2015 Half Year Results Presentation 19 AUGUST 2015 CAPRAL LIMITED - - PowerPoint PPT Presentation

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2015 Half Year Results Presentation 19 AUGUST 2015 CAPRAL LIMITED - - PowerPoint PPT Presentation

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2015 Half Year Results Presentation 19 AUGUST 2015 CAPRAL LIMITED 1 19 August 2015 CAPRAL HALF YEAR RESULTS GENERAL INFORMATION Important Notes Footprint This presentation includes forward-looking estimates that are Darwin subject to

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19 August 2015 CAPRAL HALF YEAR RESULTS

19 AUGUST 2015

CAPRAL LIMITED

2015 Half Year Results Presentation

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19 August 2015 CAPRAL HALF YEAR RESULTS

GENERAL INFORMATION

This presentation includes forward-looking estimates that are subject to risks, uncertainties and assumptions outside of Capral’s control and should be viewed accordingly. Trading EBITDA is the Statutory EBITDA adjusted for signifj- cant items that are material items of revenue or expense that are unrelated to the underlying performance of the business. Capral believes that Trading EBITDA provides a better understanding of its fjnancial performance and allows for a more relevant comparison of fjnancial performance between fjnancial periods. These items are LME and Premium revaluation, and abnormal costs relating to restructuring that are non-recurring in nature. Trading EBITDA is presented with reference to the Australian Securities and Investment Commission Regulatory Guide 230 “Disclosing non-IFRS fjnancial information” issued in December 2011.

Darwin Cairns Townsville Mackay Slacks Creek Bremer Park Gold Coast Newcastle Rockdale Erskine Park Laverton Angaston Welshpool Canning Vale Wangara Bibra Lake Kilburn Dandenong Hobart Campbellfield Penrith Parramatta Extrusion site Warehouse/ Aluminium Centre Corporate office Minto Austex Dies Kunda Park

Footprint Important Notes

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19 August 2015 CAPRAL HALF YEAR RESULTS

OVERVIEW OF RESULTS

SIX MONTHS TO JUNE 2015

Housing market is strong but industrial markets are soft

  • Dwelling commencements on track to hit 210,000 YE June 20152
  • Detached residential housing up 10%
  • Other residential (apartments) up 25%
  • Non-residential building activity declined by 13%²
  • Business conditions remain soft in the manufacturing, marine and

transport sectors

Highly competitive environment

  • Continued suspected dumping of aluminium extrusions
  • Excess domestic capacity continues to adversely impact margins

$4.1m Trading EBITDA profjt in fjrst half $2.6m EBITDA

  • Trading EBITDA1 profjt of $4.1m (2014: $2.6m)
  • EBITDA profjt of $2.6m (2014: $2.1m)
  • Volumes up 1.5% on H1 2014
  • Improved housing market driving volume increase
  • Metal cost increases (~25% higher vs H1 2014) adversely impacted margins

Net loss of $1.5m

  • Net loss of $1.5m (2014: $2.1m loss) includes:
  • LME and Premium revaluation (including Forex impact) of negative $1.2m
  • Restructuring costs of $0.3m
  • Depreciation of $3.5m
  • Finance costs of $0.6m

Safety performance remains key focus

  • TRIFR³ of 10.0 at HY15 (HY14: 4.5)
  • Ongoing focus on leading safety indicator management

3 TRIFR is total reportable lost time and medically treated injuries per million work hours 1 See Important Notes (page 2) and reconciliation to EBITDA (page 4) 2 Source: BIS Shrapnel May 2015 forecast

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19 August 2015 CAPRAL HALF YEAR RESULTS

FINANCIAL SUMMARY

SIX MONTHS TO JUNE 2015

2015 Sales Volumes - External (‘000 tonnes) 27.4 Sales Revenue 194.7 Depreciation/Amortisation (3.5) EBIT (0.9) Finance Cost (0.6) (1.5) $m LME and Premium Revaluation EBITDA (1.2) 2.6 2014 27.0 176.3 (3.6) (0.6) $m (0.3) 2.1 (1.5) (2.1) Trading EBITDA 2.6 4.1

