RESULTS PRESENTATION for the six months ended 30 June 2018 - - PowerPoint PPT Presentation

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RESULTS PRESENTATION for the six months ended 30 June 2018 - - PowerPoint PPT Presentation

Sep 14, 2023 174 likes •412 views

RESULTS PRESENTATION for the six months ended 30 June 2018 HALF-YEAR 2018 IN CONTEXT FINANCIAL REVIEW OPERATING REVIEW FINANCIAL PEFORMANCE OUTLOOK Half-year 2018 in context Operating profit in line with comparable

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SLIDE 1

RESULTS PRESENTATION

for the six months ended 30 June

2018

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SLIDE 2

HALF-YEAR 2018 IN CONTEXT

  • FINANCIAL REVIEW
  • OPERATING REVIEW
  • FINANCIAL PEFORMANCE
  • OUTLOOK
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SLIDE 3

3

Half-year 2018 in context

  • Operating profit in line with comparable prior period
  • Paper business showed good improvement
  • Offset by declines in the Plastics business
  • External factors that impacted the Group’s results included:
  • Chinese policy on waste importation
  • Overcapacity in styrene
  • Drought
  • Sugar tax
  • Progress on strategic projects:
  • Felixton mill and PE corrugator performing in line with expectations
  • Mpact Polymers disappointing due to feedstock quality – bottle washing equipment
  • rdered, commissioning towards the end of 2018
  • New PET extruder/thermo-formers commissioned in May 2018 – doubling tray capacity
  • B-BBEE Level 4 on new codes
  • Controllable costs and working capital well managed
  • Balance sheet remains strong
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SLIDE 4
  • HALF-YEAR 2018 IN CONTEXT

FINANCIAL REVIEW

  • OPERATING REVIEW
  • FINANCIAL PEFORMANCE
  • OUTLOOK
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SLIDE 5

5 4,688 4,833 4,976 5,411 5,287

2,000 4,000 6,000 8,000 10,000 12,000 2016 2017 2018

R million

HY1 HY2

10 099 10 120 322 169 168 462 288 6.9% 3.5% 3.4%

200 400 600 800 1,000 2016 2017 2018

R million

HY1 HY2 HY1 margin

784 457

  • Revenue up 2.9% to R5.0bn
  • Volumes down 5.1%
  • Up 3.8% excluding Recycling
  • Average price increase reflects

favourable sales mix variance

  • EBITDA of R443m up 2.5%
  • Underlying operating profit of R168m in line

with comparable prior period

  • Gains in Paper reflect benefits of

Felixton mill project and recovered paper prices

  • Offset by declines in Plastics
  • Underlying earnings of 31.5 cps (June

2017: 34.3 cps)

  • Gearing improved to 34.4% (June 2017:

36.3%)

  • ROCE of 7.4% (June 2017: 10.6%)
  • Interim dividend of 15 cps

Group revenue Underlying operating profit

Financial review

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SLIDE 6
  • HALF-YEAR 2018 IN CONTEXT
  • FINANCIAL REVIEW

OPERATING REVIEW

  • FINANCIAL PEFORMANCE
  • OUTLOOK
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SLIDE 7

7 3,463 3,720 3,916 3,962 4,025

2,000 4,000 6,000 8,000 10,000 2016 2017 2018

R million

HY1 HY2

292 177 219 372 266 8.4% 4.8% 5.6%

200 400 600 800 1,000 2016 2017 2018

R million

HY1 HY2 HY1 margin

664 443

  • Revenue up 5.3% to R3.9bn
  • Segment volumes declined by 5.0%
  • Up 6.5% excluding Recycling
  • Containerboard and cartonboard

up 9.4%

  • Converted paper packaging up

2.1%

  • Recycling volumes declined due to

increased integration and closure of customer’s newsprint machine

  • Average price increase reflects

favourable sales mix variance

  • Underlying operating profit up 23.8% to

R219m

  • Higher throughput and gross profit from

Felixton mill post rebuild

  • Average recovered paper prices in line

with 1H2017

  • PE corrugator performing well

7 425 7 745

Segment revenue Underlying operating profit

Paper business

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SLIDE 8

8 2 699 2 388

Segment revenue Underlying operating profit

1,257 1,121 1,062 1,442 1,267

500 1,000 1,500 2,000 2,500 3,000 2016 2017 2018

R million

HY1 HY2

119 57 26 136 85 9.5% 5.1% 2.4%

50 100 150 200 250 300 2016 2017 2018

R million

HY1 HY2 HY1 margin

  • Revenue down 5.3% to R1.1bn
  • Volumes down 11.7%
  • Primarily due to preforms, crates and

