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Audited group results for the year ended 27 December 2013
DELTA EMD LIMITED
Registration number: 1919/006020/06
Income tax number: 9375057719
Share code: DTA ISIN: ZAE000132817
("Delta EMD" or "the Group")
AUDITED GROUP RESULTS
FOR THE YEAR ENDED 27 DECEMBER 2013
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
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
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
year at year at
December December
2013 2012
R'000 R'000
ASSETS
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
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
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
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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
NOTES
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
COMMENTARY
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.
PERFORMANCE OF THE GROUP'S EMD BUSINESS
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).
DISPOSAL OF THE GROUP'S AUSTRALIAN PLANT SITE
Efforts to sell the Group's former plant site in Australia continue.
PROSPECTS
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.
DIVIDEND
No dividend has been declared.
PREPARER OF FINANCIAL STATEMENTS
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
Johannesburg
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
Directors:
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 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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