ASSORE LIMITED - Results for the half year ended 31 December 2017

Release Date: 21/02/2018 08:00
Code(s): ASR
 
Wrap Text
Results for the half year ended 31 December 2017

Assore Limited 
Registration Number: 1950/037394/06
Share code: ASR   
ISIN: ZAE000146932 
(Assore or group or company)

RESULTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

Highlights
-  Outstanding safety performance in the group
-  Headline earnings 12% higher             
-  Interim dividend increased 67% to R10 per share            
-  Strong commodity prices
-  Increased sales volumes for all products                      


CEO Charles Walters said:
"Improved volumes across our range of products and improved USD prices for all commodities in our basket except 
chrome ore were enough to overcome a 6% strengthening of the Rand allowing us to post a 12% growth in headline 
earnings. Given our strong balance sheet and good operational cash generation, we were pleased to be in a 
position to increase the interim dividend by 67% to R10 per share."

Commentary
Results
Headline earnings for the six months to 31 December 2017 (the current period) increased by 11,8% to R2,4 billion,
compared to the same period in the previous financial year (the previous period, or 2016). This increase comprises 
higher headline earnings in Assmang Proprietary Limited (Assmang), which were 21,7% higher than 2016 and lower 
headline earnings from the rest of the group’s operations, which were 9,3% lower than 2016, at R701,8 million.

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 remained firm with world economic growth for the 2017 calendar year (CY2017) 
estimated at 3,6%, while China's economy increased by 6,9% over the same period. These growth rates supported 
increased crude and stainless steel demand, with crude steel production for CY2017 5,3% higher than the previous 
year, at 1,691 million metric tonnes. Global production of stainless steel for CY2017 was 5,6% above the 
previous year, with the increase in China recorded at 5,8%. 

These conditions led to prices that were generally slightly higher for the group's products, which are reflected 
in the table below:
                                                        Half-year             Half-year                                
                                                            ended                 ended       % Increase/    
Average price, US dollar, delivered in China     31 December 2017      31 December 2016        (decrease)              
Iron ore (62% iron content, "fines" 
grade per metric tonne)                                        68                    65                 5    
Manganese ore (44% grade manganese content                                                         
per dry metric tonne unit)                                   6,30                  6,02                 5    
Chrome ore (44% chrome content material                                                            
per metric tonne)                                             195                   224               (13)   

Even though demand for chrome ore remained healthy, prices over the current period were lower than 2016. 
This was mainly due to an abnormally high price spike exceeding US dollars (USD) 400 per metric tonne that 
occurred in 2016 as a result of extremely low chrome ore inventories as well as higher levels of stainless 
steel production in China. These inventories normalised to a level of 2,3 million  tonnes 
for the current period, which brought about lower prices.

Environmental regulations imposed in China have resulted in strong demand for high grade iron ores, including 
"lumpy" iron ore. The premium for "lumpy" material, was higher by nearly USD5 per metric tonne in the current 
period, compared to 2016. Over 50% of Assmang's iron ore is sold into the market as "lumpy" grade material.

Demand for manganese ore remained strong driven by weaker than expected Chinese domestic production of 
manganese ore, increased production of crude steel and significantly higher Chinese electrolytic manganese 
metal (EMM) production. This resulted in an undersupplied market, thus providing support for strong but 
stable prices for both the high-grade (44% manganese content) and the lower-grade (37% manganese content) 
indices.

The alloy market remained tight as growth in supply was not sufficient to offset the increases in demand. 
These conditions, together with robust manganese ore prices, strong steel consumption and high steel prices 
resulted in alloy prices across the grades being maintained at the higher levels as seen at the start of the 
2017 calendar year.

The average level of the SA rand/US dollar exchange rate was 6% stronger across the current period, which 
offset the impacts of the improved US dollar selling prices and sales volumes to a limited extent.

Safety
The group continues to maintain and achieve exceptional safety records. In 2017, Assmang's operations received 
three safety awards at the annual Mine Safe conference, as arranged by the mining industry, Department of Mineral 
Resources (the DMR) and organised labour. Black Rock Manganese Mine was awarded first place for best safety 
performance in underground mines, while Beeshoek Iron Ore Mine (Beeshoek) achieved first place for best safety 
performance for base metal mines and second place for the best year-on-year safety improvement. Beeshoek was also 
the recipient of the best safety performance award from the DMR for achieving 16 000 fatality-free production shifts. 
On 16 January 2018, Black Rock Manganese Mine achieved 6 million fatality-free shifts.

