saudi arabian mining company (ma’aden)1 earnings call presentation q2 2018 saudi arabian mining...
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Earnings Call Presentation Q2 201811
Saudi Arabian Mining Company (Ma’aden)Earnings Conference Call – Second Quarter 2018
July 26, 2018
Earnings Call Presentation Q2 201822
Reem M. AsaadHead of Investor Relations
Earnings Call Presentation Q2 201833
Forward looking statement
This presentation contains statements that are, or may be deemed to be, forward looking statements, including statements about the beliefs
and expectations of Saudi Arabian Mining Company (the "Company"). These statements are based on the Company's current plans,
estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks
and uncertainties and speak only as of the date they are made. As a result of these risks, uncertainties and assumptions, a prospective
investor should not place undue reliance on these forward-looking statements. A number of important factors could cause actual results or
outcomes to differ materially from those expressed in any forward-looking statements. The Company is not obliged to, and does not intend to,
update or revise any forward- looking statements made in this presentation whether as a result of new information, future events or otherwise.
This communication has been prepared by and is the sole responsibility of the Company. It has not been reviewed, approved or endorsed by
any financial advisor, lead manager, selling agent, receiving bank or underwriter retained by the Company. This communication is provided
for information purposes only. In addition, because this communication is a summary only, it may not contain all material terms and this
communication in and of itself should not form the basis for any investment decision.
The information and opinions herein is believed to be reliable and has been obtained from sources believed to be reliable, but no
representation or warranty, express or implied, is made with respect to the fairness, correctness, accuracy reasonableness or completeness
of the information and opinions. There is no obligation to update, modify or amend this communication or to otherwise notify you if
information, opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
You are strongly advised to seek your own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory
issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or
opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial
instrument, credit, currency, rate or other market or economic measure. Furthermore, past performance is not necessarily indicative of future
results. The Company disclaims liability for any loss arising out of or in connection with your use of, or reliance on, this communication.
These materials may not be published, distributed or transmitted and may not be reproduced in any manner whatsoever without the explicit
consent of Ma’aden’s management. These materials do not constitute an offer to sell or the solicitation of an offer to buy the securities in any
jurisdiction.
Non-IFRS Financial Measures
Some of the financial information included in this presentation is derived from Ma’aden consolidated financial statements but are not terms
defined within the International Financial Reporting Standards (IFRS) as applied In the Kingdom of Saudi Arabia. Such information is provided
as the Company believes they are useful measures for investors. A reconciliation of this information with the consolidated financial statements
is included in the presentation.
Earnings Call Presentation Q2 201844
Darren C. DavisPresident & Chief Executive Officer
Earnings Call Presentation Q2 201855
PRODUCTION
■ 103K ounces of gold, up 47% vs. Q2 2017
■ 236K tonnes of primary aluminium, up 7% vs. Q2 2017
■ 507K tonnes of ammonia, lower 8.6% vs. Q2 2017
■ 789K tonnes of ammonium phosphate fertilizer, up 18% vs. Q2 2017
■ 455K tonnes of alumina, up 30% vs. Q2 2017
STRONG COST
PERFORMANCE
STRONG
FINANCIAL
PERFORMANCE
■ Mixed picture on raw materials prices
■ Phosphate benefiting from lower raw materials costs
■ Aluminium business benefiting from full value chain integration and stable
operations despite increased raw materials costs
■ Underlying EBITDA Margin1 decreased slightly to 53%
OUTLOOK
■ Improved prices across the portfolio, year-on-year
■ Sales SAR 3,414 million, up 14% vs. Q2 2017
■ Operating income SAR1,045 million, up 29% vs. Q2 2017
■ Net profit SAR 630 million, up 45% vs. Q2 2017
■ Price outlook generally neutral but uncertainty due to trade tensions
■ Mansourrah & Massarah Gold Project BFS completed
■ International opportunities under review
1 see appendix for details
Strong operational performance
Earnings Call Presentation Q2 201866
1,428 1,5041,360
1,521
1,9471,815
52% 49%43%
47%55% 53%
0%
10%
20%
30%
40%
50%
60%
70%
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
EBITDA EBITDA Margin
SA
R m
illio
nR
ebase t
o 1
00 a
s o
n 1
Jan 2
017
Source: Bloomberg
Commodity price movement
Underlying EBITDA and margins
Mixed trends in the commodities markets despite volatility
Earnings Call Presentation Q2 201877
% Average quarterly change
Phosphate market remained strong in Q2
■ DAP prices have continued to move up with a $13/tonne improvement in Q2 versus Q1 (+2%).
