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MML - Metmar Limited - Preliminary Report 28 February 2010
METMAR LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/007269/06)
Share code: MML & ISIN code: ZAE000078747
("Metmar" or "the Company")
PRELIMINARY REPORT 28 FEBRUARY 2010
Highlights
* Profit before taxation from continuing operations increased by 44.7%
* Positive cash inflow of R19.3 million
* Net asset value per share increased by 30.0%
* Profit on sale of associate R153.9 million
* Distribution from share premium of 25 cents per ordinary share
AUDITED RESULTS
For the year ended 28 February 2010
ABRIDGED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AT
28 February 2010 28 February 2009
Audited Audited
R 000 R 000
ASSETS
Non-current assets
Property, plant and equipment 63,926 28,114
Intangible assets 64,872 65,804
Investment in associate 80,000 -
Financial assets held-to-maturity 114,607 67,902
323,405 161,820
Current assets
Inventories 226,298 167,881
Trade and other receivables 399,685 397,578
Financial assets held-to-maturity 26,834 -
Taxation receivable 13,857 -
Cash and cash equivalents 97,946 78,671
764,620 644,130
Non-current assets classified as held
for sale - 106,383
Total assets 1,088,025 912,333
EQUITY AND LIABILITIES
Equity and retained earnings 487,172 361,430
487,172 361,430
Non-current liabilities
Financial liabilities 7,613 41,975
Instalment sale agreements 7,884 -
Deferred taxation 13,875 3,698
29,372 45,673
Current liabilities
Trade and other payables 398,736 330,013
Trade finance liabilities 172,745 157,731
Taxation payable - 17,486
571,481 505,230
Total equity and liabilities 1,088,025 912,333
Net asset value per share (cents) 241.03 185.69
Net tangible asset value per share (cents) 208.93 151.89
Number of shares in issue 202,122,157 194,637,127
ABRIDGED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED
28 February 2010 28 February 2009
Audited Audited
Note R 000 R 000
Continuing operations
Revenue 1,684,610 3,438,714
Cost of sales (1,539,717) (3,182,448)
Gross profit 144,893 256,266
Other operating income 20,539 45,411
Operating expenses (98,035) (130,916)
Operating profit 67,397 170,761
Profit on sale of associate 153,911 -
Net finance income/(cost) 1,513 (16,751)
Profit before taxation 222,821 154,010
Taxation (48,416) (40,390)
Profit from continuing
operations 174,405 113,620
Discontinued operations
(Loss)/profit from
discontinued operations (12,079) 63,868
Total
Profit before taxation 210,636 235,430
Taxation (48,310) (57,942)
Total profit and
comprehensive income for the year 162,326 177,488
Earnings per share
Basic and diluted (cents) 2. 81.1 90.3
ABRIDGED CONDENSED GROUP CASH FLOW STATEMENTS FOR THE YEARS ENDED
28 February 2010 28 February 2009
Audited Audited
R 000 R 000
Cash flows from operating activities
Cash generated from operations 72,078 58,878
Net finance income/(cost) 1,513 (16,751)
Dividend received - 53,655
Taxation paid (69,194) (30,431)
Net cash from operating activities 4,397 65,351
Net cash generated from/(utilised in)
investing activities 63,914 (134,872)
Net cash (utilised in)/generated from
financing activities (49,036) 41,118
Total cash movement for the year 19,275 (28,403)
Cash and cash equivalents at the
beginning of the year 78,671 107,074
Cash and cash equivalents at the end
of the year 97,946 78,671
ABRIDGED CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY
Share Foreign
capital and currency Retained
premium reserve earnings
R 000 R 000 R 000
Balance at 1 March 2008 29,197 - 165,761
New share issue 25,000 - -
Other - - (205)
Total comprehensive income for the year - - 174,445
Distribution to shareholders (35,035) - -
Balance at 28 February 2009 19,162 - 340,001
New share issue - - -
Total comprehensive income for the year - - 161,886
Distribution to shareholders 81,677 - -
Other - 1,005 -
Balance at 28 February 2010 100,839 - 501,887
Non-
controlling
interests Total equity
R 000 R 000
Balance at 1 March 2008 924 195,882
New share issue - 25,000
Other - (205)
Total comprehensive income for the year 3,043 177,488
Distribution to shareholders (1,700) (36,735)
Balance at 28 February 2009 2,267 361,430
New share issue - -
Total comprehensive income for the year 440 162,326
Distribution to shareholders - 81,677
Other (1,952) (947)
Balance at 28 February 2010 755 604,486
COMMENTARY
PROFILE AND STRUCTURE
Metmar Trading (Pty) Limited ("Metmar Trading"), which comprises the major
business of Metmar, focuses on commodity trading, finance and logistics
facilitation and developing new sources of supply. Metmar`s majority
shareholders include four of their five executive directors who have combined
experience of more than 100 years in their industry.
