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Extracts from the provisional audited results for the year ended 31 December 2019 and cash dividend declaration
KUMBA IRON ORE LIMITED
Kumba Iron Ore Limited is a member of the Anglo American plc Group
Registration number: 2005/015852/06
JSE share code: KIO
ISIN: ZAE000085346
INCOME TAX NUMBER: 9586/481/15/3
("Kumba" or "the Company" or "the group")
EXTRACTS FROM THE PROVISIONAL AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019
AND CASH DIVIDEND DECLARATION
HIGHLIGHTS
- Fatality free since May 2016
- Attributable free cash flow of R17.1 billion
- Return on Capital Employed (ROCE) of 83%
- EBITDA margin improved from 45% to 52%
- Operating efficiency up from 65% of benchmark to 68%
- Final cash dividend of R15.99 per share
OVERVIEW
Themba Mkhwanazi, Chief Executive of Kumba, said, "Kumba's strategy has helped deliver exceptional earnings growth, as
we continue to increase the resilience of the business. Against challenging operational conditions, we marked another
year of strong financial performance with EBITDA up by 62% to R33.4 billion. Our financial performance reflects the
benefits of higher iron ore prices, improved efficiencies and further cost savings ahead of our target, which have
cushioned the impact of the operational challenges experienced during the period. These results were also achieved
through a relentless focus on safety as we maintained our fatality free track record since May 2016. Our commitment
to responsible production, aimed at unlocking value from our world-class assets, has in turn allowed us to help build
thriving communities and improve people's lives.
Kumba's EBITDA margin increased to 52% and cash flow from operations is up by 79% to R34.7 billion. Kumba's strong
performance and robust balance sheet, resulted in the Board declaring a final cash dividend of R15.99 per share.
Combined with the interim dividend of R30.79 per share, this represents a total payout ratio of 92% of headline
earnings per share for 2019, in excess of our 50% to 75% dividend payout policy. In total we have created value of
R19.8 billion for shareholders and our empowerment partners this year.
Since embarking on our margin enhancement strategy, Kumba's return on capital employed has improved from 49% in 2018
to 83% in 2019, reflecting favourable markets and the continued success of our value over volume strategy. We are
focused on optimising the value of our assets, generating strong cash flows and further improving returns. Kumba has
transformed into a more capital efficient and resilient business, providing greater stability for our employees,
contractors and the communities around us, as well as delivering sustainable returns to our shareholders."
FINAL CASH DIVIDEND
Our capital allocation framework seeks to ensure that the business generates sufficient cash flow after sustaining
capital before prioritising shareholder returns. This is done while maintaining balance sheet flexibility to protect
the business from market volatility as well as ensuring that appropriate levels of capital are allocated to life
extension projects. The Board has declared a final cash dividend of R15.99 per share, and combined with the interim
dividend of R30.79 per share, this amounts to a total dividend of R46.78 per share (2018: R30.24) for the year. This
equates to a 92% payout ratio of headline earnings for 2019.
OPERATIONAL PERFORMANCE
Total tonnes mined increased 2% to 297.9 Mt (2018: 292.5 Mt) with mining activity improving in the second half of the
year following challenges with primary equipment reliability in the first six months of the year. This, combined with
plant maintenance, impacted production volumes which decreased by 2% to 42.4 Mt (2018: 43.1 Mt). The average
lump to fine ratio was broadly maintained at 67:33 (2018: 68:32) and the average quality at 64.2% Fe (2018: 64.5% Fe).
At a mine level, Sishen's production was similar to 2018 at 29.2 Mt with waste stripping down 0.5% to 181.1 Mt (2018:
182 Mt). At Kolomela, production decreased by 5% to 13.2 Mt (2018: 13.9 Mt) owing to the maintenance of the DMS plant
and waste stripping was increased to 63.2 Mt (2018: 56.0 Mt).
Total sales volumes decreased to 42.2 Mt (2018: 43.3 Mt), driven by lower domestic sales of 2.2 Mt (2018: 3.3 Mt),
while export sales were maintained at 40.0 Mt. Due to lower domestic sales and refurbishment of the ship loader at
Saldanha Port, finished stock increased to 6.4 Mt (2018: 5.3 Mt).
REVENUE AND EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (EBITDA)
Total revenue increased by 41% to R64.3 billion compared to R45.7 billion for 2018, mainly as a result of stronger
prices, higher market premiums and currency gains, which were partially offset by lower sales volumes due to the lower
domestic offtake. Kumba's average realised iron ore export price increased by 35% to US$97/tonne (2018: US$72/tonne),
while the average Rand/US$ exchange rate weakened by 9% to R14.45/US$1 (2018: R13.24/US$1). Sales volumes reduced by
2% to 42.2 Mt (2018: 43.3 Mt). Shipping revenue increased by R938 million benefiting from a weaker currency and
higher volumes.
EBITDA of R33.4 billion reflected an increase of 62% compared to R20.6 billion in 2018. Growth was driven by a
35% strengthening of the average realised FOB prices of US$97/tonne (2018: US$72/tonne) and currency gains of 9% from
a weaker Rand/US$ exchange rate. Cost savings of R920 million and market premia of R646 million went a long way towards
mitigating higher mining and logistics costs, as well as the 2% decline in sales volumes.
Kumba's EBITDA margin increased to 52% (2018: 45%). Kumba delivered strong financial results with net profit up 69% to
R21.3 billion (2018: R12.6 billion) and headline earnings increasing by 69% to R16.3 billion (2018: R9.7 billion).
Attributable and headline earnings per share for the year were R50.72 and R50.88 (2018: R30.08 and R30.28), respectively.
