Wrap Text
Final results for the year ended 30 June 2015
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 2015
- Substantially lower prices for iron and manganese ores
- Impairment charges recorded of R886 million
- Record sales volumes of iron and chrome ores
- Headline earnings for the year reduced by 53,3%
- Strong cash position
- Final dividend declared of R3,00 per share
Chairman Des Sacco, commented:
“The financial results for the year were significantly affected by lower prices for iron and manganese
ores and challenging operating conditions, specifically increased costs in electricity and labour which
far exceed inflation. However, record sales volumes were achieved for iron and chrome ore and a strong
cash position was maintained.”
Consolidated income statement
Year ended Year ended
30 June 30 June
2015 2014
R’000 Reviewed Audited
Revenue 3 357 297 2 894 596
Turnover 2 526 096 1 768 561
Cost of sales (2 376 827) (1 649 450)
Gross profit 149 269 119 111
Fees and commission earned from joint venture 643 442 926 060
Other income 205 672 200 384
Impairment of non-financial assets - group (365 073) -
Impairment of financial assets (114 258) (26 327)*
Other expenses (408 869) (460 023)*
Finance costs (33 391) (61 152)
Profit before taxation and joint venture 76 792 698 053
Taxation (102 293) (240 486)
(Loss)/profit after taxation, before joint venture (25 501) 457 567
Share of profit from joint venture, after taxation 1 317 138 3 572 155
Share of loss of associate, after taxation (1 197) -
Profit for the period 1 290 440 4 029 722
Attributable to:
Shareholders of the holding company - group and associate 1 403 371 4 005 123
Non-controlling shareholders (112 931) 24 599
As above 1 290 440 4 029 722
Earnings as above 1 403 371 4 005 123
Impairment of non-financial assets 771 261 276 922
Impairment of financial assets 114 258 26 327
Loss on disposal of fixed assets 10 009 542
Taxation effect of above items (180 831) (79 024)
Non-controlling shareholders’ portion (141 717) -
Headline earnings 1 976 351 4 229 890
Earnings per share (basic and diluted - cents) 1 360 3 881
Headline earnings per share (basic and diluted - cents) 1 915 4 098
Dividends per share declared in respect of the
profit for the year (cents) 600 1 000
- Interim 300 450
- Final 300 550
Weighted average number of ordinary shares (million)
Ordinary shares in issue 139,61 139,61
Weighted impact of treasury shares held in trust (36,40) (36,40)
103,21 103,21
* Other expenses have been restated in order to disclose the impairment of financial assets separately.
Consolidated statement of comprehensive income
Year ended Year ended
30 June 30 June
2015 2014
R’000 Reviewed Audited
Profit for the year (as above) 1 290 440 4 029 722
Items that may be reclassified into the income statement
dependent on the outcome of a future event (11 428) 94 183
(Loss)/gain on revaluation to market value of available-for-sa
investments after taxation (24 209) 52 434
(Loss)/gain on revaluation to market value of available-for-sa
investments (29 758) 59 452
Deferred capital gains tax thereon 5 549 (7 018)
Exchange differences on translation of foreign operations 15 506 4 973
Actuarial (loss)/gain on pension fund after taxation (2 725) 36 776
Total comprehensive income for the year, net of tax 1 279 012 4 123 905
Attributable to:
Shareholders of the holding company 1 384 130 4 096 869
Non-controlling shareholders (105 118) 27 036
As above 1 279 012 4 123 905
Consolidated statement of cash flow
Year ended Year ended
30 June 30 June
2015 2014
R’000 Reviewed Audited
Cash (utilised)/generated by operations (962 774) (725 162)
Cash retained from investing activities 817 093 1 638 776
Acquisition of available-for-sale investment - (161 926)
Long-term liabilities repaid - (500 000)
Other financing activities 422 278 189 164
Increase in cash for the year 276 597 440 852
Cash resources at beginning of year 2 144 598 1 703 746
