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MML - Metmar Limited - Audited abridged financial results for the year ended
28 February 2011
METMAR LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/007269/06)
Share code: MML & ISIN code: ZAE000078747
("Metmar" or "the Company" or "the Group")
Audited abridged financial results for the year ended 28 February 2011
- Revenue up 38.1% to R2.33 billion
- Headline earnings per share up 36.7% to 23.1 cents
- Net asset value per share up by 8.6% to 261.8 cents
- Investments in chrome assets
COMMENTARY
PROFILE AND STRUCTURE
Metmar is an established commodities trader and logistics facilitator that is
building a vertically integrated business with investments in production
assets. As Metmar places a priority on the elimination of risk, speculative
trading does not form part of Metmar`s operating objective, while there is
normal risk in the investment activities.
Metmar is focused on developing assets and generating revenues related to the
trading of ores, alloys, metals, plastics, rubber and chemicals. The Group`s
activities are underpinned by long standing relationships with leading local
financial institutions, producers, industrial consumers, customers and
logistical service providers.
With access to funding in the equity market, Metmar ensures its long term
economic sustainability by taking minority interests in commodity producers
thereby obtaining trading rights.
FINANCIAL PERFORMANCE
Metmar achieved satisfactory operating results, with headline earnings 36.7%
up from those achieved in the previous financial period.
Revenue grew by 38.1% from R1.7 billion to R2.3 billion compared to the
corresponding period of 2010. The gross profit margin achieved at 7.9% was
similar to last year. The decrease in attributable earnings of R115.5 million
from R161.8 million to R46.3 million was mainly due to the profit on the
disposal of PGR 17 Investments (Proprietary) Limited, which was included in
attributable earnings for the year ended 28 February 2010.
Headline profits increased from R33.6 million in 2010 to R 48.6 million in the
current period.
The financial position of the Group remains strong with the net asset value of
the Group increasing by 8.6% to 261.8 cents per share (2010: 241.0 cents).
The cash at the end of the period was R48.4 million (2010: R97.9 million).
This decrease was due to an operating outflow as a result of: increased
working capital needed due to higher trading activities, a cash outflow of
R124.2 million from investing activities, less cash generated from the private
placement of shares during the period of R127.6 million.
ACQUISITIONS
On 24 March 2010 Metmar Africa Limited ("Metmar Africa") entered into an
agreement with Zimbabwe Alloys Limited ("ZAL")to acquire 40% of the issued
share capital of Zimbabwe Alloys Chrome (Private) Limited ("ZAC") for USD51.3
million. Metmar`s investment in Metmar Africa is held by wholly owned
subsidiary Metmar Mauritius Limited ("Metmar Mauritius"). The purchase
consideration was payable in various phases of the transaction.
In the third phase of the transaction, following receipt of a signed Competent
Persons Report, the shareholders of Metmar Africa were concerned that the
indicated reserves did not justify further contributions towards ZAC capital
and working capital requirements. After a meeting with ZAL on 21 December
2010, in order to derisk the project, Metmar Africa decided to reduce their
shareholding from 40% to 15% in ZAC, based on the total Metmar Africa
expenditure and investment incurred to date totalling USD16.2 million. At 28
February 2011, in terms of the revised agreement, an amount of USD1.5 million
was owing to ZAL by Metmar Africa, which is included in trade and other
payables.
ZAC is a mining and production company whose business includes, inter alia,
the mining of contained chromite, the processing thereof into concentrate and
alloy and the sale of the resultant material. Metmar Mauritius controls the
sales and marketing of certain of these materials produced by ZAC.
Metmar Mauritius owns 51.4% of Metmar Africa, however, at the end of the
financial period, pending finalisation of certain administrative issues,
Metmar Mauritius held the balance of the shares of Metmar Africa on behalf of
the remaining shareholders. All shareholders` contributions to the investment
and working capital requirements of ZAC have now been received.
Metmar acquired 20% of Eastern Belt Chrome Mines (Proprietary) Limited
("EBCM") in May 2010 for R7.2 million.
These two investments, together with access to technology with its strategic
partners, provide Metmar, via offtake agreements, access to substantial
sources of chrome and associated commodities.
