Wrap Text
Final results for the year ended 30 June 2014
Assore Limited
Company registration number: 1950/037394/06
Share code: ASR
ISIN: ZAE000146932
(“Assore” or “Group” or “Company”)
Final results for the year ended 30 June 2014
- Record headline earnings for the year
- Final dividend increased to R5,50 per share
- Lower iron ore prices during the second half
- Revenues continued to benefit from weaker Rand
Des Sacco, Chairman of Assore, said:
“The Group reported record headline earnings for the year, despite lower dollar prices for its products which were more than offset by the weaker Rand.
Demand for the Group’s products remains strong, underpinned by continuing growth in world steel production.”
Consolidated income statement
Year ended Year ended
Year ended 30 June 2013 30 June 2013
30 June 2014 Audited - Audited -
R’000 Reviewed restated reported
Revenue 2 894 596 1 964 409 14 175 175
Turnover 1 768 561 999 280 13 500 864
Cost of sales (1 649 450) (934 228) (7 803 491)
Gross profit 119 111 65 052 5 697 373
Profit on disposal of available-for-sale investments - 27 850 27 850
Fees and commissions earned from joint venture 926 060 868 364 434 182
Other income 200 384 85 954 811 844
Other expenses (486 350) (447 530) (2 014 974)
Finance costs (61 152) (91 237) (116 786)
Profit before taxation and joint venture 698 053 508 453 4 839 489
Taxation (240 486) (171 227) (1 411 121)
Profit after taxation, before joint venture 457 567 337 226 3 428 368
Share of profit from joint venture, after taxation 3 572 155 3 092 476 -
Profit for the year 4 029 722 3 429 702 3 428 368
Attributable to:
Shareholders of the holding company 4 005 123 3 426 978 3 425 644
Non-controlling shareholders 24 599 2 724 2 724
As above 4 029 722 3 429 702 3 428 368
Earnings as above 4 005 123 3 426 978 3 425 644
Profit on disposal of available-for-sale investment, before taxation - (27 851) (27 851)
Impairment of financial assets, before taxation 26 327 - -
Impairment of non-financial assets, before taxation 276 922 155 919 155 919
Loss on disposal of fixed assets, before taxation 542 23 521 23 521
Taxation effect of above items (79 024) (44 744) (44 744)
Headline earnings 4 229 890 3 533 823 3 532 489
Earnings per share (basic and diluted - cents) 3 881 3 320 3 319
Headline earnings per share (basic and diluted - cents) 4 098 3 424 3 423
Dividends per share declared in respect of
the profit for the year (cents) 1 000 600 600
- interim 450 250 250
- final 550 350 350
Weighted average number of ordinary shares (million) used for purposes
of determining earnings per share
Ordinary shares in issue 139,61 139,61 139,61
Impact of shares owned by BEE trusts, but treated as treasury shares
in terms of IFRS (36,40) (36,40) (36,40)
103,21 103,21 103,21
Consolidated statement of comprehensive income
Year ended Year ended
Year ended 30 June 2013 30 June 2013
30 June 2014 Audited - Audited -
R’000 Reviewed restated reported
Profit for the year (as above) 4 029 722 3 429 702 3 428 368
Items that may be reclassified into the income statement
dependent on the outcome of a future event: 57 407 (29 915) (29 915)
Reclassification of fair value gain on disposal of
available-for-sale investments after taxation - (22 657) (22 657)
Gain/(loss) on revaluation to market value of
available-for-sale investments after taxation 52 434 (19 465) (19 465)
Gain/(loss) on revaluation to market value of
available-for-sale investments at year end 59 452 (23 928) (23 928)
Deferred capital gains taxation thereon (7 018) 4 463 4 463
Exchange differences on translation of foreign operations 4 973 12 207 12 207
Actuarial gains on pension fund after taxation 36 776 18 185
Total comprehensive income for the year, net of tax 4 123 905 3 417 972 3 398 453
Attributable to:
Shareholders of the holding company 4 096 869 3 409 266 3 389 747
Non-controlling interests 27 036 8 706 8 706
As above 4 123 905 3 417 972 3 398 453
Consolidated statement of cash flow
Year ended Year ended
Year ended 30 June 2013 30 June 2013
30 June 2014 Audited - Audited -
R’000 Reviewed restated reported
Cash (utilised)/generated by operations (725 162) (230 061) 3 855 985
