Pretoria Portland Cement Company Limited Beyond 2010 Unaudited interim results

Transcription

1 Pretoria Portland Cement Company Limited Beyond 2010 Unaudited interim results for the half-year ended 31 March

2 2009 A TALE OF 2 HALVES 1 ST HALF 2009 Group financial overview Cement Market Production and costs Capital projects Lime and aggregates Picture Precast Yard for the Gautrain 2

3 H Financial Highlights Revenue R3.26bn 12% [R2.92bn] EBITDA* R1.24bn 5% [R1.18bn] EBITDA margin* 38.2% [40.5%] Cash generated from operations R1.03bn (7%) [R1.11bn] Operating profit* R1.10bn 2% [R1.08bn] Interim dividend 45 cps [45 cps] * Excluding impact of the BBBEE IFRS 2 charges 3

4 H Summary Income Statement R million R million % Change Revenue EBITDA Depreciation and amortisation (145) (104) 38 BBBEE IFRS 2 charges (487) - Operating profit (43) Finance costs (180) (57) (216) Investment income (34) Profit before exceptional items (56) Exceptional items - 1 Share of associate s retained profit 4 7 Taxation (363) (413) (12) Profit for the period (83) HEPS (cents) (excluding BBBEE IFRS 2 charges) (16) CASH EARNINGS PER SHARE (cents) (excl. BBBEE IFRS 2 charges) (3) DPS (cents)

5 H Summary Balance Sheet ASSETS Non-current assets 2009 R million 2008 R million Property, plant and equipment Other Current assets Inventories Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Capital and reserves Non-current liabilities Long-term borrowings Deferred taxation Provisions and other non-current liabilities Current liabilities Short-term borrowings Trade and other payables TOTAL EQUITY AND LIABILITIES

6 H Summary Cash Flow Statement Cement/ clinker low last year end + maintenance items 2009 R million 2008 R million Cash flow from operating activities Operating cash flows before movement in working capital Net investment in working capital (232) (88) Net (finance costs) / investment income (97) 9 Taxation paid Deferred tax benefit of Batsweledi (398) (555) Cash available from operations Capital investment and other movements (396) (433) Net funding raised BBBEE Trust s shares consolidated as treasury shares (1 185) - Acquisition of treasury shares (by PPC subsidiary) - (589) Net cash flow before dividends paid Dividends paid (956) (1 166) Net cash inflow/(outflow) 150 (833) 6

7 H Financial Overview Continued strong cash generation Cash generated from operations and EBITDA +5% HEPS -16% (excl. BEE charges) Sales volumes Regional cement sales -6% Lime burnt product -36% and Operating Profit down 60% Input cost pressures peaked Cement R/t delivered cost ~24% Y-on-Y (but moving down) Operations Dwaalboom kiln2 performing - 3 old inland kilns shut-down to match demand Cash finance charges/ investment income (net): R97m on increased borrowings mainly expansion projects related 7

8 H Segmental Analysis* * Excluding impact of BBBEE IFRS 2 charges n.b. Dwaalboom K2 depreciation R32m 2009 R million 2008 R million % change 2008 Year EBITDA % Cement EBITDA margin 40.3% 42.0% -1.7% pts 42.5% Operating profit % EBITDA % 167 Lime EBITDA margin 19.2% 31.4% -12.2% pts 27.9% Operating profit % 141 EBITDA % 93 Aggregates EBITDA margin 25.0% 28.9% -3.9% pts 33.1% Operating profit % 82 EBITDA % GROUP EBITDA margin 38.2% 40.5% -2.3% pts 40.7% Operating profit %

9 H Cement Industry Regional Sales Regional industry cement volumes for the 6 months down 7.5% Mpumalanga +8.6%, Botswana +14.2% Gauteng -15.5%, Western Cape -21.0% Construction sector +12% indicating demand from infrastructure projects Number of infrastructure projects now taking cement Medupi power station & area (H1 ~ tons), Gauteng, Mpumalanga & Limpopo road upgrades Major projects recently started Kusile power station, Ingula pumped storage Industry clinker and cement imports down to almost nothing 9

10 H Cement Industry Imports Cement and Clinker Imports kt Clinker Cement % of Regional Sales 18% 16% 14% 12% % 80 8% 60 6% 40 4% 20 2% 0% Mar-09 Jan-09 Nov-08 Sep-08 Jul-08 May-08 Mar-08 Jan-08 Nov-07 Sep-07 Jul-07 May-07 Mar kt less imports in period under review = 11% of regional sales 10

11 H Cement PPC Regional Sales PPC Regional sales -6% Preferred supplier to most major infrastructure projects Re-entered some exports markets but Rand strength making it less profitable Partially offset decline in the coastal markets Sold tons clinker Dwaalboom kiln 2 production allowed the planned shutdown of 3 older kilns Jupiter, Hercules kilns 4 & 5 average 39 yrs old De Hoek kiln 5 running intermittently lower demand in Western Cape 11