Sales volumes
Increased sales volumes of iron ore were realised, in both the export and local markets. Sales volumes of
manganese ore were well above the levels of the previous period, due to a combination of factors. The logistical 
issues at Port Elizabeth, which restricted sales volumes in the previous period, were mostly resolved by July 2017. 
In the current period, railage availability was also higher as a result of increased export capacity via Saldanha 
Port. This additional availability was met by increased production from Nchwaning II shaft at Assmang's Black Rock 
manganese mines. 

Production at Sakura Ferroalloys SDN BHD, Malaysia (Sakura), has reached and exceeded capacity, resulting in higher 
sales volumes of manganese alloys. Continued strong 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:
                                               Half-year              Half-year            
                                                   ended                  ended              % 
Metric tonnes '000                      31 December 2017       31 December 2016       increase    
Iron ore                                           9 130                  8 805              4    
Manganese ore*                                     1 556                  1 417             10    
Manganese alloys                                     162                    139             17    
Chrome ore                                           794                    733              8    
* Excluding intra-group sales to Cato Ridge Works.                       

Dwarsrivier
Mining and beneficiation efficiency improved by 3,1% and 0,7% respectively compared to 2016. These efficiency 
improvements, together with labour productivity improvements resulted in an overall increase in production 
volumes of 7,2%. Inflationary increases were effectively countered by improved efficiencies and cost of 
production was marginally higher (0,1%) on a per-tonne basis. A new monthly production record was achieved 
in July 2017. Cash flow (before capital expenditure) was R990 million following record half-year 
sales volumes.

Expansion and capital expenditure
Capital expenditure in Assmang was consistent with that of the previous period, at R1,2 billion. Approximately 
half of this amount was spent in Assmang's Iron Ore division, with R522 million spent on waste-stripping. A further 
R285 million (2016: R652 million) was spent in its Manganese division on the manganese expansion project, which 
stood at 83,6% completion at December 2017. The project is expected to be completed in 2020, at which stage an 
overall manganese capacity of 4 million tonnes will be available from the Black Rock mines. Dwarsrivier spent 
R130 million, mostly on sustainability and compliance items. Exploration and related activities continue in 
IronRidge Resources Limited (AIM-listed), in which the group currently holds 29,5%.

Outlook
World economic growth for the 2018 calendar year is forecast to be stronger than CY2017, at 3,7%. It is also 
expected that improved economic growth levels will be realised in all major areas in the world, and not merely 
in the East, as has been the case in recent years. As a result, strong demand for the group's products is anticipated 
in the short term and prices are expected to remain within relatively stable ranges. It is also expected that Chinese 
environmental policies should continue to support demand for the group's high-quality products.

For iron and manganese ores, the relatively higher current price levels may attract additional supply into these
markets and depending on economic growth levels, may put pressure on price levels in the medium term. 

Dividends
The results in this announcement include the final dividend relating to the previous financial year of 800 cents
(2016: 500 cents) per share, which was declared on 29 August 2017, and paid to shareholders on 26 September 2017. 
Based on the level of earnings for the period, the board has declared an interim dividend of 1 000 cents 
(2017: 600 cents) per share, which will be paid to shareholders on 19 March 2018.

Accounting policies and basis of preparation
The directors of Assore take full responsibility for the preparation of this announcement. 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 Financial Pronouncements as issued by Financial Reporting Standards Council, 
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 2017.

Directors 
Shareholders are advised that following his appointment as Chief Financial Officer to Assore in February 2017, 
Mr Ross Davies has been appointed as a director, effective 20 February 2018. Ross qualified as a chartered accountant 
in 1994 and joined the group as Group Accountant in 2008.

Declaration of interim dividend
Shareholders are advised that on 20 February 2018, the board of directors (the board) approved Interim dividend 
number 122 (the dividend), of 1 000 cents per share (gross) for the half-year ended 31 December 2017.

