| Wed 21 Oct 2009, 12:07 | | MML - Metmar - Unaudited Interim Financial Results for the six months ended |
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MML
MML
MML - Metmar - Unaudited Interim Financial Results for the six months ended
31 August 2009
METMAR LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/007269/06)
Share Code: MML
ISIN Code: ZAE000078747
"Metmar" or "the Company"
Unaudited Interim Financial Results for the six months ended 31 August 2009
Highlights
- Net profit on disposal of associate PGR 17 of R126,2 million
- Attributable earnings per share up by 17% to 72,6 cents (in comparison to
31 August 2008)
- Net asset value per share up 48% to 232,28 cents (in comparison to 31
August 2008)
- Cash and cash equivalents amounted to R105,3 million at the end of the
period
- Cash generated from operations increased from R5,9 million in 2008 to R38,4
million in the current period
CONDENSED CONSOLIDATED GROUP STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year
to to to
31 August 31 August 28 February
Figures in R`000 Notes 2009 2008 2009
CONTINUING OPERATIONS
Revenue 829 735 2 087 469 3 438 714
Cost of sales (760 309) (1 952 947) (3 182 448)
Gross profit 69 426 134 522 256 266
Other income 2 169 602 14 367 45 411
Operating expenses (45 813) (51 893) (130 916)
Operating profit 193 215 96 996 170 761
Investment revenue 15 109 7 225 37 238
Finance costs (15 642) (12 257) (53 989)
Profit before 192 682 91 964 154 010
taxation
Taxation (36 936) (27 379) (40 390)
Profit from 155 746 64 585 113 620
continuing operations
DISCONTINUED
OPERATIONS
(Loss)/profit before (14 814) 69 737 81 420
taxation
Taxation 2 770 (13 736) (17 552)
(Loss)/profit from (12 044) 56 001 63 868
discontinued
operations
TOTAL
Profit before 177 868 161 701 235 430
taxation
Taxation (34 166) (41 115) (57 942)
Profit for the period 143 702 120 586 177 488
Profit attributable
to:
Owners of parent 3 143 200 118 819 174 445
Minority interests 502 1 767 3 043
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
at at at
31 August 31 August 28 February
Figures in R`000 2009 2008 2009
ASSETS
Non-current assets
Property, plant and 46 868 15 018 28 114
equipment
Goodwill and intangible 64 365 85 784 65 804
assets
Financial assets held to 206 009 21 456 67 902
maturity
317 242 122 258 161 820
Current assets
Inventories 179 616 224 420 167 881
Financial assets at fair 11 501 5 537 -
value through profit or
loss
Trade and other receivables 338 112 634 042 397 578
Cash and cash equivalents 105 302 75 183 78 671
634 531 939 182 644 130
Non-current assets - 103 987 106 383
classified as held for sale
Total assets 951 773 1 165 427 912 333
EQUITY AND LIABILITIES
Capital and reserves 469 496 305 133 361 430
Non-current liabilities
Interest-bearing borrowings 2 804 39 599 41 975
Deferred tax 3 214 6 069 3 698
6 018 45 668 45 673
Current liabilities
Trade and other payables 303 332 605 134 316 030
Trade finance facilities 106 836 173 603 157 731
Financial liabilities 29 168 15 465 13 983
Tax liabilities 36 923 20 424 17 486
476 259 814 626 505 230
Total liabilities 482 277 860 294 550 903
Total equity and 951 773 1 165 427 912 333
liabilities
Net asset value per share 232,28 156,77 185,69
(cents)
Net tangible asset value 200,44 112,70 151,89
per share (cents)
Number of shares in issue 202 122 157 194 637 127 194 637 127
CONDENSED CONSOLIDATED GROUP STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
six months to six months to year to
31 August 31 August 28 February
Figures in R`000 2009 2008 2009
Net cash generated from 19 897 13 593 65 351
operating activities
Cash generated from 38 414 5 907 58 878
operations
Interest received 15 109 7 225 37 238
Finance costs (15 642) (12 257) (53 989)
Dividend received - 23 090 53 655
Taxation paid (17 984) (10 372) (30 431)
Net cash generated from 19 897 13 593 65 351
operating activities
Net cash generated 74 046 (85 997) (134 872)
