| Mon 30 Jun 2003, 13:48 | | Preliminary reviewed results for the 12 months en |
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SA Chrome -
South African Chrome and Alloys Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/003452/06)
("SA Chrome" or "the company")
Share Code: SCE
ISIN: ZAE 000022943
Preliminary reviewed results for the 12 months ended 31 March 2003
Group abridged income statement
12 months to 13 months to
31 March 2003 31 March 2002
Reviewed Audited
R"000 R"000
Revenue 183,782 44,643
Operating loss (98,993) (16,747)
Net financing (costs)/income (48,543) 160
Loss before exceptional items (147,536) (16,587)
Exceptional items - (6,535)
Net loss before taxation (147,536) (23,122)
Taxation - -
Net loss after exceptional items (147,536) (23,122)
Transfer from non-distributable
reserves - 60
Net loss for the period (147,536) (23,062)
Loss per share (14.67) (2.54)
Headline loss per share (14.60) (1.82)
Ordinary shares in issue 1,014,957,119 998,566,822
Weighted average shares for period 1,005,706,710 911,400,085
Note 1: Taxation has not been provided for due to estimated assessed losses.
Note 2: The difference between loss per share and headline loss per share
relates to the loss on disposal of assets of R690,726.
Statement of changes in equity
12 months to 13 months to
31 March 2003 31 March 2002
Reviewed Audited
R"000 R"000
Share capital 10,150 9,986
Balance at beginning of period 9,986 2,258
New shares issued during period 164 7,728
Share premium 421,406 407,350
Balance at beginning of period 407,350 68,156
Premium on new shares issued 14,112 340,145
during period
Share issue expenses written off (56) (951)
Accumulated loss (200,452) 53 726
Balance at beginning of period (53,726) (30,664)
Effect of adopting AC 133
- Financial Instruments 810 -
Opening accumulated loss restated (52,916) (30,664)
Net loss for the period (147,536) (23,062)
Non-distributable reserves - 1
Balance at the beginning of period 1 61
Revaluation surplus realised on
sale of shares (1) (60)
Balance at end of period 231,104 363,611
Group abridged balance sheet
As at As at
31 March 2003 31 March 2002
Reviewed Audited
R"000 R"000
ASSETS
NON-CURRENT ASSETS 675,824 647,824
Options, mineral and
participation rights 258 258
Property, plant and equipment 656,315 630,960
Investments 18,680 14,401
Long-term receivables 571 2,205
CURRENT ASSETS 113,214 93,960
Inventories 75,614 23,076
Trade and other receivables 36,292 24,264
Bank and cash 1,308 46,620
TOTAL ASSETS 789,038 741,784
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 231,104 363,611
Share capital 10,150 9,986
Share premium 421,406 407,350
Non-distributable reserves - 1
Accumulated loss (200,452) (53,726)
NON-CURRENT LIABILITIES
Long-term borrowings 335,435 284,229
CURRENT LIABILITIES 222,499 93,944
Trade and other payables 177,052 63,418
Current portion of long-term 45,447 30,526
borrowings
TOTAL EQUITY AND LIABILITIES 789,038 741,784
Net asset value per share (cents) 22.8 36.4
GROUP ABRIDGED CASH FLOW STATEMENT
12 months to 13 months to
31 March 2003 31 March 2002
Reviewed Audited
R"000 R"000
Cash utilised by operations (24,432) (30,765)
Net interest (cost)/income (48,543) 160
Cash flows from operating activities (72,975) (30,605)
Cash flows from investing activities (52,684) (523,644)
Cash flows from financing activities 80,347 599,784
Net (decrease)/increase in cash and
Cash equivalents (45,312) 45,535
Cash and cash equivalents at
beginning of period 46,620 1,085
Cash and cash equivalents at end
of period 1,308 46,620
Commentary
Accounting policy
This report has been prepared in terms of South African Statements of Generally
Accepted Accounting Practice (GAAP), and is consistent with those applied in the
financial statements for the 13 months ended 31 March 2002, except for the
adoption of AC 133 Financial Instruments: Recognition and Measurement.
The year under review
The past year has been challenging, as we moved from project status to bringing
the largest single greenfields project undertaken in the ferrochrome industry up
to 80% of capacity by year-end.
The challenges included:
1. Commissioning the plant in considerably less time, and with fewer
difficulties, than the industry average for similar operations.
2. Successfully developing and implementing engineering solutions to overcome
the start-up difficulties.
3. Delivering a quality product timeously to our customers in America, Europe
and the Far East.
4. The impact of the new South African mining legislation.
5. Coming into operation in an environment of a strengthening Rand and low
ferrochrome prices.
Despite a production shortfall, against forecast, of 50 000 tonnes as a result
of the late start-up and start-up difficulties associated with a greenfields
operation, the company met the challenges and is now positioned to generate
profits.