1

Loss after Tax

2

Abnormals (0.2) (0.3)

H1 H1

3

2 Included in other expenses 3 Restructuring costs - included in Other Expenses 1 See Important Notes (page 2)

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19 August 2015 CAPRAL HALF YEAR RESULTS

CASH FLOW IMPACTED BY HIGHER WORKING CAPITAL

$m Jun 14 EBITDA Working Capital Finance Cost Equity Compensation Amortisation Other Operating Cash Flow Capex Spend Decrease in Net Cash 6 months to 2.1 (4.3) (0.6) 0.3 0.2 (2.3) (1.6) (6.8) Acquisition (2.9) $m Jun 15 2.6 (10.0) (0.6) 0.3 0.1 (7.6) (1.6)

  • (9.2)

Working Capital increased due to higher metal costs and sales revenue Balance sheet with a positive net cash balance1

¹ Intramonth debt levels up to $19.5m

The fjnance facility with GE is primarily utilised for working capital funding

$m $m $m Jun 14 Dec 14 Jun 15 Net Assets 107.7 112.9 111.5 Net Cash 7.8 16.5 7.3 Franking Credits 27.1 27.1 27.1 Accumulated unrecognised tax losses 292.8 295.8 289.6 $m $m Balance Capral Finance Facilities Limit Jun 15 Dec 14 GE Revolver 60 10.1 Nil Jun 14 7.6

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19 August 2015 CAPRAL HALF YEAR RESULTS

LEVERAGE TO RECOVERY IN RESIDENTIAL CONSTRUCTION

* SOURCE: BIS SHRAPNEL, ABS ¹ June 2015

2010 2011 2012 75 100 125 150 200 175 155 152 ‘000

Underlying demand

198 2013 2014 175 25 50 207 2015E*¹ 169 225

RECOVERY STARTED IN 2013 AND ANTICIPATED TO CONTINUE THROUGH 2015 MONTHLY DWELLING APPROVALS AND QUARTERLY DWELLING COMMENCEMENTS

March 2010 June 2010 June 2011 March 2011 Sept 2010 Dec 2010 Dec 2011 March 2012 Sept 2011 June 2012 Sept 2012 Dec 2012

10,000 13,000 14,000 15,000 16,000 11,000 12,000

MONTHLY UNITS

APPROVALS COMMENCEMENTS

Source: ABS and BIS Shrapnel March 2013 June 2013

17,000 18,000

Sept 2013 Dec 2013 March 2014 June 2014 Sept 2014 Dec 2014 BIS Shrapnel forecast March 2015

19,000 20,000

June (F) 2015 Sept (F) 2015

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19 August 2015 CAPRAL HALF YEAR RESULTS

METAL COSTS CONTINUE TO IMPACT MARGINS

  • The rapid rise in metal costs has not been fully

recovered in sales price

  • Both LME and Premiums rose throughout 2014
  • The weaker AUD added to the metal cost increase
  • From Q1 2014 to Q1 2015:
  • LME rose from USD $1,708t to USD $1,800t
  • MJP rose from USD $225t to USD $425t
  • LME and Premiums have fallen in Q3 2015

0.00 0.50 1.00 1.50 2.00 2.50 3.00 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 A$/kg LME MJP Premium (Major Japanese Ports)

Metal Cost (AUD - Quarterly Average)

2012 2013 2014 2015 Source: London Metal Exchange, Reserve Bank of Australia, Reuters

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19 August 2015 CAPRAL HALF YEAR RESULTS

ALUMINIUM EXTRUSION DEMAND IS RECOVERING FROM CYCLICAL LOW LEVELS

  • Extrusion Market in 2015 is forecast to grow

but still ~13% below 2007 high

  • The housing sector is strong with dwelling

approvals exceeding 200,000 units for calendar year 2014

  • An increase in apartments relative to houses

has increased the lag between approval and completion and reduced the intensity of aluminium extrusions

  • Key industrial sectors (manufacturing, marine

and transport) remain soft

  • Increasing level of fabricated products being

imported to the detriment of local aluminium supply Note:

  • Capral’s estimated share at 28% of the domestic

extrusion market remains steady

  • New domestic extrusion capacity has been

commissioned over recent years, including extrusion capability installed by traditional Capral customers

  • Import market share has fallen to below 40% as

a result of anti-dumping measures.