from/(utilised in)
investing activities
Purchase of subsidiary - (71 183) (71 385)
and division
Purchase of property, (20 670) (4 518) (18 201)
plant and equipment
Realisation of (3 891) (3 713) -
derivative financial
instruments
Proceeds from sale of 248 215 - -
associate
Net purchase of (149 608) (6 583) (45 286)
financial assets
Net cash generated 74 046 (85 997) (134 872)
from/(utilised in)
investing activities
Net cash (utilised (67 312) 40 513 41 118
in)/generated from
financing activities
Proceeds from share 25 000 25 000 25 000
issue
Net movement in (31 676) 51 848 52 853
financial liabilities
Distributions to (60 636) (36 335) (36 735)
shareholders
Net cash (utilised (67 312) 40 513 41 118
in)/generated from
financing activities
Total cash movement for 26 631 (31 891) (28 403)
the period
Cash at the beginning 78 671 107 074 107 074
of the period
Cash and cash 105 302 75 183 78 671
equivalents at the end
of the period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN GROUP EQUITY
Share capital Retained Minority
Figures in R`000 and premium income interests Total
Balance at 1 March 29 197 165 761 924 195 882
2008
Issue of shares 25 000 - - 25 000
Profit for the - 118 819 1 767 120 586
period
Distribution to (35 035) - (1 300) (36 335)
shareholders
Balance at 31 19 162 284 580 1 391 305 133
August 2008
Other - (205) - (205)
Profit for the - 55 626 1 276 56 902
period
Distribution to - - (400) (400)
shareholders
Balance at 28 19 162 340 001 2 267 361 430
February 2009
Issue of shares 25 000 - - 25 000
Profit for the - 143 200 502 143 702
period
Distribution to (60 636) - - (60 636)
shareholders
Balance at 31 (16 474) 483 201 2 769 469 496
August 2009
COMMENTARY ON INTERIM RESULTS
PROFILE AND STRUCTURE
Metmar is an established commodities trader and logistics facilitator that is
building a vertically integrated business with investments in production assets.
Metmar Group`s core activity is the physical trading of commodities. As Metmar
places a significant priority on the elimination of risk, speculative trading
does not form part of Metmar`s operating objective.
The focus of the Group is the generation of revenues related to the mining,
production and trading of ores, alloys, metals, plastics and rubber and
chemicals. Metmar`s activities are underpinned by strong and long standing
partnerships with financial institutions, producers, industrial consumers,
customers and logistical service providers. Financially the Metmar Group has
benefited from a conservatively managed balance sheet and the ability to
identify and manage key business risks.
FINANCIAL PERFORMANCE
Despite the significant drop in revenue which decreased by 60,3% from R2 087,5
million to R829,7 million, the Metmar Group has performed satisfactorily in the
tough market conditions that prevailed during the first six months of the
current financial year. The Group has traded selectively to avoid risk and
increase gross profit margins over this period, resulting in lower volumes with
positive cash inflows.
Under these circumstances Metmar`s trading results for 2009 are satisfactory,
notwithstanding being well below those achieved in 2008.
The cash generated from operations amounted to R38,4 million for the six months
compared to R5,9 million for the previous corresponding period. The cash and
cash equivalents increased to R105,3 million at the end of the period.
When comparing the current period`s trading results, reflecting the decline in
headline earnings, with those of 2008, it should be borne in mind that the
prevailing economic conditions of the two periods were totally different.
In 2008 the commodity cycle was at its peak, with producers hard pressed to meet
demand and receiving record prices for their output, while the 2009 period was
characterised by a severe global recession with severely reduced demand for
commodities and as a consequence substantially lower prices prevailed.
