Investor Presentation 20 February 2017 · Interim Results February 2017 21 20 23 28 38 102 968 107...

Interim resultsto 31 December 2016

Investor Presentation20 February 2017

Interim Results February 2017

Agenda

Group overview and performance

Divisional performance

Financial analysis

Group prospects

01

02

03

04

Group overview and performance


Executive summary

4

Black empoweredPLATFORM SPECIALITY

chemical group focusing on thedistribution and manufacturing of

lower volume higher marginspeciality products

Targeting the global need for food security,

clean water and manufacturing demand through the agricultural,

food, industrial and water divisions


Group platform structure

5

INDUSTRIALAGRICULTURAL WATERFOOD

70%

100%

70%

BOTSWANA

100%100%

100%

100%

100%

100%

EUROPE

Group services

Investor relations,

Group Finance,

Corporate Finance,

Treasury, IT, HR,

Marketing,

Regulatory, Legal100%

ZAMBIA


Geographical scope and target markets

6

Target markets

Export destinations

Import origins


Interim financial performance highlights

7

Turnover

increased by 32%

Gross profit margins

decreased to

Operating profit increased by

62% to R97m at a margin of

HEPS

increased by 34% to

R823m 22.7% 11.8% 37.9cpsDec 2015

R626m

Dec 2015

23.4%

Dec 2015

R60m at 9.6% margin

Dec 2015

28.4cps

EBITDA

increased by 58% to

Net debt to equity

(gearing ratio) improved to

Weighted average number of

shares increased by 20% to

Interim dividend

declared of

R103m 38% 161.3m 4cpsDec 2015

R65m

Dec 2015

47%

Dec 2015

134.6m30 Dec 2015 : nil


Operating environment

Risk mitigation:

Diversified product range, industry spread and geographical positioning

• Challenging global socio economic conditions

• Marked economic slowdown in emerging markets

• Currency volatility

• Drought aftermath– global warming

• Local political instability

• The only constant remaining is CHANGE

8


Revenue (R million) | Interim Results

9

410

518

589626

823

0

100

200

300

400

500

600

700

800

900

Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016


Gross profit (R million) | Interim Results

10

87

111

137146

187

0

20

40

60

80

100

120

140

160

180

200



Operating profit (R million) | Interim Results

11

44 42

51

60

97

0

20

40

60

80

100

120



21 20 23

28

38

102 968 107 968 107 968

134 634

161 301

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

0

5

10

15

20

25

30

35

40

Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 We

igh

ted

ave

rage

nu

mb

er

of

shar

es

(‘0

00

)

HEP

S

Period

HEPS (cps) Weighted average number of shares ('000)

HEPS vs Weighted average number of shares

12


21.1% 21.4%

23.2% 23.4%22.7%

10.6%

8.1% 8.5%9.6%

11.8%


GP% OP%

Ratios | Interim Results | 5 year history

13


Group consolidated income statement

14

Dec 16

R'000

Variance

%

Dec 15

R'000Revenue 823 386 31.6% 625 684Cost of sales (636 657) (479 566)Gross profit 186 729 27.8% 146 118Gross profit % 22.7% 23.4%Operating expenses (89 352) 3.9% (86 032)Operating profit 97 377 62.1% 60 086Operating profit % 11.8% 9.6%Net interest paid (14 368) (9 115)Net profit before tax 83 009 62.9% 50 971Tax expenses (21 475) (12 305)Profit after tax 61 534 59.1% 38 666

Profit for the year attributable to:Non-controlling interest 487 553Owners of the parent 61 047 60.2% 38 113

61 534 38 666

Earnings per share (cents) 37.85 33.7% 28.31Headline earnings per share (cents) 37.85 33.5% 28.35

Weighted average shares in issue 161 301 134 634Shares in issue 161 301 161 301Treasury shares (641) (641)


Organic growth | Operating profit

15

97 377

60 086

14 543

22 748

0

20 000

40 000

60 000

80 000

100 000

120 000

Dec 2015 Act Bragan 3 months

Organic growth Dec 2016 Act

Organic GrowthDec 16

R'000

Variance

%

Dec 15

R'000

Operating Profit 97 377 62% 60 086

Bragan 3 months pre-acquisition - 14 543

Operating Profit - adjusted 97 377 30% 74 629

30%


Export revenue

16

26%

5%

1%

1%10%

1%2%

4%

38%

12% Rest of Africa

Botswana

France

Israel

Malawi

Mozambique

Swaziland

USA

Zambia

Zimbabwe

Divisional performance


Agriculture

18

Dec 16

R'000

Variance

%

Dec 15

R'000

Revenue 155 973 9.4% 142 636

Cost of sales (104 102) (99 336)

Gross profit 51 871 19.8% 43 300

Gross profit % 33.3% 30.4%

Operating expenses (22 743) 22.7% (18 533)

Operating profit 29 128 17.6% 24 767

Operating profit % 18.7% 17.4%


Agricultural division business model

• Geographic spread and product range mostly into semi permanent and permanent crops provide risk mitigation AGAINST drought conditions

• Five major distributors nationally

• High value high margin products developed in-house

• 71% of product range - fruit, nuts and vegetables – foliar feeds, soil health, adjuvant and nutritional products

• 29% maize and wheat – herbicides and pesticides

• Various competitors in various areas – Nulandis, Arysta and other smaller players

• Barriers to entry –

• significant investment in production and research facilities

• product development timeline, process and investment – 3 to 5 years.

