Silica (Alluvial Silica)

22

Afrimat Contracting International

• Utilising mobile crushing plants• Renewable energy contracts a typical

example


example

Short term contractsShort term contracts Long term contractsLong term contracts

• Utilising fixed crushing plants• Typically: Medupi and Kusile• Utilising fixed crushing plants• Typically: Medupi and Kusile

Mostly through entrepreneurial flairMostly through entrepreneurial flair


example


example

International operationsInternational operations Entrepreneurial expansion projectsEntrepreneurial expansion projects

• Utilising fixed crushing plants• Typically: Medupi and Kusile

• Mobile or fixed plants• Previously Namibia, now Mozambique• Mobile or fixed plants• Previously Namibia, now Mozambique

• Mostly greenfields• Currently in Mpumalanga (Nelspruit /

Hayzyview)

• Mostly greenfields• Currently in Mpumalanga (Nelspruit /

Hayzyview)

23

SA Block

Excellent profit growth for reporting period

Focus on reduction in costs, improved margins

Capitalising on cement market dynamics

Sourcing alternative materials for long term sustainability

Looking at associated businesses, e.g. blending

Excellent profit growth for reporting period

Focus on reduction in costs, improved margins

Capitalising on cement market dynamics

Sourcing alternative materials for long term sustainability

Looking at associated businesses, e.g. blending

24

Clinker Supplies

Exceptional business with excellent marginsExceptional business with excellent margins1

Vierfontein ramping up – 6.1m tons resourceVierfontein ramping up – 6.1m tons resource2

Focus on securing more long term sourcesFocus on securing more long term sources

25

Vierfontein ramping up – 6.1m tons resourceVierfontein ramping up – 6.1m tons resource

Around five years remaining at Vaal PlantAround five years remaining at Vaal Plant

2

3

4

Infrasors

Incorporation into Afrimat successful

Margins expected to improve further

Impacted by excessive rain and Numsa strike during H1

Marble Hall plant upgraded and in excellent condition

Delf Sand overheads reduced dramatically

Business development progressing well

Await Delf Cullinan mining license

Incorporation into Afrimat successful

Margins expected to improve further

Impacted by excessive rain and Numsa strike during H1

Marble Hall plant upgraded and in excellent condition

Delf Sand overheads reduced dramatically

Business development progressing well

Await Delf Cullinan mining license

26

What makes us excited

Management restructuring delivering excellent results after first year

Operational efficiency drive and performance managementdelivering excellent results

Asset management and maintenance continuously improving

Project management of improvement projects significantly improved

Strategic diversification working well

Loss makers : Namibia and Delf Coastal disposed of

Management restructuring delivering excellent results after first year

Operational efficiency drive and performance managementdelivering excellent results

Asset management and maintenance continuously improving

Project management of improvement projects significantly improved

Strategic diversification working well

Loss makers : Namibia and Delf Coastal disposed of

27

3. GROUP STRATEGY

28

Defending growth

Diversification:- Glen Douglas

- Clinker- Infrasors

Traditionalbusinessremains

significant partof overallbusiness

Mobility –ability to locate

to whereprojects are

Defendinggrowth

Traditionalbusinessremains

significant partof overallbusiness

Offer productswhich are

valued by themarket

Adapt to quickchanging

environment

Continualassessment ofnew markets

29

StrategyD

iver

sifie

d gr

oup

50 years of management experience in the industry with knowledge topre-empt changes in order to protect growth

50 years of management experience in the industry with knowledge topre-empt changes in order to protect growth

Mining & Aggregates Concrete BasedProducts

Div

ersi

fied

grou

p

AggregatesAggregates IndustrialMineralsIndustrialMinerals ContractingContracting Concrete

ProductsConcreteProducts ReadymixReadymix

Mining & AggregatesMining & Aggregates Concrete BasedProducts

Concrete BasedProducts

30

Strategic principles

• Geographic location• Unique and scarce products (niche

products)• Operations with structural cost

advantages



advantages

Competitive advantageCompetitive advantage

• Wide product range• Across wide geographic markets• Effective hedge against market

volatility


volatility

DiversifiedDiversified• Geographic location• Unique and scarce products (niche


advantages



advantages


volatility


volatility

Innovation and creativity

Operational and marketing31

4. ENVIRONMENT AND INDUSTRY TRENDS

32

Conference Board Leading Economic Indexwith recessions highlighted (world economy)

