Wrap Text
Final results for the year ended 30 June 2016
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 2016
Highlights
- Acquisition of Dwarsrivier completed
- First furnace at Sakura Ferroalloys in production
- Commodity prices recover in second half
- Final dividend declared of R5,00 per share
- Strong cash position maintained
Assore Chairman, Mr. Des Sacco, said:
“Prices for the group’s products recovered during the second half of the financial year. However, global economic conditions
remain challenging, with continued over-supply in the iron ore market. Despite these dynamics, record sales volumes of iron
and chrome ores were achieved by the group for the second year in a row. The level of profitability in the second half has
recovered to similar levels of the previous financial year.”
“The acquisition of Dwarsrivier represents a major step forward for the Assore group, in balancing our product risk more equitably.
Additionally, the group has embarked on cost saving programmes to improve and maintain the competitiveness of its operations in
light of increased operating costs in South Africa.” Sacco added.
Consolidated income statement
R'000 Year ended Year ended
30 June 2016 30 June 2015
Reviewed Audited
Revenue 2 941 047 3 357 297
Turnover 2 027 813 2 526 096
Cost of sales (1 918 242) (2 376 827)
Gross profit 109 571 149 269
Fees and commission earned from joint venture 673 761 643 442
Other income 266 391 205 672
Impairment of non-financial assets - group (65 686) (365 073)
Impairment of financial assets (30 344) (114 258)
Other expenses (514 814) (408 869)
Finance costs (38 576) (33 391)
Profit before taxation, joint venture and associate 400 303 76 792
Taxation (176 376) (102 293)
Profit/(loss) after taxation, before joint venture and associate 223 927 (25 501)
Share of profit from joint venture, after taxation 1 281 000 1 317 138
Share of loss from associate, after taxation (7 286) (1 197)
Profit for the year 1 497 641 1 290 440
Attributable to:
Shareholders of the holding company 1 539 363 1 403 371
Non-controlling shareholders (41 722) (112 931)
As above 1 497 641 1 290 440
Earnings as above 1 539 363 1 403 371
Impairment of non-financial assets 268 395 771 261
Impairment of financial assets 30 344 114 258
Profit on sale of subsidiary (8 578) -
(Profit)/loss on disposal of property, plant and equipment (8 321) 10 009
Taxation effect of above items (58 824) (180 831)
Non-controlling shareholders' portion (18 203) (141 717)
Headline earnings 1 744 176 1 976 351
Earnings per share (basic and diluted - cents) 1 491 1 360
Headline earnings per share (basic and diluted - cents) 1 690 1 915
Dividends per share declared in respect of the profit for the year (cents) 700 600
- Interim 200 300
- Final 500 300
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
Consolidated statement of comprehensive income
R'000 Year ended Year ended
30 June 2016 30 June 2015
Reviewed Audited
Profit for the year (as above) 1 497 641 1 290 440
Items that may be reclassified into the income statement dependent on the outcome
of a future event 125 367 (11 428)
Loss on revaluation to market value of available-for-sale investments after taxation (18 270) (24 209)
Loss on revaluation to market value of available-for-sale investments (23 544) (29 758)
Deferred capital gains tax thereon 5 274 5 549
Exchange differences on translation of foreign operations 139 877 15 506
Actuarial gain/(loss) on pension fund, after taxation 3 760 (2 725)
Total comprehensive income for the year, net of tax 1 623 008 1 279 012
Attributable to:
Shareholders of the holding company 1 652 559 1 384 130
Non-controlling shareholders (29 551) (105 118)
As above 1 623 008 1 279 012
Consolidated statement of financial position
R'000 At At
30 June 2016 30 June 2015
Reviewed Audited
ASSETS
Non-current assets
Property, plant and equipment and intangible assets 178 609 256 504
Investments
- joint venture 15 094 529 14 585 308
- available-for-sale 180 084 233 972
- associate 124 848 120 756
- other 44 591 47 808
Pension fund surplus 68 070 57 474
Net deferred taxation asset 17 421 4 964
Total non-current assets 15 708 152 15 306 786
Current assets
Inventories 1 037 471 924 762
Trade and other receivables 418 466 410 325
Restricted cash 479 522 450 000
Cash resources 3 184 925 2 421 195
Total current assets 5 120 384 4 206 282
TOTAL ASSETS 20 828 536 19 513 068
EQUITY AND LIABILITIES
Share capital and reserves
Ordinary shareholders' interest 18 945 480 17 808 956
Non-controlling (deficit)/interests (33 871) 15 765
Total equity 18 911 609 17 824 721
Non-current liabilities
Long-term liabilities
- interest-bearing - 346 100
- non-interest-bearing 28 554 21 081
Total non-current liabilities 28 554 367 181
Current liabilities
Interest-bearing 995 774 960 866
Non-interest-bearing 892 599 360 300
Total current liabilities 1 888 373 1 321 166
TOTAL EQUITY AND LIABILITIES 20 828 536 19 513 068
Consolidated statement of cash flow
R'000 Year ended Year ended
