Wrap Text
Press release and management call on interim results for the six months ended 31 December 2014
PETMIN LIMITED
Incorporated in the Republic of South Africa
Registration Number 1972/001062/06
Share Code JSE: PET
ISIN: ZAE000076014
("Petmin" or the "Company")
24 FEBRUARY 2014
PETMIN PRESS RELEASE AND MANAGEMENT CALL ON INTERIM RESULTS FOR THE SIX MONTHS
ENDED 31 DECEMBER 2014
Petmin headline earnings climb 25%
Continuing growth at Somkhele and exciting prospects at NAIC
Financial highlights
* Headline earnings per share up 25%
* After-tax profit for the period up 42% to R47million (2013: R32m)
* Operating cost per sales tonne reduced by 7% despite weakening Rand
*Net cash flow from operating activities up 12% to R313 million (2013: R279m)
* Capital expenditure down 25% to R18 million (2013: R24 million)
Operating highlights
* Anthracite production up 27% at Somkhele
*Anthracite sales volumes up 89%
* Energy coal production up 55%
*Energy coal sales volumes up 943%
*Shareholding in North Atlantic Iron Corporation (NAIC) increased to 34%
* NAIC site selection and unbundling process on track
JSE-listed Petmin continued its satisfying growth trajectory with a solid performance in difficult
trading conditions at its Somkhele anthracite mine, as headline earnings per share were up 25%, the
company reported in interim financial results for the six months to end-December 2014.
Petmin reported after-tax profit for the period up 45% to R47 million (2013:R32m). Normalised
earnings per share were up 8% from the same period in 2013.
Net cash flow from operating activity was up 12% to R313 million (2013: R279m). Capital
expenditure declined 25% to R18 million (2013: R24 million).
"The Somkhele management team, together with employees and community stakeholders at
Somkhele, is doing a remarkable job by remaining focused on cost reduction and efficiency
improvements," said Petmin CEO Jan du Preez.
Somkhele
The Somkhele anthracite mine in KwaZulu-Natal, operated by wholly-owned subsidiary Tendele Coal
Mining (Tendele), is Petmin's key operating asset. Somkhele maintained its excellent safety record
during the period under review, with a Lost Time Injury Frequency Rate (LTIFR) of zero.
Production of saleable anthracite at Somkhele increased 27% to 678,002 tonnes in the six months
ended 31 December 2014 (2013: 534,523 tonnes) with a 3% improvement in yields and 23% increase
in Run-Of-Mine (ROM) tonnes washed.
Anthracite sales volumes increased 89% to 659,754 tonnes (2013: 349,414). Export sales volumes
increased 231% and inland sales volumes increased 25% as Petmin's metallurgical coal customers
ramped new projects up to full production.
Average dollar export prices dropped 22%, a reflection on global commodity markets and product
mix compared to 2013. Demand remained firm due to interruptions in local and Eastern European
supply.
Energy product
Somkhele's third processing plant produces energy product from discard.
Production increased 55% to 171,474 tonnes (2013:110,349 tonnes) during the period under review,
with yield improving by 23%.
Energy coal sales increased 943% to 268,768 tonnes (2013: 25,777) following a temporary
suspension of sales in the six months to end-2013. A dispute with one of Tendele's customers over
the interpretation of the contracted qualities of energy product has been scheduled for continued
arbitration hearings during May 2015.
Anthracite outlook
Management expects production and sales of Somkhele's metallurgical anthracite and energy
product to be maintained at current levels for the six months ending 30 June 2015.
Confirmed orders have been received for 94% of anticipated anthracite production to June 2015.
Anticipated energy coal production is fully committed to confirmed orders.
Management expects the continued effects of local supply constraints and the crisis in Eastern
Europe to continue to support demand for Somkhele's products.
North Atlantic Iron Corporation (NAIC) industrial project
The North Atlantic Iron Corporation (NAIC) is Petmin's highest priority project. NAIC aims to become
the dominant supplier of merchant pig iron to the Northern USA electric arc furnace steelmaking
industry.