33

Leading Indicator for South Africa:January 2000 to January 2014

Source: SARB 34

Annual domestic cement sales

35

Steel production in South Africa

Source SAISI 36

Civil Confidence Index

60

70

80

90

100

Source : Bureau of Economic Research, 2014Q4

0

10

20

30

40

50

Q1

1997

Q2

1997

Q3

1997

Q4

1997

Q1

1998

Q2

1998

Q3

1998

Q4

1998

Q1

1999

Q2

1999

Q3

1999

Q4

1999

Q1

2000

Q2

2000

Q3

2000

Q4

2000

Q1

2001

Q2

2001

Q3

2001

Q4

2001

Q1

2002

Q2

2002

Q3

2002

Q4

2002

Q1

2003

Q2

2003

Q3

2003

Q4

2003

Q1

2004

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

Q2

2006

Q3

2006

Q4

2006

Q1

2007

Q2

2007

Q3

2007

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

37

SA age of national road network

Source StanLib 38

Paved network condition: Summary 2013

Source: SABITA 39

Provincial and SANRAL’s expenditures on roads trend

Source: SABITA 40

Building Confidence Index

60

70

80

90

100

0

10

20

30

40

50

60

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Ma… Se

…

Source : Bureau of Economic Research 41

Market shifting to rural areas, but very stable

More focus on service delivery infrastructureWater infrastructureRoadsSanitation systems

Mild reduction in low cost housing spend

Steel makers in trouble

Cement industry dynamics creates interesting opportunities

Trends in Afrimat’s markets

Market shifting to rural areas, but very stable

More focus on service delivery infrastructureWater infrastructureRoadsSanitation systems

Mild reduction in low cost housing spend

Steel makers in trouble

Cement industry dynamics creates interesting opportunities

42

Macro-environment

• Large scale pessimism• Reduced growth forecast• Weakening currency

• Large scale pessimism• Reduced growth forecast• Weakening currency

South AfricaSouth Africa• Large scale pessimism• Reduced growth forecast• Weakening currency

South Africa

• Worst is over• Slow recovery started• Stable environment

• Worst is over• Slow recovery started• Stable environment

EuropeEurope

• Reduced growth rate• Remains important trade partner for South Africa• Reduced growth rate• Remains important trade partner for South AfricaChinaChina

43

5. PROSPECTS

44

Outlook and drivers

Short term outlook:Industrial Minerals diversifications and enhancements are inplaceStrong marketing and managementDemand coming from wide diversificationContinue to evaluate opportunities

Momentum drivers:Roads – SANRAL and provincesRenewable energyRural infrastructure and service delivery projects fromGovernment (e.g. water, sanitation)Industrial minerals

Short term outlook:Industrial Minerals diversifications and enhancements are inplaceStrong marketing and managementDemand coming from wide diversificationContinue to evaluate opportunities

Momentum drivers:Roads – SANRAL and provincesRenewable energyRural infrastructure and service delivery projects fromGovernment (e.g. water, sanitation)Industrial minerals

45

Risk mitigation

• Drive to create a unique and positive culture• Communication and upliftment• BEE share scheme

• Drive to create a unique and positive culture• Communication and upliftment• BEE share scheme

Labour unrestLabour unrest

• Seeking opportunities outside of SA• Eyes wide open in South Africa• Payments terms strictly monitored


Country risk inSouth AfricaCountry risk inSouth Africa

• No single dominant debtor• Strict efficient credit control• No single dominant debtor• Strict efficient credit control

Steel industry underpressureSteel industry underpressure

• Constant strategic management (avoidingthreats, exploiting opportunities)

• Entrepreneurial culture and creative innovativesolutions

• Strong balance sheet

• Constant strategic management (avoidingthreats, exploiting opportunities)

• Entrepreneurial culture and creative innovativesolutions

• Strong balance sheet

Macro-economicthreatsMacro-economicthreats



Country risk inSouth AfricaCountry risk inSouth Africa

46

Afrimat will pursue a conservativegrowth strategy preserving the

integrity of the balance sheet andremain vigilant of cash

Afrimat will pursue a conservativegrowth strategy preserving the

integrity of the balance sheet andremain vigilant of cash

47

Q & A

Thank you for your attendance and participation

www.afrimat.co.za

For any further Investor Relations questions please contact:

Thank you for your attendance and participation

www.afrimat.co.za

For any further Investor Relations questions please contact:

Andries van Heerden (CEO): 021 917 8840 orVanessa Rech (Keyter Rech Investor Solutions): 011 447 8656

48

APPENDIX

49

Group overview

50

Afrimat’s portfolio and footprint

… portfolio … and footprint

MINING & AGGREGATESCommercial quarries (23)

Sand and gravel mines (7)

Dolomite mines (2)

Clinker (3)

Limestone mine (1)

Silica mines (2)

Mobile Crushing

Drilling & Blasting

CONCRETE BASED PRODUCTSConcrete brick & block factories (9)

Readymix batching sites (14)