Cash resources per statement of financial position 2 421 195 2 144 598
Consolidated statement of financial position
At At
30 June 30 June
2015 2014
R’000 Reviewed Audited
ASSETS
Non-current assets
Property, plant and equipment and intangible assets 256 504 552 191
Investments
- joint venture 14 585 308 14 768 170
- available-for-sale 233 972 377 988
- associate 120 756 -
- other 47 808 46 613
Pension fund surplus 57 474 56 973
Deferred taxation 4 964 -
Total non-current assets 15 306 786 15 801 935
Current assets
Inventories 924 762 627 190
Trade and other receivables 410 325 383 923
Restricted cash 450 000 -
Cash resources 2 421 195 2 144 598
Total current assets 4 206 282 3 155 711
TOTAL ASSETS 19 513 068 18 957 646
EQUITY AND LIABILITIES
Share capital and reserves
Ordinary shareholders' interest 17 808 956 17 302 592
Non-controlling interest 15 765 150 271
Total equity 17 824 721 17 452 863
Non-current liabilities
Net deferred taxation liabilities - 63 426
Long-term liabilities
- interest-bearing 346 100 346 100
- non-interest-bearing 21 081 27 134
Total non-current liabilities 367 181 436 660
Current liabilities
Interest-bearing 960 866 538 588
Non-interest-bearing 360 300 529 535
Total current liabilities 1 321 166 1 068 123
TOTAL EQUITY AND LIABILITIES 19 513 068 18 957 646
Consolidated statement of changes in equity
Year ended Year ended
30 June 30 June
2015 2014
R’000 Reviewed Audited
Share capital, share premium and other reserves
Balance at beginning of year 418 583 326 837
Other comprehensive (loss)/income for the year (19 747) 91 746
Net (decrease)/increase in the market value of
available-for-sale investments (24 209) 52 434
Actuarial gains/(losses) on pension plan after taxation (2 725) 36 776
Foreign currency translation reserve arising on consolidation 7 187 2 536
Balance at beginning and end of year 398 836 418 583
Treasury shares
Balance at beginning and end of the year (5 051 583) (5 051 583)
Retained earnings
Balance at beginning of year 21 935 592 18 756 125
Profit for the period attributable to shareholders 1 403 371 4 005 123
Ordinary dividends declared during the year (877 260) (825 656)
- total dividends declared (1 186 660) (1 116 856)
- dividends on treasury shares held in BEE trusts 309 400 291 200
Balance at end of year 22 461 703 21 935 592
Ordinary shareholders’ interest 17 808 956 17 302 592
Non-controlling interests
Balance at beginning of year 150 271 128 910
Share of total comprehensive income (134 506) 21 361
- profit for the year (112 931) 24 599
- other comprehensive income 7 813 2 437
- dividends paid to non-controlling shareholders (29 388) (5 675)
Balance at end of year 15 765 150 271
Total equity 17 824 721 17 452 863
Segmental information
Associate mining and beneficiation
Marketing Other mining Eliminations and
R’000 Iron ore Manganese Chrome Sub-total and shipping and beneficiation adjustments* Consolidated
Year ended 30 June 2015 - reviewed
Revenues
Third party 12 622 422 7 152 284 1 798 712 21 573 418 3 007 156 350 161 (21 573 438) 3 357 297
Inter-segment - - - - 5 101 - (5 101) -
Total revenues 12 622 422 7 152 284 1 798 712 21 573 418 3 012 257 350 161 (21 578 539) 3 357 297
Contribution to profit after taxation 2 381 257 94 165 183 802 2 659 224 197 485 (222 986) (2 659 224) (25 501)
Impairment of financial and
non-financial assets (147 114) (665 262) - (812 376) (114 258) (365 073) 406 188 (885 519)
Year ended 30 June 2014 - audited
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-segment - - - - 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
Contribution to profit after taxation 6 357 416 684 025 127 817 7 169 258 504 298 (46 731) (7 169 258) 457 567
Impairment of financial and
non-financial assets - (519 880) - (519 880) (26 327) (16 982) 259 940 (303 249)
*Eliminations and adjustments comprise mainly the adjustments required to give effect to the requirement of IFRS to equity account the group’s investment
in Assmang.
