Wrap Text
Results for the half-year ended 31 December 2016
Assore Limited
Company Registration Number: 1950/037394/06
Share code: ASR
ISIN: ZAE000146932
("Assore" or "group")
RESULTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
- Headline earnings 2,9 x more than previous period
- Interim dividend 200% higher than last year
- Substantial recovery in commodity prices
- Dwarsrivier contributes R421 million to profit
Assore Chairman, Des Sacco, said: “The prices of our products recovered over the first half of the
financial year and combined with the weaker Rand/USD exchange rate, the group recorded considerably
higher earnings than expected. Dwarsrivier has had a particularly good half year, and the mine showed
record half-year profits due to the high prices for chrome and improvements in production volumes.”
Commentary
Results
Headline earnings for the six months to 31 December 2016 (the current period) increased by 194,2% to
R2,2 billion, compared to the same period in the previous financial year (the previous period, or 2015).
This was brought about by considerately higher headline earnings recorded for the current period by
both Assmang Proprietary Limited (Assmang), and Dwarsrivier Chrome Mine Proprietary Limited (Dwarsrivier)
(refer "Dwarsrivier" below). The contribution to headline earnings for the six months from Assmang was
R1 427 million (2015: R614 million) and Dwarsrivier generated R421 million for the current period, after
it became a wholly owned subsidiary of the group from 1 July 2016.
The group's major interests consist of its 100% ownership of Dwarsrivier and its 50% interest in Assmang
which it controls jointly with African Rainbow Minerals Limited (ARM). In accordance with International
Financial Reporting Standards (IFRS), the group accounts for Assmang's results using the equity
accounting method.
The markets for the group's commodities have made strong recoveries, and prices for all products closed
significantly higher than in the previous period. Demand for crude steel in China was stronger than expected,
causing higher levels of imports of iron ore, which resulted in the average index selling price for iron
ore fines (62% iron content) delivered in China increasing to US dollars (USD) 65 per metric ton from
USD51 per metric ton in the previous period. Average prices for manganese ore were more than double those for
the previous period, with the average price for high grade ore increasing by 127% to USD6.00 per dry metric ton
unit (dmtu), delivered in China. In addition to the increased steel production referred to above, logistical
concerns over the manganese export facilities at Port Elizabeth created pressure on supply over the period,
driving prices for all grades higher. Chrome ore prices increased considerably over the current period,
caused by inventory shortages in China and significantly increased levels of stainless steel production,
with prices for 44% chrome content material exceeding USD400 per ton delivered in China compared to
approximately USD165 per ton at the beginning of the current period. The average level of the
US dollar/SA rand exchange rate across the current period was nearly 3% weaker, which also improved the
group's profitability marginally.
Sales volumes
Iron ore sales volumes were higher than during the previous period, with higher production throughput being met
with increased export railage availability and continued local demand for Beeshoek material. Infrastructural
bottlenecks at Port Elizabeth resulted in reduced sales volumes of manganese ore and production of manganese
alloys increased significantly, following the completed commissioning of Sakura's two furnaces. Exceptional
demand for chrome ore was evident across the period and improved production levels at Dwarsrivier enabled the
group to achieve record sales volumes of chrome ore for a six-month period (refer "Dwarsrivier" below).
The following table sets out the sales volumes achieved by the group for the current period:
Metric tons ('000) Half-year Half-year
ended ended Increase/
31 December 31 December (decrease)
2016 2015 %
Iron ore 8 805 7 920 11
Manganese ore* 1 417 1 471 (4)
Manganese alloys 139 80 174
Chrome ore 733 586 25
* Excluding intra-group sales to Cato Ridge Works.
Dwarsrivier
Mining efficiency in the current period improved by 5,0% compared to the previous period and combined with
improved beneficiation plant performance of 3,3%, comparable production volumes increased by 26%, resulting
in the cost of production being 4,6% lower on a per ton basis. This enabled the mine to take advantage of
the higher chrome ore prices and generate in excess of R500 million in cash, which covered the base purchase
price of the mine in the course of the current period. Capital expenditure amounted to R33 million for the
current period.
Expansion and capital expenditure
Capital expenditure in Assmang amounted to R1,2 billion (2016: R1,6 billion) for the period. The continued
spend in its manganese division on the manganese expansion project consumed R652 million (2015: R936 million).
