Wrap Text
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').
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.