Metmar is focused on developing assets and generating revenues related to the
mining, production and trading of ores, alloys, metals, plastics, rubber and
chemicals. Metmar and its subsidiaries` (collectively, "the Group") long
standing relationships with leading local financial institutions and its
extensive experience in identifying and managing associated risks, strengthen
the Group`s value proposition to its customers and suppliers.
FINANCIAL PERFORMANCE
Metmar ends an exceptionally challenging year reporting solid results,
notwithstanding the largest commodity correction experienced in history taking
place during the reporting period. The Group`s financial position continues to
improve with the net asset value per share being 30% higher than 2009.
Revenue decreased by 51% from R3.4 billion to R1.7 billion, with an improvement
in gross margin from 7.5% to 8.6%. Operating profit was R67.4 million (2009:
R170.8 million), net interest earned amounted to R1.5 million (2009: R16.8
million cost) and a R153.9 million profit from sale of PGR 17 Investments
(Proprietary) Limited and Mogale Alloys (Proprietary) Limited ("PGR 17/Mogale")
was achieved resulting in a profit before tax of R222.8 million (2009: R154,0
million). Discontinued operations made a loss of R12.1 million (2009: R63.9
million profit). The tax charge was R48.3 million (2009: R57.9 million)
resulting in a total comprehensive income for the year of R162.3 million (2009:
R177.5 million).
There was a cash inflow of R19.3 million for the year compared to a cash
outflow of R28.4 million in 2009. As a consequence the cash and cash
equivalents increased to R97.9 million.
OPERATIONAL PERFORMANCE
Despite the commodity consumption crisis and price volatility, Metmar`s
commodities traded remained at similar tonnages albeit at significantly lower
prices than the previous year.
West African Group ("WAG Division") ended year two of the three year earn out
process well ahead of its targets. Their increased profits, volumes and market
share were highlights in a generally depressed polymer, rubber and rubber
chemicals market. This new division, combined with SNF International, has
delivered an extremely encouraging performance.
Revenue for Owen Plastics (Proprietary) Limited/Tufflex Plastics (Proprietary)
("Owen") remained constant with a 10% increase in the total tonnage processed.
This reflected the downward trend in raw material prices over the period.
Subsequent to the financial year end, Owen changed its name to Tufflex Plastic
Products (Proprietary) Limited when the businesses of the two companies were
combined.
The Zimbabwean screening activities of Gubha Resources (Proprietary) Limited`s
metallurgical coke stock pile were expanded to include coking coal.
Negotiations were initiated to obtain access to fresh production of
metallurgical coke through financing the refurbishment of coke batteries and
the supply of screening equipment with corresponding offtake agreements. This
will generate substantial sales to Zambia and the Democratic Republic of Congo
("DRC").
Metmar Industrial (Proprietary) Limited commenced screening activities at
Zimbabwe Iron & Steel Corporation Limited, following the purchase of screening
equipment. Negotiations have commenced to obtain access to additional
production through the provision of finance for the refurbishment of coke
batteries and the provision of screening equipment with corresponding offtake
agreements, generating major sales to the South African market.
STRATEGIC EQUITY INVESTMENTS
Kalahari Resources (Proprietary) Limited
Development of the Kalagadi Manganese project is progressing well. The contract
for supplying, erecting and commissioning of the sinter plant has been
finalised and the bulkearthworks started two weeks ago. Plans have been
finalised for the relocation of the smelter site to zone 5 Coega. Completion of
the entire project is scheduled for June 2012.
KIVU Resources Limited ("KIVU")
KIVU holds exploration permits in the DRC and Rwanda. Initial exploration
activities in Rwanda have identified 19 tin and tantalum ore bodies on the
concession areas. Drilling results in Gatumba South indicate a reserve in
excess of 6 million tons of tin and tantalum at a value-in-the-ground in excess
of US$120 million.
The infield pilot plant at Ruhanga Mine on the Kirengo deposit is in full
production with pleasing results. The plant processes between 250 to 350 tons
of ore per day.
The DRC concessions include the "Bisie" mine near Walikali, which produces 60%
of all tin mined in the KIVU and the Maniema provinces of the DRC. The deposit
is believed to be the richest deposit of tin known, the size of which has not
yet been determined.
Minero Zinc (Proprietary) Limited) ("Minero Zinc") (name in the
process of being changed to Pering Base Metals) On 25 February 2009 an
independent Competent Persons Report was published, which concluded that Pering
is an economically viable lead and zinc project. Project funding was
subsequently delayed due to negative market and funding conditions. This
prompted a value engineering exercise to de-risk the project and investigate
further optimisation opportunities to improve returns and reduce peak funding.