30 June 2016 30 June 2015
Reviewed Audited
Cash generated/(utilised) by operations 212 491 (962 774)
Cash retained from investing activities 862 431 817 093
Other financing activities (311 192) 422 278
Increase in cash for the year 763 730 276 597
Cash resources at beginning of year 2 421 195 2 144 598
Cash resources per statement of financial position 3 184 925 2 421 195
Segmental information
Other mining Eliminations
Associate mining and beneficiation Marketing and and
R'000 Iron ore Manganese Chrome Sub-total and shipping beneficiation adjustments* Consolidated
Year ended 30 June 2016 - reviewed
Revenues
Third party 12 532 603 6 666 055 1 893 709 21 092 367 2 650 817 290 230 (21 092 367) 2 941 047
Inter-segment - - - - 5 542 - (5 542) -
Total revenues 12 532 603 6 666 055 1 893 709 21 092 367 2 656 359 290 230 (21 097 909) 2 941 047
Contribution to profit after taxation 2 440 236 103 748 42 965 2 586 949 367 384 (143 457) (2 586 949) 223 927
Impairment of financial and non-financial
assets - (405 418) - (405 418) (30 344) (65 686) 202 709 (298 739)
Year ended 30 June 2015 - audited
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)
*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.
Consolidated statement of changes in equity
R'000 Year ended Year ended
30 June 2016 30 June 2015
Reviewed Audited
Share capital, share premium and other reserves
Balance at beginning of year 398 836 418 583
Other comprehensive income/(loss) for the year 113 196 (19 747)
Net decrease in the market value of available-for-sale investments (18 270) (24 209)
Actuarial gains/(losses) on pension plan after taxation 3 760 (2 725)
Foreign currency translation reserve arising on consolidation 127 706 7 187
Balance at end of year 512 032 398 836
Treasury shares
Balance at end of the year (5 051 583) (5 051 583)
Retained earnings
Balance at beginning of year 22 461 703 21 935 592
Profit for the year attributable to shareholders 1 539 363 1 403 371
Ordinary dividends declared during the year (516 035) (877 260)
- total dividends declared (698 035) (1 186 660)
- dividends on treasury shares held in BEE trusts 182 000 309 400
Balance at end of year 23 485 031 22 461 703
Ordinary shareholders' interest 18 945 480 17 808 956
Non-controlling interests
Balance at beginning of year 15 765 150 271
Share of total comprehensive loss (49 636) (134 506)
- profit for the year (41 722) (112 931)
- other comprehensive income 12 171 7 813
- share of total comprehensive loss (29 551) (105 118)
- derecognition of non-controlling interest on disposal of subsidiary 8 232 -
- dividends paid to non-controlling shareholders (28 317) (29 388)
Balance at end of year (33 871) 15 765
Total equity 18 911 609 17 824 721
Fair values of financial instruments
The group uses quoted prices in active markets that are unadjusted for identical assets and liabilities for financial
instruments measured at level 1. The values of all other financial instruments recognised, but not subsequently measured
at fair value, approximate fair value.
Year ended Year ended
30 June 2016 30 June 2015
Reviewed Audited
R'000 Level 1 Level 1
Assets measured at fair value
Available-for-sale investments 180 084 233 972
Other investments 44 591 47 808
224 675 281 780
Commentary
Results
Headline earnings for the financial year to 30 June 2016 ("2016"? or "the reporting period"?) declined by 11,7% to
R1,7 billion, compared to R2,0 billion in the previous financial year (2015). After taking into account impairment
charges of R300 million (2015: R886 million), attributable earnings for 2016 were similar to those recorded in 2015,
at R1,5 billion, with attributable earnings for Assmang Proprietary Limited (Assmang) marginally lower by 2,7% at
R2,6 billion in 2016. 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.
During the second half of 2016, prices for the group's products recovered, due mostly to the application of economic
stimulus and increased environmental restrictions in China, which favour the group's products, combined with improved
steel prices and increased productivity. The index price for iron ore (62% iron content, "fines"? grade, delivered in China)
reached levels of below US dollars 40 per tonne in the first half of 2015, but recovered to an average price of US
dollars 52 per tonne for the second half. Prices for manganese ores also recovered over the second half of 2016, during
which the average price was US dollars 3.13 per manganese unit (44% manganese content, "lumpy"? grade, delivered in China),
18% higher than during the first half of the year.
After declining significantly towards the end of the first half of 2016, and into the second half, prices for chrome
ore recovered and increased sharply during the middle of the second half, with average prices for the year at
approximately US dollars 150 per tonne (44% grade concentrate, delivered in China). These recent increases in selling
prices were brought about mainly by global inventory shortages.
