FINANCIAL RESULTS For the year ended 31 December 2012 Presentation - - PowerPoint PPT Presentation

26 and 27 February 2013

Presentation

For the year ended 31 December 2012

FINANCIAL RESULTS

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PRESENTATION

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› Welcome › Business environment and performance › AECI results › Performance by segment

» Explosives » Specialty chemicals

› Projects and strategy › Outlook and underlying growth

Outline

PERFORMANCE

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Highlights

› Revenue up 11% to R14,9bn › EBITDA from operations up 6% to a record R1,8bn › Headline earnings excluding effects of all B-BBEE transactions up 1% › Profit optimisation of projects underway › Best ever safety performance achieved › Gearing reduced to 32% › Acquisitions of R420m authorised › AEL’s strategic position in Indonesia enhanced by AN plant acquisition › Final cash dividend of 185cps up 2,3% compared to 179cps in ’11

business environment and performance

BUSINESS ENVIRONMENT AND PERFORMANCE

› AECI delivered a creditable performance in a difficult trading environment › Depressed global growth and industrial action in SA made volume growth difficult › Businesses responded with tight cost management and restructuring › Strength of the business model, especially in the chemicals cluster, demonstrated in the result › Looking forward, market growth prospects linked to global economic growth uncertainties › However, AECI has internal profit optimisation plans that will deliver value independent of external growth scenarios › AECI also has a healthy pipeline of acquisitions and growth projects

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Summary

52% 10% 33% 3% 2%

REVENUE SPLIT

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52% Mining 10% Agriculture 33% Manufacturing 3% Property 2% Fibres

BUSINESS ENVIRONMENT

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SA manufacturing volumes Jan ’07 – Jan ’13

Cum y-o-y = 2,0% Base: 2005=100 Source: StatsSA

BUSINESS ENVIRONMENT

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SA mining volumes Jan ’07 – Jan ’13

Cum y-o-y= -3,1% Base: 2010=100 Index base year changed in October from 2005 to 2010 Source: StatsSA

BUSINESS ENVIRONMENT

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ZAR/US$ exchange rate

Average US$/ZAR=7,25 Average US$/ZAR=8,20 Opening Jan 12 US$/ZAR=8,15 Closing Dec 12 US$/ZAR=8,49

BUSINESS ENVIRONMENT

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Ammonia IPP pricing (ZAR/tonne)

BUSINESS ENVIRONMENT

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Effect on performance

› Open cast mining volumes in Africa (including South Africa) grew strongly › Underground mining volumes in SA and Indonesia were negatively impacted by industrial action and other stoppages › The weaker ZAR/US$ exchange rate helped the mining and manufacturing sectors but failed to lift volumes › Prices remained high due to high US$ commodity prices and the weaker exchange rate › The industrial relations environment deteriorated significantly post Marikana and made change management difficult

AECI results

0,0 0,2 0,4 0,6 0,8 1,0 1,2 08 09 10 11 12

ALL WORKERS TRIR

Maximum tolerable level

SAFETY AND HEALTH

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Performance

ENVIRONMENTAL, B-BBEE AND EE UPDATE

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Performance and strategy

› Environmental performance

» Formalisation and launch of the Modderfontein Reserve » Green Gauge – range of environmental improvement projects identified

through resource efficiency assessments

» No serious environmental incidents in ’12 » Included in JSE’s Socially Responsible Investment Index for fourth

successive year › B-BBEE ratings improved significantly and nearly all companies are now Level 5 or Level 4 contributors › EE performance continues to improve

100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850

Headline earnings 11: R772m Specialty chemicals: R63m Explosives: (R79m) Property: (R65m) Specialty fibres: (R13m) Corporate: R149m CST & EST SBP: (R168m) Finance costs and tax: (R54m) Other: R6m Headline earnings 12: R611m

RESULTS

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Headline earnings (Rm)

400 800 1 200 1 600 2 000 08 09 10 11 12

EBITDA (Rm)

RESULTS

› EBITDA +6% to R1,8bn › Volumes flat overall › Chemicals volumes -2,9%

» manufactured -1,4% » traded -4,3%

› Explosives +5,1% › Foreign revenue +17% to R4 527m › Market share maintained

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EBITDA and volumes

RESULTS

› Operating margin declined from 9,8% to 9,0% mainly due to deterioration at AEL and Heartland › Favourable impact

» Reduced corporate costs

› Outweighed by

» Nitrates shortages and supplier

force majeure

» Negative effect of strikes » Non-cash B-BBEE transactions

IFRS costs

» Restructuring charges

› Therefore, underlying performance is better than reported results

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Operating margin and volumes

2 4 6 8 10 12 08 09 10 11 12

OPERATING MARGIN (%)

