Audited results for the year ended 31 December 2015 · 2020. 8. 14. · 9 Audited results for the...

AUDITED RESULTSFOR THE YEAR ENDED 31 DECEMBER 2016

2

Audited results for the year ended 31 December 2016

AGENDA

1 Opening remarks / market update

2 Financial results

3 Operational review

4 Strategy update

5 Outlook

OPENING REMARKS / MARKET UPDATE

1 2 3 4 5

4


KEY POINTS

• Record sales of 232 000 tons (2015: 198 000 tons)

- Rolled Products sales of 214 000 tons (2015: 180 000 tons)

• Best ever safety performance: Total Recordable Case Frequency Rate – 0.27

- Equivalent to global benchmark

• Much improved second half earnings: HEPS 48 cps in H1 versus 71cps in H2

• Net cash inflow R415 million for the year, after R33 million in H1

5


MARKET OVERVIEW

LME aluminium price rising

• China reportedly closing capacity

• Supply versus demand imbalance in the West

• LME closed at $1 713/t (2015: $1 508/t)

• Geographic premiums have remained stable

Automotive demand for aluminium continues to grow

Local economy stubbornly soft, however

• Demand for beverage cans improving

• Automotive demand improved in 2016

• Building and construction and general engineering soft

6


ALL-IN ALUMINIUM PRICE (USD/TON)

1 500

1 700

1 900

2 100

2 300

2 500

2 700

Jan-1

2

Mar-

12

May-1

2

Jul-

12

Sep-1

2

Nov-1

2

Jan-1

3

Mar-

13

May-1

3

Jul-

13

Sep-1

3

Nov-1

3

Jan-1

4

Mar-

14

May-1

4

Jul-

14

Sep-1

4

Nov-1

4

Jan-1

5

Mar-

15

May-1

5

Jul-

15

Sep-1

5

Nov-1

5

Jan-1

6

Mar-

16

May-1

6

Jul-

16

Sep-1

6

Nov-1

6

Jan-1

7

LME + Midwest SHFE

Source: Metal Bulletin

FINANCIAL RESULTS

1 2 3 4 5

8


FINANCIAL HIGHLIGHTS

• Group EBIT up 110% to a record R622 million

• HEPS and normalised EPS improved to 119 cps (up 222% / 116%)

• Strong cash generation reduced borrowings to R577m (2015: R975m)

• Dividend of 15 cps declared (2015: 8 cps)

9


OPERATING PROFIT

2016Rm

2015 Rm

Change%

Operating profit 622 295 110

(Profit) / loss on disposal of property, plant and equipment (6) 11

Bargain purchase gain: Isizinda - (52)

Headline EBIT 616 254 143

Share-based payment costs on 2015 BEE transaction - 20

Transaction costs - 5

Post retirement medical aid past service costs adjustment - 5

Equity-settled share-based payment: Isizinda 1 27

Normalised EBIT 617 311 98

Metal price lag (gain) / loss (50) 161

Comparable EBIT 567 472 20

10


COMPARABLE EBITDA BEFORE METAL PRICE LAG

0

100

200

300

400

500

600

700

800

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

R m

illion

11


FOCUSING ON THE KEY VALUE DRIVERS

Sales volume Up 19% • Driven by strong manufacturing performance in Rolled Products

Currency 15% weaker • Resulting in improved US Dollar cost competitiveness

$ Aluminium price 7% stronger • Resulting in metal price lag benefit, after 50% hedging

$ Rolling margins 16% weaker • Weaker mix, regional premiums, Euro weakness, Chinese metal arbitrage

ZAR Conversion costs / unit Down 4% • Volume / currency adjusted costs in line with price / commodity inflation

• High fixed cost base

Working capital Inventory days down

26%

• Debtor and creditor days sales in line

• Significant improvements in inventory efficiencies

SIB Capital expenditure Down > R100m • Normalisation of stay in business capex and improved capital discipline

