Annual General Meeting 2 August 2017, 14h00 Century City Conference Centre No. 4 Energy Lane Century City, Cape Tow n
Core message 1. Our strategy is working ▪ Consistently delivering ▪ Over 10 years 2. Current market conditions ▪ Difficult 3. Prospects ▪ Diro in production ▪ Leading indicators
Group overview ▪ A supplier of quality materials sourced from our open pit mines and quarries ▪ Strategically diversified through product range, target market and location
What we do ▪ Open pit mining ▪ Industrial minerals ▪ Aggregates ▪ Iron ore ▪ Concrete based products ▪ Bricks and blocks ▪ Readymix concrete
Open pit mining: industrial minerals Products ▪ Lime ▪ Metallurgical dolomite ▪ Metallurgical quartzite
Quarrying: aggregates Products ▪ Concrete stone ▪ Road stone
Bulk commodities Products ▪ Iron ore
Concrete brick and block making Products ▪ Bricks and blocks ▪ Paving
Readymix concrete Products ▪ Readymix concrete ▪ Readymix mortar
Afrimat’s portfolio … and footprint MINING & AGGREGATES Commercial quarries (25) Dolomite mines (3) Clinker (4) Limestone mines (2) Silica mines (2) Iron ore mine (1) Sand and gravel mines (5) Mobile crushing Drilling & blasting CONCRETE BASED PRODUCTS Concrete brick & block factories (9) Readymix batching sites (16) … which generates a balanced consistent income stream
Core message 1. Our strategy is working ▪ Consistently delivering ▪ Over 10 years 2. Current market conditions ▪ Difficult 3. Prospects ▪ Diro in production ▪ Leading indicators
Company positioning ▪ Primarily focused on mid-tier open pit mining ▪ Unique competitive advantage ▪ Geographic location ▪ Unique metallurgy ▪ Structural cost advantage ▪ Highly entrepreneurial culture ▪ Hedged against economic volatility through wide diversification Our strategy is working
Financial overview Highlights 32,5% 11,7% 25,4% Contribution from HEPS Return on net operation’s margin to 196,4 cps operating assets to 18,2% (2016:156,6 cps) (2016: 16,3%) 19,8% 22,4% 21,9% Final dividend NAV per share of Net debt: to 50,0 cps equity ratio 881 cents (2016: 41,0 cps) (2016: 720 cents) Our strategy is working
Financial overview Revenue and operating profit Operating Revenue (R’000) Contribution form profit operations (R’000) 2,500,000 margin 18,2% 450,000 400,000 2,000,000 1,074,899 350,000 203,492 968,502 966,549 969,316 300,000 1,500,000 160,765 250,000 146,400 666,236 200,000 119,362 1,000,000 1,153,258 150,000 1,030,098 1,003,237 76,860 202,109 931,871 160,923 100,000 500,000 671,349 127,349 108,909 75,623 50,000 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 1st half 2nd half 1st half 2nd half Our strategy is working
Financial overview Headline earnings per share – full year 250 CAGR of 26,42% 196.4 200 2013-2017 Cents per share 156.6 150 135.6 HEPS Year on 109.0 year 100 growth 76.9 25,4% 50 0 2013 2014 2015 2016 2017 Our strategy is working
Financial overview Net cash from operating activities 450,000 406,046 CAGR 400,000 24,36% 2013-2017 350,000 320,339 Rands (‘000’s) 300,000 261,646 243,861 250,000 200,000 169,764 150,000 100,000 50,000 0 2013 2014 2015 2016 2017 Our strategy is working
Operational overview Well diversified contribution from operations February 2017 February 2016 Cap ape Lim Lime, , 8% 8% Traditional busi business, , 32% 32% Traditional busi business, , 44% 44% Cli linker Group, , 38% 38% Cli linker Group, , 23% 23% Mozambique, , 0% 0% Infrasors, , 10% 10% Infrasors, , 12% 12% Gle len Dou Dougla las, , 18% 18% Mozambique, , 0% 0% Gle len Dou Dougla las, , 18% 18% Our strategy is working
What makes Afrimat different 250.0 ▪ Growth through Headline earnings per share diversification 196.4 200.0 ▪ Core business 156.6 principles 150.0 135.6 ▪ 109.0 Strategic 100.0 management 76.9 70.4 62.6 53.3 ▪ 51.3 Our market 50.0 40.5 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Our strategy is working
Growth through diversification Profit history with and without acquisitions 200 Glen Douglas 180 Clinker 160 140 Infrasors 120 Cape Lime 100 80 60 40 20 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Headline earnings per share Reality without strategic acquisitions Our strategy is working