CASH FLOW
Kumba ended the year with a net cash position of R12.3 billion (2018: R11.7 billion) net of lease liabilities. Cash flow
generated from operations increased by 84% to R34.7 billion (2018: R18.9 billion) due to higher EBITDA and lower working
capital requirements.
OUTLOOK FOR 2020
Kumba's production guidance for 2020 is 41.5 Mt to 42.5 Mt, with Sishen producing ~29 Mt of product and mining
170 Mt to 180 Mt of waste at a stripping ratio of 4.4, with the average LoM stripping ratio remaining at ~3.4.
Kolomela's production guidance is ~13 Mt and waste stripping at 55 Mt to 60 Mt with the stripping ratio expected
to average 4 in 2020 and the LoM average stripping ratio of 3.8.
Total sales guidance is between 42 Mt and 43 Mt, including 1 Mt of domestic sales.
Unit costs for Sishen and Kolomela are projected to be between R355/tonne to R370/tonne and R280/tonne to
R290/tonne, respectively.
Capital expenditure, including deferred stripping costs, is expected to be in the range of R6.6 billion to
R7.1 billion.
Themba Mkhwanazi concluded: "With supportive demand fundamentals for our high quality products, we are focused on
delivering our safe production targets to continue capitalising on this opportunity. We are focused on improving operational
equipment reliability and productivity, building on the strong financial performance in 2019. Underpinned by our strong
balance sheet and capital discipline, we have a solid foundation for achieving our 2020 targets."
NOTICE OF FINAL CASH DIVIDEND
At its Board meeting on 17 February 2020, the directors approved a gross final cash dividend of
1,599 cents per share on the ordinary shares from profits accrued during the period ended
31 December 2019. The dividend has been declared from income reserves.
The dividend will be subject to a dividend withholding tax of 20% for all shareholders who are not exempt
from or do not qualify for a reduced rate of withholding tax. The net dividend payable to shareholders
subject to withholding tax at a rate of 20% amounts to 1,279.20000 cents per share.
The issued share capital at the declaration date is 322,085,974 ordinary shares.
The salient dates are as follows:
Publication of declaration data Tuesday, February 18, 2020
Last day for trading to qualify and participate in the final dividend Tuesday, March 10, 2020
Trading ex-dividend commences Wednesday, March 11, 2020
Record date Friday, March 13, 2020
Dividend payment date Monday, March 16, 2020
Share certificates may not be dematerialised or rematerialised between Wednesday, 11 March 2020
and Friday, 13 March 2020 both days inclusive. Any change of address or dividend instructions must be
provided by the last day for trading.
EARNINGS PER SHARE
for the year ended
31 Dec 31 Dec %
Rand per share 2019 2018 change
Earnings
Basic 50.73 30.08 69
Diluted 50.58 29.87 69
Headline earnings
Basic 50.88 30.28 70
Diluted 50.73 30.06 69
Dividend
Interim 30.79 14.51 112
Final 15.99 15.73 2
Normalised earnings are not reported on as this measure no longer provides more relevant
or comparable information.
SALIENT FEATURES AND OPERATING STATISTICS
for the year ended
31 Dec 31 Dec %
2019 2018 change
Market information
Closing share price (Rand) 417 283 47
Market capitalisation (Rand million) 134,326 91,166 47
Net asset value attributable to owners of Kumba 112.49 109.47 3
(Rand per share)
Operating statistics ('000 tonnes)
Production 42,388 43,106 (2)
Sishen mine 29,175 29,246 -
Kolomela mine 13,213 13,860 (5)
Sales 42,218 43,257 (2)
Export sales 40,038 39,966 -
Domestic sales 2,180 3,291 (34)
Sishen mine FOR unit cost (Rand per tonne)
Unit cost 467.27 378.20 23
Cash cost 345.11 289.97 19
Kolomela mine FOR unit cost (Rand per tonne)
Unit cost 374.40 354.69 38
Cash cost 270.38 248.56 9
EXTRACTS FROM THE PROVISIONAL AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019
This unaudited short form announcement is the responsibility of the directors of the Company. The information disclosed
is only a summary of the information in the full audited announcement and does not contain full or complete details.
The full annual results announcement should be considered for any investment decisions. The full annual results announcement
for Kumba is available for viewing at https://senspdf.jse.co.za/documents/2020/JSE/ISSE/KIO/KumbaFY19.pdf and is available
on the Company's website www.angloamericankumba.com/investors/financial-results-centre.aspx. The full results announcement
is also available for inspection at the Company's registered office and the offices of our sponsors RAND MERCHANT BANK
(a division of FirstRand Bank Limited) during normal business hours and is available at no charge. Alternatively, copies of
the full announcement may be requested from the Company's investor relations department (penny.himlok@angloamerican.com).
The consolidated and Company annual financial statements were audited by Deloitte & Touche who issued an unmodified
audit opinion on these financial statements. Their audit opinion, together with the accompanying financial statements,
can be viewed on the Company's website www.angloamericankumba.com/investors/financial-results-centre.aspx which also
provides more details on the key audit matters on pages 12 and 13 of the annual financial statements, being (a) the
life-of-mine estimates and (b) the completeness and accuracy of environmental rehabilitation and decommissioning
provisions.
Any reference to future financial performance included in this announcement has not been audited or reported on by the
Company's auditors.
Directors: Non-executive: MSV Gantsho (Chairman), MS Bomela, NS Dlamini, SG French (Irish),
TP Goodlace (British/South African), MA Jenkins, NB Langa-Royds, SS Ntsaluba, ST Pearce (Australian),
BP Sonjica, DG Wanblad
Executive: TM Mkhwanazi (Chief Executive), BA Mazarura (Chief Financial Officer)
For more information please visit: www.angloamericankumba.com
18 February 2020
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 18-02-2020 07:05:00
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