jumbo bins

  • Average price up 6.4%
  • Underlying operating profit of R26m
  • Lower gross profit in styrene due to
  • vercapacity in sector
  • Drought effect on jumbo bin sales
  • Customer backward integration into

preforms and sugar tax

  • New PET tray capacity commissioned May

2018, benefit expected 2H2018

255 142

Plastics business – Converting1

Note: 1. Plastics Converting is defined as the Plastics business excluding Mpact Polymers.

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SLIDE 9

9

Plastics business – Mpact Polymers

  • Operating loss of R39m (June 2017: R30m)
  • Production in line with prior period, below target
  • Low yields and higher maintenance costs due to dirty feedstock and

inadequate washing facilities – bottle washing equipment to be installed in 4Q2018

  • Global PET benchmark prices up on prior period
  • Profitability will continue to be undermined until new equipment is commissioned despite

higher anticipated throughput and selling prices 2H2018

  • Balance sheet restructure successfully completed in July 2018
  • IDC senior loan facility restructured into:
  • R83m interest bearing loan (Prime + 1%)
  • R146m non-interest bearing subordinated loan
  • IDC increased shareholding by 10% at nominal value (IDC shareholding: 31%,

Mpact: 69%)

  • Further cash injection by way of shareholders subscribing for preference shares of

R90m, ranking ahead of subordinated loans

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SLIDE 10
  • HALF-YEAR 2018 IN CONTEXT
  • FINANCIAL REVIEW
  • OPERATING REVIEW

FINANCIAL PEFORMANCE

  • OUTLOOK
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SLIDE 11

11

Revenue Underlying operating profit Underlying EPS Interim dividend ROCE Gearing %

2.9%

R5.0 billion R168 million 31.5 cents per share 15 cents per share 7.4% 34.4%

Financial performance

8.2% 3.2 1.9

No change No change

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12

Notes: 1. Paper business raw materials include purchased paper, wood, pulp and recovered paper. 2. Plastic raw materials include styrene, PET, HDPE, PVC, polypropylene and post consumer PET bottles 3. Other variable costs include chemicals, packaging costs and stock movements.

Source: RISI – PPI Asia, Old Corrugated Containers (OCC), CNF China US$, converted to ZAR

40 60 80 100 120 140 160 180 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Index (June 2016 = 100) ZAR US$

Benchmark recovered paper prices (OCC)

Variable costs

1,565 1,542 529 525 300 335 387 438 337 354 500 1,000 1,500 2,000 2,500 3,000 3,500 HY1 2017 HY1 2018 R million Paper business raw materials Plastic raw materials Energy Selling & distribution costs Other 3 194 +2.4%

Source: Mpact 3 2

13.2% 11.9% 0.8% 1.5% 5.0%

1

80 90 100 110 120 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Index(ZAR) (June 2016 = 100) P1 P2 P3

Benchmark polymer prices

  • Lower volumes of recovered paper purchases,
  • ffset by increased virgin containerboard
  • Lower plastic raw material cost
  • Volumes down 11.7%

3 118

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SLIDE 13

13

792 854 491 485 264 275 200 400 600 800 1,000 1,200 1,400 1,600 1,800 HY1 2017 HY1 2018 Personnel costs Net operating expenses Depreciation and amortisation

Fixed costs

4.4% 1.3% 7.8%

+4.3% 1 547 1 614

  • Fixed costs up 4.3%
  • Personnel costs excluding cost

capitalised to the Felixton project increased by 6.6%

  • Net operating expenses down

1.3%

  • Cost saving and unrealised

foreign exchange gains

R million

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14

R million HY1 2017 HY1 2018 change Underlying operating profit 169 168 (0.5%) Net finance costs (100) (112) 12.7% Earnings from equity accounted investees and profit on disposals 5 13 >100% Underlying profit before tax 74 69 (6.9%) Tax charge before special items (22) (20) (7.7%) Non-controlling interests 6 5 (14.1%) Underlying earnings 58 54 (7.2%) Special items, net of tax

  • (3)

100% Reported earnings for the year 58 51 (12.9%) Underlying earnings per share (cps) 34.3 31.5 (8.2%)