Core business principles ▪ Strong operational efficiency ▪ Unique competitive advantages ▪ The right people in the right position ▪ Synergistic teamwork ▪ Customer advocacy through service, reliability and quality of supply ▪ Values based entrepreneurial culture Our strategy is working
Strategic management ▪ Companywide 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 Our strategy is working
Our market • Bracing for economic slow down
Core message 1. Our strategy is working ▪ Consistently delivering ▪ Over 10 years 2. Current market conditions ▪ Difficult 3. Prospects ▪ Diro in production ▪ Leading indicators
Afrimat construction index 135 Index; Q3 2010=100 130 125 120 115 110 105 100 95 90 Q3'10 Q1'11 Q1'12 Q1'13 Q1'14 Q1'15 Q1'16 Q1'17 4 2 3 4 2 3 4 2 3 4 2 3 4 2 3 4 2 3 4
1000000 1200000 1400000 1600000 1800000 2000000 200000 400000 600000 800000 0 Sq. m 2007m1 Seasonal adjusted BPP: Residential+Non Residential 2001m1 to 2017m5. 2007m4 2007m7 2007m10 Building plans passed 2008m1 2008m4 2008m7 2008m10 2009m1 2009m4 Source: StatsSA, P5041.1 and Eviews 8. 2009m7 2009m10 2010m1 2010m4 2010m7 2010m10 2011m1 2011m4 2011m7 2011m10 2012m1 2012m4 2012m7 2012m10 2013m1 2013m4 2013m7 2013m10 2014m1 2014m4 2014m7 2014m10 2017m 5828931.7 2015m1 2015m4 2015m7 2015m10 2016m1 2016m4 2016m7 2016m10 2017m1 2017m4
Leading indicator as a proxy for domestic cement sales Leading indicator: May 2010 to May 2017 Source: SARB, 20 July 2017. Index 104 102 100 98.6 98 96 95.8 94 92 92 90 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17
Budget 2016/17: Water and sanitation Source: National budget 2017, Individual chapters. R billion 49 44 44.9 39 39.3 34 37.2 29 24 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Budget 2016/17: Human settlements R billion Source: National budget 2017, Individual chapters. 23 22 22.3 21 20 20 19 18 18.3 17 16 15 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Budget 2016/17: Transport & logistics Source: National budget, Individual chapters. R billion 130 120 117.4 110 100 104.6 90 91.4 80 70 60 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Prices of iron ore in $/dmt. Source: World Bank, Commodity Markets Outlook, April 2017. 120 100 80 60 $ Nominal 2010=100 2025: 55.2 2017: 65 2019: 50 40 2017: 68.6 2019: 50.4 2025: 49.9 20 0 2014 2015 2016 2017 2018 2019 2020 2025 2030
Core message 1. Our strategy is working ▪ Consistently delivering ▪ Over 10 years 2. Current market conditions ▪ Difficult 3. Prospects ▪ Diro in production ▪ Leading indicators
Trends in Afrimat’s markets Local environment Macro environment • • Sovereign downgrade Slight stabilisation in commodity markets • Spending on smaller infrastructure • and services projects remains in place Rand remains volatile • • Roads remain focus for Government Slower growth in China impacting and SANRAL South Africa • • Steel industry stable Brexit and Trump creating uncertainty • Environmental focus: clean water and clean air • Increased number of mining opportunities
Short term outlook ▪ Infrasors reaping benefits of improvement initiatives ▪ Diro expected in H2 of F2018 ▪ Cape Lime to benefit from marketing efforts ▪ Glen Douglas and Clinker Supplies stable ▪ Mozambique on care and maintenance ▪ Traditional business cyclical Afrimat will pursue a conservative growth strategy preserving the integrity of the balance sheet Remain driven by successful execution
Risk mitigation • Seeking opportunities outside of South Africa • Country risk in Eyes wide open in South Africa South Africa • Credit terms strictly monitored • Diversify revenue currencies • Constant strategic management (avoiding threats, exploiting opportunities) Macro-economic • Entrepreneurial culture and creative innovative solutions threats • Strong but conservative balance sheet • Drive to create a unique and positive culture • Communication and upliftment Labour unrest • BEE share scheme • No labour action during the year • Maintain diversified revenue streams Volatility in • commodity Low cost base markets • Creative marketing & logistics
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