OPERATIONAL PERFORMANCE AND PROSPECTS
As anticipated at the interim reporting date, during the second half of the
period, volumes and commodity prices increased resulting in improved trading
conditions.
The features of the operational activities for the period are summarised as
follows:
- WAG division, distributors of polymers, natural rubber and rubber chemicals
had a record year. WAG division is ranked amongst the top five suppliers of
polymer raw material suppliers in South Africa with a distribution volume in
excess of 50,000 metric tons per annum.
- Metmar Industrial (Proprietary) Limited ("Metmar Industrial") remained
active both locally and in Zimbabwe. The company creates markets for by-
product materials for the metallurgical industry. Its primary operation is the
screening and marketing of metallurgical coke from Zimbabwe. Metmar Industrial
supplied in excess of 80,000 metric tons of metallurgical coke to the South
African, Zimbabwean and Zambian markets during the financial period.
- KIVU focuses on exploration and mining principally in tin and tantalum in
Rwanda. Exploration has been focussed on the major deposits in Kirengo,
Gatumba South and Rukaragata and these results have exceeded KIVU`s
expectations and confirm the existence of significant large scale economic
deposits on the Rwandan concessions. KIVU also holds mineral rights to tin and
tantalum concessions in the eastern Democratic Republic of Congo ("DRC").
Artisanal mining has almost terminated and as a result, supply of tin from
these sources has drastically reduced.
- Metmar directly and indirectly owns 11.66% of Kalahari Resources
(Proprietary) Limited ("Kalahari Resources"), which owns 40% of Kalagadi
Manganese (Proprietary) Limited ("Kalagadi"). Kalagadi is in the process of
developing a manganese operation encompassing an underground manganese mine
which will produce 3 million metric tons of ore per annum. Ore will be
beneficiated at the mine to produce 2.4 million metric tons of sinter per
annum. A smelter will be built at Coega to produce 320 000 metric tons of high
carbon ferro manganese per annum. The mine and sinter plant are anticipated to
be completed by 2012 with the smelter coming into operation in 2013.
- Metmar owns 20% of Pering Base Metals (Proprietary) Limited ("PBM"). PBM
owns 100% of Pering Mine (Proprietary) Limited ("Pering Mine"). Pering Mine
holds a combined in-pit and stockpiled reserve of 51 million metric tons from
which PBM plan to produce 1.2 billion pounds of zinc and lead over a 13 year
life-of-mine. The process of raising equity and bank funding has commenced for
the finance required for re-commissioning of the Pering Mine.
- Metmar owns a 20% share of SA Metals Equity (Proprietary) Limited, whose
objective is to build a plant to extract pig iron from calcine. The pre-
feasibility study showed excellent returns and the final bankable feasibility,
engineering studies and environmental impact assessment are in process. Access
to an iron rich dump in Brits has been obtained and construction is planned to
commence in 2012. Production is planned to commence earliest in 2014, when
Metmar will have the marketing rights of the pig iron with an additional cost
reduction of co generation.
- From its investment in EBCM, Metmar has acquired the offtake for chrome ore
from the mining operations at Swartkoppies mine and the entire offtake for all
chrome ore from the future mining operations at the Goudmyn mine. These mines
are located in the Steelpoort area. During the final quarter of the financial
period, Metmar successfully sold 22 500 metric tons of chrome ore and chrome
concentrate. Mining has not yet commenced at the Goudmyn mine.
- In June 2010 Metmar acquired 40% in Metmar Speciality Metals (Proprietary)
Limited ("MSM"). Thereafter this entity acquired, as a going concern,
approximately 40 000 metric tons of bulk ferro vanadium slag located as a
dump. This was valued at R40 million. Metmar advanced the purchase price to
MSM. Metmar has been appointed as the exclusive agent for all products
produced by MSM.
RESTRUCTURE
Effective from 1 March 2011 the Group has been restructured along three
distinct businesses each with their own areas of expertise. These businesses
are:
Metmar Investments and Resources - This business will manage the investments
and projects of the Group. It will also be responsible for current and future
investments in mining operations, thereby securing trading rights.
Metmar Trading - This business will manage the trading operations of the
Group, other than plastics and rubber.