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 20% will apply;
3. the net local dividend amount is 800 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 36 455 970 (2016: 36 447 746) 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      Tuesday, 13 March 2018
- Trading "ex dividend" commences                                            Wednesday, 14 March 2018
- Record date                                                                   Friday, 16 March 2018
- Dividend payment date                                                         Monday, 19 March 2018
- Dates (inclusive) between which share certificates may not be              Wednesday, 14 March 2018 
  to dematerialised or rematerialised                                           Friday, 16 March 2018

On behalf of the board
Desmond Sacco            CE Walters
Chairman                        Chief Executive Officer

Johannesburg
21 February 2018


Consolidated income statement
                                                                                            Half-year              Year    
                                                                          Half-year             ended             ended    
                                                                              ended       31 December           30 June    
                                                                   31 December 2017              2016              2017    
R'000                                                                     Unaudited         Unaudited           Audited    
Revenue                                                                   3 841 588         3 284 813         7 223 959    
Turnover                                                                  3 138 720         2 721 760         5 945 266    
Cost of sales                                                            (2 416 102)       (1 893 337)       (4 200 692)    
Gross profit                                                                722 618           828 423         1 744 574    
Fees and commission earned from joint venture                               458 174           421 616           920 055    
Other income                                                                291 731           192 390           372 317    
Bargain purchase gain                                                             -                 -           256 755    
Impairment of non-financial assets                                          (21 564)                -                 -    
Other expenses                                                             (336 003)         (297 070)         (801 762)    
Unrealised foreign exchange loss                                            (81 998)                -                 -    
Finance costs                                                                (8 912)           (7 324)          (19 662)    
Profit before taxation and joint venture                                  1 024 046         1 138 035         2 472 277    
Taxation                                                                   (262 764)         (300 823)         (583 420)    
Profit after taxation, before joint venture                                 761 282           837 212         1 888 857    
Share of profit from joint venture, after taxation                        1 728 868         1 418 662         3 266 282    
Share of loss from associates, after taxation                                (8 404)           (7 011)          (16 809)    
Profit for the period                                                     2 481 746         2 248 863         5 138 330    
Attributable to:                                                                                                           
Shareholders of the holding company                                       2 454 375         2 219 151         5 021 171    
Non-controlling shareholders                                                 27 371            29 712           117 159    
As above                                                                  2 481 746         2 248 863         5 138 330    
Earnings as above                                                         2 454 375         2 219 151         5 021 171    
Impairment of non-financial assets                                           21 564                 -                 -    
Profit on disposal of available-for-sale investments                        (42 565)                -                 -    
Profit on disposal of property, plant and equipment                          (5 619)           (2 410)            1 670    
Impairment arising on the sale of Dwarsrivier in joint venture                    -                 -           373 014    
Bargain purchase gain (Dwarsrivier)                                               -           (44 659)         (256 755)    
Impairment of non-financial assets in joint venture entity                        -                 -            96 501    
Taxation effect of above items                                                1 258                 -           (26 555)    
Headline earnings                                                         2 429 013         2 172 082         5 209 046    
Earnings per share (basic and diluted - cents)                                2 379             2 151             4 865    
Headline earnings per share (basic and diluted - cents)                       2 355             2 105             5 047    
Dividends per share declared in respect of the profit 
for the period (cents)                                                        1 000               600             1 400    
- Interim                                                                     1 000               600               600    
- Final                                                                                                             800    
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                             (36,45)           (36,43)           (36,40)    
                                                                             103,16            103,18            103,21    


Consolidated statement of comprehensive income
                                                                                            Half-year              Year
                                                                          Half-year             ended             ended          
                                                                              ended       31 December           30 June          
                                                                   31 December 2017              2016              2017          
R'000                                                                     Unaudited         Unaudited           Audited          
Profit for the period (as above)                                          2 481 746         2 248 863         5 138 330          
Items that may be reclassified into the 
income statement dependent on the 
outcome of a future event                                                    22 086            23 688          (183 604)          
Gain on revaluation to market value of 
available-for-sale investments after taxation                                30 186            36 085            38 251          
Gain on revaluation to market value of 
available-for-sale investments                                               38 900            46 501            49 292          
Deferred capital gains tax thereon                                           (8 714)          (10 416)          (11 041)          
Exchange differences on translation of foreign operations                    (8 100)          (12 397)         (248 814)          
Actuarial gain on pension fund, after taxation                                    -                 -            26 959          
Total comprehensive income for the period, net of tax                     2 503 832         2 272 551         4 954 726          
(Less)/add back: Comprehensive (income)/loss  
attributable to non-controlling shareholders                                (40 166)           25 743          (104 364)          
Attributable to shareholders of the holding company                       2 463 666         2 298 294         4 850 362          