■ Overall demand continues to be healthy including strong demand in India despite weakening of the Rupee.
■ Supply growth has been slower than anticipated which has also helped to support prices.
■ Chinese exports remain lower than 2017.
■ Sulphur prices have fallen in Q2 as have ammonia prices.
10% 1% 5% 8% 10%
2017
Q1 Q2 Q3 Q4 Q1 Q2
2018
2%
Average DAP Price Tampa Index (US$/t) 5 Jan 2017 – 28 Jun 2018
310
320
330
340
350
360
370
380
390
400
410
420
Source: Ma’aden SBU analysis, CRU , FMB and FERTECON
Earnings Call Presentation Q2 201888
Aluminium Price Movement (US$/t)
Source: Bloomberg, Ma’aden SBU analysis, CRU June 2018
% Average quarterly change
Aluminium market fundamentals remain strong
■ Aluminium prices were broadly flat q-o-q (+5%) but considerable volatility seen during Q2.
■ Some weakening in demand growth but slower growth in supply is offsetting and a small global deficit likely in 2018.
■ Trade tensions could outweigh the market fundamentals.
■ Alumina prices remain elevated (+35% in Q2) due to supply side issues which may take some time to resolve.
■ Raw material prices remain a concern, notably caustic soda, coke and pitch.
Al
Al2O31% 12% 13%
9% 3% 6%
33%
4%
14%
2%
2017
Q1 Q2 Q3 Q4 Q1 Q2
2018
35%
5%
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
200
250
300
350
400
450
500
550
600
650
700
Alumina Aluminium
Earnings Call Presentation Q2 201899 Source: Bloomberg, CRU June 2018, SBU secondary analysis
Both gold and copper prices under pressure
■ Gold prices have continued to move downwards, driven by rising interest rates.
■ Gold prices were -5% lower q-o-q.
■ In Q2 copper prices remained under pressure as fears over trade impacted demand expectations.
■ Fundamentals remain strong over the medium term but volatility in prices can be expected to continue.
Gold (US$/oz) and copper (US$/t) price movement % Average quarterly change
Au
2% 9% 12% -7% -1%
-1% 3% 2% 2% -5%
2017 2018
Q2 Q3 Q4 Q2Q1
Cu
0
7500
6500
6000
5500
1000
500
0
7000
1360
1340
1320
1300
1280
1260
Jul’17 Aug Sept Oct Nov JunFebJan’18Dec MayAprMar
Copper Gold
Earnings Call Presentation Q2 20181010
Ali S. Al-QahtaniChief Financial Officer
Earnings Call Presentation Q2 20181111
All of our businesses except phosphate grew profitability in
Q2-2018 compare to same quarter last year
Consolidated Phosphate
Q2-18vs.
LY Qtr.
vs.
Prev. Qtr.Q2-18
vs.
LY Qtr.
vs.
Prev. Qtr.
Sales (SRmn) 3,414 14% -4% Sales (SRmn) 1,484 0% -4%
EBITDA* (SRmn) 1,815 21% -7% EBITDA* (SRmn) 725 -6% -6%
EBITDA margin 53% 3% -1% EBITDA margin 49% -3% -1%
40% of Group EBITDA
Aluminium Gold
Q2-18vs.
LY Qtr.
vs.
Prev. Qtr.Q2-18
vs.
LY Qtr.
vs.
Prev. Qtr.
Sales (SRmn) 1,435 23% 1% Sales (SRmn) 495 51% -17%
EBITDA* (SRmn) 826 43% -1% EBITDA* (SRmn) 263 72% -22%
EBITDA margin 58% 8% -1% EBITDA margin 53% 7% -4%
46% of Group EBITDA 14% of Group EBITDA
Earnings Call Presentation Q2 20181212
434
274
110
-194 -70
186
-55-4 -10 -49
1 7 630
Net income bridge Q2 2018 vs. Q2 2017SAR MN
Growing volumes and improved prices driving earnings
+45%
Key factors
Aluminium ↑
Alumina ↑
APF ↑
Gold ↑
Key factors
Alumina ↑
APF ↑
Gold ↑
Key factors
MPC
Gold
Price
effect
Volume
effect*
Cost
effect
Sales, mktg.
& log.
G&A Finance
costs
OthersNet
profit
Q2-17
Net
profit
Q2-18
Impair &
write-off
Depn. &
amort.
Explo.
& tech.
serv.