RESULTS

› Excluding the IFRS charges of 151cps

» HEPS at 697cps down 3% » Return on net assets: 17,1% » Return on invested capital:

13,2%

» Economic value added

remains positive

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HEPS

100 200 300 400 500 600 700 800 08 09 10 11 12

HEPS (cps)

10 20 30 40 50 60 70 500 1 000 1 500 2 000 2 500 08 09 10 11 12

AT 31 DECEMBER

Borrowings Gearing Target range

RESULTS

› Capex: R557m – incl. R265m for expansion projects › NWC to revenue: 18,0% (’11: 17,7%) › Net borrowings: R1 841m › Gearing at 32% vs 50% in 1H12 › Cash interest cover: 8,2x › Final cash dividend: 185cps

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Cash utilisation

Rm %

performance by segment

(250) (150) (50) 50 150 250 350 450 550 650 750 850 950

Specialty chemicals Explosives Specialty fibres Property EST SBP 11 12 Corporate

RESULTS

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Profit from operations (Rm)

SPECIALTY CHEMICALS

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Business environment

› Firm but volatile commodity prices in US$ terms and weaker R/$ supported prices › SA manufacturing sector still pedestrian › However, stronger growth in food and beverage, agricultural and personal care sectors › Platinum mining sector strikes and closures had negative impact (R45m) › International competition remains intense

SPECIALTY CHEMICALS

› Volumes

• 2,9%

» Manufactured

• 1,4%

» Traded

• 4,3%

› Prices +14,0% › Excellent performances from Akulu, CI, IOP, Lake, Nulandis › Solid performance from Senmin in difficult market › Restructuring charge of R30m offset by capital profits from Resitec and CSL HO disposals › Successful integration of all acquisitions

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Performance

Revenue R8 397m +11% TP R944m +7% Trading margin (%) 11,2 (’11: 11,7) Average WC (%) 17 (’11: 16)

SPECIALTY CHEMICALS

6 800 7 000 7 200 7 400 7 600 7 800 8 000 8 200 8 400 8 600

Revenue Dec 11 Volumes -2,9% Price +14% Revenue Dec 12 +11,1%

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Price and volume analysis (Rm)

EXPLOSIVES

› Global mining sector is under pressure, but remains attractive › Strong mining volume growth in Africa (outside SA) › SA mining: surface volumes grew significantly, narrow reef declined › Prospects in Africa remain good › Indonesian mining also affected by industrial relations issues and weakening thermal coal prices

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Business environment

AEL MANUFACTURING SITES

EXPLOSIVES

› Disappointing performance in difficult circumstances › Ammonia and AN supply chain interruptions (R50m) › Mining strikes (R62m) › Cost reduction exercise underway

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Performance

Revenue R6 327m +15% TP R431m

• 15%

Trading margin (%) 6,8 (’11: 9,3) Average WC (%) 19 (’11: 17)

350 400 450 500 550 600 650 700 750

R510m: Actual trading margin Dec 11 R212m: Material margin (R153m): Fixed cost inflation & depreciation (R53m): Business expansion costs R57m: Reduction ISAP / ISCP costs (R61m): Foreign gain in 2011 (R81m): Supply chain and strike events R431m: Actual trading margin Dec 12

EXPLOSIVES

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Performance

PROPERTY

› A disappointing result › Revenue of R47m from land sales

» Westlake – industrial use

› R66m development expenditure

» Roads and electrical infrastructure

› Outlook for industrial end use improving

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Performance

Revenue R400m

• 16%

TP R34m

• 66%

Trading margin (%) 8,5 (’11: 20,8)

20 40 60 80 100 120

Trading profit 2011: R99m Development activities: (R52m) Leasing activities: (R22m) Services: R2m Environmental charge: R7m Trading profit 2012: R34m

PROPERTY

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Performance

SPECIALTY FIBRES

› Acceptable result in difficult market conditions › Exports to Europe and Asia under pressure › US auto volumes improved in 2H12 › Capital investment of US$10m on single-stage process underway › STF will be included in chemicals cluster in future

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Performance

Revenue R339m +2% TP R40m

• 25%

Trading margin (%) 11,8 (’11: 15,9)

(240) (220) (200) (180) (160) (140) (120) (100) (80) (60)

Corporate 11: (R227m) Legacy costs: R71m Long-term incentives: R47m Captive insurance: R31m Other: R0m Corporate 12: (R78m)

CORPORATE

31 Sustainable level = (170)

240 260 280 300 320 340 360

Tax charge IFRS 2 charge STC Other PBT tax @ 28%

RESULTS

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Tax rate (Rm)

projects and strategy

EXPLOSIVES

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Investments

Total R409m Expansion capital spend R163m » SA – Xstrata, Sishen R31m » Africa – bulk plants for Burkina, Egypt and DRC R63m » International – new contracts R14m Sustenance capital R204m » Nitrates statutory maintenance R64m BBRI R42m