Gross profit margins increased from 6,4% to 8,4%, while gross profit has reduced
by 48,4% from R134,5 million to R69,4 million due to unprecedented rapid
decreases in commodity prices and the cut-backs in production by Metmar`s major
long-term alloy suppliers which limited availability of product to Metmar.
Taxation from continuing operations amounting to R36,9 million includes capital
gains taxation on the disposal of PGR 17 Investments (Pty) Limited ("PGR") of
R27,6 million.
Profit for the period of R143,7 million exceeded the previous comparative period
of R120,6 million by R23,1 million. Headline earnings per ordinary share,
including discontinued operations and excluding the profit on disposal of
associate company, PGR 17, decreased by 86% from 63,3 cents to 8,6 cents.
During 2007 Metmar acquired its 21% stake in PGR 17 for a total purchase
consideration of R50,8 million. Since acquisition equity accounted income from
PGR 17 to 1 April 2009 amounted to R51,8 million of which Metmar received a
total of R33,0 million in dividend income. The trading revenue received by
Metmar for the year ended 28 February 2009 from the Mogale operation amounted to
R17,6 million, which accounted for 0,51% of Metmar`s total revenue of R3,4
billion. While the absence of the Mogale business has impacted on the first six
months of this financial year, the R150,9 million cash received on disposal has
presented Metmar with numerous opportunities to participate in acquisitions and
projects that require managerial, financial and marketing know-how, which Metmar
is able to provide. The advent of the financial and economic crisis has created
opportunities to expand Metmar`s investments in strategic production assets.
Following a general meeting of Metmar shareholders on 1 September 2009, Metmar
disposed of its 21% interest in their associate PGR 17, which included its 11,8%
indirect interest in Mogale Alloys (Pty) Limited ("Mogale"), to Ruukki SA (Pty)
Limited ("Ruukki SA") with effect from 1 April 2009 for a total sale price of
R248,2 million. On 28 May 2009 Metmar received R150,9 million in respect of part
payment of the total sale price by Ruukki SA. The first unconditional deferred
payment amounting to R26,8 million is payable in 2011. The second deferred
payment of R70,4 million due in 2012 is conditional and is subject to successful
commissioning of the furnaces and receipt in writing by Ruukki SA of all the
governmental licences, permits, authorisations or permissions which are
necessary to operate the furnaces. If a portion of the second deferred payment
becomes due and payable on or before 31 December 2009, then such amount will
bear interest at the prime rate, from 1 April 2009 to the actual payment date
(both days inclusive).
Financial assets additions include the investment of R40,0 million in Minero
Zinc (Pty) Limited ("Minero Zinc"), first and second deferred payments totalling
R97,2 million to be paid to Metmar on the disposal of PGR 17 and other minority
strategic equity investments.
OPERATIONAL PERFORMANCE AND PROSPECTS
The key operational activities for the period are summarised as follows:
- The recently acquired WAG division, distributors of polymers, natural rubber
and rubber chemicals, has delivered results in excess of budget and continues to
operate well ahead of the target levels in terms of the purchase price earn out
formula. Margins have increased across the entire product range, which is mainly
attributable to tighter stock control measures.
The SNF plastics division remains profitable, but it is operating slightly below
expectations due mainly to the application of a strict credit policy in Zambia.
The upturn in the copper mining sector in Zambia should have a favourable effect
on volumes and profits going forward.
Owen Plastics and Tufflex have produced sound results with a greater acceptance
of the finished goods range produced from recycled polymers. Plastic wood decks
and pallets have been particularly well received in the market.
- Gubha Resources, the coke screening operation at Hwange Colliery in Zimbabwe,
is progressing steadily. Their activities have been expanded to include the
screening of Hwange coal.
- Metmar Industrial is active both locally and in Zimbabwe, participating in
projects involving the recovery of slurry coal and the recycling of waste,
namely char demetalisation at Scaw Metals in South Africa and the re-screening
of coke stockpiles in the southern region of Zimbabwe. Following the acquisition
of capital equipment, production has commenced in Zimbabwe and Metmar has
received a great deal of positive response from the major local alloy producers.