Initial results are positive and the bankable feasibility study will be updated
accordingly. Metmar has a 20% interest in Minero Zinc.
PGR 17/Mogale Alloys
In September 2009, Metmar disposed of its 21% interest in PGR 17/Mogale Alloys
to Ruukki SA (Pty) Limited ("Ruukki SA") with effect from 1 April 2009 for a
total sale price of R248.2 million. In May 2009 Metmar received R150.9 million
from Ruukki SA in respect of part payment of the total sale price.
The first unconditional deferred payment amounting to R26.8 million is payable
in May 2010. The second deferred payment of R70.4 million was conditional and
is subject to successful commissioning of the furnaces and receipt in writing
by Ruukki SA of all the governmental licences, permits, authorisations or
permissions which are necessary to operate the furnaces. All furnaces have now
been successfully commissioned.
OUTLOOK
By most measures the world economy is out of intensive care and a greater sense
of optimism prevails. Good demand exists for commodities, particularly base
metals, and spot prices have increased substantially. For instance, copper has
recently traded for US$8 000 per ton. Growth in China for the recently reported
fourth quarter of 2009 was 11.7% and this country is at the forefront of the
increasing demand for commodities. The only concern is what the effect on the
global economy will be when governments cease with the significant stimulants
they injected into their respective economies and the current aggressive
restocking of depleted inventories comes to an end.
In South Africa growth is currently forecast at about 3% and certainly in the
early months of this financial year ending on 28 February 2011, Metmar has seen
an improvement in business. In light of the marked change in the prevailing
economic conditions both globally and in South Africa, it is envisaged that
trading will improve in 2010.
DISTRIBUTION TO SHAREHOLDERS
Metmar`s policy to pay dividends of at least half the headline profits earned
will continue. A distribution from the profit on the sale of the investment in
PGR 17/Mogale Alloys will also be made to compensate shareholders for the
dilution of their interest when funds were raised through a share issue to fund
this particular investment.
The directors are pleased to advise that the Company will accordingly be making
a capital reduction out of the share premium account of 25.0 cents per ordinary
share ("the distribution") compared to a distribution of 30.0 cents per
ordinary share in June 2009. Further details are set out below.
The distribution is being implemented in terms of the general authority to make
payments to shareholders granted to directors at the annual general meeting
held on 12 August 2009.
The important dates relating to the distribution are set out below:
Last day to trade in order to participate in the
distribution Friday, 18 June 2010
Metmar shares commence trading "ex" the distribution Monday, 21 June 2010
Record date for the distribution Friday, 25 June 2010
Payment date for the distribution Monday, 28 June 2010
Metmar share certificates may not be dematerialised or rematerialised between
Monday, 21 June 2010 and Friday, 25 June 2010, both dates inclusive.
NOTES TO THE AUDITED FINANCIAL RESULTS
1. Basis of preparation
The audited consolidated financial results have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), the South African
Companies Act 1973 (Act. 61 of 1973), as amended and the JSE Limited Listings
Requirements. The principal accounting policies used in the preparation of the
financial results for the year ended 28 February 2010 are consistent with those
applied for the year ended 28 February 2009.
2. Reconciliation between earnings and headline earnings
28.02.2010 28.02.2009
Audited Audited
R 000 R 000
Total Profit for the year after taxation 162,326 177,488
Non-controlling interests (440) (3,043)
Profit attributable to owners of parent 161,886 174,445
Adjustments for:
- (Profit)/loss on disposal of property, plant
and equipment (18) 245
- Profit on sale of associate after taxation (126,274) -
- Fair value adjustments (1,966) 123
- Goodwill impairment - 19,589
Headline earnings 33,628 194,402
Earnings per share cents)
- Headline 16.9 100.6
- Basic 81.1 90.3
Weighted average number of shares in issue 199,620,311 193,261,532
3. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash.
4. Related party transactions
During the period, the Company and its subsidiaries, in the ordinary course of
business, entered into various transactions with their associates. These
transactions were subject to terms that were no less favourable than those
arranged with third parties.
5. Segment report
This year the Group adopted IFRS 8 Operating Segments which replaced IAS 14
Segment Reporting. The standard is applied retrospectively. The accounting
policy for identifying segments is now based on internal management reporting
information that is regularly revised by the chief operating decision maker.
This change has resulted in the investment activities being identified as a
separate operating segment for the Group instead of being identified as part of
the trading activities of the Group. There has been no aggregation of the two
segments identified as trading and investments.