Once complete in 2020, the Black Rock Mines' annual capacity will increase to 4 million tons, from the original
base of 3,2 million tons. Assmang's iron ore division spent R367 million, of which approximately one-third was
spent on waste-stripping and the remainder on replacement and legislative requirements.
Construction of Sakura Ferroalloys smelting plant in Malaysia, in which Assmang holds a 54,36% interest, was
completed within budget, with the second furnace being successfully commissioned in September 2016. Both furnaces
have been ramped up to designed power input level and designed annual production capacity of a combined quantity
of 180 000 tons of manganese alloy has been achieved.
Outlook
As was the case in the 2016 calendar year, the growth in the world steel market is expected to be muted, due to
significant uncertainties remaining in the global economy, with only the United States showing some signs of
a sustainable recovery in its steel market. The better than expected level of Chinese steel production, as
well as the increase in crude steel prices in recent months is encouraging and in comparison to 2016, crude
steel production is expected to remain relatively flat for the 2017 calendar year. However, the seaborne trade
of iron ore worldwide has increased and further increases are anticipated in 2017, with additional supply
expected from Australia and South America. Prices for iron ore are expected to remain relatively strong in
the near term. Production at Dwarsrivier is anticipated to be maintained at current levels for the remainder
of the financial year, and the mine looks to take advantage of better underlying market fundamentals for the
production and demand of stainless steel. Prices for chrome ore are expected to remain strong for the near term.
Contrary to the expected near-term prices for iron and chrome ores, prices for the other commodities in which the
group trades have come under pressure recently, with prices for high-grade manganese ore declining from the high
levels of over USD9 per dmtu, to levels of below USD6 per dmtu. In addition to the impacts of the circumstances
set out above, the results of the group remain significantly exposed to fluctuations in exchange rates.
Dividends
The results in this announcement include the final dividend relating to the previous financial year of 500 cents
(2015: 300 cents) per share, which was declared on 6 September 2016, and paid to shareholders on 3 October 2016.
Based on the substantially higher level of earnings for the period, the board has declared an interim dividend
of 600 cents (2015: 200 cents) per share, which will be paid to shareholders on 20 March 2017.
Accounting policies and basis of preparation
The financial results for the period under review have been prepared under the supervision of Mr RA Davies,
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 2016.
Business acquisition
The group acquired control of 100% of Dwarsrivier on 1 July 2016. In accordance with IFRS 3 - Business
Combinations, the fair values of the assets acquired and liabilities assumed in a business combination are
required to be determined within one year of the acquisition of control of the entity. The previous business
combination disclosure (which was reported as part of the "Events after reporting period" for year ended
30 June 2016) contained provisional values as the initial accounting for the business combination had not
been completed. The fair values previously disclosed, were provisional as the "purchase price allocation"
has, to date, not yet been concluded. The fair values of the identifiable assets and liabilities of
Dwarsrivier at 1 July 2016, together with the fair value of the purchase consideration, are still in
the process of being determined and the results for the financial year ending 30 June 2017 will
therefore be adjusted to bring into account the finalisation of the initial accounting for the
business combination.
The following provisional values (based on values as at 30 June 2016) have been used in determining
the bargain purchase gain for the interim period:
R'000
Property, plant and equipment 1 136 980
Other non-current assets 17 683
Inventories 382 902
Trade and other receivables 188 637
Other current financial assets 12 384
Cash resources 12 787
Long-term provisions (63 322)
Trade and other payables (277 918)
Short-term provisions (119 695)
Net asset value acquired, at provisional fair value 1 290 438
Deferred tax liability raised in respect of the provisional
fair value of assets acquired and liabilities assumed (210 617)
Provisional fair value of interest already held by the group (494 955)
- purchase price for acquisition of 50% "A" shares issued to ARM (225 000)
- provisional fair value of equity interest distributed by Assmang (269 955)
Provisional fair value of purchase consideration (540 207)
- purchase price, agreed on 1 July 2014 (cash consideration) (450 000)
- amount refunded to Assmang for operating funds advanced between
1 July 2014 and 30 June 2016, being capital expenditure incurred, net of profits
realised in the same period (55 313)
- interest foregone on purchase consideration
placed in escrow on 1 July 2015 and paid to seller on
29 July 2016 in terms of the acquisition agreement (34 894)
Bargain purchase gain (included in Other income) 44 659
The bargain purchase gain results largely from the purchase price being agreed upon as at 1 July 2014
and the transaction being concluded on 29 July 2016, when all of the conditions precedent were met.
