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ASSORE LIMITED - Results for the half-year ended 31 December 2015

Release Date: 19/02/2016 12:00
Code(s): ASR     PDF:  
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Results for the half-year ended 31 December 2015

Assore Limited 
Company Registration Number: 1950/037394/06
Share code:  ASR   
ISIN: ZAE000146932 
(“Assore” or “group”)
Results for the half-year ended 31 December 2015


- Headline earnings decline by 25,4%    
- Oversupplied commodity markets    
- Strong cash position    
- Interim dividend declared of R2,00 per share    
- DMR consent obtained for acquisition of Dwarsrivier    

Chairman Des Sacco, commented: 
“The financial results were affected by weak commodity markets across all of the Group’s products. While this 
weakness is expected to continue in the immediate future, prevailing conditions have driven some higher cost 
capacity to exit the market, while exchange rates and freight rates are at all-time lows and continue to 
provide some relief.”

Consolidated income statement                                                                                                                         
                                                                  Half-year         Half-year             Year    
                                                                      ended             ended            ended    
                                                                31 December       31 December          30 June    
                                                                       2015              2014             2015    
                                                                  Unaudited         Unaudited          Audited    
                                                                      R’000             R’000            R’000                                                                                                                     
Revenue                                                           1 340 987         1 677 172        3 357 297    
Turnover                                                            958 955         1 295 758        2 526 096    
Cost of sales                                                      (909 244)       (1 216 392)      (2 376 827)    
Gross profit                                                         49 711            79 366          149 269    
Fees and commission earned from joint venture                       263 815           278 218          643 442    
Other income                                                        125 708           104 399          205 672    
Impairment of non-financial assets                                  (40 325)                -         (365 073)    
Impairment of financial assets                                      (87 067)          (63 308)        (114 258)    
Other expenses                                                     (216 542)         (236 030)        (408 869)    
Finance costs                                                       (17 242)          (14 531)         (33 391)    
Profit before taxation and joint venture                             78 058           148 114           76 792    
Taxation                                                            (45 489)          (46 367)        (102 293)    
Profit/(loss) after taxation, before joint venture                   32 569           101 747          (25 501)    
Share of profit from joint venture, after taxation                  575 911           845 379        1 317 138    
Share of loss from associate, after taxation                         (1 896)                -           (1 197)    
Profit for the period                                               606 584           947 126        1 290 440    
Attributable to:                                                                                                  
Shareholders of the holding company - group and associate           613 518           935 434        1 403 371    
Non-controlling shareholders                                         (6 934)           11 692         (112 931)    
As above                                                            606 584           947 126        1 290 440    
Headline earnings                                                                                                 
Earnings as above                                                   613 518           935 434        1 403 371    
Impairment of non-financial assets                                   83 895                 -          771 261    
Impairment of available-for-sale financial assets                    87 067            63 308          114 258    
Loss on disposal of property, plant and equipment                         -             4 367           10 009    
Taxation effect of above items                                      (28 438)          (13 039)        (180 831)    
Non-controlling shareholders’ portion                               (17 743)                -         (141 717)    
                                                                    738 299           990 070        1 976 351    
Earnings per share (basic and diluted - cents)                          594               906            1 360    
Headline earnings per share (basic and diluted - cents)                 715               959            1 915    
Weighted average number of ordinary shares (million)                                                              
Ordinary shares in issue                                             139,61            139,61           139,61    
Weighted impact of treasury shares held in trust                     (36,40)           (36,40)          (36,40)    
                                                                     103,21            103,21           103,21    
Dividends per share declared in respect of the profit                                             
for the period (cents)                                                  200               300              600    
- interim                                                               200               300              300    
- final                                                                                                    300    