Cash generated/(utilised) from investing activities 1 638 776 1 475 073 (2 159 046)
Proceeds on disposal of available-for-sale investments - - 36 975
Acquisition of available-for-sale investments (161 926) - -
Long-term liabilities repaid (500 000) (750 000) (750 000)
Other financing activities 189 164 157 405 157 405
Increase in cash for the year 440 852 652 417 1 141 319
Cash resources at beginning of the year 1 703 746 1 051 329 3 324 437
Cash resources per statement of financial position 2 144 598 1 703 746 4 465 756
Consolidated statement of financial position
At At
At 30 June 2013 30 June 2013
30 June 2014 Audited - Audited -
R’000 Reviewed restated reported
ASSETS
Non-current assets
Property, plant and equipment and intangible assets 552 191 510 577 10 455 788
Investments
- in joint venture 14 768 170 12 946 015 -
- in available-for-sale 377 988 178 430 220 393
- other 46 613 41 963 194 725
Pension fund surplus 56 973 12 315 -
Total non-current assets 15 801 935 13 689 300 10 870 906
Current assets
Inventories 627 190 426 292 2 552 483
Trade and other receivables 383 923 250 711 2 359 602
Cash resources 2 144 598 1 703 746 4 465 756
Total current assets 3 155 711 2 380 749 9 377 841
TOTAL ASSETS 18 957 646 16 070 049 20 248 747
EQUITY AND LIABILITIES
Share capital and reserves
Ordinary shareholders’ interest 17 302 592 14 031 378 14 022 511
Non-controlling interests 150 271 128 910 128 910
Total equity 17 452 863 14 160 288 14 151 421
Non-current liabilities
Net deferred taxation liabilities 63 426 43 622 2 486 917
Long-term liabilities
- interest-bearing 346 100 846 100 846 100
- non-interest-bearing 27 134 24 682 421 287
Total non-current liabilities 436 660 914 404 3 754 304
Current liabilities
Interest-bearing 538 588 349 424 349 424
Non-interest-bearing 529 535 645 933 1 993 598
Total current liabilities 1 068 123 995 357 2 343 022
TOTAL EQUITY AND LIABILITIES 18 957 646 16 070 049 20 248 747
Consolidated statement of changes in equity
Year ended Year ended
Year ended 30 June 2013 30 June 2013
30 June 2014 Audited - Audited -
R’000 Reviewed restated reported
Share capital, share premium and other reserves
Balance at beginning of year 326 837 344 548 344 548
Other comprehensive income/(loss) for the year 91 746 (17 711) (35 896)
Surplus on disposal of available-for-sale investments
recognised in profit for the year - (22 657) (22 657)
Net increase/(decrease) in the market value of
available-for-sale investments 52 434 (19 465) (19 465)
Actuarial gains after taxation arising in pension fund 36 776 18 185
Foreign currency translation reserve arising on consolidation 2 536 6 226 6 226
Balance at end of year 418 583 326 837 308 652
Treasury shares
Balance at beginning and end of year (5 051 583) (5 051 583) (5 051 583)
Retained earnings
Balance at beginning of year 18 756 125 15 907 437 15 907 437
Change in accounting policy (10 651)
Balance at beginning of year - restated 18 756 125 15 896 786 15 907 437
Profit for the year attributable to shareholders 4 005 123 3 426 978 3 425 644
Ordinary dividends declared during the year (825 656) (567 640) (567 640)
- total dividends declared (1 116 856) (767 840) (767 840)
- dividends on treasury shares held in BEE trusts 291 200 200 200 200 200
Balance at end of year 21 935 592 18 756 124 18 765 442
Ordinary shareholders' interest 17 302 592 14 031 378 14 022 511
Non-controlling interests
Balance at beginning of year 128 910 126 858 126 858
Share of total comprehensive income 21 361 2 052 2 052
- profit for the year 24 599 2 724 2 724
- other comprehensive income 2 437 5 982 5 982
- dividends paid to non-controlling shareholders (5 675) (6 654) (6 654)
Balance at end of year 150 271 128 910 128 910
Total equity 17 452 863 14 160 288 14 151 421
Fair values of financial instruments
The Group uses the following hierarchy for determining and disclosing the fair value inputs of financial instruments:
Level 1 - quoted prices in an active market that are unadjusted for identical assets or liabilities;
Level 2 - valuation techniques using inputs, which are directly or indirectly observable; and
Level 3 - valuations based on data that is not observable (not applicable to the Group).