Review of results
The preliminary results of the company as set out above have been reviewed by
the company"s auditor, PricewaterhouseCoopers Inc., as required by the JSE
Securities Exchange South Africa ("JSE"). The review report is available for
inspection at the company"s registered address.
Turnover in the past year, from the sale of 75 564 tonnes of ferrochrome which
commenced half way through the financial year in September 2002, was R184
million.
The losses incurred during the financial year ending 31 March 2003 were expected
as a result of start-up costs exacerbated by technological difficulties, delayed
production and the strengthening of the Rand, combined with low ferrochrome
prices, which had a negative impact on the ferrochrome industry.
Hedging arrangements
The hedging strategies adopted by the company to cover its US Dollar sales and
Euro license fee payments resulted in a foreign exchange gain of R3,8 million
for the year under review.
Share issue
Subsequent to the year-end and as announced on 17 June 2003, the company raised
R108,4 million via the issue of 180 707 723 new ordinary shares at a price of 60
cents each to fund the capital expenditure to acquire additional chromite
reserves and to upgrade the existing ferrochrome facility, for loan repayments
to its lending banks, provide working capital and for a feasibility study to
expand its ferrochrome facility.
Production costs
By year-end, the plant achieved production levels of 80% of design capacity and
reduced its ex works cost per tonne of ferrochrome. These costs will continue to
reduce as production levels increase.
New mining legislation
SA Chrome is well positioned in terms of the new mining legislation. The targets
set by the Mining Charter for the participation of historically disadvantaged
South Africans in mining companies is 15% in 5 years and 26% in 10 years. SA
Chrome has already exceeded both the 5- and 10-year targets: the Royal Bafokeng
Nation has held a 35% shareholding in SA Chrome since its listing on the JSE in
2001 and the company has been cited as a role model in the ferrochrome industry
by the Minister of Minerals and Energy.
In terms of the employment equity targets set by legislation, SA Chrome is also
a leader in the industry.
The draft Money Bill proposed royalty payments set at differing percentages,
depending on the product mined. As the mining of ore accounts for a small
percentage of SA Chrome"s revenue, which is mainly generated through
beneficiation at our Boshoek smelter, we do not expect the Money Bill to have a
significant impact on future earnings.
Feedstock reserves
During the course of the year SA Chrome acquired further reserves for its long-
term feedstock requirements and future expansion. This included the acquisition
of additional chromite reserves on farms adjacent to the SA Chrome smelter.
Furthermore, the company has, subject to certain conditions precedent, signed an
agreement with the Royal Bafokeng Nation to acquire their chromite reserves.
Market review
The combination of drastically reduced global ferrochrome inventory levels, high
capacity utilisation ratios and the strengthening of the Rand: US Dollar
exchange rate has contributed to a recovery in ferrochrome prices since mid-
2002. We expect ferrochrome base prices to increase to US$0.48 per pound chrome
content in the third quarter of 2003. The strong demand from stainless steel
producers, limited availability of stainless steel scrap and the lack of any
immediate new ferrochrome capacity coming on-stream, bodes well for ferrochrome
prices to remain firm until the end of 2004.
With SA Chrome moving towards full production, the company is well placed to
benefit from the prevailing market conditions.
Poised for growth
Continued expansion of production in a more stable production environment has
allowed SA Chrome to fulfill its delivery backlog with products of consistent
quality. We expect to achieve 100% of designed production capacity by August
2003 (20 000 tonnes per month).
Together with our offtake partner, ThyssenKrupp Metallurgie, we have now
successfully introduced SA Chrome"s product to the world"s stainless steel
consumers and current demand for the product is strong.
In the new financial year we are well placed to benefit from strengthening
ferrochrome prices and the increasing demand for ferrochrome in the stainless
steel industry, which is expected to grow by around 5% in 2003 and between 6 -
7% in 2004.
At current Rand: US Dollar exchange rates and strengthening ferrochrome prices
the company can expect to generate profits for the year ending 31 March 2004.
Now that the first phase of our ferrochrome operation is complete and moving
towards full production we are investigating ways and means of growing the
company.
With this in mind SA Chrome is undertaking a detailed feasibility study into the
expansion of our ferrochrome facility for the purpose of forming a joint
venture.
Appointments
The appointment to the Board of Mr C M Molefe as Non-Executive Chairman and the
appointment of Mr S Phiri as Chief Executive Officer took place during the year.
Thanks
Our thanks go to the SA Chrome executive and board for their dedication, and to
our shareholders for their support during a challenging year. We would also
particularly like to thank our production team whose commitment, expertise and
hard work overcame the start-up difficulties and delays associated in a
greenfields project, which now enables the company to face the future with
confidence.
Chris Molefe Terry McConnachie
Non-Executive Chairman Chief Operations Officer
30 June 2003
Date: 30/06/2003 12:39:09 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
