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DELTA EMD LIMITED - Audited group results for the year ended 27 December 2013

Release Date: 10/02/2014 12:46:00      Code(s): DTA     
Registration number: 1919/006020/06
Income tax number: 9375057719
Share code: DTA ISIN: ZAE000132817
("Delta EMD" or "the Group")


                                                            Audited    Audited   
                                                            year to    year to   
                                                           December   December   
                                                               2013       2012   
                                                   Note       R'000      R'000   
Revenue                                                     375 187    365 459   
Gross profit                                                129 220    117 821   
Investment income                                             6 073      6 226   
Under recovery of manufacturing overheads                  (29 422)   (25 393)   
Distribution expenses                                      (34 469)   (32 034)   
Administrative expenses                                    (39 214)   (31 282)   
Other costs                                                 (8 799)    (4 006)   
Profit on sale of assets                                         46          ?   
Impairment raised                                         (121 655)      (659)   
Net foreign exchange gains/(losses)                           4 535    (3 808)   
(Loss)/Profit before taxation                              (93 685)     26 865   
Taxation                                                     24 568    (9 742)   
Normal taxation                                              24 568    (8 513)   
Secondary taxation on companies                                   ?    (1 229)   
(Loss)/Profit for the year                                 (69 117)     17 123   
Other comprehensive income                                                       
Increase in foreign currency translation reserve                924      1 746   
Total comprehensive(loss)/ income for the year             (68 193)     18 869   
Attributable to equity holders of parent company                                 
(Loss)/Profit for the year                                 (69 117)     17 123   
Total comprehensive (loss)/income for the year             (68 193)     18 869   
Headline earnings attributable to                                                
ordinary shareholders                                 1      18 538     17 782   
Number of shares in issue ('000)                             49 166     49 166   
Weighted number of shares in issue ('000)                    49 166     49 166   
Dilutive number of shares in issue ('000)                    49 166     49 166   
Attributable (loss)/earnings per share (cents)                                   
?  basic                                                    (140,6)       34,8   
?  diluted                                                  (140,6)       34,8   
Dividend per share (cents)                                     25,0       25,0   

                                     Audited    Audited   
                                     year at    year at   
                                    December   December   
                                        2013       2012   
                                       R'000      R'000   
Non-current assets                                        
Property, plant and equipment        132 774    260 251   
Other non-current assets               2 274      3 291   
Current assets                                            
?  Inventories                       161 672    121 142   
?  Trade and other receivables       112 507    105 037   
?  Bank balances and cash            121 128    153 622   
Non-current assets held for sale      13 182     12 871   
Total assets                         543 537    656 214   
EQUITY AND LIABILITIES                                    
Total shareholders' funds            444 278    524 446   
Non-current liabilities                                   
Deferred taxation liabilities         10 060     46 191   
Other non-current liabilities          7 294      8 108   
Current liabilities                                       
?  Trade and other payables           71 160     62 669   
?  Short-term provisions               3 000      3 727   
?  Taxation payable                    7 745     11 073   
Total equity and liabilities         543 537    656 214   
Net asset value per share (cents)        904      1 067   

                                                         Audited    Audited   
                                                         year to    year to   
                                                        December   December   
                                                            2013       2012   
                                                           R'000      R'000   
Cash generated by trading                                 42 313     45 821   
(Increase)/decrease in working capital                  (39 182)     17 288   
Cash generated by operations                               3 131     63 109   
Net interest received                                      6 073      6 226   
Taxation paid ? normal                                  (14 890)    (9 296)   
Taxation paid ? secondary tax on companies                     ?    (1 229)   
Cash (outflow)/inflow from operating activities          (5 686)     58 810   
Replacement capital expenditure                         (15 844)   (14 074)   
Decrease in non-current assets                             1 017      1 156   
Proceeds on sale of assets                                    53          ?   
Net cash (outflow)/inflow before financing activities   (20 460)     45 892   
Dividend paid ? ordinary                                (12 291)   (12 291)   
Net (decrease)/increase in cash and cash equivalents    (32 751)     33 601   
Cash and cash equivalents at beginning of year           153 622    118 996   
Currency translation of cash in foreign subsidiary           257      1 025   
Cash and cash equivalents at end of year                 121 128    153 622   