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.
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 2015 - Reviewed
R’000 Level 1 Total
Assets measured at fair value
Available-for-sale investments 233 972 233 972
Other investments 47 808 47 808
281 780 281 780
Year ended 30 June 2014 - Audited
R’000 Level 1 Total
Assets measured at fair value
Available-for-sale investments 377 988 377 988
Other investments 46 613 46 613
424 601 424 601
Commentary
Results
Headline earnings for the financial year to 30 June 2015 declined by 53,3% to R2,0 billion, compared to R4,2 billion
in the previous financial year, while profit for the year, which is stated after impairment charges of R886 million,
decreased by 68,0% to R1,3 billion, compared to R4,0 billion. These declines are due mainly to the lower level of headline
earnings of Assmang Proprietary Limited (Assmang) for the year, which were lower by 56,8%, at R3,3 billion compared to
the previous financial year and impairment charges in Assmang amounting to R812 million.
Assore holds a 50% interest in Assmang, which it controls jointly with African Rainbow Minerals Limited (ARM) and
which, in terms of International Financial Reporting Standards (IFRS) is accounted for on the equity accounting basis.
Accordingly, Assore has disclosed its 50% share of Assmang’s profit after taxation in its income statement as “Share of
profit from joint venture after taxation”.
Average index prices for iron ore (62% iron content, fines grade, delivered in China) were 41,6% lower than the prior
year, at US dollars 72 per tonne and those for manganese ore (44% manganese content, lumpy grade, delivered in China)
were 21,6% lower, at US dollars 3,88 per manganese unit. The declines in prices were caused by lower-than-expected demand
from China and increased global supply. Manganese alloy prices also reduced during the year although the decline for
refined alloys was less than for high carbon ferromanganese. Steady increases in the demand for stainless steel resulted in
prices for chrome ore generally remaining fairly stable over the year. The lower US dollar selling prices for the
group’s products were partly offset by a weaker rand/US dollar exchange rate, which across the year, was 8,0% weaker than the
previous year. Based on lower turnover, commission income declined over the previous year by 30,5%.
Following a technical and financial review of the underground chrome mines at Rustenburg Minerals, the group has
decided to suspend indefinitely further underground development, resulting in an impairment charge of R365 million. In
addition, Assmang has closed its last operational furnace at Machadodorp Works and a further ferromanganese furnace at Cato
Ridge Works has been closed due to the weak alloy market and increased electricity and labour costs necessitating
impairment charges amounting to R812 million, of which 50% has been included in the Group’s results. An additional impairment
charge of R114 million was recorded against the group’s share portfolio, due to declines in the share prices of the shares
in which the group is invested.
Sales volumes
Assmang achieved record sales volumes of iron ore, brought about by strong local demand, which was met from the
Beeshoek Iron Ore Mine and improvements in the throughput of the off-grade plant at Khumani Iron Ore Mine. Record sales
volumes of chrome ore were also achieved by Dwarsrivier Chrome Mine, due to better availability of rail capacity.
The table below sets out Assmang’s sales volumes for the year:
Increase/
Year ended 30 June (decrease)
Metric tonnes ’000 2015 2014 %
Iron ore 16 185 15 640 3
Manganese ore* 2 736 2 708 1
Manganese alloys 223 279 (20)
Chrome ore 1 068 988 8
*Excluding intra-group sales to alloy plants.
Expansion and capital expenditure
On 24 June 2015, Assore announced the acquisition from ARM of its 50% indirect share of Dwarsrivier Chrome Mine
(Dwarsrivier) (held in Assmang) for a consideration of R450 million. The completion of the transaction is subject to certain
conditions precedent, the most significant of which is the consent required, in terms of the Mineral Resources and
Petroleum Development Act, by the Department of Mineral Resources (DMR) for the transfer of the mining right from Assmang to a
new entity that will operate Dwarsrivier (the “Section 11” transfer). This amount has been disclosed as “Restricted
cash” in the Consolidated statement of financial position. The consideration will be adjusted for capital expenditure net
of financial results from the operation in the intervening period until the Section 11 transfer is achieved. Once consent
is granted, Assore will own 100% of Dwarsrivier, retrospective to 1 July 2014.
