FINANCIAL RESULTS For the year ended 31 December 2012 Presentation 26 and 27 February 2013
overview
2 PRESENTATION Outline › Welcome › Business environment and performance › AECI results › Performance by segment » Explosives » Specialty chemicals › Projects and strategy › Outlook and underlying growth
3 PERFORMANCE Highlights › Revenue up 11% to R14,9bn › EBITDA from operations up 6% to a record R1,8bn › Headline earnings excluding effects of all B-BBEE transactions up 1% › Profit optimisation of projects underway › Best ever safety performance achieved › Gearing reduced to 32% › Acquisitions of R420m authorised › AEL’s strategic position in Indonesia enhanced by AN plant acquisition › Final cash dividend of 185cps up 2,3% compared to 179cps in ’11
business environment and performance
5 BUSINESS ENVIRONMENT AND PERFORMANCE Summary › AECI delivered a creditable performance in a difficult trading environment › Depressed global growth and industrial action in SA made volume growth difficult › Businesses responded with tight cost management and restructuring › Strength of the business model, especially in the chemicals cluster, demonstrated in the result › Looking forward, market growth prospects linked to global economic growth uncertainties › However, AECI has internal profit optimisation plans that will deliver value independent of external growth scenarios › AECI also has a healthy pipeline of acquisitions and growth projects
6 REVENUE SPLIT 3% 2% 33% 52% 10% 52% Mining 10% Agriculture 33% Manufacturing 3% Property 2% Fibres
7 BUSINESS ENVIRONMENT SA manufacturing volumes Jan ’07 – Jan ’13 Base: 2005=100 Source: StatsSA Cum y-o-y = 2,0%
8 BUSINESS ENVIRONMENT SA mining volumes Jan ’07 – Jan ’13 Base: 2010=100 Source: StatsSA Index base year changed in October from 2005 to 2010 Cum y-o-y= -3,1%
9 BUSINESS ENVIRONMENT ZAR/US$ exchange rate Opening Jan 12 Closing Dec 12 US$/ZAR=8,15 US$/ZAR=8,49 Average US$/ZAR=8,20 Average US$/ZAR=7,25
10 BUSINESS ENVIRONMENT Ammonia IPP pricing (ZAR/tonne)
11 BUSINESS ENVIRONMENT Effect on performance › Open cast mining volumes in Africa (including South Africa) grew strongly › Underground mining volumes in SA and Indonesia were negatively impacted by industrial action and other stoppages › The weaker ZAR/US$ exchange rate helped the mining and manufacturing sectors but failed to lift volumes › Prices remained high due to high US$ commodity prices and the weaker exchange rate › The industrial relations environment deteriorated significantly post Marikana and made change management difficult
AECI results
13 SAFETY AND HEALTH Performance ALL WORKERS TRIR 1,2 Maximum tolerable level 1,0 0,8 0,6 0,4 0,2 0,0 08 09 10 11 12
14 ENVIRONMENTAL, B-BBEE AND EE UPDATE Performance and strategy › Environmental performance » Formalisation and launch of the Modderfontein Reserve » Green Gauge – range of environmental improvement projects identified through resource efficiency assessments » No serious environmental incidents in ’12 » Included in JSE’s Socially Responsible Investment Index for fourth successive year › B-BBEE ratings improved significantly and nearly all companies are now Level 5 or Level 4 contributors › EE performance continues to improve
15 RESULTS Headline earnings (Rm) 850 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 Headline Specialty Explosives: Property: Specialty Corporate: CST Finance Other: Headline earnings chemicals: (R79m) (R65m) fibres: R149m & EST SBP: costs and R6m earnings 11: R63m (R13m) (R168m) tax: 12: R772m (R54m) R611m
16 RESULTS EBITDA and volumes › EBITDA +6% to R1,8bn EBITDA (Rm) › Volumes flat overall › Chemicals volumes -2,9% 2 000 » manufactured -1,4% » traded -4,3% 1 600 › Explosives +5,1% 1 200 › Foreign revenue +17% to R4 527m › Market share maintained 800 400 08 09 10 11 12
17 RESULTS Operating margin and volumes › Operating margin declined from OPERATING MARGIN (%) 9,8% to 9,0% mainly due to deterioration at AEL and Heartland 12 › Favourable impact » Reduced corporate costs 10 › Outweighed by 8 » Nitrates shortages and supplier 6 force majeure 4 » Negative effect of strikes » Non-cash B-BBEE transactions 2 IFRS costs 0 » Restructuring charges 08 09 10 11 12 › Therefore, underlying performance is better than reported results
