reviewed group interim results presentation 2004 · reviewed group interim results for the twelve...
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REVIEWED GROUP INTERIM RESULTSFor the twelve months ended 30 June 2004
PRESENTATION 2004
HARNESSING THE POWER OF THE EARTH
www.kumbaresources.com
2
CHIEF EXECUTIVE
HARNESSING THE POWER OF THE EARTH
3
178152
82
207
112 113
FY02 FY03 12M04
1H 2H
KEY FINANCIALS
194.6Headline earnings (cps)
35Interim dividend (cps)
R580mHeadline earnings
R1 101mNet operating profit
R8 454mRevenueHeadline EPS (cps)
385
264
195
Stronger second half
4
HIGHLIGHTS
Record safety performance
Good progress on HIV / AIDS programme
Solid operating performance from all businesses
Strong US$ commodity prices but
Pleasing safety performance
5
RAND IMPACT
Continued Rand strength (24% appreciation y-o-y) mitigated by:
Strong sales volumes
Good hedging policy contributing R81m
Business improvementprogramme
Continued impact by strong Rand
4
5
6
7
8
9
10
11
12
13
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
R/US$ AU$/US$
9.01
6.86
(average realised)
2H02 1H03 2H03 1H04 2H04
6
BUSINESS IMPROVEMENT PROGRAMME
To maintain an attractive return in a prolonged strong rand environment
R800m EBIT contribution
Cost and revenue focus
Shared services optimisation
Programme
Detailed planning - 2004
All improvements implemented during 2005
Full financial benefits in 2006
Crucial in strong Rand environment
7
EXECUTIVE DIRECTOR OPERATIONS
HARNESSING THE POWER OF THE EARTH
8
SAFETY & ENVIRONMENT
Safety
Fatalities at all time low
Lost Day Injury Frequency Rate (LDIFR) at record low level
Environment
Environmental management programmes approved for all operations
ISO Certification
4 Business units certified ISO 14001
3 Business units certified OSHAS 18001
All operations by December 2004
Zero tolerance key focus
Fatalities
LDIFR
64
8
4
1
FY00 FY01 FY02 FY03 12M04
3.47 3.133.55
4.59
2.3
FY00 FY01 FY02 FY03 12M04
9
IRON ORE MARKETS
Strong growth in global blast furnace output
Continued growth in Chinese imports of iron ore (148 Mt last year)
Price increase of 18.6% effective 1 April 2004
Global blast furnace output
Source: AME
0
200
400
600
800
1999 2001 2003 2005f
Mt
EU 15 China Japan Other
Kumba well positioned for blast furnace demand
10
IRON ORE OPERATIONS
Total production exceeds 30 Mt
New record at Sishen -27.5 Mt
Exports influenced by stock build-up
Strong domestic sales
Continued growth in iron ore output
Total production and exports
8
10
12
14
16
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Export sales Production
11
0
5
10
15
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Kumba Other
IRON ORE EXPORT CHANNEL
Record tonnage railed of 21.9 Mt
Port expansion on track for completion by end of 2005
Negotiations underway for further 12 Mtpa expansion by 2008
Sishen-Saldanha rail performance
Infrastructure expansion is key to future growth
12
COAL MARKETS
Total sales to Eskom -14.4 Mt
Record sales to Matimba -13.9 Mt
Strong domestic and international demand
Thermal coal and coke prices (US$/t)
Sources: SA Coal Report, CRU
20
30
40
50
60
70
80
50
150
250
350
450
RBCT thermal coal FOB
Chinese market coke exports
13
COAL OPERATIONS
Excellent safety results at each coal mine
Total coal production exceeds 19 Mt
Annual record production at Grootegeluk andLeeuwpan
Production volumes
5
6
7
8
9
10
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Grootegeluk LeeuwpanTshikondeni
Solid operating performance at all mines
14
HEAVY MINERALS MARKETS
Signs of recovery in pigment market
Zircon, rutile and pig-iron in strong demand
Titania slag market over-supplied
First sales of slag and pig-iron
Good sales of synthetic rutile
Zircon and pigment prices (US$/t)
Source: TZMI
360
380
400
420
440
460
480
Q4
01
Q2
02
Q4
02
Q2
03
Q4
03
1000
1200
1400
1600
1800
Zircon Pigment
15
Excellent synthetic rutile and pigment production at Tiwest
Good growth in slag and pig-iron production from SA operations
Planned shut of furnace 2 for improvements and repair
Heavy minerals production
Good growth in production of key products
HEAVY MINERALS OPERATIONS
0
10
20
30
40
50
60
70
80kt
1H 2H
16
ZINC MARKETS
US$ zinc price recovery
Depressed Rand price
Low treatment charges prevail
Zinc metal price
Source: LME
Challenging market conditions persist
700
800
900
1000
1100
1200
1H022H02 1H03 2H031H04 2H04
US$/t
5000
6000
7000
8000
9000
10000R/t
17
BASE METALS OPERATING RESULTS
Sustained record production at Rosh Pinah
Chifeng refinery expansion on schedule
Zincor metal production affected by concentrate quality
Zn metal
(kt)
Zn conc.