ABRIDGED SEGMENTAL ANALYSIS FOR THE YEARS ENDED
28 February 2010
Audited
R`000
Trading Investment
Segments activities activities TOTAL
Segment revenues 1,684,610 - 1,684,610
Net finance income/(cost) 1,513 - 1,513
Depreciation and amortisation
of financial assets (5,979) - (5,979)
1,680,144 - 1,680,144
Other material non-cash items
Goodwill impairment - - -
Segment assets 881,656 206,369 1,088,025
Segment liabilities 600,853 - 600,853
Reconciliation of the Group`s
operating segments to key
financial results presented
in the annual
financial statements:
Total segment revenues 1,684,610 - 1,684,610
Other income 20,539 - 20,539
Group revenues 1,705,149 - 1,705,149
Segment profit or loss 67,397 - 67,397
Profit on sale of associate - 153,911 153,911
(Loss)/profit from discontinued
operations - (12,185) (12,185)
Net finance income/(cost) 1,513 - 1,513
Total profit before taxation 68,910 141,726 210,636
28 February 2009
Audited
R`000
Trading Investment
Segments activities activities TOTAL
Segment revenues 3,438,714 - 3,438,714
Net finance income/(cost) (16,751) - (16,751)
Depreciation and amortisation
of financial assets (4,369) - (4,369)
3,417,594 - 3,417,594
Other material non-cash items
Goodwill impairment 18,089 - 18,089
Segment assets 844,431 67,902 912,333
Segment liabilities 550,903 - 550,903
Reconciliation of the Group`s
operating segments to key
financial results presented
in the annual
financial statements:
Total segment revenues 3,438,714 - 3,438,714
Other income 19,307 26,104 45,411
Group revenues 3,458,021 26,104 3,484,125
Segment profit or loss 170,761 - 170,761
Profit on sale of associate - - -
(Loss)/profit from discontinued
operations - 81,420 81,420
Net finance income/(cost) (16,751) - (16,751)
Total profit before taxation 154,010 81,420 235,430
6. Post balance sheet event
Negotiations commenced during March 2009 and on 15 September 2009 Metmar and a
consortium of investors, represented by Metmar ("the Metmar Consortium"),
purchased a 40% shareholding in Zimbabwe Alloys Limited ("Zim Alloys") which
was conditional on the fulfilment of conditions precedent including a
financial, legal, commercial and technical due diligence.
Following the outcome of the due diligence, the structure of the transaction
was amended. On 24 March 2010 Metmar Africa Limited ("Metmar Africa"), situated
in Mauritius, in which Metmar has a 25% interest, entered into an agreement
with Zim Alloys to acquire `40% of the issued share capital of Zimbabwe Alloys
Chrome (Pvt) Limited ("ZAC"), situated in Zimbabwe for a total purchase
consideration of US$51.3 million. ZAC is a wholly owned subsidiary of Zim
Alloys. Metmar`s investment in Metmar Africa is held by wholly owned
subsidiary, Metmar Mauritius Limited, situated in Mauritius. The shareholders
of Metmar Africa have access to capital and the expertise to effectively and
efficiently design, construct, refurbish, operate and manage the logistics and
operations of ZAC. Metmar Africa will control the sales and marketing of
certain materials produced by ZAC.
The trading of South African chrome is currently a large part of Metmar`s
activities. The acquisition expands these trading activities into a higher
quality Zimbabwean chrome and provides the Company with the opportunity to
realise synergistic benefits.
The first phase will cover refurbishment of the metal recovery plant plus
refurbishment, or if required new washing plants to start cash generation.
During this phase the design of a DC furnace will also begin.
The second phase involves a Competent Persons Report which should be completed
within eight months when Metmar Africa will decide on funding options.
7. Corporate governance
The Metmar group complies with the code of Corporate Practice and Conduct
published in the King II Report on Corporate Governance.
8. Audit opinion
Grant Thornton, per DS Reuben, the Group`s auditor, has audited the
consolidated financial results contained in this abridged report, and has
expressed an unqualified opinion. Their report is available for inspection at
the Company`s registered office.
9. Annual general meeting
The Company`s annual general meeting of shareholders will be held at Metmar`s
registered office 24 Sloane Street, Bryanston on Wednesday, 11 August 2010 at
09h30.
Colin B Brayshaw David J Ellwood
Non-Executive Chairman Chief Executive Officer
28 April 2010
Directors: CB Brayshaw* (Chairman), DJ Ellwood (Chief Executive Officer),
PP Boshoff, MF de Wet, GR Forsdyke, GP Lotis, D Mashile-Nkosi*, L Matteucci*,
AP Ruiters*
* Non-executive
Company Secretary: MRD Boyns (British)
Registered office : 24 Sloane Street, Bryanston, 2191 (P O Box 98549,
Sloane Park, 2152)
Transfer Secretaries : Computershare Investor Services (Pty) Limited
(P O Box 61051, Marshalltown, 2107)
Sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Auditors: Grant Thornton, per DS Reuben
These results may be viewed on the internet on www.metmarlimited.com
29 April 2010
Date: 29/04/2010 16:30:03 Supplied by www.sharenet.co.za
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