Inventory
Change
* Including the volume effect of main raw materials
↑
↑
Earnings Call Presentation Q2 20181313
754 13
-175
19 4 44
-28 -16 -7 -36
19 39 630
Net income bridge Q2 2018 vs. Q1 2018SAR MN
Decline in sales volumes and average realized prices
resulted in lower earnings
-16%
Key factors
APF ↑
Alum ↑
Alumina ↑
IM ↑
Key factors
Aluminium
Ammonia
Gold
IM
Price
effect
Volume
effect*
Cost
effect
Sales, mktg.
& log.
G&A Finance
costs
OthersNet
profit
Q1-18
Net
profit
Q2-18
Impair &
write-off
Depn. &
amort.
Explo.
& tech.
serv.
* Including the volume effect of main raw materials
Inventory
Change
↑
↑
↑
↑
Earnings Call Presentation Q2 20181414
Operational performance
Earnings Call Presentation Q2 20181515
Phosphate Performance
Ammonium phosphate fertilizer (Kt)
Ammonia (Kt)
668
755789
733 728 750
355
393406
200
250
300
350
400
450
400
450
500
550
600
650
700
750
Q2 2017 Q1 2018 Q2 2018
Production Sales Avg Prices
555 598
507
393 350301
329 328
277
100
150
200
250
300
350
400
450
500
0
100
200
300
400
500
600
700
Q2 2017 Q1 2018 Q2 2018
Production Sales Avg Prices
US$/t
US$/t
Operational performance
■ Record production and sales volume of DAP both q-o-q
and over corresponding quarter of last year.
■ Ammonia production is consistent but low in Q2 2018
due to a planned turnaround shutdown.
■ Ammonia sales volume is lower in line with the
production and increased consumption in non-
commercial DAP from MWSPC.
Cost performance
■ During Q2, cash cost of ammonium phosphate fertilizer
was lower compared to Q1 in line with softening in
sulfur price.
Earnings Call Presentation Q2 20181616
Aluminium Performance
Primary aluminium (Kt)
Alumina production (Kt)
US$/t
US$/t
Operational performance
■ During the Q2 2018, 236K tonnes of primary
aluminium were produced, an increase of 8%
compared to the same quarter last year.
■ Produced 455K tonnes of alumina, an increase of 30%
compared to same quarter last year and exports of
63K tonnes made during this quarter.
■ Ma’aden continues to focus on increasing production
from both the smelter and the alumina refinery above
nameplate capacity.
Cost performance
■ During the quarter, aluminium cash costs increased
due to higher input costs, in particular alumina, pitch
and coke prices.
■ Alumina cash cost also increased due to the higher
production despite key input prices notably caustic
soda compare to same quarter last year.
Projects
■ The rolling mill operation continues to ramp up
production.
219 233 236
155 156 151
2,018
2,269
2,337
1,800
1,900
2,000
2,100
2,200
2,300
2,400
-
50
100
150
200
250
Q2 2017 Q1 2018 Q2 2018
Production External Sales Avg LME Prices
349 389
455
63 63
395
484
-
100
200
300
400
500
600
-
50
100
150
200
250
300
350
400
450
500
Q2 2017 Q1 2018 Q2 2018
Production External Sales Avg API Prices
Earnings Call Presentation Q2 20181717
Gold and Copper Performance
Gold (‘000 ounces)
Copper volumes (Kt)¹
¹ Ma’aden attributable production & sales @ 50%
US$/oz
$/t
Operational performance
■ Gold production reached 103k ounces in Q2, a 47%
increase compared to the same quarter last year.
■ Production growth reflects the continued ramping up of
the Ad Duwayhi mine compared to the same quarter
last year.
■ Copper production reached 12kt of copper from the
Jabal Sayid operations, a 13% increase compared to
the same quarter last year.
Cost performance
■ Cash costs per ounce of gold decreased, primarily as a
result of higher volumes and higher grades at the Ad
Duwayhi mine compared to the same quarter last year.
■ Cash costs of copper also continued to decline.