(kt)37 38 37
54 5467
1H02 2H02 1H03 2H03 1H04 2H04
Rosh Pinah
54 51 58 57 55 52
10 22
1H02 2H02 1H03 2H03 1H04 2H04
Zincor Chifeng
Refinery in China contributes to zinc metal output
18
INDUSTRIAL MINERALS
Dolomite sales
(Mt)
FeSi production
(t)Good production levels maintained
Solid financial contribution
0.66 0.650.67 0.65 0.66 0.67
1H02 2H02 1H03 2H03 1H04 2H04
19182415
2647 2671 28112703
1H02 2H02 1H03 2H03 1H04 2H04
19
EXECUTIVE DIRECTOR FINANCE
HARNESSING THE POWER OF THE EARTH
20
REVENUE
22)8921 087Base Metals
13)7 4698 454Total
29)312275
4021 189
Heavy Minerals - Ticor SA- Ticor Ltd
9.016.86R/US$ exchange rate realised
(80)408Other
12)7887Industrial Minerals
7)1 6381 747Coal
(7)4 2343 934Iron Ore
% ChangeFY0312M04R million
21
EBIT / MARGIN
(9)(45)Base Metals
7)1 744)1 865)Total EBITDA
(in Rand) (%)Rm)(%)Rm)
16
27
814
17
21
13
23
6
18
17
97)24)38)
(25)75)
Heavy Minerals - Ticor SA- Ticor Ltd
1 101)
93)
20)
310)
673)
12M04
(7)1 189)Total EBIT
(46)Other
(5)21)Industrial Minerals
11)279)Coal
(24)882)Iron Ore
% ChangeFY03
22
EBIT COMPARISON
R million
Production cost
Sales growth and cost focus
1101251189 (67)192169(166)
262
975 (1082)
(240)(156)
1168
FY
03 E
BIT
Sal
es
Pric
e
Exc
hang
e ra
te
Infla
tion
Vol
ume
Dis
trib
utio
n co
st
Tic
or L
td
Cos
t sa
ving
s
Goo
dwill
"Cor
e" E
BIT
Non
-rec
urrin
g ite
ms
12M
04 E
BIT
23
CURRENCY IMPACT
Adjusted for:
(809)Price increases
-)189)Non-recurring items
-)(122)Asset disposals
17)17)Comparable EBIT margin
1 262)1514)Comparable EBIT
1 162)Realised exchange rate impact
73)(7)Unrealised translation loss/(gain)
1 189)1 101)EBIT
FY0312M04R million
Rand appreciation reduces margin
24
EARNINGS
(26)718)528)Attributable earnings
(27)242)177)Attributable earnings per share (cents)
(23)Minority interest
(23)718)551)Profit after taxation
(10)(229)(253)Taxation
2)(29)Equity (loss)/income
(10)(244)(268)Net financing cost
(7)1 189)1 101)EBIT
% ChangeFY0312M04R million
Total dividend for the period 55 cps
25
HEADLINE EARNINGS
66)33)Goodwill and exceptionals
-)24)Closure cost
(2)(103)Net surplus on asset disposals
2)98)Impairment charges
297)298)Average number of shares in issue (million)
(26)264)195)Headline earnings per share (cents)
(26)784)580)Headline earnings
Post tax adjustments:
(26)718)528)Attributable earnings
% ChangeFY0312M04R million
HEPS 195 cps
26
CASHFLOW
(559)-)Net impact of Ticor Ltd consolidation
-)133)Share issue
44)208)Asset disposals
2 374)2 252)Closing net debt
(1 231)122)(Increase)/decrease in net debt
(110)36)Non cashflow movements
(264)(314)Other capital expenditure
(1 122)(759)New capacity
Net cash used in investing activities
780818)Net cashflow from operating activities
1 143)2 374)Opening net debt
FY0312M04R million
Positive operational cashflow
27
RATIOS
3936Net debt / equity (%)
1511Return on equity - attributable income (%)