2007 2008 2009 2010 2011 20 40 60 80 29.3 32.7 62.0 30.3 28.8 22.5 28.1 50.6 26.725.7 23.0 52.4 59.1 150 175 200 ‘000 Tonnes PA 200 183.3 165.2 171.5 160.5 ALUMINIUM EXTRUSION MARKET CAPRAL EXTRUSION PRODUCTION H2 FY 156.0 22.4 45.4 H1 2012 20.5 125 21.7 42.2 2013 2014 160.9 20.6 Forecast 167.9 22.2 42.8 22.7

(Based on BIS Shrapnel forecasts and GDP projections)

23.0 45.7 175.5 2015 e 22.7

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19 August 2015 CAPRAL HALF YEAR RESULTS

  • Best aluminium product offer
  • Leading market share position
  • Long term customer relationships
  • Experienced and committed workforce
  • Commitment to continuous improvement and

customer service

  • National extrusion manufacturing footprint
  • National distribution network
  • Continue to reduce cost base
  • Complete OSA integration
  • Lean manufacturing drive to world class productivity
  • Optimise the supply chain to reduce inventory levels
  • Leverage our technical expertise with key customers
  • Improve customer interface tools
  • Leverage the housing cycle upswing
  • Grow the internal distribution channel to market
  • Develop innovative new products
  • Develop value-add capability both locally and overseas

and PURSUE A BETTER ANTI-DUMPING OUTCOME

BUILD

On our strengths

OPTIMISE

What we do

GROW

In the future

KEY STRATEGIC INITIATIVES

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19 August 2015 CAPRAL HALF YEAR RESULTS

COMMISSION CONFIRMS CONTINUED DUMPING FROM CHINA

  • Case won in 2010 but the levels of duties imposed were low relative to

Canada and USA

  • Concerns around ongoing circumvention by importers are:
  • Duty Avoidance
  • Duty Absorption/ Sales at a loss

The impact of the imposed anti-dumping measures has been modest Key issues being pursued

  • Continuing to interact with Government around strengthening the anti-dumping regime
  • Continue to monitor and pursue anti-circumvention activities
  • Explore anti-dumping cases against other countries in the region

Response and Action

  • The Australian Government has pursued a signifjcant reform agenda
  • Capral initiated an inquiry by the Anti-Dumping Commission under new anti-circumvention

legislation against the largest exporter/importer of extrusions from China

  • In February 2015 duty avoidance by the largest exporter/importer was found and

substantial additional duties were imposed. Decision upheld on review

  • Extrusion exports from this exporter appear to have all but ceased. We estimate

around half of this volume may revert to local supply

  • Statement of Essential Facts released in August 2015 recommends continuation of

measures for a further fjve years

  • Today the Australian Government announced overall increased anti-dumping

measures effecting aluminium extrusion imports from China

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19 August 2015 CAPRAL HALF YEAR RESULTS

OUTLOOK

  • Housing commencements are forecast1 to be around 207,000 for the year to December

2015, up 5% on 2014. Detached housing up 1% and multi-residential up 9%

  • The weakening AUD is positive for local manufacturing and under normal circumstances

should assist Capral’s competitive position

  • Additional duties imposed on the largest Chinese exporter should have a positive impact,

as will continuation of measures at higher duty levels

  • We continue to drive cost out of the business and cost saving initiatives are targeted to
  • ffset infmation
  • The integration of the OneSteel Aluminium business will be completed during H2 2015
  • Aluminium raw material cost, both LME and Premium, has recently fallen. This will result

in a signifjcant devaluation of inventory in Q3 2015 impacting EBITDA

  • Capral expects to generate positive operating cash fmow in H2 2015
  • Full year Trading EBITDA² is forecast to be between $10m and $12m and EBITDA between

$5m and $7m, provided the current momentum in the housing market is maintained and the industrial sectors do not decline further.

1 BIS Shrapnel May 2015 forecast 2 See Important Notes (page 2)