Directors
As announced on 6 December 2016, the group's Chief Executive Officer (CEO), Mr Chris Cory, who joined the
group in 1989 and reached retirement in the current month, will exit the group on 30 June 2017.
Mr Charles Walters will join the group as CEO-designate with effect from 1 April 2017, and on
1 July 2017 will be appointed to the board as the group's CEO.
Declaration of interim dividend
Shareholders are advised that on 21 February 2017, the board of directors (the board) approved an Interim
dividend number 120 (the dividend), of 600 cents per share (gross) for the half year ended 31 December 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 510,0 cents per share for shareholders liable to pay the dividend tax
4. The issued ordinary share capital of Assore is 139 607 000 shares, of which 36 447 746 (2015: 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 and participate
in the interim dividend Tuesday, 14 March 2017
- Trading ex dividend" commences Wednesday, 15 March 2017
- Record date Friday, 17 March 2017
- Dividend payment date Monday, 20 March 2017
- Dates (inclusive) between which share certificates
may not be dematerialised or rematerialised Wednesday, 15 March 2017 to Friday, 17 March 2017
On behalf of the board
Desmond Sacco CJ Cory
Chairman Chief Executive Officer
22 February 2017
Johannesburg
Consolidated income statement
Half-year Half-year Year
ended ended ended
31 December 31 December 30 June
2016 2015 2016
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 3 284 813 1 340 987 2 941 047
Turnover 2 721 760 958 955 2 027 813
Cost of sales (1 893 337) (909 244) (1 918 242)
Gross profit 828 423 49 711 109 571
Fees and commission earned from joint venture 421 616 263 815 673 761
Other income 192 390 125 708 266 391
Impairment of non-financial assets - (40 325) (65 686)
Impairment of financial assets - (87 067) (30 344)
Other expenses (297 070) (216 542) (514 814)
Finance costs (7 324) (17 242) (38 576)
Profit before taxation and joint venture 1 138 035 78 058 400 303
Taxation (300 823) (45 489) (176 376)
Profit after taxation, before joint venture 837 212 32 569 223 927
Share of profit from joint venture, after taxation 1 418 662 575 911 1 281 000
Share of loss from associate, after taxation (7 011) (1 896) (7 286)
Profit for the period 2 248 863 606 584 1 497 641
Attributable to:
Shareholders of the holding company 2 219 151 613 518 1 539 363
Non-controlling shareholders 29 712 (6 934) (41 722)
As above 2 248 863 606 584 1 497 641
Earnings as above 2 219 151 613 518 1 539 363
Bargain purchase gain (44 659) - -
Impairment of non-financial assets - 83 895 268 395
Impairment of financial assets - 87 067 30 344
Profit on disposal of property, plant and equipment (2 410) - (8 321)
Profit on disposal of subsidiary - - (8 578)
Taxation effect of above items - (28 438) (58 824)
Non-controlling shareholders' portion - (17 743) (18 203)
Headline earnings 2 172 082 738 299 1 744 176
Earnings per share (basic and diluted - cents) 2 151 594 1 491
Headline earnings per share (basic and diluted - cents) 2 105 715 1 690
Dividends per share declared in respect of the
profit for the period (cents) 600 200 700
- Interim 600 200 200
- Final 500
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 (36,43) (36,40) (36,40)
103,18 103,21 103,21
Consolidated statement of comprehensive income
Half-year Half-year Year
ended ended ended
31 December 31 December 30 June
2016 2015 2016
Unaudited Unaudited Audited
R'000 R'000 R'000
Profit for the period (as above) 2 204 204 606 584 1 497 641
Items that may be reclassified into the income
statement dependent on the outcome of a future event 23 688 (7 263) 125 367
Gain/(loss) on revaluation to market value of
available-for-sale investments after taxation 36 085 (23 114) (18 270)
Gain/(loss) on revaluation to market value of
available-for-sale investments 46 501 (28 412) (23 544)
Deferred capital gains tax thereon (10 416) 5 298 5 274
Exchange differences on translation of
foreign operations (12 397) 115 851 139 877
Actuarial gain on pension fund, after taxation - - 3 760
Total comprehensive income for the period, net of tax 2 227 892 599 321 1 623 008
Attributable to:
Shareholders of the holding company 2 204 255 598 488 1 652 559
Non-controlling shareholders 23 637 833 (29 551)
As above 2 227 892 599 321 1 623 008
Consolidated statement of financial position
At At At
31 December 31 December 30 June
2016 2015 2016
Unaudited Unaudited Audited
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment
and intangible assets 1 289 991 199 056 178 609
Investments
- joint venture 15 258 461 14 661 219 15 094 529
- available-for-sale 240 008 118 492 180 084
- associate 117 837 118 860 124 848
- other 27 363 48 160 44 591
Net deferred taxation asset - 26 594 17 421
Pension fund surplus 68 070 57 474 68 070
Total non-current assets 17 001 730 15 229 855 15 708 152
Current assets
Inventories 1 103 685 1 135 868 1 037 471
Trade and other receivables 870 672 274 635 418 466
Restricted cash - 450 000 479 522
Cash resources 4 868 395 2 763 455 3 184 925
Total current assets 6 842 752 4 623 958 5 120 384
TOTAL ASSETS 23 844 482 19 853 813 20 828 536
EQUITY AND LIABILITIES
Share capital and reserves
Ordinary shareholders' interest 20 667 093 18 097 823 18 945 480
Non-controlling deficit (34 904) (3 634) (33 871)
Total equity 20 632 189 18 094 189 18 911 609
Non-current liabilities
Net deferred taxation liabilities 236 364 - -
Long-term liabilities
- interest-bearing - 346 100 -
- non-interest-bearing 100 324 32 141 28 554
Total non-current liabilities 336 688 378 241 28 554
Current liabilities
Interest-bearing 811 281 1 073 468 995 774
Non-interest-bearing 2 064 324 307 915 892 599
Total current liabilities 2 875 605 1 381 383 1 888 373
TOTAL EQUITY AND LIABILITIES 23 844 482 19 853 813 20 828 536
Consolidated statement of cash flow
Half-year Half-year Year
ended ended ended
31 December 31 December 30 June
2016 2015 2016
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash generated from/(utilised in) operations 1 176 477 (271 220) 212 491
Cash generated by investing activities 691 486 500 878 862 431
Cash (utilised)/generated by financing activities (184 493) 112 602 (311 192)
Increase in cash for the period 1 683 470 342 260 763 730
Cash resources at beginning of period 3 184 925 2 421 195 2 421 195
Cash resources per statement of financial position 4 868 395 2 763 455 3 184 925
Consolidated statement of changes in equity
Half-year Half-year Year
ended ended ended
31 December 31 December 30 June
2016 2015 2016
Unaudited Unaudited Audited
R'000 R'000 R'000
Share capital, share premium and other reserves
Balance at beginning of period 512 032 398 836 398 836
Other comprehensive income/(loss) for the year 29 762 (15 030) 113 196
Net increase/(decrease) in the market value
of available-for-sale investments, after taxation 36 085 (23 114) (18 270)
Actuarial gains on pension plan after taxation - - 3 760
Movement in foreign currency translation
reserve arising on consolidation (6 323) 8 08 127 706
Balance at end of period 541 794 383 806 512 032
Treasury shares
Balance at beginning of period (5 051 583) (5 051 583) (5 051 583)
Acquired during the period (11 265) - -
Balance at end of period (5 062 848) (5 051 583) (5 051 583)
Retained earnings
Balance at beginning of period 23 485 031 22 461 703 22 461 703
Profit for the period attributable to shareholders 2 219 151 613 518 1 539 363
Ordinary dividends declared during the period (516 035) (309 621) (516 035)
- total dividends declared (698 035) (418 821) (698 035)
- dividends on treasury shares held in BEE trusts 182 000 109 200 182 000
Balance at end of period 25 188 147 22 765 600 23 485 031
Ordinary shareholders' interest 20 667 093 18 097 823 18 945 480
Non-controlling interests
Balance at beginning of period (33 871) 15 765 15 765
Share of total comprehensive loss (1 033) (19 399) (49 636)
- profit/(loss) for the period 29 712 (6 934) (41 722)
- other comprehensive (loss)/income (6 075) 7 767 12 171
- share of total comprehensive income/(loss) 23 637 833 (29 551)
- derecognition of non-controlling interest
upon disposal of subsidiary - - 8 232
- dividends paid to non-controlling shareholders (24 670) (20 232) (28 317)
Balance at end of period (34 904) (3 634) (33 871)
Total equity 20 632 189 18 094 189 18 911 609
Fair value 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.
