| Thu 7 Feb 2002, 0:00 | | Iscor Limited - Interim Financial Results |
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ISCOR LIMITED
Share code : ISC
ISIN code : ZAE000022729
INTERIM FINANCIAL RESULTS
for the six months ended 31 December 2001
* Operating profit up 137%
* Strong operating cash flow
* Saldanha turnaround on target
COMMENTS
Group results
The Group results for the six months ended 31 December 2001 reflect the
financial information of Iscor Limited after unbundling the mining assets
(other than an undivided share of the mining rights in the Sishen iron ore
mine) effective 1 July 2001 and the restructuring of Saldanha Steel,
effective 28 November 2001.
The results for the steel operations include:
- the Si
2001
- Saldanha Steel's results 50% equity accounted up to 27 November 2001 and
thereafter consolidated as a wholly-owned operation.
To facilitate comparison with previously published results:
- the comparative periods exclude the mining operations; and
- the benefit to the steel operation for retaining the interest in the
Sishen mining rights from 1 July is shown separately in the segment results.
For the six months the Group posted much improved operating results compared
to the same period last year. Revenue increased by 23% while net operating
profit of R566 million (excluding the iron ore procurement benefit) improved
by 82%. Including the iron ore procurement benefit, net operating profit
increased by 137% to R738 million. The second quarter showed a significant
improvement on the first quarter's results.
Headline earnings for the six months of R107 million (39 cents per share)
showed a significant improvement on last year's loss of R97 million (38
cents per share).
Attributable profit for the period included net exceptional items of R275
million:
- surplus on sale of certain mining assets
as part of the unbundling R363 million
- surplus on sale of housing portfolio R21 million
- provision for restructuring costs at
Vanderbijlpark Works, after tax (R109 million)
Operational cash flow was strong but net debt increased from the R1 183
million at 30 June 2001 to R2 318 million at 31 December 2001 as a result of
the takeover of 50% of Saldanha Steel's debt. The scheduled rights issue
during March/April 2002 should reduce the net debt by year-end to a level of
less than the R1,8 billion indicated in the unbundling revised listing
circular.
SEGMENT RESULTS
Quarter ended Six months ended Year ended
31 December 30 September 31 December 30 June
2001 2001 2001 2000 2001
Rm Rm Rm Rm Rm
REVENUE
Flat Steel Products
- Vanderbijlpark 2 027 1 864 3 891 3 343 6 859
- Saldanha Steel* 245 - 245 -
Long Steel Products 1 016 1 063 2 079 1 725 3 655
Suprachem 164 141 305 225 465
Other 94 79 173 147 339
Intra Group (131) (116) (247) (207) (435)
Total 3 415 3 031 6 446 5 233 10 883
NET OPERATING PROFIT
Flat Steel Products
- Vanderbijlpark 230 50 280 285 460
- Saldanha Steel* 22 22
Long Steel Products 149 83 232 41 159
Suprachem 47 15 62 29 67
Other - 8 8 8 25
Group costs (24) (12) (38) (52) (102)
Total before iron ore
adjustment 424 144 566 311 609
Iron ore procurement
benefit** 172 172
Total 596 144 738 311 609
* One month only
** For period July - December 2001
Flat Steel Products
Vanderbijlpark
The increase in revenue and net operating profit for the second quarter was
driven by strong domestic demand, the weakening of the currency and cost
savings.
For the six months net operating profit was 2% below the comparative period.
Although local sales were 10% higher, and the exchange rate weaker (the
average rate realised on exports was R9,27/USD as against R6,96/USD the
previous period), this was offset by lower dollar prices.
Vanderbijlpark has now come to the end of its major re-engineering programme
with manning levels around 7 000. The final stage of the restructuring
resulted in a once-off charge of R156 million (R109 million after taxation)
included in exceptional items. The savings before taxation generated through
this action will be some R54 million for the second half and R220 million
for a full financial year.
Saldanha Steel
The results for the six-month period were made up as follows:
Five months ended Month of Six months ended
November December December December
2001 2001 2001 2000
Rm Rm Rm Rm
Operating (loss)/profit (263) 22 (241) (297)
Financing cost (313) - (313) (418)
Tax - - - 210
Net (loss)/profit (576) 22 (554) (505)
Iscor's share of
(loss)/profit (288) 22 (266) (253)
Iscor's percentage share 50% 100% 50%
Hot rolled coil production volumes for the six months increased by 17% over
the previous period and averaged nearly 90% of capacity for the second
quarter. Sales volumes were also up strongly in the second quarter with
further high levels of despatches in January 2002. The very low level of
international prices offset the benefits of the weaker exchange rate.