70
118103
69
118103
1263
1348
1279
1000
1100
1200
1300
1400
1500
0
20
40
60
80
100
120
140
Q2 2017 Q1 2018 Q2 2018
Production Sales Avg Prices
10.612.0
12.0
10.7
12.5
7.35974
65256856
4000
5000
6000
7000
8000
9000
0
2
4
6
8
10
12
14
Q2 2017 Q1 2018 Q2 2018
Production Sales Price
Earnings Call Presentation Q2 20181818
Financial position
Earnings Call Presentation Q2 20181919
7,3
33
49,8
81
2,1
25
8,6
31
27,2
52
Current
Liability
All numbers are in SAR millions Long term borrowing
By business By source
12,9
14
44,1
28
26,2
94
11,8
88
Capital work
in progress
Mine, plant,
property &
equipment
Current assets
Other non
current assets
Equity
Total Debt
Other non current
liability
Assets Equity and
liabilitiesAs at 30 June 2018
Balance sheet
95%
5%
Floating Fixed
51%
49%
SAR USD
Type of loan
Financial position
Non controlling
interest
Banks,
59%
PIF, 33%
SIDF, 8%
Banks PIF SIDF
MWSPC, 34%
MAC, 20%
MPC, 18%
MBAC,
15%
MRC, 9%
MIC, 2%
MGBM, 2%
Earnings Call Presentation Q2 20182020
125 7 7 6 6
45 45
54 54
5353
57% 56%
62% 61% 60% 60%
0%
10%
20%
30%
40%
50%
60%
70%
0
10
20
30
40
50
60
2014 2015 2016 2017 Q1 2018 Q2 2018
Cash & Cash Equivalent Long Term Borrowing Debt/Total Capital
6.1x8.2x12.6x11x9.2x 6.1x
Net debt1
SRbn
33 40 47 47 47
Capital Structure
■ Our ongoing refinancing program continues and in July 2018 we successfully closed the refinancing of Ma’aden
Bauxite & Alumina Company on much improved terms
■ Also in July we executed the first of a series of interest rate hedges
■ Our liquidity position remains strong with cash on hand of SAR6B and our undrawn SAR7.5B corporate revolver
1 see appendix
2 2016 restated as per IFRS
Net debt: EBITDA
47
Earnings Call Presentation Q2 20182121
Summary
Fundamentals for our commodities remain strong
▪ Fundamentals in phosphate, aluminium, alumina and copper all remain strong
▪ Some weakness in gold and ammonia but both remain highly profitable
▪ Global trade tensions are a concern for the balance of the year
Strong production performance
▪ Gold production levels stabilising after ramp up of the Ad-Duwayhi mine
▪ Strong production outlook at MPC, Aluminium Smelter and Alumina Refinery
▪ Some challenges in Wa’ad Al Shamal production but ramp up continues
Maintaining pressure on costs
▪ With stable production, focus continues on efficiency and cost reduction
▪ Focus on digitisation initiatives to improve performance
Outlook for growth remains strong
▪ Mansourrah & Massarah Gold project BFS completed
▪ International opportunities under review
Earnings Call Presentation Q2 20182222
Q&A
Earnings Call Presentation Q2 20182323
Appendix
Earnings Call Presentation Q2 20182424
Schedule debt repayment profile
As at 30 June 2018
482
675 695
1,117 1,164
1,565
1,946
2,227
1,227
1,717
1,004
721 715
390
-
500
1,000
1,500
2,000
2,500
3,000
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
USD Millions
MIC
MGBM
MWSPC
MBAC
MRC
MAC
MPC
Earnings Call Presentation Q2 20182525
Sales summary
(All numbers are in ‘000 tonnes except as mentioned)
Particulars Q2 2018 Q2 2017
%
change
Phosphate business
Ammonium phosphate fertilizer 750 733 2%
Ammonia MPC 107 111 -4%
Ammonia MWSPC 194 282 -31%
Aluminium business
Alumina 63 0 100%
Primary Aluminium 151 155 -3%
Precious and base metals business
Gold (‘000 ounces) 103 69 49%
Copper 7.3 10.7 -32%
Earnings Call Presentation Q2 20182626
Non-IFRS Financial Measures
Non-IFRS Financial Measures
Some of the financial information included in this presentation is derived from Ma’aden consolidated
financial statements but are not terms defined within the International Financial Reporting Standards
(IFRS) as applied In the Kingdom of Saudi Arabia. Such information is provided as the Company
believes they are useful measures for investors. An explanation of these terms is provided below.
■ Debt / Total Capital = (Long-term borrowings + Current portion long-term borrowings) / (Long-term
borrowings + Current portion of long-term borrowings + Total equity)
■ Operating Cashflow = Net cash generated from operating activities
■ Underlying EBITDA Earnings before interest, tax, depreciation and amortization, impairment and
asset write offs.
■ Underlying EBITDA Margin: Underlying EBITDA / Sales
■ Net Debt = (Short-Term Debt + Long-Term Debt) - Cash and Cash Equivalents
Earnings Call Presentation Q2 20182727
Thank You!Copyright © 2018 Ma’aden. All rights reserved.