• product registration process – greater than 3 years

19


Agricultural product contribution - revenue

20

10%

5%

14%

40%

25%

6%Herbicides

Insecticides

Fungicides

Foliar Feeds

Adjuvants

Seed Enhancement


Agriculture supply chain

21


Prospects | Agriculture

• Drive export growth through distributors

• European toll manufacturer for European business –100% owned

• Product registrations granted on natural product range

• Seed division expansion focus

• New product development – pipeline solid

• Biological product range launch – estimated late 2017

22


Food

23

* 6 months up to December 2015 is based on 3 months actual and 3 months pre-acquisition date

Dec 16

R'000

Variance

%

Dec 15

R'000 *

Revenue 397 102 29.3% 307 128

Cost of sales (329 566) (260 309)

Gross profit 67 536 44.2% 46 819


Operating expenses (16 887) 22.4% (13 796)




Food business model

• Bulk Importer and distributor of food ingredients

• Products used in food, beverage, bakery, dairy, pharmaceuticaland cosmetics industries

• Largest supplier Gauteng - primary competitors: CJP Chemicals,Savannah Fine Chemicals and to a smaller extent Protea Chemicals (Omnia) and other smaller companies

• Barriers to entry : capital (to hold stock), industry know-howand experience, existing supplier networks and establishedcustomer relationships

24


Food product contribution - revenue

25

21%

21%

10%8%

8%

7%

5%

5%

4%

4%4% 3%

Bakery

General Food Ingredient commodities

Traders

Beverage

Flavours

Meat

Dairy

Other

Industrial

Confectionary

Spice & Sauce

Pharma / Nutrition


Food supply chain

26

Manufacture / suppliers Transportation : road, rail, air and ship

F I N I S H E D G O O D S I N V E N T O R Y

Transportation


Prospects | Food

• Export growth – focus – Zambia

• Drive growth in Western Cape and KZN

• Additional speciality food product lines

• Cross selling opportunity development

• Further Agri procurement integration (food grade)

27


Industrial

28

* Lead Chrome plant closure end March 2016 revenue included in 2015 – R67m

Dec 16

R'000

Variance

%

Dec 15

R'000 *

Revenue 221 249 (14.9%) 260 117

Cost of sales (175 684) (211 351)

Gross profit 45 565 (6.6%) 48 766


Operating expenses (24 382) (29.5%) (34 566)




Industrial business model

29

• Commodity and speciality chemicals importer and break bulk supplier

• Commodities – solvents, waxes, black products and industrial grade agri raw materials

• Speciality chemicals – pigments, dispersions and water treatment products

• Competitors – Protea Chemicals, Crest Chemicals, Tag solvents and other

• Barriers to entry – supplier relationships, bulk storage capacity underground, IP - Pigments and dispersions, broad customer base and relationships, logistics capability and brand, exclusive distribution agreement – water products


Industrial product contribution - revenue

30

33%

22%6%

7%

8%

13%

11%

Solvents

Commodities

Water

Pigments

Dispersions

Leather

Africa


Industrial supply chain

31

Manufacture / suppliers Transportation : road, rail, air and ship

F I N I S H E D G O O D S I N V E N T O R Y

Packing & labelling Transportation

Break bulk and consolidation centre


Prospects | Industrial

• Further agricultural procurement integration (industrial grade)

• New higher margin product ranges on board

• Logistics and distribution – industrials and water consolidated –significant cost benefits achieved

• Drive exports – build scale in Zambia

• Targeting construction chemicals, speciality adhesives and catalysts

32


Water

33

Dec 16

R'000

Variance

%

Dec 15

R'000

Revenue 49 062 (20.2%) 61 452

Cost of sales (27 305) (32 362)

Gross profit 21 757 (25.2%) 29 090


Operating expenses (16 979) (23.0%) (22 041)

Operating profit 4 778 (32.2%) 7 049


Operating profit contribution:

Silica 638 (80.5%) 3 264

Water 4 140 9.4% 3 785


Water product contribution - revenue

34

56%44%

Water

Silica


Prospects | Water

• Experienced performance driven MD appointed – Ex Nalco/Ecolab

• Revenue growth through renewed focus on large and heavy industrial - Mining, Industrial, Automotive and Petrochemical industries – tenders submitted