The values of all other financial instruments recognised, but not subsequently measured at fair value, approximate
fair value.
Year ended 30 June 2014 - reviewed
R’000 Level 1 Level 2 Total
Assets measured at fair value
Available-for-sale investments 377 988 - 377 988
Other investments* 46 613 - 46 613
424 601 - 424 601
Year ended 30 June 2013 - audited - restated
R’000 Level 1 Level 2 Total
Assets measured at fair value
Available-for-sale investments 178 430 - 178 430
Other investments* 41 963 - 41 963
Forward exchange contracts# - 10 921 10 921
220 393 10 921 231 314
* During the year, Other investments were transferred from Level 2 to Level 1, since these are traded in what has been reassessed as an active market.
# Forward exchange contracts, which are included in trade and other receivables, are measured based on bankers’ quoted exchange rates.
Segmental information
Other
Joint venture mining and beneficiation Marketing mining and
R’000 Iron ore Manganese Chrome Sub-total and shipping beneficiation Adjustments# Consolidated
Year ended 30 June 2014
- reviewed
Revenues
Third party 18 101 329 8 309 121 1 609 868 28 020 318 2 541 872 352 724 (28 020 318) 2 894 596
Inter-segmental - - - - 6 479 - (6 479) -
Total revenues 18 101 329 8 309 121 1 609 868 28 020 318 2 548 351 352 724 (28 026 797) 2 894 596
Profit/(loss) arising 6 357 416 684 025 127 817 7 169 258 504 298 (46 731) (7 169 258) 457 567
Year ended 30 June 2013
- audited - restated
Revenues
Third party 15 962 985 7 450 238 1 876 674 25 289 897 1 508 351 456 058 (25 289 897) 1 964 409
Inter-segmental - - - - 5 098 - (5 098) -
Total revenues 15 962 985 7 450 238 1 876 674 25 289 897 1 513 449 456 058 (25 294 995) 1 964 409
Profit/(loss) arising 5 517 176 827 117 (134 391) 6 209 902 369 761 (32 535) (6 209 902) 337 226
#Adjustments required to give effect to the requirement of IFRS to equity account the Group’s investment in Assmang.
COMMENTARY
Results
Headline earnings for the financial year to 30 June 2014 increased by 19,7% to R4,2 billion, compared to R3,5 billion
in the previous financial year. This increase is due mainly to the higher level of headline earnings of Assmang
Proprietary Limited (“Assmang”) for the year, which increased by 16,6% to R7,5 billion compared to the previous financial year,
and increased commissions earned on higher turnovers by Assmang.
Assore holds a 50% interest in Assmang, which it controls jointly with African Rainbow Minerals Limited in terms of a
longstanding shareholder agreement. Accordingly, Assmang is accounted for on the equity accounting basis (previously
proportionately consolidated) and Assore has disclosed its share of Assmang’s profit after taxation in its income statement
as “Share of profit from joint venture, after taxation” (refer “Accounting policies, basis of preparation and review by
auditors” below).
Prices for iron ore in US dollars declined substantially during the second half of the financial year as the market
moved into oversupply due mainly to additional volumes of ore being exported from Australia. The average index price for
iron ore (62% iron content for fine grade, delivered in China) for the second half of the year was 16,5% lower than
during the first half. Premiums for lumpy grades of iron ore were extremely volatile during the year, ranging from US dollars
19 per tonne, to below US dollars 3 per tonne. In the first half of the financial year, manganese ore prices remained
reasonably strong despite record levels of seaborne trade. However, in the second half of the year, there was oversupply
in the market, caused primarily by the new South African producers, and prices came under severe pressure. Prices for
manganese alloys were generally lower across the year. Chrome ore prices also fluctuated during the financial year, with
average US dollar prices being 5% lower than in the previous year. In the early part of the year, the Eskom “buyback”
arrangements were concluded with ferrochrome producers, resulting in producers curtailing production, freeing up additional
chrome ore for the export market and depressing prices. In the second half, the prolonged platinum strike deprived the
market of “UG2” grade chrome concentrate, resulting in recovery of prices for chrome ore. The reduced US dollar selling
prices for the Group’s products were offset by a weaker rand/US dollar, which, across the year, was 17% weaker than the
previous year. These factors contributed to Assmang’s turnover increasing by 12% compared to the previous year, leading
to increased commissions earned by the Group on Assmang’s sales. Depressed market conditions and increased cost factors
resulted in Assmang assuming an impairment charge of R519 million before taxation in its operations at Machadodorp,
which reduced the Group’s headline earnings by R187 million.