                                             Share       Foreign                         
                                           capital      currency    Accumu-              
                                               and   translation      lated              
                                           premium       reserve     profit      Total   
                                             R'000         R'000      R'000      R'000   
Balance at 27 December 2011                  4 856         1 550    510 387    516 793   
Total comprehensive income for the year          ?         1 746     17 123     18 869   
Dividend paid ? ordinary                         ?             ?   (12 291)   (12 291)   
Prior years unclaimed dividends reversed         ?             ?      1 075      1 075   
Balance at 27 December 2012                  4 856         3 296    516 294    524 446   
Total comprehensive loss for the year            ?           924   (69 117)   (68 193)   
Dividend paid ? ordinary                         ?             ?   (12 291)   (12 291)   
Prior years unclaimed dividend reversed          ?             ?        316        316   
Balance at 27 December 2013                  4 856         4 220    435 202    444 278   

                                                                           Audited    Audited   
                                                                           year to    year to   
                                                                          December   December   
                                                                              2013       2012   
                                                                             R'000      R'000   
1.   Reconciliation between attributable earnings and headline earnings                         
     Attributable (loss)/earnings after taxation                          (69 117)     17 123   
     Impairment raised                                                     121 655        659   
     Profit on sale of assets                                                 (46)          ?   
     Taxation effect                                                      (33 954)          ?   
     Headline earnings attributable to ordinary shareholders                18 538     17 782   
     Attributable headline earnings per share (cents)                                           
     ?  basic                                                                 37,7       36,2   
     ?  diluted                                                               37,7       36,2   

2.   Basis of presentation
     The Group is domiciled in South Africa. The audited summarised consolidated financial results at and for the year ended
     27 December 2013 comprise the company and its subsidiaries (the ?Group').

     The Group's principal accounting policies have been applied consistently over the current and prior financial years.

     The Group's summarised consolidated financial results have been prepared in accordance with the framework concepts and
     measurement and recognition requirements of International Financial Reporting Standards (IFRS), interpretations issued by the
     IFRS Interpretations Committee (IFRIC), the Companies Act of South Africa, as well as SAICA Financial Reporting Guides as
     issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
     Standards Council.

     The auditors, Deloitte & Touche, have issued their unmodified opinion on the Group's financial statements for the year ended
     27 December 2013. The audit was conducted in accordance with International Standards on Auditing. This preliminary report
     has been derived from the Group financial statements and consistent in all material respects, with the Group financial statements.
     A copy of their audit reports are available for inspection at the company's registered office.The auditors have issued an
     unmodified audit opion for the annual financial statements as well as an unmodified audit opinion for this extract from the annual
     financial statements. Any reference to future financial performance included in this announcement, has not been reviewed or
     reported on by the Company's auditors.

                                                            Audited    Audited   
                                                            year to    year to   
                                                           December   December   
                                                               2013       2012   
                                                              R'000      R'000   
3.   Commitments                                                                 
     Capital commitments ? authorised but not contracted      7 007      6 475   
     Capital commitments ? contracted                         2 815      4 975   
                                                              9 822     11 450   
     Operating lease commitment                               3 038      3 471   

The Group's underlying performance for 2013 reflects continued oversupply in the global electrolytic manganese dioxide (EMD) market,
increasingly competitive pricing, and market selling prices that did not afford a full recovery of higher input costs.

The Group's revenue totaled R375,2 million and exceeded the prior year (2012: R365,5 million) with marginally lower sales volumes and an
improved sales mix which resulted in slightly improved average selling prices.

The majority of the Group's sales were made in Rand-denominated selling prices, which on average were slightly higher than the prior year.
The average Rand selling price realised on US dollar denominated sales was also slightly higher than the prior year, due to a weaker Rand, and
notwithstanding lower average US dollar selling prices.