Metmar Polychem - The trading of plastics and rubber, which since the
acquisition of WAG has become a major profit contributor to the Group, will be
managed by this business.
As a result of the restructure of the Group, segment reporting in 2012 will be
different to 2011.
DISPUTE
There has been no progress relating to the dispute with Ruukki SA
(Proprietary) Limited as advised in the announcement published on SENS on 22
September 2010.
DIRECTORATE
Dr AP Ruiters resigned as a director on 15 April 2011. No other changes in
directorate took place during the period under review.
OUTLOOK
The global economy is showing signs of growth with the USA growing at
approximately 3% and China at around 9%. Currently the largest threat to this
continued growth is inflation, which driven by higher commodity and food
prices, is rising at a concerning rate. Should commodity prices remain at
current levels, as a result of continuing strong demands, we anticipate market
conditions to continue being conducive to trading.
In South Africa growth is currently forecast at about 3% and certainly in the
early months of this financial year ending on 28 February 2012, Metmar has
seen an improvement in business. In light of the marked change and the
prevailing economic conditions both globally and in South Africa, it is
envisaged that trading will at worst remain at current levels.
The information contained in this paragraph has not been reviewed or reported
on by the Company`s auditors.
DIVIDEND
The directors are pleased to advise that the Company has declared a dividend
of 11.0 cents per ordinary share for the twelve month period ended 28 February
2011 ("the dividend") compared to a distribution out of the share premium
account of 25.0 cents per ordinary share in June 2010. Further details are set
out below.
The important dates relating to the dividend are set out below:
Last day to trade in order to participate in Friday, 17 June 2011
the dividend
Metmar shares commence trading "ex" the Monday, 20 June 2011
dividend
Record date for the dividend Friday, 24 June 2011
Payment date for the dividend Monday, 27 June 2011
Metmar share certificates may not be dematerialised or rematerialised between
Monday, 20 June 2011 and Friday, 24 June 2011, both dates inclusive.
CORPORATE GOVERNANCE
The Metmar Group is committed to applying the King Code of Governance
Principles (King III) incorporated in the King Report on Governance for South
Africa which came into effect on 1 March 2010.
ANNUAL GENERAL MEETING
The Company`s annual general meeting of shareholders will be held at Metmar`s
registered office 24 Sloane Street, Bryanston during August 2011. A separate
notice convening the meeting will be sent to shareholders in due course.
NOTES TO THE AUDITED ABRIDGED FINANCIAL RESULTS
1. Basis of preparation
The audited consolidated financial results have been prepared
in accordance with International Financial Reporting Standards
("IFRS"), the AC500 standards as issued by the Accounting
Practices Board, or its successor, the South African Companies
Act and the JSE Limited Listings Requirements. The principal
accounting policies used in the preparation of the financial
results for the year ended 28 February 2011 are consistent with
those applied for the year ended 28 February 2010, except for
the early adoption of IRFS 9.
28 February 28 February
2011 2010
R`000 R`000
2. Reconciliation between earnings and
headline earnings
Profit for the period 46 746 161 886
Adjustments for:
- Loss/(profit) on disposal of 241 (18)
property, plant and equipment after
taxation
- Profit on disposal of associate net - (126 274)
of capital gains taxation
- Fair value adjustments 1 587 (1 966)
Headline earnings 48 574 33 628
Earnings per share from continuing and
discontinued operations (cents)
- Headline 23.1 16.9
- Basic 22.2 81.1
Weighted average number of shares in 210 511 611 199 620 311
issue
3. Financial assets includes:
Non-current assets
At fair value through other
comprehensive income (held to maturity
- 2010)
Pering Base Metals (Proprietary) 80 000 -
Limited
Eastern Belt Chrome Mines 7 200 -
(Proprietary) Limited
Kalahari Resources (Proprietary) 20 000 20 000
Limited
KIVU Resources Limited 11 745 10 071
SA Metals Equity (Proprietary) Limited 8 000 8 000
Zimbabwe Alloys Chrome (Proprietary) 116 293 -
Limited
Deferred payment consideration on - 76 536
disposal of PGR 17 Investments
(Proprietary) Limited
243 238 114 607
4. 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.