During the six months ended 31 December 2014, Petmin invested an additional US$1 million in NAIC,
takings its shareholding to 34%. In the period to June 2015, Petmin expects to invest a further US$5
million to take its shareholding in NAIC to 40% for a total investment of $25m. It has an option to
acquire a further 9.9% at a market-related price.
The NAIC team is focused on the site selection process for NAIC's first merchant pig iron plant, with
sites in Ashtabula, Ohio, and Quebec, Canada, selected from a short list of thirteen.
An independent trade-off analysis between the two sites will be concluded in the second quarter of
calendar 2015, coinciding with the completion of the pre-feasibility study (PFS) by Hatch
Engineering. Detailed engineering design and project costing will commence once a site is selected.
"It remains our focus to be at the bottom end of the pig iron cost curve, and is confident that the PFS
will substantiate an unlevered IRR of some 20% in our North American project," said Bradley Doig,
Petmin's Business Development Director.
Unbundling of NAIC
The unbundling of the NAIC shares to shareholders remains on track once the PFS is concluded. It is
anticipated that a dividend in-specie of approximately 50 cents per share will be declared, following
the primary listing of NAIC in North America and a secondary listing on the JSE.
Veremo pig iron project
Veremo is a pig iron development project in Mpumalanga. The Veremo management team is
conducting smelt tests and finalising the mine design. Development can only commence when the
Mining Right awarded in January 2014 is executed by the Department of Mineral Resources. All
development capital is funded by Framework (the 75% shareholder in Veremo) and supported by
Kermas, its holding company.
On 25 November 2014, Petmin instituted proceedings against Veremo, Framework and Kermas for
three separate payments of R65 million due to Petmin arising from the original transaction, and is
awaiting confirmation of dates for arbitration hearings. The dispute will not affect the continued
development of the project.
Other developments
At 31 December 2014, the Group had cash on hand of R10 million and undrawn overdraft facilities of
R140 million with Standard Bank.
Dividends and share buy-backs
In the six months ended 31 December 2014, Petmin paid a dividend of three cents per share and
acquired 11 565 606 of its own shares for a total investment of R18 million, or R1.58 per share. An
updated Competent Persons Report in 2014 valued the Somkhele anthracite mine at R1.6 billion or
approximately R2.84 per share for Somkhele only.
At 31 December 2014 the Group held, 15 877 062 of its own shares in treasury stock, representing
2.75% of the total issued shares.
Management believes that Petmin's current share price significantly undervalues the Group's assets
and Petmin will continue with a share buy-back programme when the opportunity arises.
Live call and Q&A with Petmin management
Analysts, investors and media are invited to join a live call and Q&A with Petmin management at
11h30 SA Standard Time on Tuesday 24 February 2015. Dial in details below.
Country/city
Access Number
South Africa - Cape Town
021 819 0900
South Africa - Durban
031 812 7600
South Africa - Johannesburg Neotel
011 535 3600
South Africa - Johannesburg Telkom
010 201 6800
Australia - Toll-Free
1 800 350 100
Other Countries - International
+27 11 535 3600
Other Countries - International
+27 10 201 6800
UK - Toll-Free
0808 162 4061
USA and Canada - Toll Free
1 855 481 5362
Playback access (code 34574)
Other Countries - International
+27 11 305 2030
South Africa
011 305 2030
UK - Toll Free
0 808 234 6771
USA and Canada - Toll Free
1 855 481 5363
Management presentation available
A detailed presentation will be made available on www.petmin.co.za .
Enquiries:
Petmin
Bradley Doig
+27 11 706 1644
Media
Jonathon Rees
+27 76 185 1827
Sponsor and Corporate Advisor (JSE)
River Group
Andrew Lianos
+27 834 408 365
JOHANNESBURG
24 February 2015
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