Consolidated statement of comprehensive income                                                                                    
                                                                  Half-year         Half-year             Year          
                                                                      ended             ended            ended          
                                                                31 December       31 December          30 June          
                                                                       2015              2014             2015          
                                                                  Unaudited         Unaudited          Audited          
                                                                      R’000             R’000            R’000          
Profit for the period (as above)                                    606 584           947 126        1 290 440          
Items that may be reclassified into the                      
income statement dependent on the outcome                    
of a future event                                                    (7 263)           (9 130)         (11 428)          
Loss on revaluation to market value of                       
available-for-sale investments after taxation                       (23 114)          (27 282)         (24 209)          
Loss on revaluation to market value of                       
available-for-sale investments                                      (28 412)          (33 545)         (29 758)          
Deferred capital gains tax thereon                                    5 298             6 263            5 549          
Exchange differences on translation of foreign operations            15 851            18 152           15 506          
Actuarial loss on pension fund after taxation                             -                 -           (2 725)         
Total comprehensive income for the period, net of tax               599 321           937 996        1 279 012          
Attributable to:                                                                                                        
Shareholders of the holding company                                 598 488           917 409        1 384 130          
Non-controlling shareholders                                            833            20 587         (105 118)          
As above                                                            599 321           937 996        1 279 012          


Consolidated statement of financial position                                                                                         
                                                                                       
                                                                         At                At               At    
                                                                31 December       31 December          30 June    
                                                                       2015              2014             2015    
                                                                  Unaudited         Unaudited          Audited    
                                                                      R’000             R’000            R’000                                                                                                                                                                                 
Assets                                                                                                            
Non-current assets                                                                                                
Property, plant and equipment and intangible assets                 199 056           591 348          256 504    
Investments                                                                                                       
- joint venture                                                  14 661 219        14 863 549       14 585 308    
- available-for-sale                                                118 492           287 454          233 972    
- associate                                                         118 860                 -          120 756    
- other                                                              48 160            43 372           47 808    
Deferred taxation                                                    26 594                 -            4 964    
Pension fund surplus                                                 57 474            56 973           57 474    
Total non-current assets                                         15 229 855        15 842 696       15 306 786    
Current assets                                                                                                    
Inventories                                                       1 135 868           770 028          924 762    
Trade and other receivables                                         274 635           420 819          410 325    
Restricted cash                                                     450 000                 -          450 000    
Cash resources                                                    2 763 455         2 137 134        2 421 195    
Total current assets                                              4 623 958         3 327 981        4 206 282    
TOTAL ASSETS                                                     19 853 813        19 170 677       19 513 068    
EQUITY AND LIABILITIES                                                                                            
Share capital and reserves                                                                                        
Ordinary shareholders’ interests                                 18 097 823        17 652 363       17 808 956    
Non-controlling (deficit)/interest                                  (3 634)           161 278           15 765    
Total equity                                                     18 094 189        17 813 641       17 824 721    
Non-current liabilities                                                                                           
Net deferred taxation liabilities                                         -            47 907                -    
Long-term liabilities                                                                                             
- interest-bearing                                                  346 100           346 100          346 100    
- non-interest-bearing                                               32 141            26 562           21 081    
Total non-current liabilities                                       378 241           420 569          367 181    
Current liabilities                                                                                               
Interest-bearing                                                  1 073 468           752 310          960 866    
Non-interest-bearing                                                307 915           184 157          360 300    
Total current liabilities                                         1 381 383           936 467        1 321 166    
TOTAL EQUITY AND LIABILITIES                                     19 853 813        19 170 677       19 513 068    


Consolidated statement of cash flow                                                                                       
                                                                  Half-year         Half-year             Year    
                                                                      ended             ended            ended    
                                                                31 December       31 December          30 June    
                                                                       2015              2014             2015    
                                                                  Unaudited         Unaudited          Audited    
                                                                      R’000             R’000            R’000                                                                                                                               
Cash utilised by operations                                        (271 220)         (346 561)        (962 774)       
Cash generated by investing activities                              500 878           125 375          817 093         
Cash generated by financing activities                              112 602           213 722          422 278         
Increase/(decrease) in cash for the period                          342 260            (7 464)         276 597         
Cash resources at beginning of period                             2 421 195         2 144 598        2 144 598       
Cash resources per statement of financial position                2 763 455         2 137 134        2 421 195       