5. 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.
6. Segment report
The accounting policy for identifying segments is based on
internal management reporting information that is regularly
revised by the chief operating decision maker. Investment
activities are identified as a separate operating segment for
the Group. There has been no aggregation of the two segments
identified as trading and investments.
Audited abridged segmental analysis for the years ended
28 February 2011
R`000
Trading Investment
Segments activities activities TOTAL
Segment revenues 2 326 774 - 2 326 774
Segment operating profit 72 483 - 72 483
Profit on sale of associate - - -
before taxation
Fair value adjustments (6 320) - (6320)
Net fair value gains on forward 4 232 - 4 232
exchange contracts
Net finance cost (26 467) - (26 467)
Operating profit as per 70 395 - 70 395
statements of comprehensive
income
(Loss) from discontinued - (300) (300)
operations
Profit/(loss) for the year 70 395 (300) 70 095
before tax
Profit/(loss) for the year after 47 426 (688) 46 738
tax
Assets and liabilities
Segment assets 1 328 464 11 842 1 340 306
Segment liabilities 725 335 6 399 731 734
Audited abridged segmental analysis for the years ended (continued)
28 February 2010
R`000
Trading Investment
Segments activities activities TOTAL
Segment revenues 1 684 610 - 1 684 610
Segment operating profit 68 419 - 68 419
Profit on sale of associate - 153 911 153 911
before taxation
Fair value adjustments 1 556 - 1 556
Net fair value gains on forward 1 912 - 1 912
exchange contracts
Net finance cost (2 977) - (2 977)
Operating profit as per 68 910 153 911 222 821
statements of comprehensive
income
(Loss) from discontinued - (12 079) (12 079)
operations
Profit/(loss) for the year 68 910 141 832 210 742
before tax
Profit/(loss) for the year after 48 130 114 196 162 326
tax
Assets and liabilities
Segment assets 881 656 - 881 656
Segment liabilities 600 853 - 600 853
POST BALANCE SHEET EVENT
The directors are not aware of any material matter or circumstance arising
since the end of the financial period, which would affect the financial
position other than those in the normal course of business.
AUDIT OPINION
Grant Thornton, the Group`s external auditors, have audited the consolidated
financial results contained in this abridged report, and have expressed an
unqualified opinion. Their report is available for inspection at the Company`s
registered office.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Further to the announcement made on 18 April 2011, shareholders are advised
that Metmar is still in negotiations, which if successfully concluded, may
have a material effect on the price of the Company`s securities.
Accordingly, shareholders are advised to exercise caution when dealing in the
Company`s securities until a full announcement is made or this cautionary is
withdrawn.
Colin Brayshaw
Non-Executive Chairman
David Ellwood
Chief Executive Officer
Molleen de Wet
Chief Financial Officer
16 May 2011
Directors: CB Brayshaw* (Chairman), DJ Ellwood (Chief Executive Officer), PP
Boshoff, MF de Wet (Chief Financial Officer), GR Forsdyke, GP Lotis, D Mashile-
Nkosi*, L Matteucci* *Non-executive
Company Secretary: MRD Boyns (British)
Registered office: 24 Sloane Street, Bryanston, 2191 (PO Box 98549, Sloane
Park, 2152)
Transfer Secretaries: Computershare Investor Services (Pty) Limited (PO Box
61051, Marshalltown, 2107)
Sponsor: One Capital
Auditors: Grant Thornton, per DS Reuben
Audited abridged consolidated statements of financial position
at 28 February 28 February
2011 2010
Note R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 56 006 63 926
Intangible assets 61 914 64 872
Investment in associate - 80 000
Financial assets 3 243 238 114 607
Deferred taxation 4 331 1 517
365 489 324 922
Current assets
Inventories 269 856 226 298
Trade and other receivables 622 927 440 377
Cash and cash equivalents 70 192 97 946
962 975 764 621
Non-current assets held-for-sale 11 842 -
Total assets 1 340 306 1 089 543
EQUITY AND LIABILITIES
Equity and retained earnings 608 572 487 173