12


FY 2015 V FY 2016 EBITDA BRIDGE

0

200

400

600

800

1 000

1 200

1 400

444 341 (102) 210 332 (209) 19 (251) 24 808

2015 Group

EBITDA

Currency Regional premiums

Metal price lag

Volume Margin / Mix

Recycling benefit

Conversion costs

Other business

units

2016 Group

EBITDA

R m

illion

External drivers Operational performance

893

13


H1 2016 V H2 2016 EBITDA BRIDGE

0

100

200

300

400

500

600

700

350 (113) (17) 38 195 92 37 (131) 7 458

H1 2016GroupEBITDA

Currency Regionalpremiums

Metal price lag

Volume Margin / Mix

Recyclingbenefit

Conversioncosts

Otherbusiness

units

H2 2016GroupEBITDA

R m

illion

External drivers Operational performance

258

14


STRENGTHENING THE BALANCE SHEET

Focus areas Delivered

Improve liquidity • New 3-year working capital facility • Covenant light• R400m additional headroom

Drive operating performance

• EBITDA before metal price lag up 25%, driven by strong manufacturing fundamentals

Working capital • Significant improvements in inventory efficiencies

Capital discipline • Optimising SIB capex

15


FY 2016 CASH FLOW

0

200

400

600

800

1 000

1 200

975 (743) (166) 102 128 264 17 577

2015 Net

borrowings

Cash generated

before working

capital changes

Changes in

working capital

Net interest

paid

Income tax

paid

Capital

expenditure

Other 2016 Net

borrowings

R m

illion

16


DRIVING WORKING CAPITAL EFFICIENCIES

119

103

115

85

0

20

40

60

80

100

120

140

2013 2014 2015 2016

Days s

ale

s

Average inventory days

17


CAPITAL EXPENDITURE

0

100

200

300

400

500

600

700

800

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Forecast

R m

illion

SIB capex * Improvement capex and investments * Depreciation

* Excludes capitalised borrowing costs

18


LIQUIDITY AND CAPITAL STRUCTURE

0

500

1 000

1 500

2 000

2009 2010 2011 2012 2013 2014 2015 2016

R m

illion

Net borrowings and headroom

Net borrowings Headroom

0

10

20

30

40

2009 2010 2011 2012 2013 2014 2015 2016

%

Net debt to equity

19


FOCUS ON VALUE IMPROVEMENT

Drive free cash flow generation

• Maintain volume gains

• Drive mix / margin improvement

• Focused cost reduction

• Improved metal input mix

• Maintain working capital gains

• Prudent stay in business capex

De-risk the balance sheet

• Reduce borrowings and maintain sufficient facility headroom

Invest in growth opportunities

• Grow return on capital employed

OPERATIONAL REVIEW

1 2 3 4 5

21


ROLLED PRODUCTS – KEY FEATURES

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015 2016

Tons (

000's

)

Rolled Products sales volume

Local sales Export sales

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015 2016

US$ margin index

0.00

0.50

1.00

1.50

2.00

2010 2011 2012 2013 2014 2015 2016

Safety performance

TRCFR LTIFR

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016

Group local sales mix

Packaging Automotive Extrusions Other

22


ROLLED PRODUCTS OPERATING MARGIN IN RAND

40

60

80

100

120

140

160

180

2010 2011 2012 2013 2014 2015 2016

Indexed

Margin in Rand / ton Unit cost in Rand / ton

23


A HULAMIN EBITDA MODEL

Sales volume Rolling margin Rand/$ Revenue

Manpower

Energy

Maintenance

Material

Consumables

Other Metal price lag

Other e.g. Extrusions; scrap

EBITDA Result

24


HALF ON HALF SALES AND PRODUCT MIX

0

20

40

60

80

100

120

140

160

180

2015 H1 2015 H2 2016 H1 2016 H2

RP sales and product volume index

RP sales volume Can end stock HT Plate Common alloy exports Local sales

25


FACTORS AFFECTING SALES VOLUME

Internal issues

• Improved plant performance including

- Lean manufacturing performance – Kaizan

- Product yield

- Rolling productivity

- Improved reliability

• Slab supply from Isizinda

• Manpower stability

External issues

• Supply of services

- Energy

- Logistics

- Other infrastructure e.g. water

26


ROLLED PRODUCTS PRODUCTION (ANNUALISED)