The average rand/US dollar exchange rate across the second half of 2016 was R15,38, which was 12,2% weaker than the
first half. This also lifted the profitability of the group over the second half. The resultant turnover for Assmang for
2016 was 2,2% lower than 2015, with commissions earned for 2016 by the group at similar levels to 2015.
Impairment charges
During the year, a review of the continued commercial viability of Furnace 6 at Assmang's Cato Ridge Works was
undertaken and it was decided to cease production of high-carbon ferromanganese from this furnace, resulting in an
impairment charge of R333 million. Assets at Machadodorp Works, with a net book value of R72 million were also written
down, in the form of an impairment charge. In accordance with IFRS, the group recognised 50% of Assmang's results
in determining its profit and therefore the group's share of the impairment arising from Assmang is R203 million.
In addition, thegroup has assumed impairment charges amounting to R96 million, most of which arose from the assessment
of the recoverability of the remaining assets at Rustenburg Minerals (R41 million) and the reduction in the value of the
group's share portfolio (R30 million). The total impairment charge recognised therefore amounts to R299 million, before
deferred taxation relief and obligations of non-controlling shareholders.
Sales volumes
For the second consecutive financial year, Assmang achieved record sales volumes of iron and chrome ores due to
increased production at Khumani Iron Ore Mine and at Dwarsrivier Chrome Mine, combined with the utilisation of additional
port and rail capacities. The initial impact of the expansion project at Assmang's Black Rock mines, combined with increased
rail capacity, realised additional sales tonnages of manganese ore. Sales volumes of ferromanganese were depressed due
to lower levels of global crude steel production.
The table below sets out Assmang's sales volumes for the year:
Increase/
Year ended 30 June (decrease)
Metric tons '000 2016 2015 %
Iron ore 17 008 16 185 5
Manganese ore* 3 030 2 736 11
Manganese alloys 175 223 (22)
Chrome ore 1 147 1 068 7
*Excluding sales to intra-group and associated alloy plants.
Expansion projects
On 24 June 2015, Assore announced the acquisition from ARM of its 50% indirect share of Assmang's Dwarsrivier
Chrome Mine (Dwarsrivier) for a consideration of R450 million. The final necessary regulatory approval was granted
on 30 June 2016 and payment for Dwarsrivier was completed on 29 July 2016. The acquisition will improve the balance
of the group's product risk as well as generate production and marketing efficiencies. In terms of the transaction,
Assore also refunded Assmang an amount of R55 million for funding advanced from the effective date of the transaction,
being 1 July 2014. Refer "Event after the reporting period"? below for more detail of the transaction.
Construction of the Sakura Ferroalloys smelting plant in Malaysia, in which Assmang holds a 54,36% interest, is
nearing completion, with the first ferromanganese being produced (tapped) from Furnace 1 in May 2016, and the first
shipment exported in June 2016. Furnace 1 has a design production capacity of 110 000 tonnes of ferromanganese per annum.
The second furnace, which will produce 70 000 tonnes of silico manganese annually, is scheduled to be commissioned in
September 2016 and is expected to reach full production capacity in early 2017. The anticipated cost to completion of
the project remains within its original budget of US dollars 328 million.
The expansion and sustainability project at Assmang's Black Rock Mines continues, with most aspects of the project
remaining on schedule. Once completed, this will enable Assmang's Manganese Division to produce in excess of
4 million tons of manganese products annually, from the end of 2017. Assmang spent R1,7 billion (2015: R1,3 billion)
during 2016 on the project, with R2,1 billion remaining to be spent.
Capital expenditure
Capital expenditure for the year in Assmang amounted to R3,0 billion (2015: R3,8 billion). In addition to the
expenditure on expansion projects referred to above, approximately one third of the remainder was spent on
waste-stripping in its Iron Ore Division, with replacement capital making up the balance.
Event after the reporting period
On 29 July 2016, Assore acquired the entire issued share capital of Dwarsrivier Chrome Mine Proprietary Limited (DCM)
from Assmang. This acquisition has resulted in a better commercial balance in the base minerals to which the group is
exposed.