608 572 487 173
Non-current liabilities
Financial liabilities 73 400 15 497
Deferred taxation 15 659 15 392
89 059 30 889
Current liabilities
Financial liabilities 17 581 26 333
Trade and other payables 596 890 545 148
Bank overdraft 21 805 -
636 276 571 481
Non-current liabilities held-for- 6 399 -
sale
Total equity and liabilities 1 340 306 1 089 543
Net asset value per share (cents) 261.82 241.03
Net tangible asset value per share 235.18 208.93
(cents)
Number of shares in issue 232 440 480 202 122 157
Audited abridged consolidated statements of comprehensive income
for the years ended 28 February 28 February
2011 2010
Note R`000 R`000
Continuing operations
Revenue 2 326 774 1 684 610
Cost of sales (2 144 007) (1 539 717)
Gross profit 182 767 144 893
Net operating expenses (79 885) (74 562)
102 882 70 331
Profit on sale of associate - 153 911
Operating profit 102 882 224 242
Net finance cost (26 467) (2 977)
Fair value adjustments (6 320) 1 556
Profit before taxation 70 095 222 821
Taxation (22 669) (48 416)
Profit from continuing operations 47 426 174 405
Discontinued operations
(Loss) before taxation (300) (12 185)
Taxation (388) 106
(Loss) from discontinued operations (688) (12 079)
Total
Profit before taxation 69 795 210 636
Taxation (23 057) (48 310)
Profit for the year 46 738 162 326
Other comprehensive income:
Movement in foreign currency 4 763 1 005
reserves
Total comprehensive income 51 501 163 331
Profit attributable to:
Equity holders of Group 46 746 161 886
Non-controlling interests (8) 440
Total comprehensive income for the 46 738 162 326
year
Non-controlling interests:
Profit for the year from continuing 329 440
operations
Loss for the year from discontinued (337) -
operations
(8) 440
Net profit attributable to:
Equity holders of the Group:
Profit for the year from continuing 47 097 173 965
operations
Loss for the year from discontinued (351) (12 079)
operations
Profit for the year attributable to 46 746 161 886
equity holders of the Group
Total comprehensive income
attributable to:
Equity holders of the Group 51 509 162 891
Non-controlling interests (8) 440
51 501 163 331
Earnings per share from continuing
and discontinued operations
Basic and diluted (cents) 2 22.2 81.1
Audited abridged condensed group statements of changes in equity
Share Acqui- Non-
capital Foreign sition of control-
and currency shares in Retained ling Total
premium reserve subsidiar earnings interests equity
y
R`000 R`000 R`000 R`000 R`000 R`000
Balance at 28 19 163 - - 340 001 2 267 361 431
February 2009
New share 25 000 - - - - 25 000
issue
Total - 1 005 - 161 886 440 163 331
comprehensive
income for the
year
Loss at - - - - (1 952) (1 952)
acquisition of
subsidiary
Distribution (60 637) - - - - (60 637)
to
shareholders
Balance at 28 (16 474) 1 005 - 501 887 755 487 173
February 2010
New share 127 641 - - - - 127 641
issue
Total - 4 763 - 46 746 (8) 51 501
comprehensive
income for the
year
Distribution (50 531) - - - - (50 531)
to
shareholders
Purchase of - - (5 704) - (1 508) (7 212)
additional non-
controlling
interest in
subsidiaries
Balance at 28 60 636 5 768 (5 704) 548 633 (761) 608 572
February 2011
Audited abridged condensed group cash flow statement
for the years ended 28 February 28 February
2011 2010
R`000 R`000
Cash flows (used in)/generated from
operating activities
Cash (used in)/generated from operations (24 812) 76 568
Net finance costs (26 467) (2 977)
Taxation paid (2 906) (69 194)
Net cash (used in)/generated from (54 185) 4 397
operating activities
Net cash (used in)/generated from (124 192) 64 919
investing activities
Net cash generated from/(used in) 128 818 (50 041)
financing activities
Total cash movement for the year (49 559) 19 275
Cash and cash equivalents at the 97 946 78 671
beginning of the year
Cash and cash equivalents at the end of 48 387 97 946
the year
These results may be viewed on the internet on www.metmar.com
Johannesburg
19 May 2011
Date: 19/05/2011 14:31:00 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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