12 H PPC - Cement - Input Cost Increases Ranked in order of total impact Rand/ ton cement % change vs H1 08 Road distribution costs 24% (Diesel) 13% Coal (delivered) 63% Maintenance 28% Packaging 25% ESKOM/ Municipal Power 39% 12

13 H Cement Distribution cost increase Complex logistics in Q1 Market tightness generally made optimisation difficult Transported cement from the W. Cape when inland competitor shortage developed in Nov & Dec 08 Excess dedicated transport fleet has been downsized to match demand Some diesel reduction has been gained since January/ February Market transport rates have recently been trending softer (other than diesel costs) 13

14 H Dwaalboom Kiln 2 Progress Finished cost will be within budget Regularly achieves daily output above design capacity To April kiln has produced t of clinker ( tons cement equivalent) Achieved 83% availability in April Cash cost benefits exciting! Covered on slide 22 Dwaalboom Kiln 2 14

15 H Capital Projects Progress Ntšhafatso (Hercules) mill upgrade 330 kt/yr additional capacity Construction delays Output now only expected FY10 Capex increase of R95 m - Geotechnical/ piling problems Major escalations in contracts Clinker silo/ congested area delays Some increased scope Se Kïka (Riebeeck West) new 1,25mt/yr factory Nett additional capacity 700 kt/yr EIA report submitted, approvals awaited Limited Capex likely in 2010 New Vertical Roller Mill Hercules 15

16 H Lime and Aggregates Burnt product sales -36% due to lower demand from steel Q1 worst affected in line with lowest steel producing quarter Improvement expected in H2 09 as destocking cycle concludes World Steel Association predicting 2009 global demand decline at -14.9% Recent significant energy cost increases being recovered through long term supply contracts price adjustments Aggregate volumes -10% Reduced demand for metallurgical stone from steel industry Tighter market in Gauteng partially offset by demand from road construction Strong demand experienced in Botswana partially off-setting Gauteng decline 16

17 2009 A TALE OF 2 HALVES 2nd HALF 2009 Prospects Financial overview Cement Market Production and costs Capital projects Lime and aggregates Dividends and gearing Nelson Mandela Stadium Port Elizabeth 17

18 Prospects Regional Cement Demand Civil Construction R787bn Government infrastructure spend over next 3 years New regime must now deliver on housing and services Tokyo Sexwale appointment to head up Dept. of Human Settlement Housing Development Agency created and funded to acquire land Major infrastructure projects in progress or about to start Building - Residential Interest rates 3.5 percentage points off peak, still very high real interest rates and encouraging carry trade funds creating Rand strength Further interest rate cuts inevitable? Or exports and especially mining will continue to shrink SARB concerned about debt stressed consumers Building Non residential Hotels (10 City Lodges for 2010 World Cup, 3 hotels for Langa Sun Resort Hotels) Mixed use developments incl. residential (Cradle City R35bn over 7 years) New & upgraded retail developments 18

19 Prospects Industry Cement Regional Sales/Day to April 2009 Industry Regional Sales Per Day kt We anticipate Regional Industry Cement sales won t decline by more than 10% this financial year compared to Sep Aug Jul Jun May Apr Mar Feb Jan Dec Nov Oct PPC Regional Daily Sales - April Apr 27-Apr 25-Apr 23-Apr 21-Apr 19-Apr 17-Apr 15-Apr 13-Apr 11-Apr 09-Apr 07-Apr 05-Apr 03-Apr 01-Apr Public Holidays 19

20 Prospects Market Intelligence Building Plans Passed 2008 Category Sub Category Value (R m) % Value Cement* Cement (000 tons)** Dwelling-houses < 80 square metres Residential Dwelling-houses >= 80 square metres Flats and townhouses Other residential buildings Office and banking space Nonresidential Shopping space Industrial and warehouse space Other non-residential buildings Additions & Alterations Dwelling-houses Other buildings Total Total SA Cement Consumed Cement in Building Plans Passed as % of total SA cement sales 18% * University of the Witwatersrand Study 2006 and 2008 ** Calculated using a weighted average selling price of bags and bulk, delivered and through retail outlets 20

21 Prospects - Supply and Demand Mt Industry Demand Industry Maximum Capacity ---(Old PPC Kilns Retired) Completed Contracted / Building Imports 92% Utilisation Latest Revision : May PPC 1.25Mt/yr, Cimpor 0.6Mt/Yr: (2009) PPC Mill 0.3Mt/yr (2010) Lafarge 1Mt/yr (2010) Growth 7.4% -3.9% -10%? 0%? 6%? 21