7.17.0EBITDA (times)
4.94.1EBIT (times)
Net financing cost cover
2825EBITDA (%)
2217EBIT (%)
Margin excluding captive arrangements
FY0312M04
Solid financial metrics
28
CHIEF EXECUTIVE
HARNESSING THE POWER OF THE EARTH
29
STRATEGY
EmpowermentMPRDA - effective 1 May 2004 - Kumba well placed to conformCoordinating with Anglo on empowerment ownership process
Iron ore growthHope DownsNorthern Cape expansion projects
Coal growthInyanda Coal JVLeeuwpan expansionGrootegeluk market coke project
Heavy minerals: FairbreezeLonger term potential
Iron ore Faleme (Senegal)
Heavy minerals Toliara Sands (Madagascar)Coking coal - Moranbah South (Australia)
Robust project pipeline
30
OUTLOOK
Positive factors
Strong commodity markets
Sustained excellent operating performance
Business improvement initiatives
BUT: Rand strength and volatility poses major risk to the resource sector
Strain on cash flow from operations
Impact on new projects
Therefore, if the Rand stays at recent levels, we are unlikely to improve on earnings
32
33
REVENUE CONTRIBUTION
FY0312M04
56%
1%1%12%
8%
22%
46%
21%
19%
13% 1%
Iron oreCoalHeavy mineralsBase metalsIndustrial mineralsOther
34
EBIT CONTRIBUTION
FY0312M04
59%
8%2%
4%
27%
Iron oreCoalHeavy mineralsBase metalsIndustrial mineralsOther
71%
2%5%
22%
35
IRON ORE PHYSICAL INFORMATION
Production volumes Sales volumes
02468
10121416
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Sishen Thabazimbi
02468
10121416
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Exports Local
36
COAL PHYSICAL INFORMATION
Production volumes Sales volumes
0
2
4
6
8
10
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Eskom Domestic Export
0
2
4
6
8
10
1H02 2H02 1H03 2H03 1H04 2H04
Mt
Thermal Coal Coking Coal
Other
37
HEAVY MINERALS INFORMATION
Production volumes Sales volumes
0
100
200
300
400
500
Ticor SA Ticor Ltd
0
20
40
60
80
100
Ticor SA Ticor Ltd
38
DEPRECIATION PER SEGMENT
216Corporate
644
6
45
191
148
248
12M04
532
6
41
92
137
235
FY03
Total
Industrial Minerals
Base Metals
Heavy Minerals
Coal
Iron Ore
R million
39
CAPITAL EXPENDITURE
199274Group (other)
1 3861 073
923485Ticor SA
Expansion
264314Sustaining and environmental
FY0312M04R million
40
DEBT STRUCTURE
1 0232007630)Ticor Ltd
472
2 252)Net debt
(1 238)Cash and cash equivalents
3 4903 490)Total debt
626After 20072 188-)Short term
3 490)
5562006921 126)Ticor SA project finance
81320053191 734)Corporate
2004Long term
Maturity profileUndrawnDrawnR million
41
PROJECT CAPITAL EXPENDITURE
R91m2005Leeuwpan expansion
US$950m2010Faleme
R516m2007Fairbreeze
R344m2005Grootegeluk market coke project
R186m2007Inyanda Coal JV (50%)
R2.0bn2005Sishen South
R2.4bn 2007Sishen Expansion Project (SEP)
AU$1.7bn2007Hope Downs
Estimated capital cost
Implementation date (start)
Project
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