Sales volumes
Sales volumes of iron ore were lower for the year, due to restricted plant availability, unreliable water supply and
reduced railage capacity. Lower domestic demand for manganese ore resulted in decreased sales of higher grade ore in the
domestic market, while enforced mine stoppages and available export capacity resulted in lower sales volumes of chrome
ores.
The table below sets out Assmang’s sales volumes for the current period:
Increase/
Year ended 30 June (decrease)
Metric tonnes ’000 2014 2013 %
Iron ore 15 640 16 070 (3)
Manganese ore* 2 708 2 856 (5)
Manganese alloys 279 260 7
Chrome ore 988 1 054 (6)
Charge chrome 32 77 (58)
*Excluding intra-group sales to alloy plants
Capital expenditure
Capital expenditure by Assmang amounted to R3,6 billion (2013: R4,1 billion) for the year. Major project capital
expenditure was undertaken at the Khumani Iron Ore Mine on various optimisation projects amounting to R673 million.
At the Beeshoek Iron Ore Mine, R480 million was spent on acquiring the new mining fleet required for mining the
Village Pit, which is on schedule to commence waste-stripping in October 2014. R840 million was spent in Assmang’s
Manganese Division on the expansion of the Black Rock Mines, the total cost of which is estimated at R6,7 billion, leading
to an increase of the total output capacity in the long term to a sustainable level of at least 4 million tonnes per
annum. The bulk of the remainder of the capital was spent on replacement items.
Assmang’s joint venture ferromanganese project in Malaysia, in which it holds a 54,36% interest, is progressing
according to schedule and the first of two furnaces is expected to be commissioned in October 2015. The furnaces are designed
to produce 110 000 tonnes of high carbon ferromanganese and 70 000 tonnes of silico manganese alloys annually. The total
project value is set at US dollars 328 million and Assmang will meet its commitment to the project from existing cash
resources.
Outlook
World steel production remained strong throughout the year, with growth occurring not only in China but in the rest of
Asia, North America and in Europe. A series of stimulus measures by the Chinese Central Government has been successful
and further investment in rail, social housing and urban infrastructure is underway. Despite some concerns regarding
instability in the Chinese financial system and property market, it is expected that the Chinese and world steel production
will continue to grow.
While demand for the Group’s products remained strong, supply for both iron and manganese ores has overtaken this
increased demand. The index price of iron ore in June 2014 was 31% lower than the average price for the 2013 calendar year
and trade in this lower range is expected to continue for the foreseeable future. It is encouraging that the higher cost
producers both in China and other areas have reduced production levels and although port stocks in China are high, steel
mills are generally running on low stocks. The premium for lumpy grades has returned to a higher level which is
expected to be maintained.
The oversupply in the manganese ore market is primarily due to the ramping up of production levels by the new South
African producers in the Kalahari. Current price levels, particularly for the medium grade ores produced by these mines,
appear to have bottomed and the higher grade ore prices which were dragged down by this excess supply of medium grade ore
have begun to recover. It is further apparent that export volumes of higher cost/lower quality ores from other
countries are being reduced and it is anticipated that prices may well recover further, particularly as China and India are both
importing near record quantities.
The dynamics of the chrome ore market were disrupted by the extended strike in the South African platinum mines, which
limited the availability of UG2 concentrate, resulting in a temporary increase in the price for chrome ore. The
resumption of this supply is expected to reach the market later in the year, until which point it is expected that chrome ore
prices should remain stable before starting to decline.
In addition to the impacts of the above market dynamics, the results of the Group remain significantly exposed to
fluctuations in exchange rates.
Dividends
The results in this announcement include the interim dividend of 450 cents (2013: 250 cents) per share which was
declared on 11 February 2014 and paid to shareholders on 10 March 2014. In line with the results for the year, the directors
of Assore have declared a final dividend of 550 cents (2013: 350 cents) per share, making a total dividend in respect of
profit for the year of 1 000 cents (2013: 600 cents) per share. The final dividend will be paid to shareholders on or about
29 September 2014 and, in accordance with IFRS, is not included in the results contained in this announcement as it was
declared after year end.
