2016 FULL YEAR RESULTS PRESENTATION 23 FEBRUARY 2017 CAPRAL - - PowerPoint PPT Presentation

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2016 FULL YEAR RESULTS PRESENTATION 23 FEBRUARY 2017 CAPRAL - - PowerPoint PPT Presentation

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2016 FULL YEAR RESULTS PRESENTATION 23 FEBRUARY 2017 CAPRAL LIMITED 1 23 FEBRUARY 2017 CAPRAL FULL YEAR RESULTS GENERAL INFORMATION Important Notes Darwin This presentation includes forward-looking estimates that are subject to risks,

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23 FEBRUARY 2017 CAPRAL FULL YEAR RESULTS

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2016 FULL YEAR RESULTS PRESENTATION

23 FEBRUARY 2017

CAPRAL LIMITED

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23 FEBRUARY 2017 CAPRAL FULL YEAR RESULTS

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GENERAL INFORMATION

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

Important Notes

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 signifjcant 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 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.

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23 FEBRUARY 2017 CAPRAL FULL YEAR RESULTS

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OVERVIEW OF RESULTS

FULL YEAR TO DECEMBER 2016

Housing market remained strong, industrial markets are improving

  • Dwelling commencements increased to 226,500 in 20162
  • Detached housing and medium density steady
  • High density (apartments) up 9%
  • Non-residential building activity improved by 7%2
  • Business conditions in the industrial sectors are slowly improving

$20.3m Trading EBITDA1 $21.1m EBITDA

  • Trading EBITDA1 of $20.3m (2015: $13.0m)
  • EBITDA of $21.1m (2015: $5.1m)
  • Revenue up 5.5% on 2015
  • Volumes up 9.7%
  • Strong housing market driving volume increase

Net Profjt of $14.4m

  • Net Profjt after tax of $14.4m (2015: $2.5m loss) includes:
  • LME and Premium revaluation of $1.0m
  • Depreciation and amortisation costs of $5.9m
  • Finance costs of $0.9m

Safety performance remains key focus

  • TRIFR³ of 15.5 (2015: 13.3)
  • LTI frequency rate of 3.2 (2015:4.0)
  • Ongoing focus on strong safety culture and leading safety indicator management

3 TRIFR is total reportable lost time and medically treated injuries per million work hours 2 Source: BIS Shrapnel Dec 2016 forecast (two quarters delayed)

Highly competitive environment

  • Investigation into dumping of aluminium extrusions from Vietnam and Malaysia

delivered preliminary duties of ~13% in October 2016. Expect fjnalisation in fjrst half of 2017

  • Excess domestic extrusion capacity remains

1 See Important Notes (Page 2) and reconciliation of EBITDA (page 4)

Strong Cash Flow and Dividend declared

  • Operating Cash Flow $15.6m
  • Fully franked dividend of 1.25 cps declared
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FINANCIAL SUMMARY

TWELVE MONTHS TO DECEMBER 2016

2015 Sales Volumes - External (‘000 tonnes) 57.8 Sales Revenue 402.6 Depreciation/Amortisation (6.4) EBIT (1.3) Finance Cost (1.2) (2.5) $m Restructuring related cost Trading EBITDA (0.7) 5.1 2016 63.4 424.8 (5.9) (0.9) $m

  • 21.1

15.3 14.4 EBITDA 20.3 13.0

1

Statutory Profit/(Loss) after Tax Other one off costs (0.2) (0.2) LME Revaluation (7.0) 1.0

2 2

1 See Important Notes (page 2) 2 Included in other expenses

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TRADING EBITDA BRIDGE

Trading EBITDA $m

5 10 15 20 25 Trading EBITDA FY15 Volume Margin and Mix Inflation Other Cost Management Initiatives Trading EBITDA FY16

$13.0m $6.5m $0.5m ($3.4m) $3.0m $0.7m $20.3m

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BALANCE SHEET REMAINS STRONG

Positive operating cash fmow driven by improved earnings Robust fjnancial position The fjnance facility is used for intra month funding

1 Intra month average net cash level $8.9m, $2.4m maximum net debt level

$m $m Dec 16 Dec 15 EBITDA Working Capital Finance Cost Equity Compensation Amortisation Other Operating Cash Flow Capex Spend Increase/ (Decrease) in Net Cash 12 months to 5.1 2.9 (1.2) 0.6 (0.1) 7.3 (3.7) 3.6 Acquisition

  • $m

Dec 14 11.0 (1.2) (1.2) 0.7 0.6 7.7 (3.0) (2.8) 1.9 Acquisition Restructuring Costs

  • (2.2)

21.1 (5.0) (0.9) 0.3 0.1

15.6

(4.3) 11.3

  • $m

$m $m Dec 16 Dec 15 Dec 14 Net Assets 110.7 112.9 Net Cash 20.1 16.5 Franking Credits 27.1 27.1 Accumulated unrecognised tax losses 289.6 297.6

1

125.3 31.4 27.1 286.6

$m Capral Finance Facilities Limit Dec 16 GE Revolver 60 Nil Dec 15 Nil Drawn Down

1 1 $50.5m refjnance completed with ANZ in January 2017

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METAL COSTS HAVE BEEN STABLE THROUGHOUT 2016

Source: London Metal Exchange, Reserve Bank of Australia, Reuters

  • Metal costs reached multi-year highs in

H1 2015 but Premiums collapsed during the second half of 2015

  • Metal costs in 2016 have generally been

stable but LME increased late in the year and has continued to rise in early 2017