Consolidated statement of changes in equity                                                                                                   
                                                                  Half-year         Half-year             Year    
                                                                      ended             ended            ended    
                                                                31 December       31 December          30 June    
                                                                       2015              2014             2015    
                                                                  Unaudited         Unaudited          Audited    
                                                                      R’000             R’000            R’000                                                                                                                                  
Share capital, share premium and other reserves                                                                   
Balance at beginning of period                                      398 836           418 583          418 583    
Other comprehensive losses for the period                           (15 030)          (18 024)         (19 747)    
Net decrease in the market value of 
available-for-sale investments                                      (23 114)          (27 282)         (24 209)    
Actuarial losses on pension plan after taxation                           -                 -           (2 725)    
Foreign currency translation reserve arising 
on consolidation                                                      8 084             9 258            7 187                                                                                                                                                 
Balance at end of period                                            383 806           400 559          398 836    
Treasury shares                                                                                                    
Balance at beginning and end of period                           (5 051 583)       (5 051 583)      (5 051 583)    
Retained earnings                                                                                                 
Balance at beginning of period                                   22 461 703        21 935 592       21 935 592    
Profit for the period attributable to shareholders                  613 518           935 434        1 403 371    
Ordinary dividends declared during the period                      (309 621)         (567 639)        (877 260)    
- total dividends declared                                         (418 821)         (767 839)      (1 186 660)    
- dividends on treasury shares held in BEE trusts                   109 200           200 200          309 400                                                                                                                                               
Balance at end of period                                         22 765 600        22 303 387       22 461 703    
Ordinary shareholders’ interest                                  18 097 823        17 652 363       17 808 956    
Non-controlling interests                                                                                         
Balance at beginning of period                                       15 765           150 271          150 271    
Share of total comprehensive income, net                            (19 399)           11 007         (134 506)    
- (loss)/profit for the period                                       (6 934)           11 692         (112 931)    
- other comprehensive income                                          7 767             8 895            7 813    
- share of total comprehensive income                                   833            20 857         (105 118)   
- dividends paid to non-controlling shareholders                    (20 232)           (9 580)         (29 388)                                                                                                                                               
Balance at end of period                                             (3 634)          161 278           15 765    
Total equity                                                     18 094 189        17 813 641       17 824 721    


Segmental information                                                                                                                                                                                             
                                                                                                 
                                                                                                                          
                                                                                              
                                                                                                        Other mining     Eliminations   
                                   Associate mining and beneficiation                    Marketing               and              and                                                                                                                          
                                    Iron ore    Manganese     Chrome      Sub-total   and shipping     beneficiation      adjustments*  Consolidated                                                                                    
                                       R’000        R’000      R’000          R’000          R’000             R’000            R’000          R’000                                                                                                                                                                                                                                                                                        
Half-year ended 31 December 2015                                                                                                                        
Revenues                                                                                                                                                
Third party                        5 322 872    3 020 941    951 047      9 294 860      1 196 105           144 882       (9 294 860)     1 340 987    
Contribution to profit               957 069      192 898     77 781      1 227 748         61 493           (62 546)        (620 111)       606 584    
Impairment of financial and 
non-financial assets                       -      (62 740)         -        (62 740)       (70 289)          (40 325)          31 370       (141 984)    
Half-year ended 31 December 2014                                                                                                                        
Revenues                                                                                                                                                
Third party                        5 970 123    3 872 371    708 455     10 550 949      1 498 974           180 693      (10 553 444)     1 677 172    
Contribution to profit             1 173 669      473 488     56 074      1 703 231        107 463           (11 952)        (851 616)       947 126    
Impairment of financial 
and non-financial assets                   -            -          -              -        (50 269)                -                -        (50 269)    
*Eliminations and adjustments comprise mainly of the adjustments required to give effect to the requirement of IFRS to equity account the group’s 
investment in Assmang.                                                                                                                                                                  


Fair value 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.                                            
                                                                          
                                                     Half-year           
                                                         ended    Year ended          
                                                   31 December       30 June             
                                                          2015          2015          
                                                     Unaudited       Audited          
                                                       Level 1       Level 1            
                                                         R’000         R’000                 
                                                                                   