Consolidated statement of financial position
                                                                                                   At                At    
                                                                                 At       31 December           30 June    
                                                                   31 December 2017              2016              2017    
R'000                                                                     Unaudited         Unaudited           Audited    
ASSETS                                                                                                                     
Non-current assets                                                                                                         
Property, plant and equipment and intangible assets                       1 662 604         1 289 991         1 584 642    
Investments                                                                                                                
- joint venture                                                          16 278 970        15 258 461        15 327 400    
- available-for-sale                                                        223 876           240 008           229 376    
- associates                                                                172 297           117 837           108 729    
- other                                                                      21 559            27 363            24 098    
Pension fund surplus                                                         93 144            68 070            93 144    
Total non-current assets                                                 18 452 450        17 001 730        17 367 389    
Current assets                                                                                                             
Inventories                                                               1 049 715         1 103 685         1 223 032    
Trade and other receivables                                                 625 364           870 672         1 104 332    
Cash resources                                                            7 115 272         4 868 395         5 626 778    
Total current assets                                                      8 790 351         6 842 752         7 954 142    
TOTAL ASSETS                                                             27 242 801        23 844 482        25 321 531    
EQUITY AND LIABILITIES                                                                                                     
Share capital and reserves                                                                                                 
Ordinary shareholders' interest                                          24 524 354        20 667 093        22 649 300    
Non-controlling deficit                                                      (1 877)          (34 904)          (24 348)    
Total equity                                                             24 522 477        20 632 189        22 624 952    
Non-current liabilities                                                                                                    
Net deferred taxation liabilities                                           264 871           236 364           283 778    
Long-term liabilities                                                                                                      
- non-interest-bearing                                                      135 925           100 324           134 920    
Total non-current liabilities                                               400 796           336 688           418 698    
Current liabilities                                                                                                        
Interest-bearing                                                            513 874           811 281           579 719    
Non-interest-bearing                                                      1 805 654         2 064 324         1 698 162    
Total current liabilities                                                 2 319 528         2 875 605         2 277 881    
TOTAL EQUITY AND LIABILITIES                                             27 242 801        23 844 482        25 321 531    
                                                                                                          

Fair values 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; and                                
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. The following assets, all measured at level 1, were required to be recorded at fair value as follows:                                                      
                                                                          Half-year         Half-year              Year     
                                                                              ended             ended             ended     
                                                                        31 December       31 December           30 June     
                                                                               2017              2016              2017     
                                                                          Unaudited         Unaudited           Audited    
                                                                            Level 1           Level 1           Level 1    
R'000                                                                                                                        
Assets measured at fair value                                                                                              
Available-for-sale listed investments                                       223 876           240 008           229 376    
Available-for-sale unlisted investments                                      21 559            27 363            24 098    
                                                                            245 435           267 371           253 474    

Consolidated statement of cash flow
                                                                          Half-year         Half-year             
                                                                              ended             ended        Year ended 
                                                                        31 December       31 December           30 June 
                                                                               2017              2016              2017 
                                                                          Unaudited         Unaudited           Audited     
R'000                                                                                                                     
Cash generated from operations                                              595 079         1 176 477           734 600    
Cash generated by investing activities                                      958 900           691 486         2 123 308    
Cash utilised by financing activities                                       (65 485)         (184 493)         (416 055)    
Increase in cash for the period                                           1 488 494         1 683 470         2 441 853    
Cash resources at beginning of period                                     5 626 778         3 184 925         3 184 925    
Cash resources per statement of                                                                           
financial position                                                        7 115 272         4 868 395         5 626 778    
                                                                                                                    