The final accounting for the business combination has not yet been completed as the group is in the process of
determining the acquisition date fair values of the identifiable assets and liabilities of DCM. Furthermore, the group
is still in the process of determining the fair value of the total purchase consideration, which excluding the equity
interest in DCM, the value of which is still being determined, is comprised as follows:
R'000
Purchase price, agreed as at 1 July 2014 450 000
Amount refunded to Assmang for operating funds
advanced between 1 July 2014 (effective date
of the transaction) and 30 June 2016 (closure date of the transaction) 55 313
Interest foregone on purchase consideration
placed in escrow and paid to seller in terms of acquisition agreement 34 894
540 207
Had control been obtained from 1 July 2015, the following
disclosures for 2016 would have been adjusted as follows:
R'000 Reviewed Adjustment Adjusted
Profit for the year attributable to
shareholders of the holding company 1 539 363 17 934 1 557 297
Revenue 2 941 047 1 667 301 4 608 348
Outlook
The economic environment facing the steel industry continues to be challenging with China's economic slowdown
impacting globally across a range of indicators, contributing to increased volatility in financial markets,
sluggish growth inglobal trade and lower commodity prices in the last two years. The global steel market
continues to suffer from insufficient investment expenditure and weakness in the manufacturing sector.
Within the European Union (EU), the predicted mild recovery in steel demand has not taken place, with
lower than expected demand set to continue into 2017.
The recent increases in iron ore prices have attracted additional supply from higher cost producers and will add to
the already-existing oversupplied iron ore market. Prices are therefore expected to remain under pressure and it is
unlikely that the current price levels will be maintained. Pressure from the Chinese authorities on steel mills and
pelletising operations continues to increase demand for "lumpy"? grade products, which carry a premium over the "fines"?
grade material. This is expected to continue into the near to medium term.
The markets for manganese are driven by similar dynamics, where oversupply of mostly medium-grade ores continues to
cause volatility in prices for manganese ores. Current prices for manganese alloys are weak, however, these are
expected to recover slightly off their low base.
Stainless steel production in China continues to be driven by increased demand and other seasonal factors that are
expected to continue for the medium term. Consolidation in the South African ferrochrome industry, as well as stable
levels of supply from chrome ore miners, have resulted in a notable recovery in chrome ore prices. Inventories of
chrome ore in Chinese ports recently reached a ten-year low and based on the current fundamentals, the chrome ore
market should remain strong in the near future.
Mining and alloy production in South Africa is becoming increasingly expensive, due largely to price increases in
electricity and labour that continue to exceed inflation. Therefore, the group has embarked on further right-sizing
and restructuring projects in an attempt to improve and maintain the competitiveness of its operations.
In addition to the impact of the above economic conditions and market dynamics, the results of the group continue to
be significantly exposed to fluctuations in exchange rates.
Dividends
The results in this announcement include the interim dividend of 200 cents (2015: 300 cents) per share which was
declared on 18 February 2016 and paid to shareholders on 14 March 2016. Based on the increased level of earnings
achieved in the second half of the year, a final dividend of 500 cents (2015: 300 cents) per share has been declared,
making a total dividend in respect of results for the year of 700 cents (2015: 600 cents) per share. The final dividend
will be paid to shareholders on or about 3 October 2016 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 2015, 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
On 26 May 2016, Ms IN Mkhari resigned from the board as an independent non-executive director and the board wishes to
thank her for her contribution during the period of her appointment.
Declaration of final dividend
Shareholders are advised that on 6 September, the board declared final gross dividend number 119 (the dividend), of
500 (2015: 300) cents per share (gross) for the year ended 30 June 2016.
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 425,0 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; 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 for and participate
in the final dividend Tuesday, 27 September 2016
Trading "ex dividend"? commences Wednesday, 28 September 2016
Record date Friday, 30 September 2016
Dividend payment date Monday, 3 October 2016
Dates (inclusive) between which share certificates
may not be dematerialised or rematerialised Wednesday, 28 September 2016
to Friday, 30 September 2016
On behalf of the board
Desmond Sacco CJ Cory Johannesburg
Chairman Chief Executive Officer 7 September 2016
Directors:
Executive: Desmond Sacco (Chairman), CJ Cory (Chief Executive Officer), PE Sacco (Marketing),
BH van Aswegen (Operations and Growth)
Non-executive: EM Southey* (Deputy Chairman and Lead Independent Director), TN Mgoduso*, S Mhlarhi*,
WF Urmson*
*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
Notes to the editors:
- Assore’s principal investment is a 50% interest in Assmang Limited (Assmang) which it controls jointly with African
Rainbow Minerals Limited (ARM) in terms of a longstanding shareholders agreement.
- Assmang mines both iron and manganese ore in the Northern Cape, the former at the Khumani and Beeshoek mines and the
latter at the Black Rock mines. It has manganese smelting facilities at Cato Ridge in Kwazulu Natal. In addition, Assmang
holds a 54.36% shareholding in Sakura Ferroalloys, a manganese smelter located in the Sarawak Province of Malaysia.
- With effect from 29 July 2016, Assore owns 100% of Dwarsrivier Chrome Mine Proprietary Limited (“DCM”), which was
acquired from Assmang. DCM currently produces 1,3 million tons of chrome products per annum.
Further enquiries:
Singular Systems
Jacques de Bie: 082 691 5384
Date: 07/09/2016 09:02:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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