- Exploration at the KIVU Resources project in Rwanda continues to progress
steadily. KIVU owns tin, tantalum and tungsten deposits in both Rwanda and
eastern Democratic Republic of Congo ("Congo"). Metmar owns 7% of KIVU Resources
and has an exclusive marketing agreement for the current and future production
of the operations.
The Congolese Government is under pressure from the United Nations, the IMF and
the World Bank to resolve the unrest in the Eastern Congo. Metmar anticipates
resolution and is confident a working joint venture arrangement will be in place
in the coming months.
- Construction of the shafts and mine infrastructure are underway at Kalagadi
Manganese. Civil contractors are on site and the project is on target despite
technical delays. The first shaft is more than 52m below the surface, while the
second shaft is more than 32m down. The first manganese ore should be produced
by end May 2011, and sintered a month later.
- In June 2009 Metmar acquired a further 10% of Minero Zinc for a cash
consideration of R40,0 million, bringing Metmar`s total investment in Minero
Zinc to 20% for a total consideration of R80,0 million. Minero Zinc exercised
the right to purchase Pering Mine in September 2008 and has since taken delivery
and title to the mine itself. Minero Zinc plans to reopen the mine and
commission a new 5 million metric tons per annum DMS plant and 1,5 million
metric tons per annum concentrator plant. Production is expected to start at an
annual rate of about 16 000 metric tons of zinc and 1 500 metric tons of lead,
in concentrate.
Internal funding is being used to continue detailed design post feasibility. Due
to tightening of credit in the capital market, funding arrangements have not yet
been concluded. The project will be commissioned 18 months after funding has
been finalised. A bulk sample programme is being investigated to define grade
variation on the historical stockpiles. These investigations should be completed
in 2009 for possible implementation early in 2010. It is pleasing to note that
the zinc price has increased to reach levels where the project will yield good
returns.
- Metmar recently acquired a 49% interest in Clay Fusion Technologies (Pty)
Limited ("CFT"), which owns a patent involving a specialised brick making
technology recycling waste steel slag. The clay bricks are produced for
considerably less than the price of conventional bricks in the Vaal Triangle,
where a total of 130 million bricks are being produced a month. The CFT brick is
six times stronger than SABS` requirement and 30% lighter. Apart from the
marketing of the bricks, there is a potential benefit of an income stream from
carbon credits. Following the importation of a trial dryer to facilitate the
drying process in the brick production, the first trial run was an astounding
success. Next year upon the completion of phase one, CFT will be producing 6,5
million bricks a month.
- Metmar has purchased a 20% share in SA Metals Equity (Pty) Limited, whose
objective is to produce pig iron. The prefeasibility study has been completed by
Bateman with bankable feasibility and Environmental Impact Assessment expected
soon. Production is planned to commence early in 2013, when Metmar will have the
marketing rights of 500 000 metric tons of pig iron as well as the supply of
coal and 240 000 metric tons of dolomite to the project.
- Metmar is in the process of establishing a briquetting plant at one of the
junior coal mines. Once operative, the plant will process up to 15 000 metric
tons per month, which the mine guarantees to sell in a joint venture with Metmar
for a period of five years. Dependent on market conditions, Metmar will derive
substantial annuity income from this project.
DISTRIBUTION TO SHAREHOLDERS
A distribution of 30,0 cents per ordinary share was made in June 2009 in respect
of the Metmar Group`s 2009 financial year.
PROSPECTS
The world economic future still remains unclear. Most economies, including South
Africa, are showing signs of improvement, notably China and India are performing
satisfactorily. However, there is still much debate as to how fast or
sustainable a global recovery will be ranging from quick in the short term to
slow over an extended period. Under both scenarios continuing volatility in
commodity prices is predicted. There are also concerns about currencies,
including the strong rand and the weak US dollar, and how sudden movement in
these could impact economies and commodity prices with China being a key player.