• Rebranding and repositioning of water business immanent

• Solenis product range – extend distribution

• Water and Industrial overhead consolidation - significant cost benefit achieved

35


Key ratios | Interim Results

36

Dec 16

R'000

Change

%

Dec 15

R'000

Revenue (R’m) 823 32% 626

EBITDA (R’m) 103 58% 65

Operating profit (R’m) 97 62% 60

PAT (R’m) 62 59% 39

Interest cover (times) 7 ↔ 7

Dividend (cps) 4 ↑ 0

EBITDA to operating cash 14% ↑ (21%)

Net debt (R’m) 229 0.4% 230

Net Debt to Equity ratio (Gearing %) 38% 19% 47%

Cash generated from operations (R’m) 14 201% (14)

Current ratio 2.7 0.5 2.2

Acid test ratio 1.4 0.1 1.3

Net working capital days 105 5 100

Financial analysis


HEPS

38

Dec 16

R'000

Variance

%

Dec 15

R'000

Headline earnings (R’000) 61 047 60% 38 165

Weighted average number of shares in

issue (‘000)161 301 134 634

HEPS (cps) 37.9 34% 28.4


Net Debt vs Equity (Gearing %)

39

337 372

550

121 155

193

36%

42%

35%

June 2014 June 2015 June 2016

Annual Results

Equity Bank Debt Debt : Equity

370 490

602

155

230

229

42%

47%

38%

Dec 2014 Dec 2015 Dec 2016

Interim Results

Equity Bank Debt Debt : Equity


Return on Equity (ROE)

40

337 372

550

38 47

80

11%13%

15%

June 2014 June 2015 June 2016

Annual Results

Equity Return ROE

370

490

602

33

39

62

9%

8%

10%

Dec 2014 Dec 2015 Dec 2016

Interim Results

Equity Return ROE


Cash flow performance

41

* Includes final dividend for the 12 months ended 30 June 2016 paid to shareholders of 6cps on 31 October 2016.

Dec 16

R'000

Variance

%

Dec 15

R'000

Operating activities 14 403 201% (14 239)

EBITDA 103 064 58% 65 086

Net working capital (88 661) 12% (79 325)

Finance cost (14 368) (9 049)

Tax paid (17 611) (15 903)

Investing activities (7 880) (237 636)

Financing activities* 31 194 381 707

Cash flow / (deficit) for the period 5 738 104 880

Cash – beginning of the period 49 943 (50 959)

Cash – end of the period 55 681 53 921


Strategic financial management objectives

•Drive profitability and HEPS

• ZAR/USD exchange rate hedging policy

• Optimise cost structures

•Cash generation and optimisation

• Improving net working capital days

• Group treasury and facility management

• Ensuring optimised capex spend

• Dividend distribution

• Free cash flows

• Distribution covenants

42

Group prospects


Group prospects

• Continue to balance and strengthen current businesses

• Extend commodity positions

• Expand core Specialist chemical product ranges

• Achieving the full potential of operational restructuring initiatives

• Focused export growth drive

44


Acquisition strategy and principles

• High barrier to entry specialist chemical businesses

• Strong local or foreign currency earning businesses or potential to earn foreign currency

• Target to have an EBIT of R50m plus - significant impact on Group valuation

• Selective smaller strategic businesses complementary to an existing division to accelerate organic growth

• Focussed on existing 4 Pillars; possible 5th pillar

45


Operating margin % and Net working capital days target

46

Operating margin Jun 2015 Dec 2015 Jun 2016 Dec 2016Jun 2017

Target

Agricultural 10.7% 17.4% 13.9% 18.7% 13% - 15%

Food 11.2% 10.8% 12.1% 12.7% 12% - 15%

Industrial 4.8% 5.5% 8.3% 9.6% 9% - 11%

Water 19.9% 11.5% 10.7% 9.7% 15% - 17%

Net working capital Jun 2015 Dec 2015 Jun 2016 Dec 2016Dec 2017

Target

Days 110 100 101 105 80 - 90


Human capital and transformation

• Black ownership – reduced to 45% during the period – initiatives to increase greater than 50% will be implemented

• Management long term share option scheme – submitted to JSE for approval –circular will be mailed soon

• Successful student training programs – 15 take-ins per annum – 80% success rate annually moved to permanent employment within the Group

47


CEO’s priorities and objectives

Build proven investment case

• Consistent results driven performance

• Build reputation as a platform chemical (life sciences) company

• Focus on speciality lower volume higher margin businesses growth

• Drive export business growth

• Continue to strengthen current business reputation

• Acquisition drive

48


Contact details

49

Lizette Lynch (CEO)

Johan Ferreira (FD)

083 260 0395

079 107 3470

Investor Presentation 20 February 2017 · Interim Results February 2017 21 20 23 28 38 102 968 107...

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