| Tue 13 Nov 2001, 0:00 | | South African Chrome & Alloys Limited - Unaudited |
|
ended 31 August 2001
South African Chrome & Alloys Limited
Unaudited results for the six months ended 31 August 2001
South African Chrome & Alloys Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/003452/06)
("SA Chrome")
Share Code: SCE
ISIN Number: ZAE 000022943
Unaudited results for the six months ended 31 August 2001
Group abridged income statement
6 months to 6 months to Year to
31 August 31 August 28 Feburary
2001 2000 2001
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 31,714 31,934 70,857
Operating (loss) / profit (4,169) 1,851 1,502
Net financing
income / (costs) 6,181 27 (494)
Profit before
exceptional items 2,012 1,878 1,008
Exceptional items (808) (2,440) (19,999)
Acquisition costs - (1,254) (1,124)
Due diligence expenses (808) - -
Ferrochrome smelter
project expenses - (1,186) (17,699)
Goodwill written off - - (1,176)
Net profit / (loss) after
exceptional items 1,204 (562) (18,991)
Transfer from non-
distributable reserves 61 - 57
Net income / (loss)
for the period 1,265 (562) (18,934)
Earnings / (loss)
per share (cents) 0,15 (0,35) (10,69)
Headline earnings
per share (cents) 0,25 1,16 0,62
Ordinary
shares in issue 997,900,166 194,093,730 225,785,841
- Weighted
average for period 822,073,632 161,341,595 177,583,065
Note 1 - Taxation has not been provided due to assessed losses.
Note 2 - The difference between the headline earnings per share and earnings
per share is attributable to the exceptional item of R808,000 being 0,10
cents per share.
Group abridged cash flow statement
6 months to 6 months to Year to
31 August 31 August 28 February
2001 2000 2001
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash utilised
by operations (10,581) (4,265) (4,256)
Net interest
received / (paid) 6,181 27 (494)
Cash flows from
operating activities (4,400) (4,238) (4,750)
Cash flows from
investing activities (201,937) (16,914) (19,777)
Cash flows from
financing activities 315,608 10,802 15,144
Net increase / (decrease)
in cash and
cash equivalents 109,271 (10,350) (9,383)
Cash and cash
equivalents at
beginning of period 1,085 10,468 10,468
Cash and cash equivalents
at end of period 110,356 118 1,085
STATEMENT OF CHANGES
IN EQUITY
Share capital 9,979 1,941 2,258
Balance at beginning
of period 2,258 1,286 1,286
New shares issued
during period 7,721 655 972
Share premium 407,058 54,254 68,156
Balance at beginning
of period 68,156 30,531 30,531
Premium on new shares
issued during the period 339,852 23,723 37,667
Share issue expenses
written off (950) - (42)
Accumulated loss (29,398) (12,291) (30,663)
Balance at beginning
of period (30,663) (11,729) (11,729)
Net income / (loss)
for the period 1,265 (562) (18,934)
Non-distributable reserves 1 118 61
Balance at beginning
of period 61 118 118
Devaluation of
listed investment - - (57)
Revaluation profit realised (60) - -
Balance at end of period 387,640 44,022 39,812
Group abridged balance sheet
31 August 31 August 28 February
2001 2000 2001
Unaudited Unaudited Audited
R'000 R'000 R'000
ASSETS
NON-CURRENT ASSETS 295,987 41,763 42,045
Options, minerals and
participation rights 258 258 258
Property, plant
and equipment 280,945 40,714 41,302
Investments 14,401 159 65
Long-term receivables 383 632 420
CURRENT ASSETS 139,617 17,668 22,689
Inventories 10,116 6,394 5,597
Accounts receivable 17,764 8,409 14,750
Bank and cash 111,737 2,865 2,342
435,604 59,431 64,734
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 387,640 44,022 39,812
Share capital 9,979 1,941 2,258
Share premium 407,058 54,254 68,156
Non-distributable reserves 1 118 61
Accumulated loss (29,398) (12,291) (30,663)
NON-CURRENT LIABILITIES
Long-term liabilities 9,179 1,922 6,104
CURRENT LIABILITIES 38,785 13,487 18,818
Accounts payable 32,142 6,672 14,375
Bank overdraft 1,381 2,747 1,257
Short-term borrowings 5,262 4,068 3,186
435,604 59,431 64,734
Net asset value
per share (cents) 38,85 22,68 17,63
Commentary
Accounting policy
This interim report has been prepared in accordance with statements of GAAP,
using accounting policies consistent with those applied in the financial
statements for the year ended 28 February 2001.
Review of results
Trading in chrome sands from the company's mine was limited due to the
necessity of completing the underground mining infrastructure and upgrading
the washing plant to ensure adequate feedstock for The Ferrochrome Facility.
Limited trading in chrome sands will continue.
Welprop Mining Services (Pty) Ltd incurred a loss mainly as a result of
strikes and an underground water problem that arose on a raiseclimber
contract. Corrective measures to restore this company to budgeted profits
have been taken.