The net operating profit of R22 million for December was positively
influenced by currency revaluations of inventories and receivables at 31
December 2001, totalling some R55 million.
For the first five months 50% of the net loss was equity accounted and the
December profit fully consolidated. The total debt was taken over by the IDC
and Iscor on 27 November 2001. There was no tax relief for the period as the
full deferred tax provision was utilised against the impairment charge
raised at the end of the previous financial year.
Good progress is being made with driving down costs and improving throughput
and efficiencies.
The six-week reline of the Corex liquid iron plant will take place during
the last quarter of the financial year. The loss in production and slightly
lower prices expected will prevent any improvement in the second-half
results but these should improve considerably after the Corex reline.
Long Steel Products
Notwithstanding the decrease in sales during the second quarter of 14% as a
result of the traditional closure of operations by customers during
December, net operating profit increased by 80% due to the impact of the
weakening of the exchange rate on export revenue as well as stronger
domestic prices.
Net operating profit for the first half of the financial year of R232
million was significantly higher than last year's first-half profit of R41
million as a result of a substantial improvement in domestic demand,
additional benefits derived from continuous improvement initiatives and the
impact of the weaker exchange rate.
Suprachem
Suprachem distils and refines crude tar, which is a by-product of Iscor's
coke production, and manufactures market coke for ferrochrome producers from
coke oven batteries no longer used by Iscor.
Net operating profit for the half year of R62 million more than doubled
compared to last year due to the weakening of the exchange rate which
impacted positively on pitch and market coke prices. Market coke volumes
were also higher due to the positive results of the rebuild programme on the
Vanderbijlpark coke battery operated by Suprachem.
LNM BUSINESS ASSISTANCE AGREEMENT
At a general meeting held on 15 January 2002, shareholders approved a three-
year business assistance agreement with steel producer LNM Holdings N.V.,
the world's fourth largest steel producer.
The agreement is a performance-based deal in terms of which LNM will provide
business, technical, purchasing and marketing assistance to Iscor over the
next three years in exchange for between 5% and 10% of Iscor's issued
capital after the rights offer provided that sustainable cost savings of
between R350 million and R700 million per annum are achieved.
OUTLOOK
Results from Iscor's established operations should continue to improve
during the second half. Saldanha Steel, however, will continue to impact
negatively on profits and cash flow until the Corex reline is completed and
international hot-rolled coil prices improve from the current low levels.
Interest charges will run at a higher level until the proceeds of the rights
offer are received during April. Overall, headline earnings should improve
in the second half.
On behalf of the Board
L L van Niekerk M Macdonald
(Chief Executive Officer) (Executive Director, Finance)
4 February 2002
GROUP INCOME STATEMENT
Six months ended 31 December Year ended 30 June
2001 2000 2001 2001
Unaudited Unaudited Unaudited Audited
Iscor Iscor Iscor
excluding excluding including
Mining Mining Mining
Operations Operations Operations
Rm Rm Rm Rm
Revenue 6 446 5 233 10 883 15 115
Operating expenses 5 708 4 922 10 274 13 611
Net operating profit 738 311 609 1 504
Net financing costs (147) (97) (188) (459)
Net loss from equity
accounted investments
before taxation
(note 1) (245) (338) (703) (567)
Exceptional items
(note 2) 228 25 (29) 43
Impairment charge (1 500) (1 500)
Goodwill amortisation (27)
Profit/(loss) before
taxation (note 3) 574 (99) (1 811) (1 006)
Taxation (191) 28 482 282
Profit/(loss) from
ordinary activities 383 (71) (1 329) (724)
Minority interest (1) (1) (1) (1)
Profit/(loss) attributable
to ordinary shareholders 382 (72) (1 330) (725)
Adjusted for:
- Exceptional items
(note 2) (228) (25) 29 (43)
- Share of Saldanha
Steel's impairment
charge 1 500 1 500
- Share of associates'
goodwill amortisation 40
- Share of associates' exceptional items (14)
- Goodwill amortisation 27
- Net deficit on disposal or scrapping of
property, plant and equipment 42 245
- Taxation on
adjustments (47) (404) (465)