EXPLOSIVES

› Detonator volumes = 2011 due to lower local demand › Machines capable of much higher production rates › Quality and first time pass rates greatly improved › Machines stable, more uptime achieved via better process and people management systems

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Initiating systems profit improvement

20 40 60 80 100 08 09 10 11 12

ISAP DETONATORS (millions)

EXPLOSIVES

› Automatic assemblies significantly higher than ’11 › Powder development on track for completion in June ’13 › Rest of range to be qualified during ’13 › Cost savings of R57m achieved in 2012 and a further R70m expected in 2013 › Section 189 notices issued

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Initiating systems profit improvement cont.

5 10 15 20 25 30 08 09 10 11 12

ISAP ASSEMBLIES (millions)

Target=31

EXPLOSIVES

› US$23m investment for 42,6% equity share in BBRI in three phases › In Kalimantan – heart of mining activity and close to KPC, AEL’s largest customer in the region › ANS capacity of 60ktpa back- integrated into major ammonia source adjacent to the plant › Construction close to completion and beneficial production expected in 3Q13

BBRI

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SPECIALTY CHEMICALS

› General Electric’s Chemical and Monitoring Solutions business

» African footprint with excellent people » specialised equipment for water processing » continued support and technology from a world-class partner » in line with water, oil, gas, energy strategy roll-out

› Senmin PAM plant

» exit of BASF as a partner finalised » allows AECI to compete in all global mining chemical markets with PAM

› Cellulose Derivatives

» Competition Tribunal approval obtained

› Bolt on acquisition for Lake Foods: Afoodable › Brazilian country investment still seen as attractive

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Acquisitions update

SPECIALTY CHEMICALS CLUSTER

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Restructuring 2012

Chemiphos

incorporated into Chemical Initiatives and ChemSystems

Industrial Urethanes

incorporated into Lake Chemicals and Chemfit

Duco

divisions were sold

Resitec

sold

Lake Chemicals

new business formed Jan ’13

Lake Foods

new business formed Jan ’13

SPECIALTY CHEMICALS CLUSTER

Akulu Marchon Lake Chemicals Chemfit Lake Foods Chemical Initiatives Nulandis Chemisphere Technologies Resinkem ChemSystems Senmin Crest Chemicals SANS Technical Fibers ImproChem Specialty Minerals SA Industrial Oleochemical Products

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Now 15 businesses in the Cluster

SPECIALTY CHEMICALS CLUSTER

› African specialty chemicals business focused on

» Mining chemicals

Senmin

» Water, oil, gas and energy

ImproChem

» Agriculture

Nulandis

» Food additives

Lake Foods

» Personal and home care

Akulu Marchon › South African diverse specialty chemicals cluster

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• utlook and

underlying growth

22% 19% 15% 15% 9% 5% 4% 1% 1% 9% 11%

Phosphate Uranium Other

GROUP MINING REVENUE

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Revenue by mineral mined 2012

22% Platinum

19% Coal

15% Copper, cobalt,

chrome and nickel

15% Gold 9% Quarry, construction

and civil 5% Diamond

4% Iron ore 11% Other

21% 18% 8% 7% 6% 5% 5% 4% 4% 4% 4% 3% 1% 1% 1% 1% 1% 6% 11%

Appliances and furniture Construction Steel and metals Engineering and foundry Textiles and leather Various other

SPECIALTY CHEMICALS

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Revenue by market sector 2012

21% Mining

18% Agriculture

8% Food and beverage 7% Paper and packaging 6% Chemical industry

5% Detergents

5% Explosives 4% Toiletries, cosmetics

and pharmaceuticals

4% Coatings, ink and adhesives

4% Plastics and rubber

3% Automotive 11% Other

OUTLOOK AND FOCUS

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› SA manufacturing volumes expected to track GDP growth › Property sales for industrial end uses expected in 2013 › Strong focus on operational excellence in AEL

» cost reduction » return AEL to acceptable profitability » restructuring costs are expected

› AECI mining volumes in Africa and Indonesia expected to grow on the back of new projects and contracts

» SA narrow reef – platinum and gold mining – expected to remain challenging » significant potential for increased sales and profits from mining chemicals

› Strong focus on the strategic pillars in chemicals cluster for growth in Africa › Acquisition activity expected locally and internationally

INVESTORS’ CALENDAR

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› Graham Edwards retires from the Board 28 February › Mark Dytor succeeds him as Chief Executive 1 March › AGM 27 May › Half-year ends 30 June › Interim results released and JHB presentation 24 July › CT presentation 25 July

thank you