Consolidated statement of changes in equity
                                                                                            Half-year              Year          
                                                                          Half-year             ended             ended          
                                                                              ended       31 December           30 June          
                                                                   31 December 2017              2016              2017          
R'000                                                                     Unaudited         Unaudited           Audited          
Share capital, share premium and other reserves                                                                                  
Balance at beginning of period                                              563 925           512 032           512 032          
Other comprehensive income for the period                                    26 055            29 762            51 893          
Net increase in the market value of                        
available-for-sale investments                                               30 186            36 085            38 251          
Foreign currency translation reserve arising               
on consolidation                                                             (4 131)           (6 323)          (13 317)          
Actuarial gains on pension plan after taxation                                    -                 -            26 959          
                                                                                                                                 
Balance at end of period                                                    589 980           541 794           563 925          
Treasury shares                                                                                                                  
Balance at beginning of period                                           (5 062 848)       (5 051 583)       (5 051 583)          
Acquired during the period                                                   (2 662)          (11 265)          (11 265)          
Balance at end of period                                                 (5 065 510)       (5 062 848)       (5 062 848)          
Retained earnings                                                                                                                
Balance at beginning of period                                           27 370 925        23 485 031        23 485 031          
Profit for the period attributable to shareholders                        2 454 375         2 219 151         5 021 171          
Ordinary dividends declared during the period                              (825 416)         (516 035)       (1 135 277)          
- total dividends declared                                               (1 116 856)         (698 035)       (1 535 677)          
- dividends on treasury shares held in BEE trusts                           291 440           182 000           400 400          
                                                                                                                                 
Balance at end of period                                                 28 999 884        25 188 147        27 370 925          
Ordinary shareholders' interest                                          24 524 354        20 667 093        22 872 002          
Non-controlling interests                                                                                                        
Balance at beginning of period                                              (24 348)          (33 871)          (33 871)          
Share of total comprehensive loss                                            22 471            (1 033)            9 523          
- share of total comprehensive income/(loss)                                 23 402            23 637           104 364          
- profit for the period                                                      27 371            29 712           117 159          
- other comprehensive income                                                 (3 969)           (6 075)          (12 795)          
- dividends paid to non-controlling shareholders                               (931)          (24 670)          (94 841)          
Balance at end of period                                                     (1 877)          (34 904)          (24 348)          
Total equity                                                             24 522 477        20 632 189        22 847 654          


Segmental information
                            Joint venture mining and beneficiation                
                                                                                                     Other        
                                                                                                    mining                   
                                                                                               activities,                    
                                                                                  Marketing   eliminations                    
                                                                         Dwars-         and            and                    
R'000                     Iron ore   Manganese   Chrome   Sub-total      rivier    shipping   adjustments1   Consolidated        
Half-year ended                                                                                              
31 December 2017                                                                                             
- Unaudited                                                                                                  
Revenues                                                                                                                      
Third party              7 900 942   5 962 454   82 860  13 946 256   1 981 955   1 862 603    (13 949 226)     3 841 588    
Inter-segment                    -           -        -           -           -      69 182        (69 182)             -    
Total revenues           7 900 942   5 962 454   82 860  13 946 256   1 981 955   1 931 785    (14 018 408)     3 841 588    
Contribution to profit   1 745 668   1 743 077  (18 536)  3 470 209     440 045     375 774     (1 804 283)     2 481 746    
Impairment of                                                                                                
financial and                                                                                                
non-financial assets             -           -                    -           -           -        (21 564)       (21 564)    
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)             -    
                         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    
Notes:                                                                                                                                    
Other mining activities include the group's pyrophyllite and related business and the remainder of its operations.                                
1 The majority of adjustments to revenues give effect to joint venture revenues, which are not disclosed as Assmang 
  is equity-accounted.  

21 February 2018                                 
                                                                                     

Corporate information
Directors
Executive Desmond Sacco (Chairman)
CE Walters (Chief Executive Officer)
RA Davies (Finance)
PE Sacco (Marketing)
BH van Aswegen (Operations and Growth) 

Non-executive EM Southey* (Deputy Chairman and Lead Independent Director)
DN Aitken*,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
Singular Systems Proprietary Limited
28 Fort Street
Birnam, 2196

Sponsor 
The Standard Bank of South Africa Limited

Shareholders are advised that these results for the half-year ended 31 December 2017, 
as well as a presentation covering these results are available on the group’s website, 
www.assore.com.

Date: 21/02/2018 08:00:00 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.

Email this JSE Sens Item to a Friend.

Share This Story