The level of commodity stocks being held suggests that restocking has probably
been largely completed and demand could abate with prices decreasing, unless
there is a continuing improvement in global economies.
The Company does not expect the financial results for the year ending 28
February 2010 to match the record levels achieved under the boom conditions for
the previous year.
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited consolidated interim financial results have been prepared in
accordance with, and containing the information required by IAS 34: Interim
Financial Reporting, International Financial Reporting Standards ("IFRS"), the
South African Companies Act, as amended, and the JSE Listings Requirements. The
principal accounting policies used in the preparation of the financial results
for the period ended 31 August 2009 are consistent with those applied for the
year ended 28 February 2009.
2. Other income
Includes:
Unaudited Unaudited Audited
six months to six months to year to
31 August 31 August 28 February
Figures in R`000 2009 2008 2009
Dividend received - - 26 105
Gain on disposal of 153 875 - -
associate
Profit on exchange 3 400 10 122 4 691
differences
Sundry income - rubber 8 079 2 095 11 579
consignment stock
Other 4 247 2 150 3 036
169 601 14 367 45 411
3. Reconciliation of
headline earnings
Profit for the 143 200 118 819 174 445
period/year
Adjustments for:
- gain/(loss) on (11) (3) 245
disposal of property,
plant and equipment
- gain on disposal of (126 238) - -
associate net of
taxation
- goodwill impairment - - 19 589
- fair value - 2 722 123
adjustments
Headline earnings 16 951 121 538 194 402
Earnings per share
(cents)
- Headline 8,6 63,3 100,6
- Attributable 72,6 61,9 90,3
Weighted average number 197 159 257 191 908 366 193 261 532
of shares in issue*
The calculation of
basic and diluted
earnings and headline
earnings per share is
based on the weighted
average number of
ordinary shares in
issue as follows:
- as at 28 February 194 637 127
2009
- new issue 30 June
2009 (7 485 030)
- weighted 7 485 2 522 130
030*62/184
Weighted average number 197 159 257
of shares in issue at
31 August 2009
4. Reconciliation of gain on disposal of associate PGR 17
Unaudited
six months to
31 August
Figures in R`000 2009
Carrying value of non-current asset classified as 106 383
held for sale as at 28 February 2009
Less: loss from discontinued operations 1 March (12 044)
2009 to 1 April 2009
Carrying value of non-current asset classified as 94 339
held for sale as at 1 April 2009
Disposal proceeds received 28 May 2009 (150 941)
Deferred payment due 2010 (26 834)
Deferred payment due 2011 (70 439)
Gain on disposal of associate (153 875)
Less: Taxation on Capital Gains 27 636
Gain on disposal of associate net of taxation (126 239)
5. Cash and cash equivalents
Cash and cash equivalents comprise cash balances with banks, less bank
overdrafts.
Trade finance facilities are accounted for separately.
6. Related party transactions
During the period, the Company and its subsidiaries in the ordinary course of
business, entered into various transactions with their associates. These
transactions were subject to terms that are no less favourable than those
arranged with third parties.
7. Corporate governance
The Metmar Group complies with the Code of Good Corporate Practice and Conduct
published in the King II report on Corporate Governance.
8. Post-balance sheet events
On 15 September 2009 Metmar acquired a 20% interest in Lightwave Trade and
Invest II (Pty) Limited ("the Metmar Consortium"). The Metmar Consortium
represents a consortium of investors with chrome interests in the Republic of
South Africa.
a. The Metmar Consortium entered into an agreement with Zimbabwe Alloys Limited
("Zim Alloys") and Benscore Investments (Private) Limited dated 15 September
2009 to subscribe for such number of shares in Zim Alloys as will give it an
effective 40% interest in the issued share capital of Zim Alloys.
b. Zim Alloys holds certain chrome interests in the Republic of Zimbabwe and
requires access to DC furnace technology and general technical know-how for the
effective and efficient operation and management of a chrome furnace complex.