Headline earnings/(loss) 107 (97) (163) 565
Ordinary shares (million)
- in issue 292 258 272 272
- weighted average
number of shares 276 258 262 262
- diluted weighted average
number of shares 277 269 262 262
Attributable earnings/
(loss) per share (cents)
- basic 138,4 (27,9) (507,6) (276,7)
- diluted 137,9 (26,8) (507,6) (276,7)
Headline earnings/(loss)
per share (cents)
- basic 38,8 (37,6) (62,2) 215,6
- diluted 38,6 (36,1) (62,2) 215,6
GROUP BALANCE SHEET
At 31 December At 30 June
2001 2000 2001 2001
Unaudited Unaudited Unaudited Audited
Iscor Iscor Iscor
excluding excluding including
Mining Mining Mining
Operations Operations Operations
Rm Rm Rm Rm
ASSETS
Non-current assets
Property, plant
and equipment 10 782 5 084 5 302 9 668
Intangible assets 36
Goodwill 47
Investments in
associates and
joint ventures (note 4)
-listed 804
-unlisted 456 188 301 307
Other financial assets 18 36 114 408
Derivative instruments
against interest-
bearing borrowings 2 195
13 487 5 308 5 717 11 234
Current assets
Cash and cash equivalents 1 540 911 420
Intercompany loan
- Kumba Resources 2 769 1 677
Other 4 013 2 943 3 508 5 074
Total assets 19 040 11 931 10 902 16 728
EQUITY AND LIABILITIES
Capital and reserves
Shareholders' funds 8 085 6 897 6 176 7 140
Minority interest 3 2 2 351
Non-current liabilities
Interest-bearing
borrowings 4 534 1 051 1 051 1 887
Non-current provisions 943 847 911 1 309
Deferred taxation 731 603 675 1 399
14 296 9 400 8 815 12 086
Current liabilities
Interest-bearing
borrowings 1 519 601 132 2 257
Other 3 225 1 930 1 955 2 385
Total equity and
liabilities 19 040 11 931 10 902 16 728
Net debt (note 5) 2 318 741 1 183 3 724
Net worth per share
(cents) 2 769 2 673 2 271 2 625
Capital expenditure
- incurred 271 382 901 2 198
- contracted 298 236 85 378
- authorised but not
contracted 769 379 412 805
Operating lease commitment 63 58 77 227
Contingent liabilities
- Saldanha Steel
(loan guarantees) 1 716 1 658 1 658
- other 290 310 218 247
GROUP STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
31 December 30 June
2001 2001
Unaudited Audited
Iscor including
Mining
Operations
Rm Rm
Shareholders' funds at
beginning of period 7 140 7 966
Changes in share capital and premium
- issue of shares 325 139
- unbundling costs (54) (65)
Changes in non-distributable reserves
- unbundling (597)
- revaluation of mineral rights 790
- realised sale of mineral rights (621)
- revaluation transferred to
retained income (169)
- currency translation differences 93 81
- financial instruments movements (158) (34)
- changes in attributable reserves
of associated companies and
joint ventures 224 (222)
- transfer of equity accounted earnings 33 145
- transfer of insurance reserve 1 6
- surplus on Saldanha Steel
acquisition 2 498
Changes in retained income
- unbundling (502)
- net profit/(loss) for the period 382 (725)
- transfer of equity accounted earnings (33) (145)
- transfer of insurance reserve (1) (6)
- transfer of revaluation reserve 169
- revaluation transferred to
retained income 621
- distribution in specie for
unbundling (2 056)
Shareholders' funds at end of period 8 085 7 140
GROUP CASH FLOW statement
Six months ended 31 December Year ended 30 June
2001 2000 2001 2001
Unaudited Unaudited Unaudited Audited
Iscor Iscor Iscor
excluding excluding including
Mining Mining Mining
Operations Operations Operations
Rm Rm Rm Rm
Net cash flows
from operations 1 294 577 1 028 1 754
Proceeds on disposal
of assets
- sale of 40% of
Heavy Minerals Project 363
- other 40 46 92 144
Net cash used in
investing activities
- capital expenditure (271) (382) (901) (2 198)
- investments in joint
ventures and associates (228) (600) (1 153) (1 086)
- other 590 (115)
Net cash inflow/
(outflow) 1 788 (359) (934) (1 501)
Adjustments to
movement in net debt
- unbundling adjustments
to net debt 489 527
- derivative instrument
against interest-
bearing borrowings (95) (95)
- takeover of
Saldanha Steel
loans at
hedged value (2 923)
(Increase)/decrease
in net debt (1 135) 35 (407) (1 596)
NOTES TO THE FINANCIAL STATEMENTS
Six months ended 31 December Year ended 30 June
2001 2000 2001 2001
Unaudited Unaudited Unaudited Audited
Iscor Iscor Iscor
excluding excluding including
Mining Mining Mining
Operations Operations Operations
Rm Rm Rm Rm
Note 1
Net loss from
equity accounted
investments
before taxation
- Saldanha (288) (358) (751) (751)
- Other 43 20 48 184
(245) (338) (703) (567)
Note 2
Exceptional items
- surplus on sale of
residential properties 21 25 49 49
