Wrap Text
Press Release Petmin results to end-June 2015
PETMIN LIMITED
Incorporated in the Republic of South Africa
Registration Number 1972/001062/06
Share Code JSE: PET
ISIN: ZAE000076014
Press Release Petmin results to end-June 2015
Financial highlights
*Headline earnings per share (HEPS) up 62% to 24.28 cents (2014: 14.95 cents)
*Gross profit increased to R253m (2014: R195m)
*Net cash flow from operating activities up 35% to R901m (2014: R668m)
*Revenue increased by 25% to R1.3 billion (2014: R1.0 billion)
*Dividend declared of 5c per share
*Shareholding in North Atlantic Iron Corporation (NAIC) increased to 35% (2014: 33%).
Operational highlights
*Excellent safety record maintained at Somkhele anthracite mine
*Agreement reached with local community for R350m BBBEE transaction giving local community
and employees a 20% stake in Somkhele (subject to shareholder approval)
*Site selected for first NAIC plant in Canada with detailed engineering designs underway
Solid operating performance at Somkhele anthracite mine boosts Petmin's earnings
A strong operational performance saw JSE-listed Petmin's headline earnings grow 62% to 24.28 cents per
share (2014: 14.95 cents) for the year to end-June 2015.
The company reported R253m gross profit (2014: R195m) and has declared a dividend of five cents per
share.
Normalised earnings have shown steady growth over the past two years and were up 30% to R132 million
(2014: R102 million; 2013: R82 million).
"The Somkhele team did an outstanding job in a tough market, keeping costs low and boosting production,
whilst maintaining its exemplary safety record," said Petmin chief executive Jan du Preez. "Despite flat
pricing, the strong performance is due to increased production and sales volumes, disciplined cost control,
improved plant yields and prudent revenue management."
Petmin has structured a R350 million Broad-Based Black Economic Empowerment transaction with the local
community and employees for a 20% stake in Somkhele, subject to shareholder approval.
During the year to end-June 2015, Petmin invested an additional R29 million (2014: R68 million) in its North
Atlantic Iron Corporation industrial project. Petmin's shareholding in NAIC is now 35% (30 June 2013: 33%).
During the year, Petmin bought 28,496,778 of its own shares at an average R1.53 per share and, at 30 June
2015, held 32,808,234 of its shares, representing 5.69% of total issued shares.
Somkhele
Production of saleable anthracite at Somkhele increased by 19% to 1 335 233 tonnes (2014: 1 125 089
tonnes) with improved volume and yields. Sales of anthracite were up 19% to 1 222 150 tonnes (2014: 1
026 250 tonnes) predominantly due to supply constraints affecting other producers.
Average prices for inland sales were unchanged from 2014. Average export prices dropped 2% in 2015. 71%
of Somkhele's export sales were dollar denominated with the remaining 29% in Rands. The average dollar
price of export sales dropped by 4%, offset by a 9% weakening of the average exchange rate.
Production of energy coal from rewashed discard at Somkhele increased by 51% to 368 413 tonnes (2014:
244 298 tonnes), and sales were up 102% to 352 255 tonnes (2014: 174556 tonnes). Yield was up 29%.
The average at-mine-gate selling price of energy coal increased by 9% in 2015 with continued strong
demand.
NAIC
The North Atlantic Iron Corporation (NAIC) in North America remains Petmin's priority development
project. After researching 13 potential sites over two years, NAIC has selected the Port of Saguenay in
Quebec as the location for its first pig iron plant.
Detailed site-specific engineering design work by Tenova will conclude inside six months, leading to capital
raising for plant development and construction. Environmental permitting will commence during this
period.
NAIC has made the decision to proceed with its first plant, which will be configured to produce 425 ktpa
Nodular Pig Iron for the foundry market (NPI). NPI trades at a significant premium to standard merchant pig
iron (MPI) consumed by the steel industry.
Petmin believes the Saguenay site will have a significant cost advantage over NPI currently delivered to the
Midwest region of the United States and to Europe.
Veremo
Petmin awaits the execution of a mining right awarded in January 2014 for its Veremo pig iron project in
Mpumalanga. Additional metallurgical tests were conducted during the year, and a commercial scale
campaign using Veremo ore will be undertaken at Mogale Alloys in their 10 MW DC Arc Furnace to produce
high purity pig iron and titanium rich slag.
The arbitration proceedings against Framework Investments Limited and Kermas Limited, both having
guaranteed payment of three separate amounts of R65 million due by Veremo Holdings Limited to Petmin,
will continue once dates have been finalised.
The year ahead
Petmin expects current levels of anthracite production at Somkhele to be maintained in the year ahead,
with sales to increase slightly as inventory is reduced. Local demand and prices are expected to remain
stable.
Petmin expects dollar prices for exports to remain at current levels with receipts aided by the weakening of
the Rand.
Energy coal sales are expected to increase to approximately 450 000 tonnes per annum with average at-
mine-gate prices in Rands to increase by approximately 15% due to better pricing from revised product
blends.
Capital expenditure to June 2016 is expected to be approximately R83 million, with about half of this to
open new mining areas.
Somkhele is expanding its efforts to build even stronger relationships with all stakeholders, including its
employees and the families of its employees, and with the community within which it operates, including
the Tribal Authority, all traditional structures, schools, the youth, the business community and other parties
in the community. Although engaged in providing the local community with basic services such as water,
electricity, health care and education, the company does not believe that such provisioning is its primary
responsibility. Petmin does however believe it is making a material difference in the community by working
together with the authorities and the community to ensure a better future for all.
Petmin intends to invest the final US$4 million to take its shareholding in NAIC to 40%. The proposed
unbundling and separate listing for NAIC has been delayed indefinitely due to volatility in equity markets.
Due to the current state of the commodities market, cash preservation is critical and, despite a solid
balance sheet, aside from its investment in NAIC, Petmin will not evaluate any opportunities that are not
cash producing and not in the bottom quartile of the cost curve. Management believes it will be prudent to
continue to buy back shares as the company remains undervalued relative to current financial
performance.
ENDS
Investors, analysts and media are invited to join a 10h00 call with Petmin management on Tuesday 8
September 2015 following the release of Petmin financial results for the year to end June 2015.
Dial in details for Petmin results call 10h00 Tuesday 8 September 2015
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Playback Access Numbers (code 38929)
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Other Countries - International +27 11 305 2030
South Africa 011 305 2030
UK - Toll Free 0 808 234 6771
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8 September 2015
Johannesburg
Sponsor and Corporate Advisor
River Group
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