22 Prospects Cement Costs/ Margins Potential cement cash cost savings in H2 Dwaalboom coal and electricity energy efficiency improvements between 20 25% vs the 3 kilns shutdown kiln total cash cost saving could benefit cement annual EBITDA % margin by the equivalent of 0.7 to 0.9 percentage points (pp) Balance of cement production Distribution costs, mining diesel, coal savings and reduced maintenance load in H2 after completing most annual shut-downs in H1 could add a further 1.2 to 1.6 pp to cement annual EBITDA % margin Focus is on extracting all possible savings no matter how small Should the strong Rand continue throughout H2 further cost savings could arise, but we should be cautious 22

23 Prospects Cement Costs/ Margins cont. Further meaningful cost reductions can be expected in 2010 and especially from falling coal prices and transport costs The benefit of the lower Dwaalboom cash cost will be in for a full year Cement prices Whereas only Q2 had the benefit of the January ~15% cost recovery price increase, H2 will have the benefit for rest of year In view of expected cost reductions and the current economic situation, it is possible that the normal mid year selling price increase may be deferred 23

24 Prospects Lime and Aggregates Lime sales to the steel industry should improve in H2 and early signs have been seen. It will be sometime before they get back to early 2008 levels Lime January price adjustments will be in for the half Aggregates should maintain a steady performance 24

25 Prospects - Capital Expenditure Dwaalboom Kiln 2 (Batsweledi) expansion st half nd half 2009 Full year 2010 Full year Hercules Mill (Ntšhafatso) expansion Riebeeck (Se Kïka) expansion - - -??? Other expansion projects EXPANSION CAPEX Replacement & environmental capex TOTAL CAPEX

26 Prospects Gearing and Dividends Future expansionary capital expenditure will continue to be funded through borrowings Current gross debt to EBITDA cover of 1.4 times is well within the stated target of 2 to 3 times cover Dividend cover will remain in the target range of 1.2 to 1.5 x earnings before non-cash IFRS 2 charges of R404 million Will consider the distribution of excess cash if and when this arises Level of shareholders equity and reserves will be the ultimate limiting factor until reserves increase (through issue of shares etc.) 26

27 THANK YOU QUESTION TIME 27

28 PPC 2009 Interim Results ANNEXURES 28

29 BBBEE transaction R2.7bn broad-based black ownership initiative - effected 15 December 2008 Combination of strategic black partners, PPC employees, communities, construction and related industry associations 15.29% of increased issued share capital, 15.1% black owned Impact on issued share capital New shares issued to strategic black partners, at par, with full economic and voting rights. ITO accounting treated as a separate class of shares for the calculation of EPS and HEPS Shares bought back by BEE Trusts in terms of Scheme of R31.32/ share - consolidated as treasury shares Impact of new BEE shares issued was reduced by PPC 2008 buybacks by a wholly-owned subsidiary - treated as treasury shares Effective dilution is ONLY 5.3% 000 s Shares R millions R5 R1 190 R753 29

30 BBBEE transaction (continued) Impact on statement of comprehensive income Variable interest rates were swopped for fixed interest rates to reduce interest rate exposure Dividends paid to certain internal trusts treated as an expense Impact on statement of financial position Pretoria Portland Cement Company Limited guaranteed part of the funding required for some of the Trust financing in the transaction Have to consolidate that part of the funding structure as a result of residual risk R1 190 million shares treated as treasury shares, including consolidated trusts Related funding raised as liabilities Total borrowings including BEE transaction still leave plenty of room for further gearing to the targeted level if necessary 30

31 Detail of Borrowings & Gearing 31 March 09* R million 8-year bullet loan (reduced short-term borrowings already in place) Redeemable preference shares issued in wholly-owned subsidiary 168 BBBEE SPV / Trusts redeemable preference shares and loans consolidated 939 Total funding raised with the BBBEE transaction Other borrowings Total borrowings Included in long-term borrowings Included in short-term borrowings Annual gross debt to EBITDA (excluding IFRS 2 charges) of 1.4 times are well within the targeted level of 2 to 3 times EBITDA * Total balance outstanding at 31 March 2009, net of costs 31

32 H Safety Statistics 6 Group Lost Time Injuries and Lost Time Injury Frequency Rate Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 LTIs (LHS) LTIFR (RHS) H H

33 Contacts John Gomersall Peter Esterhuysen Orrie Fenn Kevin Odendaal Tel Chief Executive Officer Chief Financial Officer Chief Operating Officer Investor Relations 33

34 Disclaimer This document including, without limitation, those statements concerning the demand outlook, PPC¹s expansion projects and its capital resources and expenditure, contain certain forward-looking views. By their nature, forwardlooking statements involve risk and uncertainty and although PPC believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forwardlooking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government action and business and operational risk management. While PPC takes reasonable care to ensure the accuracy of the information presented, PPC accepts no responsibility for any consequential, indirect, special or incidental damages, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence arising in connection with a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates, and the information published in this document is unaudited. 34