MINING & AGGREGATESCommercial quarries (23)

Sand and gravel mines (7)

Dolomite mines (2)

Clinker (3)

Limestone mine (1)

Silica mines (2)

Mobile Crushing

Drilling & Blasting

… which generates a balanced consistent income stream 51

What differentiates Afrimat

Strong financial position:Healthy cash flowStrong balance sheetIndustry leading margins throughout economic cycle

Active innovative strategic positioning:Good market intelligence and expertiseContinuously identifying and evaluating opportunitiesTrack record of successful acquisitionsSuccessful greenfield projects

Operational competence:FlexibleReliable quality supplierSuperior reaction time

Strong financial position:Healthy cash flowStrong balance sheetIndustry leading margins throughout economic cycle

Active innovative strategic positioning:Good market intelligence and expertiseContinuously identifying and evaluating opportunitiesTrack record of successful acquisitionsSuccessful greenfield projects

Operational competence:FlexibleReliable quality supplierSuperior reaction time 52

“The Afrimat Way”

Manpower:

Tangible leadershipShared valuesCompetent employeesGreat teamwork

MarketingEngaged customer relationshipsIdentifying marketing trends and opportunitiesTurning prospects into actual orders of maximisedprices and optimised product mixes

Manpower:

Tangible leadershipShared valuesCompetent employeesGreat teamwork

MarketingEngaged customer relationshipsIdentifying marketing trends and opportunitiesTurning prospects into actual orders of maximisedprices and optimised product mixes

53

“The Afrimat Way” (continued)

OperationsOptimised planning and operationsEfficient processing plant design and process flowExcellent maintenance and care

FinanceEffective planning and budgetingEfficient execution of financial management and administrationEffective systems and controlsFocusing on cash generation

OperationsOptimised planning and operationsEfficient processing plant design and process flowExcellent maintenance and care

FinanceEffective planning and budgetingEfficient execution of financial management and administrationEffective systems and controlsFocusing on cash generation

54

“The Afrimat Way” (continued)

ComplianceIn depth knowledge of legislation and requirementsMaintaining a feasible compliance strategyEnsuring company-wide adherence

ComplianceIn depth knowledge of legislation and requirementsMaintaining a feasible compliance strategyEnsuring company-wide adherence

55

Acquisitions - the underlying strategy

GoalEnhance sustainability, diversity, profitability and robustness

TargetsAcquisition purchase consideration below 15% of Afrimat market cap

In Afrimat’s space of expertise

Must have high upside

Must strengthen Afrimat

Must fit strategically into our master plan

GoalEnhance sustainability, diversity, profitability and robustness

TargetsAcquisition purchase consideration below 15% of Afrimat market cap

In Afrimat’s space of expertise

Must have high upside

Must strengthen Afrimat

Must fit strategically into our master plan

56

Afrimat’s products

Products from mines:Aggregates (crushed stone)

Metallurgical dolomite

Metallurgical quartzite

Fire retardant powder

Agricultural lime

Clinker

Products from factories:Concrete blocks

Concrete bricks

Pavers

Products from mines:Aggregates (crushed stone)

Metallurgical dolomite

Metallurgical quartzite

Fire retardant powder

Agricultural lime

Clinker

Products from factories:Concrete blocks

Concrete bricks

Pavers

57

Afrimat’s products (continued)

Products from readymix batch plants:Readymix concrete

Readymix mortar

Mobile batching

Services by the contracting team:Contract crushing

Mobile screening

Drilling

Blasting

Products from readymix batch plants:Readymix concrete

Readymix mortar

Mobile batching

Services by the contracting team:Contract crushing

Mobile screening

Drilling

Blasting58

Supply market segments

Transport infrastructure:Road and bridge buildingRailroads

Industrial minerals:Steel makersCoal minesFoundriesGlass makersCeramics

Energy infrastructure:Power stations (e.g. Medupi)Renewable energy projectsPower distribution network

Transport infrastructure:Road and bridge buildingRailroads

Industrial minerals:Steel makersCoal minesFoundriesGlass makersCeramics

59

Supply market segments (continued)

Building and Civils:

Government funded

Affordable housing

Schools, healthcare facilities

Water reticulation

Private funded

Commercial, industrial and mining

Residential

Agriculture:

Agricultural lime

Drainage stone

Paving

Building and Civils:

Government funded

Affordable housing

Schools, healthcare facilities

Water reticulation

Private funded

Commercial, industrial and mining

Residential

Agriculture:

Agricultural lime

Drainage stone

Paving

60

Documents

Interim results presentation · 2014. 11. 6. · Prospects Environment and industry trends ... Trade and other liabilities 273 360 265 376 265 743 Other liabilities / deferred tax