Half-year
ended Year ended
31 December 30 June
2016 2016
Unaudited Audited
Level 1 Level 1
R'000 R'000
Assets measured at fair value
Available-for-sale investments 240 008 180 084
Other investments 27 363 44 591
267 371 224 675
Segmental information
Other mining
activities,
Joint-venture mining and beneficiation Marketing eliminations and
Iron ore Manganese Chrome Sub-total Dwarsrivier2 and shipping adjustments1,2 Consolidated
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Half-year ended
31 December 2016
- Unaudited
Revenues
Third party 7 819 786 4 512 035 95 247 12 427 068 1 675 677 1 523 039 (12 340 971) 3 284 813
Inter-segment - - - - - 58 864 (58 864) -
Total revenues 7 819 786 4 512 035 95 247 12 427 068 1 675 677 1 581 903 (12 399 835) 3 284 813
Contribution to profit 2 044 193 756 975 (7 602) 2 793 566 420 695 346 766 (1 312 164 2 248 863
Half-year ended
31 December 2015
- Unaudited2
Revenues
Third party 5 322 872 3 020 941 60 833 8 404 646 890 214 1 196 105 (9 149 978) 1 340 987
Contribution to profit 957 069 192 898 3 812 1 153 779 73 969 61 493 (682 658) 606 584
Impairment of financial
and non-financial assets - (62 740) - (62 740) (70 289) (40 325) 31 370 (141 984)
Notes:
1 Other mining activities include the group's pyrophyllite business and its active mining operations. The majority of adjustments
to revenues give effect to joint-venture revenues, which are not disclosed as Assmang is equity-accounted.
2 Following the completion of the acquisition of Dwarsrivier with effect from 1 July 2016, and the recent suspension of mining at
the group's remaining chrome mines, segmental reporting has been amended to give effect to the segments according to which the group
is managed by executive management. The following amounts: Revenues, Third party, R890 214 000, Contribution to profit, R73 969 000
and Impairment of non-financial assets, R70 289 000, which are now reported separately under "Dwarsrivier" were previously
reported under "Joint-venture mining and beneficiation - Chrome". Other mining activities have been now included with eliminations
and adjustments, which were previously as follows: Revenue, Third party, R9 294 860 000 and Contribution to profit, R620 111 000.
"Other mining activities" previously included: Revenues, Third party, R144 882 000 and Contribution to profit, R62 546 000.
Executive Directors: Desmond Sacco (Chairman), CJ Cory (Chief Executive Officer), PE Sacco (Marketing), BH van Aswegen (Operations and Growth)
Independent non-executive Directors: EM Southey (Deputy Chairman and Lead Independent Director), TN Mgoduso, S Mlarhi, WF Urmson
Registered office: Assore House, 15 Fricker Road, IIlovo Boulevard, Johannesburg, 2196
Transfer office: Singular Systems Proprietary Limited, 28 Fort Street, Birnam, 2196
Company secretaries: African Mining and Trust Company Limited
Sponsor: The Standard Bank of South Africa Limited
www.assore.com
22 February 2017
Notes to the editors:
- Assore’s principal investments comprise of a 50% interest in Assmang Proprietary Limited (Assmang), which it controls jointly with
African Rainbow Minerals Limited (ARM) in terms of a longstanding shareholders’ agreement, and 100% ownership of Dwarsrivier Chrome
Mine Proprietary Limited (Dwarsrivier), which was acquired with effect from 1 July 2016.
- 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.
- Dwarsrivier is an underground chrome mine located in Limpopo province near to Steelpoort and Lydenburg and currently has production
capacity for 1,4 million tons of chrome product annually.
Date: 22/02/2017 11:36:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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