18 RESULTS HEPS › Excluding the IFRS charges of HEPS (cps) 151cps » HEPS at 697cps down 3% 800 » Return on net assets: 17,1% 700 » Return on invested capital: 600 13,2% 500 » Economic value added remains positive 400 300 200 100 0 08 09 10 11 12
19 RESULTS Cash utilisation › Capex: R557m – incl. R265m AT 31 DECEMBER for expansion projects Borrowings 2 500 70 Gearing › NWC to revenue: 18,0% 60 (’11: 17,7%) 2 000 Target range 50 › Net borrowings: R1 841m Rm 1 500 % 40 › Gearing at 32% vs 50% in 1H12 30 › Cash interest cover: 8,2x 1 000 › Final cash dividend: 185cps 20 500 10 0 0 08 09 10 11 12
performance by segment
21 RESULTS Profit from operations (Rm) 950 11 12 850 750 650 550 450 350 250 150 50 Corporate (50) Specialty Explosives Specialty fibres Property EST SBP chemicals (150) (250)
22 SPECIALTY CHEMICALS Business environment › Firm but volatile commodity prices in US$ terms and weaker R/$ supported prices › SA manufacturing sector still pedestrian › However, stronger growth in food and beverage, agricultural and personal care sectors › Platinum mining sector strikes and closures had negative impact (R45m) › International competition remains intense
23 SPECIALTY CHEMICALS Performance Revenue R8 397m +11% TP R944m +7% Trading margin (%) 11,2 (’11: 11,7) Average WC (%) 17 (’11: 16) › Volumes -2,9% » Manufactured -1,4% » Traded -4,3% › Prices +14,0% › Excellent performances from Akulu, CI, IOP, Lake, Nulandis › Solid performance from Senmin in difficult market › Restructuring charge of R30m offset by capital profits from Resitec and CSL HO disposals › Successful integration of all acquisitions
24 SPECIALTY CHEMICALS Price and volume analysis (Rm) 8 600 8 400 8 200 8 000 7 800 7 600 7 400 7 200 7 000 6 800 Revenue Dec 11 Volumes -2,9% Price +14% Revenue Dec 12 +11,1%
25 EXPLOSIVES Business environment AEL MANUFACTURING SITES › Global mining sector is under pressure, but remains attractive › Strong mining volume growth in Africa (outside SA) › SA mining: surface volumes grew significantly, narrow reef declined › Prospects in Africa remain good › Indonesian mining also affected by industrial relations issues and weakening thermal coal prices
26 EXPLOSIVES Performance Revenue R6 327m +15% TP R431m -15% Trading margin (%) 6,8 (’11: 9,3) Average WC (%) 19 (’11: 17) › Disappointing performance in difficult circumstances › Ammonia and AN supply chain interruptions (R50m) › Mining strikes (R62m) › Cost reduction exercise underway
27 EXPLOSIVES Performance 750 700 650 600 550 500 450 400 350 R510m: Actual R212m: Material (R153m): Fixed (R53m): R57m: Reduction (R61m): Foreign (R81m): Supply R431m: Actual trading margin margin cost inflation & Business ISAP / ISCP costs gain in 2011 chain and strike trading margin Dec 11 depreciation expansion costs events Dec 12
28 PROPERTY Performance Revenue R400m -16% TP R34m -66% Trading margin (%) 8,5 (’11: 20,8) › A disappointing result › Revenue of R47m from land sales » Westlake – industrial use › R66m development expenditure » Roads and electrical infrastructure › Outlook for industrial end use improving
29 PROPERTY Performance 120 100 80 60 40 20 0 Trading profit 2011: Development Leasing activities: Services: R2m Environmental Trading profit 2012: R99m activities: (R52m) (R22m) charge: R7m R34m
30 SPECIALTY FIBRES Performance Revenue R339m +2% TP R40m -25% Trading margin (%) 11,8 (’11: 15,9) › Acceptable result in difficult market conditions › Exports to Europe and Asia under pressure › US auto volumes improved in 2H12 › Capital investment of US$10m on single-stage process underway › STF will be included in chemicals cluster in future
31 CORPORATE Corporate Legacy Long-term Captive 11: costs: incentives: insurance: Other: Corporate 12: (R227m) R71m R47m R31m R0m (R78m) (60) (80) (100) (120) (140) (160) (180) Sustainable level = (170) (200) (220) (240)
32 RESULTS Tax rate (Rm) 360 340 320 300 280 260 240 Tax charge IFRS 2 charge STC Other PBT tax @ 28%
projects and strategy
34 EXPLOSIVES Investments Total R409m Expansion capital spend R163m » SA – Xstrata, Sishen R31m » Africa – bulk plants for Burkina, Egypt and DRC R63m » International – new contracts R14m Sustenance capital R204m » Nitrates statutory maintenance R64m BBRI R42m
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