Financial review

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SLIDE 15

15

ROCE and net debt

1

  • ROCE of 7.4% (June 2017: 10.6%)
  • Investments in new capital projects
  • Net debt marginally decreased to R2.2bn
  • Investments in capital projects offset

by improvement in trade working capital

  • Gearing improved to 34.4%

(June 2017: 36.3%)

16.7% 10.6% 7.4% 14.2% 7.7% 0% 5% 10% 15% 20% 25% 2016 2017 2018 ROCE %

Return on Capital Employed (ROCE)

HY1 Full Year

1,943 2,291 2,217 2,001 2,244

500 1,000 1,500 2,000 2,500 2016 2017 2018 R millions

Net debt

HY1 Full year

1. Return on Capital Employed (ROCE) is an annualised measure based on underlying operating profit plus share of equity accounted investees’ net earnings divided by average capital employed before impairments.

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16

1,772 1,923 1,793 18.9% 19.9% 18.0% 500 1,000 1,500 2,000 HY1 2016 HY1 2017 HY1 2018

Trade working capital % of revenue

  • Trade working capital reduced by

R130m

  • Improved creditor payment terms

R million

Trade working capital

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17

(2 244) 440 (43) (242) (117) (6) (36) 31 (2 217)

  • 2,500
  • 2,000
  • 1,500
  • 1,000
  • 500

500 Net debt at December 2017 Cash generated from

  • perations

before working capital Working capital movements Capital expenditure Interest paid Income tax paid Dividend paid to equity holders Other items Net debt at June 2018 R million

Movement in net debt

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18

R million Full year 2017 HY1 2017 HY1 2018 change Net debt - close 2 244 2 291 2 217 (3.2%) Net debt - average 2 316 2 304 2 492 8.2% Net finance costs 203 100 112 12.7% Gearing % 34.8% 36.3% 34.4% (1.9) Interest cover (underlying EBIT) (times) 2.3 1.7 1.5 Net debt to EBITDA (times) 2.2 2.0 2.2

Net finance cost and net debt

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  • Effective tax rate marginally lower, primarily due to
  • Non-recognisition of deferred tax in Mpact Polymers
  • Full year effective tax rate is expected to be higher than FY2017
  • Non-recurring S12i tax incentive of R114m for the Felixton mill rebuild

recognised in 2H2017

R million HY1 2017 HY1 2018 change Taxation charge¹ 22 20 (7.7%) Effective tax rate 29.8% 29.6% (0.2) Tax paid 47 6 (87.9%)

Taxation

Note: 1. Taxation charge excludes tax on special items

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20

Paper business Plastics business

R million R million

Capital expenditure cash flows

  • Capital expenditure spend equals 88% of depreciation
  • Projects completed
  • PET extruder and thermo-formers
  • PE corrugator
  • Piet Retief mill forming section

Note: 1. Excludes Corporate capital expenditure of R29 million which comprise spends related mainly to the purchase of Land and Buildings.

1 272 289 121 259 280

2016 2017 2018 HY1 HY2

150 102 91 130 77

2016 2017 2018 HY1 HY2

179 280 569 531

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30 15 15 65 40 20 40 60 80 100 2016 2017 2018

Cents per share Interim Final

Dividends

95 55

  • Scrip distribution with an option to receive a cash dividend

Salient dates for the 2018 Interim Scrip Distribution and Cash Dividend alternative Last day to trade to be eligible for the Scrip Distribution or Cash Dividend alternative Tuesday, 4 September 2018 Shares commence trading “ex” the Scrip Distribution and Cash Dividend alternative Wednesday, 5 September 2018 Record date in respect of Scrip Distribution and Cash Dividend alternative Friday, 7 September 2018 Scrip Distribution certificates posted and Cash Dividend payments Monday, 10 September 2018

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SLIDE 22
  • HALF-YEAR 2018 IN CONTEXT
  • FINANCIAL REVIEW
  • OPERATING REVIEW
  • FINANCIAL PEFORMANCE

OUTLOOK

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  • Benefits from the Felixton mill upgrade and lower recovered paper prices
  • Difficult trading conditions affecting the Plastics converting business expected to persist
  • Mpact Polymers should benefit from:
  • higher selling prices
  • increased throughput
  • lower finance costs compared to 2H2017
  • Profitability will continue to be under pressure until the bottle washing

equipment has been installed

  • Higher effective tax rate than prior year due to non-recurring S12i in 2017
  • Significant investments are expected to bear fruit in 2H2018 and beyond

Outlook