50

100

150

200

250

Jan 2

015

Feb 2

015

Mar

2015

Q1 2

015

Apr

2015

May 2

015

Jun 2

015

Q2 2

015

Jul 2015

Aug 2

015

Sep 2

015

Q3 2

015

Oct

2015

Nov 2

015

Dec 2

015

Q4 2

015

Jan 2

016

Feb 2

016

Mar

2016

Q1 2

016

Apr

2016

May 2

016

Jun 2

016

Q2 2

016

Jul 2016

Aug 2

016

Sep 2

016

Q3 2

016

Oct

2016

Nov 2

016

Dec 2

016

Q4 2

016

Tons (

000’s

)

27


ROLLED PRODUCTS YIELD INDEX

80%

85%

90%

95%

100%

105%

110%

2010 2011 2012 2013 2014 2015 2016 H1 2016 H2 2016

Target

28




Manpower

Energy

Maintenance

Material

Consumables



EBITDA Result

29


ROLLING MARGIN IN US DOLLARS INDEX

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015 2016 H1 2016 H2 2016

30


ROLLING MARGINS IN 2016

Strong sales and production of

• Can stock products

• Automotive

• Heat Treated Plate

Market conditions remain uncertain

• Over-supply remains

• Political uncertainty in UK and USA

Year-on-year mix % changes 2016 vs. 2015

• Low volume in 2015 with high value mix

Improvement in H2 2016

• Approx. $50 / ton

Weaker Euro vs. US Dollar

Aluminium price translation into rolling margins

• Massive fall in geographic premiums – now stable since Q2 2015

• Low SHFE vs. LME aluminium in 2015

31


HALF ON HALF PRODUCT MIX

0

20

40

60

80

100

120

140

160

180

2015 H1 2015 H2 2016 H1 2016 H2

RP sales and product volume index

RP sales volume Can end stock HT Plate Common alloy exports Local sales

32




Manpower

Energy

Maintenance

Material

Consumables



EBITDA Result

33


RAND VS. US DOLLAR 2014 TO 2016

9.00

10.00

11.00

12.00

13.00

14.00

15.00

16.00

17.00

18.00

Jan/14 Jun/14 Nov/14 Apr/15 Sep/15 Feb/16 Jul/16 Dec/16

34




Manpower

Energy

Maintenance

Material

Consumables



EBITDA Result

35


RP MANUFACTURING COSTS EXCL. METAL

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016H1

2016H1

2016

Materials Energy Manpower (excl maintenance) Consumables Maintenance (incl manpower) Other

H2

36




Manpower

Energy

Maintenance

Material

Consumables



EBITDA Result

37


SCRAP

Purchases include

• Used beverage cans

• Can makers scrap

• Other customer’s scrap

• Other scrap available in market

Sales include

• Light (thin) scrap

• Alloy contaminated scrap

2016 scrap purchases

• >16 000 tons (11 000 in H2)

• Limited by sales of can body stock

38


HULAMIN EXTRUSIONS

• R30 million capital investment approved

- Value added products (architectural)