Assets measured at fair value                                                      
Available-for-sale investments                         118 860       233 972         
Other investments                                       48 160        47 808          
                                                       167 020       281 780         


Commentary
Results
Headline earnings for the six months to 31 December 2015 declined by 25,4% to R738 million, compared to the same
period in the previous financial year (the previous period). This was due to substantially lower headline earnings recorded
for the period by Assmang Proprietary Limited (Assmang), which decreased by 28,2% to R1,2 billion. The group’s principal
investment is a 50% interest in Assmang, which it controls jointly with African Rainbow Minerals Limited (ARM), and in
accordance with International Financial Reporting Standards (IFRS), is accounted for using the equity method.

All commodity markets in which the group trades are in oversupply and prices continued to decrease over the period.
Despite these already oversupplied markets, additional supplies of iron and manganese ore have been brought into the
market during the course of the first half of this financial year. In addition, demand was impacted by lower economic growth
in North America, Europe and most of Asia which resulted in significant price decreases for the group’s products. The
average index selling price in US dollars for 62% iron ore fines delivered in China was US dollars 51 per metric ton,
compared to US dollars 82 in the previous period, a decline of 38%. The premium for “lumpy” grade ore for the period was on
average 43% lower compared to the previous period, at US dollars 6,00 per metric ton. Manganese ore prices also declined
sharply, with the index price for 44% grade, delivered in China, dropping by 38% over the last six months. The average
price for the period was US dollars 2,63 per dry metric ton manganese unit (dmtu), compared to US dollars 4,34 per dmtu
in the previous period. Prices for manganese alloys also showed marked declines due to excess production. While the
market for chrome ore showed some resistance to these declining prices in the earlier part of the period, these prices have
also reduced sharply in recent months, with 44% grade concentrate delivered in China trading 35% lower than at the end
of the previous financial year.

Lower freight rates, combined with a weaker rand/US dollar exchange rate, which was on average 25% lower than the
previous period, provided some upside to the group’s results. Commissions and technical fees earned by the group were lower
due to the lower prices for Assmang’s products.

On 24 June 2015, Assore advised shareholders that it had entered into agreements with ARM to acquire ARM’s 50% share
of Dwarsrivier Chrome Mine (Dwarsrivier) currently held in Assmang, which will result in 100% ownership of Dwarsrivier by
the group. Ministerial consent from the Department of Mineral Resources for the transaction has been received and the
transaction is expected to be completed once the remaining conditions precedent have been fulfilled. The group assumed
impairment charges, in a total attributable amount of R54 million, consisting of R31 million relating to scaled down
operations at Assmang’s Machadodorp Works (50%) and R23 million in Rustenburg Minerals Development Company Proprietary
Limited. The group’s share portfolio has declined in value over the period and a further impairment charge, net of taxation
relief, of R71 million has been recorded against attributable earnings in this regard.

Sales volumes
Sales of manganese ore were higher in the current period as a result of the group’s efforts to secure sales in new
markets and increased production at Dwarsrivier, which has resulted in additional sales of chrome ore. Manganese alloy
volumes were lower following the closure of a furnace at Assmang’s Cato Ridge Works. The following table sets out Assmang’s
sales volumes for the current period: 

Metric tons (’000)               Half-year               Half-year          
                                     ended                   ended        Increase/   
                               31 December             31 December       (decrease)   
                                      2015                    2014               %                                                                                                       
Iron ore                             7 920                   7 496               6    
Manganese ore*                       1 471                   1 422               3    
Manganese alloys*                       80                     112             (29)   
Chrome ore                             545                     478              14    
* Excluding intra-group sales to alloy plants.                                                                    

Expansion and capital expenditure
Capital expenditure in Assmang amounted to R1,6 billion (2015: R1,7 billion) for the period. The majority of the
capital (R936 million) was spent in Assmang’s Manganese Division on the expansion of the Black Rock Mines’ capacity to
produce 4 million tons per annum over the longer term. Assmang’s Iron Ore Division spent R521 million, of which R273 million
was spent on waste-stripping at its Khumani and Beeshoek mines, while R69 million was spent at Dwarsrivier mainly on
capital replacement items.