The Metmar Consortium has access to the required chrome furnace expertise.
c. The subscription price payable by the Metmar Consortium for the subscription
shares shall be an amount of USD56,25 million and shall be paid as follows:
- USD4,5 million on the subscription date;
- USD1,5 million within 90 days of the date of payment;
- USD15,0 million in the following tranches:
- USD1,5 million in cash at the end of the month following the month of first
production from the A3 furnace; and
- the balance of USD13,5 million over a period of 90 months in equal monthly
instalments, commencing at the end of the month following the month in which
the payment referred to above is made;
- USD35,25 million being the balance of the subscription price shall be applied:
- to the cost of repair of the existing A3 furnace, plant and equipment of Zim
Alloys, as and when required; and
- to the design, construction and commissioning of a 37 MVA DC furnace, training
of staff and transfer of knowledge and know-how regarding the DC technology
and/or the refurbishment of existing furnaces A1 and A2, as determined by the
board of directors of Zim Alloys.
Metmar`s share of the subscription price is USD11,25 million (20%).
d. Subject to compliance with the foreign exchange control regulations of
Zimbabwe prevailing from time to time, Zim Alloys undertakes to ensure that at
least 75% of the profits after tax be distributed to shareholders in each
financial year.
e. The Metmar Consortium entered into an agreement with Euro Chrome Resources
(Pty) Limited ("Euro Chrome") dated 15 September 2009 to acquire 40% of the
total interest in Chromecorp (Private) Limited ("Chromecorp") currently held by
Euro Chrome and the loan claims of Euro Chrome against Chromecorp.
The purchase price for Chromecorp shall be the face value of the loan claims
currently reflected in Chromecorp`s books of entry, subject to a maximum
purchase price of USD4,1 million.
Metmar`s share of the purchase price is USD0,82 million (20%).
f. The acquisitions are conditional on the fulfilment of the following
conditions precedent by no later than 30 October 2009:
- both the Zim Alloys subscription and the Chromecorp acquisition are to
constitute one composite transaction and, in the event any one transaction
fails, the other transaction shall also fail;
- the completion by the Metmar Consortium, at its sole discretion and to its
entire satisfaction, of a financial, legal, commercial and technical due
diligence on Zim Alloys and Chromecorp; and
- compliance with any applicable regulatory approvals pertaining to the
acquisitions.
g. As Euro Mineral Resources Limited ("EMR") has introduced the Metmar
Consortium to Zim Alloys, Chromecorp and their shareholders, the Metmar
Consortium has also entered into an agreement with EMR, dated 15 September 2009
whereby, as consideration for the services of EMR to the Metmar Consortium, the
shareholders of the Metmar Consortium have agreed to issue a 5% shareholding in
the Metmar Consortium to EMR upon the agreements referred to above becoming
unconditional in all respects.
h. The Zim Alloys subscription and the Chromecorp acquisition are interrelated
and represent one composite transaction.
The rationale for the Zim Alloys subscription is as described in the second
paragraph 8. b above. In addition, Metmar has also been appointed to conduct the
sales and marketing activities on behalf of Zim Alloys jointly with Cometal SA
(Spain).
CB Brayshaw DJ Ellwood
Non-Executive Chairman Chief Executive Officer
21 October 2009
Directors: CB Brayshaw* (Chairman)
DJ Ellwood (Chief Executive Officer)
PP Boshoff
MF de Wet
L Matteucci*
GR Forsdyke
GP Lotis
D Mashile-Nkosi*
AP Ruiters*
*Non-executive
Company Secretary: MRD Boyns (British)
Registered Office: 24 Sloane Street, Bryanston, 2191 (PO Box 98549, Sloane Park,
2152)
Transfer Secretaries: Computershare Investor Services (Pty) Limited (PO Box
61051, Marshalltown, 2107)
Sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Auditors: Grant Thornton
These results may be viewed on the internet on http://www.metmarlimited.com
Date: 21/10/2009 12:07:01 Produced by the JSE SENS Department.
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