0.00 0.50 1.00 1.50 2.00 2.50 3.00 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 A$/kg LME MJP Premium (Major Japanese Ports) 2013 2014 2015 2016

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RESIDENTIAL CONSTRUCTION DRIVING STRONG MARKET

MONTHLY DWELLING APPROVALS AND QUARTERLY DWELLING COMMENCEMENTS

Source: BIS Shrapnel, ABS ¹ BiIS Shrapnel Dec 2016 (2 Quarters Delayed)

2010 2011 2012 75 100 125 150 200

ANNUAL DWELLING COMMENCEMENTS

175 163 145 ‘000 181 2013 2014 175 25 50 216 2015 163 225 2016E¹ 227 2017F¹ 250 211

Detatched Housing Multi-Res Low Rise Multi-Res High Rise

RECOVERY STARTED IN 2013. MULTI-RES ANTICIPATED TO SLOW IN 2017.DETACHED HOUSING REMAINED STABLE

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

6,000 8,000 10,000 12,000 2,000 4,000

MONTHLY UNITS

APPROVALS COMMENCEMENTS

Source: ABS and BIS Shrapnel March 2013 June 2013

14,000

Sept 2013 Dec 2013 March 2014 June 2014 Sept 2014 Dec 2014 March 2015

16,000 18,000

June 2015 Sept 2015

22,000 20,000

Dec 2015 March 2016 Sept 2016 BIS Shrapnel forecast June 2016

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ALUMINIUM EXTRUSION DEMAND HAS RECOVERED FROM CYCLICAL LOW LEVELS AND IS EXPECTED TO REMAIN AT CURRENT LEVELS

  • Extrusion Market in 2016 has grown and is

expected to remain at these levels through 2017 due to the pipeline of residential work and a lift in non-residential construction

  • The residential sector is strong with approvals

exceeding ~230,000 dwellings1

  • An increase in apartments relative to houses

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

  • Non-residential building demand increased by 7%1
  • Key industrial sectors (manufacturing, marine

and transport) are slowly improving Note:

  • Capral has an estimated 29% share of the

Australian Aluminium extrusion sales volume

  • Import market share has fallen to around 34%
  • f the extrusion market, from a high of 40%
  • Excess domestic extrusion capacity still exists but

utilisation has improved

1 Source: BIS Shrapnel year ending December 2016 forecast (Dec 2016)

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 200 183 165 171 160 ALUMINIUM EXTRUSION MARKET SALES VOLUME CAPRAL EXTRUSION PRODUCTION VOLUME H2 FY 156. 22.4 45.4 H1 2012 20.5 125 21.7 42.2 2013 2014 161 20.6 Forecast 173 22.2 42.8 22.7

(Based on BIS Shrapnel forecasts and GDP projections)

23.0 45.7 179 2015 22.7 23.2 45.9 186 2016 26.9 186 26.9 53.8 2017e

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  • Widest aluminium product ofger
  • Large scale extrusion capability
  • National distribution network
  • Committed and experienced people
  • Continue to reduce cost base
  • Lean manufacturing drive to world class productivity
  • Optimise the supply chain to reduce inventory levels
  • Invest in technology to improve competitiveness
  • Leverage our technical expertise with key customers
  • Develop innovative new products and value-add opportunities
  • Capitalise on positive anti-dumping outcomes

BUILD

On our strengths

OPTIMISE

What we do

GROW

In the future

KEY STRATEGIC INITIATIVES

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ANTI-DUMPING MEASURES HAVING A POSITIVE IMPACT ON VOLUME

  • Case won in 2010 but the levels of duties imposed on Chinese imports

were low

  • Circumvention activities diminished the impact

The impact of the initial anti-dumping measures was modest Key issues being pursued

  • New case initiated by the Anti-Dumping Commission against Vietnam and

Malaysia in August 2016

  • Preliminary affjrmative decision imposed temporary duties of ~13%
  • Expect investigation to fjnalise fjrst half of 2017
  • Continue to interact with Government around strengthening the anti-dumping

regime

  • Continue to monitor and pursue anti-circumvention/non compliance activities

Response and Action

  • A sustained campaign has resulted in reforms to federal legislation and methodology
  • Continuation of measures review fjnalised in October 2015. Anti-Dumping Commission

found ongoing dumping by Chinese importers and increased measures were imposed for a further fjve years to 2020

  • Imports from China have reduced but imports from Vietnam and Malaysia have risen
  • Price suppression continues to have an adverse impact on local extruders
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OUTLOOK

  • Housing commencements are forecast¹ to be around 211,450 for the 2017 year, down 7%
  • n the strong 2016 market. Detached housing down 4% and multi-residential down 10%
  • Extrusion market expected to remain reasonably strong through 2017 due to pipeline of

residential work and increase in non-residential

  • Further material strengthening of the AUD above USD$0.75 will be a negative for local

manufacturing and Capral’s competitive position against imports

  • Anti-dumping measures assist volume but prices remain suppressed
  • Capral expects to generate positive operating cash fmow in 2017, and be net cash positive at

year end

  • Full year 2017 Trading and Statutory EBITDA² is forecast, absent any unforeseen events, to be

between $19m and $22m

  • On this basis, Capral would again be in a position to consider a franked dividend

1 BIS Shrapnel Dec 2016 forecast (two quarters delayed) 2 See Important Notes (Page 2)