Construction of two ferromanganese furnaces at Sakura Ferroalloys in Malaysia, in which Assmang holds a 54,36%
interest, is nearing completion. Commissioning has commenced on the raw material feed system and certain furnace auxiliary
areas. The project remains within budget (US dollars 328 million) and is still forecast to be fully commissioned in the
current financial year and to achieve design capacity of 110 000 tons of high carbon ferromanganese and 70 000 tons of
silico manganese alloys annually, by the end of the next financial year.

Outlook
The commodity markets in which the group sells its products are expected to remain oversupplied for the short term,
however, the rate at which the oversupply is increasing has slowed and there are signs that some of the more expensive
capacity is exiting the relevant markets. Cost reduction initiatives are being undertaken at all operations and significant 
savings have already been achieved.

In the meanwhile, prices for iron ore have stabilised to some extent at approximately US dollars 40 per metric ton
(62% iron ore fines delivered in China), marginally above the lowest prices at which it traded in December 2015 
(US dollars 38 per metric ton), while the premium for “lumpy” grade material has also improved slightly. The manganese 
ore market also appears to have stabilised, due to a reduction in production by other South African producers. However, 
prices for this commodity are expected to remain under pressure in the short to medium term.

Exchange rates have a significant impact on the performance of the group. The current level of the rand/US dollar
exchange rate, combined with persistently low freight rates, the indices of which are at all-time lows, continue to provide
relief in these weak market conditions.

Dividends
The results in this announcement include the final dividend relating to the previous financial year of 300 cents
(2014: 550 cents) per share, which was declared on 26 August 2015 and paid to shareholders on 21 September 2015. Based on 
the decreased level of earnings for the period, the board has declared an interim dividend of 200 cents 
(2014: 300 cents) per share, which will be paid to shareholders on or about 14 March 2016.

Accounting policies and basis of preparation 
The financial results for the period 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 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 2015.

Directors
On 28 February 2016, Mr Alastair Stalker, who joined the group in 1994, will reach retirement. Alastair has been the
managing director of Ore & Metal Company Limited (Ore & Metal) since 2011 and was appointed as the group’s marketing
director in September 2012. He will be succeeded in both these positions from 1 March 2016 by Mr Patrick Sacco, who is
currently the deputy managing director of Ore & Metal, as well as alternate director to Mr Desmond Sacco.

Declaration of interim dividend
Shareholders are advised that on 18 February 2016, the board of directors (the board) approved Interim dividend number
118 (the dividend), of 200 cents per share (gross) for the half year ended 31 December 2015.

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 of 15% will apply;
3. the net local dividend amount is 170,0 cents per share for shareholders liable to pay the 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; and
5. Assore’s income tax reference number is 9045/018/84/4.

The salient dates are as follows: 

- Last day for trading to qualify and participate in the interim dividend               Friday, 4 March 2016    
- Trading “ex dividend” commences                                                       Monday, 7 March 2016    
- Record date                                                                           Friday, 11 March 2016    
- Dividend payment date                                                                 Monday, 14 March 2016    
- Dates (inclusive) between which share certificates may not be 
  dematerialised or rematerialised                                                      Monday, 7 March 2016 to     
                                                                                        Friday, 11 March 2016    


On behalf of the board                          
Desmond Sacco               CJ Cory                                 Johannesburg
Chairman                    Chief Executive Officer                 19 February 2016


Executive Directors: Desmond Sacco (Chairman), CJ Cory (Chief Executive Officer), AD Stalker (Marketing), BH van Aswegen (Technical and Operations) 

Non-executive Directors: EM Southey* (Deputy Chairman and Lead Independent Director), TN Mgoduso*, S Mhlarhi*, IN Mkhari*, WF Urmson* *Independent

Alternate Director: PE Sacco 

Registered office: Assore House, 15 Fricker Road, IIlovo Boulevard, Johannesburg, 2196 

Transfer office: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001 

Company secretaries: African Mining and Trust Company Limited 

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: 19/02/2016 12:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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