Your board is of the opinion that this subsidiary company no longer forms a
core component of the future business of SA Chrome and consideration is
being given to selling this company as a going concern.
The Ferrochrome Facility
The R350 million equity and R350 million debt was successfully raised for
the establishment of the Ferrochrome Facility, thereby demonstrating the
confidence all stakeholders have in the company. Many new shareholders have
come on board and SA Chrome is well poised for the push through to
successful commissioning of the Ferrochrome Facility.
The primary focus of the company is the construction of a 235 000 ton per
annum ferrochrome facility in the Rustenburg area. Your board is confident
that the cost of this ferrochrome facility will be below the R700 million
initially budgeted. The scheduled dates of completion of this facility are
still as follows:
- Furnace 1: end of March 2002
- Furnace 2: beginning of May 2002
- Pelletiser: beginning of June 2002
- Anticipated commissioning time being six weeks on each process
The development of these state of the art facilities will enable SA Chrome
to enjoy a significant competitive advantage due to the following factors:
- highly experienced operational team now part of the process
- environmentally friendly process
- use of low cost UG2 ore located adjacent to the facility
- lower energy costs
- higher chrome recovery
- off - take arrangement with Thyssen Krupp Metallurgie for 100% of
ferochrrome production
- recent Rand weakness aids future earnings significantly
Strategic development
The Royal Bafokeng Nation ("the RBN"), which has a 34,9% shareholding in SA
Chrome, is currently drilling its vast chromite reserves with a view to
bringing them to account from 2002.
These reserves are more than sufficient for all of SA Chrome's existing and
future expansion requirements. Once its stakeholders have been consulted, SA
Chrome expects to conclude an agreement with the RBN on their chrome
reserves in 2002, either on a partnership basis or a long term supply
arrangement.
New appointments
SA Chrome's wholly owned subsidiary, SA Ferrochrome and Mining (Pty) Ltd
("SA Ferrochrome"), will house the operations of the ferrochrome facility.
Your board is pleased to announce the appointment of the following new
directors to the board of SA Ferrochrome:
Mr JAC De Klerk - Chartered Accountant (SA)
Mr De Klerk has over twelve years experience in the ferrochrome industry
having previously been employed as the financial manager of Xstrata SA's
Rustenburg operations and prior to that as financial manager of CMI.
Dr J Zaayman - B Eng, M Eng, PhD (Metallurgy)
Dr Zaayman has over ten years experience in the stainless steel industry
having initially been employed by Columbus Stainless and following that as
operations manager of Xstrata SA's Rustenburg operations.
The Ferrochrome market
Ferrochrome prices have been under pressure due to two major factors:
- The excess production of stainless steel resulted in stainless steel
overstocking and a drop in ferrochrome demand; and
- Recent high nickel prices which resulted in large quantities of stainless
steel scrap coming into the market adding to the over-supply of ferrochrome.
We anticipate an upward movement in ferrochrome prices during 2002, as SA
Chrome's operations come on stream, for the following reasons:
- Stainless steel overstocking is now virtually eliminated;
- Ferrochrome producers have responded by cutting back on production which
should result in stocks of ferrochrome reducing to normal levels; and
- Restriction on the exports of scrap from Russia and lower nickel prices
has resulted in less ferrochrome availability from scrap.
SA Chrome's initial earnings forecasts, published in the circular to
shareholders dated December 2000, were based on an exchange rate of R7 to
US$1. Recent events in the US, amongst other factors, have led to the
devaluation of the Rand to over R9 to US$1. As all of SA Chrome's sales are
in US$ this will have a favourable impact on long-term earnings, especially
when ferrochrome prices return to realistic levels with SA Chrome producing
at full output.
Change of financial year end
The current financial year end of SA Chrome is 28 February. The directors of
SA Chrome have decided to change the financial year end of the company and
its subsidiaries to 31 March. This decision was made in order to take
account of:
- The fact that selling prices of ferrochrome are determined on a quarterly
basis; and
- The anticipated completion of the first furnace will be the end of March
2002 (plus six weeks for commissioning)
SA Chrome will therefore next report financial results for the thirteen-
month period ending 31 March 2002, following which it will report financial
results for every six-month period thereafter, being 30 September and 31
March.
Website
To obtain further information on SA Chrome and to follow the development of
the ferrochrome facility please visit our website at www.sachrome.co.za.
STRATE
SA Chrome has moved onto the Share Transaction Totally Electronic ("STRATE")
system.
Shareholders will be receiving notice of an issuer sponsored nominee program
shortly.
Prospects
Your directors remain confident that the future prospects for SA Chrome,
while linked to the ferrochrome price and rand dollar exchange rate, are
extremely bright.
We expect the ferrochrome facility to be completed ahead of budget and on
schedule.
On behalf of the board
JG Dorfan TM McConnachie
Chairman Managing Director
14 November 2001
Johannesburg