Average per unit production cost for the year increased from the prior year due to input cost increases, particularly for electricity, transport, labour
and maintenance. Input cost increases were only partly offset by operational improvements.

Administration costs increased to R39,2 million (2012: R31,3 million), and included once off costs for product and market development, costs
responding to regulatory reviews of the EU and Japanese anti-dumping duties, and advisory costs associated with the Group's strategic review.
Trading profit for the year totaled R25,5 million (2012: R29,1 million), and included a write down of inventory and work in progress (R9,6 million),
and administration cost increases (R7,9 million).

During the year, the Group undertook an impairment review in accordance with IAS 36, which gave rise to a pre-tax impairment of R121,7 million
on the carrying value of the Nelspruit EMD manufacturing plant and equipment, reducing the carrying value of these assets to fair value.

Interest received of R6,1 million was in line with the prior year (2012: R6,3 million). The Group's taxation charge for the year of R11,5 million
(2012: R9,7 million) was offset with a R36,1 million deferred tax credit arising from the impairment charge. The net tax for the year is a tax credit
of R24,6 million.

Attributable loss for the year totaled R69,1 million (2012: attributable profit R17,1 million), and loss per share was 140,6 cents (2012: earnings
per share 34,8 cents). Headline earnings for the year were R18,5 million (2012: headline earnings R17,8 million), and headline earnings per share
for the year were 37,7 cents (2012: 36,2 cents).

Cash generated by operations for the year totaled R3,1 million (2012: R63,1 million). Working capital increased during the year by R39,2 million
(2012: decrease of R17,3 million), and capital expenditures for the year totaled R15,9 million (2012: R14,1 million). Dividend payments totaled
R12,3 million (2012: R12,3 million).

Year-end cash balances decreased to R121,1 million (2012: R153,6 million).

Efforts to sell the Group's former plant site in Australia continue.

Global EMD market conditions continue to be difficult. Demand for EMD in the US, Europe and Japan has declined with battery production
migrating to China and South East Asia, and with the replacement of larger batteries with smaller batteries that require less EMD. The EMD market
remains oversupplied, particularly in the US, Europe and Japan.

Delta EMD's competitive position has also weakened due to higher input costs, overseas customers' preference for domestic supply, relative
product performance and anti-dumping duties.

The Group's product research and development efforts have included work on cathode materials for electric vehicle batteries, as well as other
manganese materials. Our review of opportunities that would employ competitive advantages available to Delta EMD has concluded that none of
the possible investments would provide an acceptable return.

As disclosed previously, a substantial North American customer has advised that its 2014 purchases from Delta EMD will be substantially lower
than prior years. This longstanding customer has chosen domestic supply that is now available due to additional capacity and reduced demand
from another customer that has migrated battery production to South East Asia. Reduced sales volumes will adversely affect Delta EMD's sales
revenue, manufacturing overhead recoveries, profitability and cash flows.

Management has revised the Group's 2014 business plan and is reducing production in line with the reduced sales volumes expected during
2014, as well as reducing costs where possible. Discussions are underway with Delta EMD's significant customers to assess their short and
longer term EMD requirements.

Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group's auditors.

No dividend has been declared.

These summarised consolidated financial statements have been prepared under the supervision of JS Seymore CA(SA) in his capacity as
Chief Financial Officer of the Group.

TG Atkinson                                  P Baijnath
(Chairman)                                   (Chief Executive Officer)

7 February 2014

Registered Office
15 Heyneke Street, Industrial Site, Nelspruit, 1200

Transfer Secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001, PO Box 61051, Marshalltown, 2107

Independent non-executive: AC Hicks, BR Wright, L Matteucci

Non-executive: TG Atkinson* (Chairman) *USA

Executive: P Baijnath (Chief Executive Officer), JS Seymore, CA(SA) (Chief Financial Officer)

Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)

Released on 10 February 2014

Date: 10/02/2014 12:46:00 Supplied by www.sharenet.co.za                     
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