Accounting policies, basis of preparation and review by auditors
The financial results for the year under review have been prepared under the supervision of Mr CJ Cory, CA(SA) in
accordance with IAS 34 - Interim Financial Reporting and comply with International Financial Reporting Standards (“IFRS”),
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Listings Requirements of the
JSE Limited (“JSE”) and the Companies Act No 71 of 2008, as amended. Ernst & Young Inc., the Group¹s auditors, have
reviewed and issued an unmodified report on the condensed financial results included in this announcement in accordance with
ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A copy of their
report is available for inspection at the registered office of the Company.
The financial results have been prepared in accordance with accounting policies which are consistent with those
applied in the previous financial year, except for the following statements and amendments which were adopted during the year:
- IFRS 11 - Joint Arrangements, which has necessitated the Group to change the basis on which Assmang is accounted
for from the proportionate consolidation method to the equity accounting method. There was no impact on the profit or
headline earnings as a result of the adoption of this standard; however, there was a significant effect on the presentation
and disclosures made in the consolidated annual financial statements. The results for the year ended 30 June 2013 as
previously reported have been included in order to illustrate the impact of the adoption of this standard;
- IFRS 12 - Disclosure of Interests in Other Entities, has not had an impact on the results of the Group but has
resulted in additional disclosures;
- IFRS 13 - Fair Value Measurement, has not had an impact on the results of the Group but has resulted in additional
disclosures; and
- Amendments to IAS 19 - Employee Benefits, which did not have a material impact on the results of the Group, but has
resulted in the recognition of a pension fund surplus, an increase in other comprehensive income and additional
disclosures in the consolidated annual financial statements.
In addition to the adoption of the above standards and amendments, the Group has adopted several new IFRSs and
amendments to IFRSs which have not had any significant impact on the results or disclosures of the Group for the year under
review.
Declaration of final dividend
Shareholders are advised that on 2 September 2014, the Board of directors (“the Board”) has declared final gross
Dividend Number 115 (“the Dividend”), of 550 (2013: 350) cents per share (gross) for the year ended 30 June 2014.
In terms of paragraph 11.17 of the Listings Requirements of JSE Limited, shareholders are advised of the following
with regard to the declaration:
1. the Dividend has been declared from retained earnings;
2. the local dividend tax (“Dividend Tax’) rate is 15%;
3. the Company does not have any Secondary Tax on Companies Tax (“STC”) credits available to reduce the impact of Dividend Tax;
4. the net local dividend amount is 467,5 cents per share for shareholders liable to pay Dividends Tax;
5. the issued ordinary share capital of Assore is 139 607 000 shares, of which 36 400 000 shares are accounted for
as treasury shares in terms of IFRS and are therefore excluded from earnings per share calculations; and
6. Assore’s Income Tax reference number is 9045/018/84/4.
The salient dates are as follows:
Last day for trading to qualify for
and participate in the final dividend Thursday, 18 September 2014
Trading “ex dividend” commences Friday, 19 September 2014
Record date Friday, 26 September 2014
Dividend payment date Monday, 29 September 2014
Dates (inclusive) between which share certificates Friday, 19 September 2014
may not be dematerialised or rematerialised to Friday, 26 September 2014.
On behalf of the Board
Desmond Sacco CJ Cory Johannesburg
Chairman Chief Executive Officer 3 September 2014
Directors:
Executive: Desmond Sacco (Chairman), CJ Cory (Chief Executive Officer), AD Stalker (Marketing), BH van Aswegen (Technical and Operations)
Non-executive: EM Southey* (Deputy Chairman and Lead Independent Director), RJ Carpenter, S Mhlarhi*, WF Urmson* Alternate PE Sacco *Independent
Registered office: Assore House, 15 Fricker Road, IIlovo Boulevard, Johannesburg, 2196
Company secretary: African Mining and Trust Company Limited
Transfer office: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001
Sponsor: The Standard Bank of South Africa Limited
www.assore.com
Note to editors:
Assore holds a 50% interest in Assmang Limited (Assmang), which it controls jointly with African Rainbow Minerals Limited (ARM).
Further enquiries:
Magna Carta
Jacques de Bie Tel: 011 784 2598 Cell: 082 691 5384
Date: 03/09/2014 10:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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