- Cost reduction

• Go-To-Market strategy upgrade

• Operating profit improvement 133% off low base

• Low priced imports continue to erode local manufacturing

• Low GDP growth (demand) undermining sales volume growth

STRATEGY UPDATE

1 2 3 4 5

40


BRIDGING THE GAP

2016EBIT: R622mROCE: 7.8%FX: R14.73EPS: R1.19 / shareCash flow: R407m

• Above WACC (~12%) returns

• Strong and consistent cash generation

• Consistent dividend payments

• Strong P:E ratio

• BEE Scorecard Level 3

Capital discipline

Inventory

Sales volume increase to > 220kt

Mix / margins to improve by 10%

External scrap increase to > 25%

Cost reduction incl. CNG by 10%

41


UPDATED STRATEGIC PILLARS

Strengthen the core to compete today

Improve rolling margins to grow

Build assets of tomorrow to win

Benchmark operational performance

Cost competitiveness

Grow local and regional sales

Secure, competitive aluminium supply

Supportive regulatory environment

OUTLOOK

1 2 3 4 5

43


OUTLOOK

• Continue focus on operational performance

• Strong demand for Hulamin products in subdued market conditions

• Scrap sourcing and optimisation

• Resources deployed on rolling margin and mix improvement

• Impact of Rand / US Dollar

APPENDIX

45


SALIENT FEATURES

2016 2015 % Change

Key parameters and activities

Average LME US$ 1 604 1 494 7

Average exchange rate R/US$ 14.73 12.76 15

Group sales volume tons 232 000 198 000 17

Rolled Products sales volume tons 214 000 180 000 19

Group turnover Rm 10 099 8 395 20

Profitability

Group EBIT Rm 622 295 110

Group EBITDA Rm 808 444 82

EBITDA / turnover % 8.0 5.3 51

ROE % 9.3 3.1 200

HEPS cps 119 37 222

Normalised EPS cps 119 55 116

46


SALIENT FEATURES (CONTINUED)

2016 2015 % Change

Financial, cash flow and borrowings

Capital expenditure Rm 328 488 (33)

Cash flow before financing activities Rm 415 (420)

Net borrowings Rm 577 975 (41)

Debt equity ratio % 13 25 (48)

NAV per share cps 1 360 1 206 13

Share price (VWAP) cps 545 656

47


CONDENSED INCOME STATEMENT

2016 Rm

2015 Rm

Revenue 10 099 8 395

Cost of sales (8 958) (7 855)

Gross profit 1 141 540

Selling, marketing, distribution and administrative expenses (588) (494)

Impairment charge - -

Other gains and losses 69 249

Operating profit 622 295

Net interest expense (87) (66)

Profit before tax 535 229

Taxation (150) (65)

Net profit for the period 385 164

EBITDA (excluding impairment) 808 444

EBITDA / Sales (%) 8.0 5.3

48


GROUP EXPENSES BY NATURE

2016Rm

2015 Rm

Aluminium and other material costs 6 627 5 667

Utilities and other direct manufacturing costs 774 657

Employment costs 1 048 930

Depreciation and amortisation 186 149

Repairs and maintenance 258 255

Freight and commissions 365 309

Other operating income and expenditure 288 381

9 546 8 348

Classified as

Cost of sales 8 958 7 855

Selling, marketing and distribution expenses 444 382

Administrative and other expenses 144 111

9 546 8 348

49


CONDENSED BALANCE SHEET

2016Rm

2015 Rm

Capital employed

Equity 4 347 3 855

Net borrowings 577 975

4 924 4 830

Employment of capital

Property, plant and equipment and intangibles 3 333 3 234

Retirement benefit asset 117 142

Net working capital (incl. derivatives) 2 224 2 149

Net deferred tax liability (491) (467)

Retirement benefit obligations (259) (228)

4 924 4 830

50


CONDENSED CASH FLOW STATEMENT

2016Rm

2015Rm

Cash flows from operating activities

Operating profit 622 295

Net interest paid (102) (87)

Impairment charge - -

Depreciation and other non-cash items 121 246

Income tax payment (128) (50)

Changes in working capital 166 (280)

679 124

Cash flows from investing activities

Net additions to property, plant and equipment and intangibles and investments (264) (543)

Cash flows before financing activities 415 (419)

Cash flows – equity, dividend and other transactions (17) (119)

Cash flows for the period 398 (538)

Net borrowings – beginning of period (975) (437)

Net borrowings – end of period (577) (975)

Audited results for the year ended 31 December 2015 · 2020. 8. 14. · 9 Audited results for the...

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Transcript of Audited results for the year ended 31 December 2015 · 2020. 8. 14. · 9 Audited results for the...