- surplus/(loss) on
sale of investment 363 (9)
- restructuring costs (156) (31) (31)
- increase in the provision for
discontinuing operations (47) (47)
- surplus on 40% sale
of the heavy
minerals project 81
228 25 (29) 43
Note 3
Profit/(loss) before
taxation is arrived
at after
- depreciation (289) (256) (496) (836)
- financing costs (240) (132) (257) (627)
- interest received 93 35 69 168
- dividends received 33
Note 4
Investments in associates
and joint ventures
Listed investments
- market value 1 049
Unlisted investments
- directors' valuation 479 303 301 358
Note 5
Net debt
Interest-bearing borrowings
- non-current 4 534 1 051 1 051 1 887
- current 1 519 601 132 2 257
Cash and cash
equivalents (1 540) (911) (420)
Derivative instruments
against interest-bearing
borrowings (2 195)
2 318 741 1 183 3 724
Additional notes to the interim financial statements
1. The interim financial statements are prepared in accordance with
International Accounting Standard 34 on Interim Financial Reporting and
should be read in conjunction with the 2001 annual financial statements. The
accounting policies adopted are consistent with those applied in the
previous year except for the accounting policy for the valuation of mineral
rights which was changed to accommodate the capital structure of the
unbundling transaction between Iscor and Kumba Resources Limited. The
mineral rights comprising the 6,25 million tons of iron ore per annum from
Kumba Resources Limited were valued at R169 million and will be amortised
over 25 years. The comparative figures have not been adjusted.
2. During the period the company and its subsidiaries, in the ordinary
course of business, entered into various sale and purchase transactions with
joint ventures. These transactions occurred under terms that are no less
favourable than those arranged with third parties.
3. Net debt increased by R1 135 million over the last six months, mainly as
a result of taking over Saldanha Steel's loans amounting to R2 923 million
at the hedged value. The company has pledged its debtors and its rights to
the 6,25 million tons of Sishen iron ore to a consortium of banks as
security. The after-tax effect of the increased borrowings on headline
earnings amounted to approximately 10 cents per share.
4. The income tax expense is based on the best estimate of the weighted
average annual income tax rate expected for the full financial year.
5. With effect 1 July 2001 the mining operations of Iscor were unbundled
into Kumba Resources and its subsidiaries.To facilitate comparison, pro
forma figures for Iscor excluding mining operations have also been
disclosed.
6. Since becoming a wholly-owned subsidiary on 28 November 2001 Saldanha
Steel contributed revenues of R245 million and net operating profit of R75
million (including the iron ore procurement benefit) to the Group. Included
in the income from equity accounted investments is a loss of R288 million
for Saldanha Steel for the period 1 July 2001 to 27 November 2001.
PHYSICAL INFORMATION
Three months ended Six months ended Year ended
31 December 30 September 31 December 30 June
2001 2001 2001 2000 2001
Unaudited Unaudited Unaudited Unaudited Unaudited
'000 tons '000 tons '000 tons '000 tons '000 tons
FLAT STEEL PRODUCTS
VANDERBIJLPARK
Liquid steel
production 881 930 1 811 1 828 3 541
Sales
- Local 542 462 1 004 913 1 794
- Export 202 286 488 361 924
Total 744 748 1 492 1 274 2 718
Local sales
as % of
total sales 73 62 67 72 66
SALDANHA STEEL
Physical results ('000 tons)
- Hot-rolled coil
production 260 238 498 425 863
- Sales 254 201 455 399 901
LONG STEEL PRODUCTS
Liquid steel
production 522 525 1 047 1 003 1 985
Sales
- Local 233 266 499 368 774
- Export 168 202 370 443 891
Total 401 468 869 811 1 665
Local sales
as % of total
sales 58 57 57 45 46
Iscor Limited Registration number: 1989/002164/06
Share code: ISC ISIN code: ZAE000022729
Registered office: Iscor Head Office, Roger Dyason Road, Pretoria, West,
Pretoria, 0002.
Transfer secretaries: Mercantile Registrars Limited, First National House,
11 Diagonal Street, Johannesburg, 2001.
PO Box 1053, Johannesburg, 2000.
Directors: W A M Clewlow (Chairman), L L van Niekerk (Chief Executive
Officer), W F Coertzen, M Macdonald, L N Mittal*, A Mittal*, D D Mokgatle,
Dr K D K Mokhele, K Ngqula, M J N Njeke, A M Thebyane, J L van den Berg, Dr
M J U T van Wijngaarden *Citizen of India Company Secretary: A van der
Merwe
This report is available on Iscor's worldwide website at:
http://www.iscor.com