Capital expenditure for the year by Assmang amounted to R3,8 billion (2014: R3,6 billion), of which R1,3 billion was
spent in Assmang’s Manganese Division on the sustainability and expansion of the Black Rock Mines, which will increase
the mines’ capacity to 4 million tonnes per annum by 2017. A further R730 million was spent on waste-stripping in
Assmang’s Iron Ore Division, with R441 million spent at Beeshoek Iron Ore Mine and R289 million at Khumani Iron Ore Mine.
Construction at Sakura Ferroalloys in Malaysia, in which Assmang holds a 54,36% interest, is progressing well, within
budget and on schedule to be commissioned by the fourth calendar quarter of the current year and to achieve design
capacity of 110 000 tonnes of high carbon ferromanganese and 70 000 tonnes of silico manganese alloys annually by the end of
the next financial year.
Outlook
Growth in crude steel production is expected to remain subdued for the short to medium term with the Chinese economy,
in particular, showing continued signs of weakness and reduced demand. Economic growth in the rest of the world is also
expected to remain muted and, combined with the increased supply of low cost iron ore and central and local government
support for Chinese iron ore mines, prices are not anticipated to recover over this period and may deteriorate further
from current levels. Similar dynamics are evident in the markets for manganese, where additional mine capacity has
resulted in oversupply of mostly medium grade ores. This low priced ore and the poor demand from the largest seaborne markets
in North America and Europe will continue to depress manganese alloy prices for the foreseeable future. Stainless steel
demand appears to be stronger and prices for chrome ore are not expected to change significantly.
The cost of mining and production in South Africa is becoming increasingly expensive, due largely to price increases
in electricity and labour which far exceed inflation, resulting in the group embarking on various right-sizing and
restructuring projects in an attempt to improve and maintain the competitiveness of its operations.
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 300 cents (2014: 450 cents) per share which was
declared on 10 February 2015 and paid to shareholders on 9 March 2015. In line with the results for the year, the board of
directors of Assore (the board) has declared a final dividend of 300 cents (2014: 550 cents) per share, making a total
dividend in respect of results for the year of 600 cents (2014: 1 000 cents) per share. The final dividend will be paid to
shareholders on or about 21 September 2015 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), and 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. The accounting policies applied are consistent with
those adopted in the financial year ended 30 June 2014 and amendments and improvements to IFRS effective in the year have
not had any significant impact on the results or disclosures of the group for the year under review. Ernst & Young Inc.,
the group’s 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.
Directors
Since the interim results announcement on 10 February 2015, Mr RJ Carpenter resigned from the board as a
non-executive director on 15 June 2015, after 51 years’ service in the group, 25 years of which were as an executive
director.
Declaration of final dividend
Shareholders are advised that on 25 August 2015, the board declared final gross dividend number 117 (the dividend), of
300 (2014: 550) cents per share (gross) for the year ended 30 June 2015.
In terms of paragraph 11.17 of the Listings Requirements of the JSE, 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 of 15% will apply.
3. The net local dividend amount is 255,0 cents per share for shareholders liable to pay dividends tax.
4. 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.
5. 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 Friday, 11 September 2015
Trading “ex dividend” commences Monday, 14 September 2015
Record date Friday, 18 September 2015
Dividend payment date Monday, 21 September 2015
Dates (inclusive) between which share certificates Monday, 14 September 2015
may not be dematerialised or rematerialised to Friday, 18 September 2015.
On behalf of the board
Desmond Sacco CJ Cory Johannesburg
Chairman Chief Executive Officer 26 August 2015
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), TN Mogoduso*, S Mhlarhi*, IN Mkhari*, 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:
Singular Systems
Jacques de Bie Cell: 082 691 5384
Date: 26/08/2015 09:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
