| Wed 20 Aug 2003, 9:08 | | Audited Group Financial Results And Dividend Annou |
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ISC
Iscor Limited - Audited Group Financial Results And Dividend Announcement
ISCOR LIMITED
Registration number: 1989/002164/06
Share code: ISC ISIN code: ZAE000022729
AUDITED GROUP FINANCIAL RESULTS AND DIVIDEND ANNOUNCEMENT
For the year ended 30 June 2003
GROUP INCOME STATEMENT 2003 2002
Audited Audited
Rm Rm
Revenue 19 082 14 188
Operating expenses (14 465) (12 150)
Earnings before interest,
taxation, depreciation and
amortisation (Ebitda) 4 617 2 038
Depreciation (881) (729)
Amortisation of intangible assets (2) (1)
Profit from operations before impairment and
goodwill movements 3 734 1 308
Impairment (charge)/credit (Note 2) (13) 998
(Goodwill amortisation)/negative
goodwill realised (Note 3) (21) 2 585
Profit from operations 3 700 4 891
Net financing costs (136) (388)
Net profit/(loss) from equity accounted investments
before tax (Note 4) 103 (218)
Exceptional items (Note 5) 57 298
Profit before taxation (Note 6) 3 724 4 583
Taxation (Note 7) (1 215) (442)
Profit attributable to ordinary shareholders 2 509 4 141
ADDITIONAL INFROMATION
Profit attributable to ordinary shareholders 2 509 4 141
Adjusted for:
- Exceptional items (Note 5) (57) (298)
- Impairment charge/(credit)(Note 2) 13 (998)
- Goodwill amortised/(Negative
goodwill realised) (Note 3) 21 (2 585)
- Taxation on adjustments (4) 220
Headline earnings 2 482 480
Perfomance per ordinary share
Headline earnings per share (cents)
- basic 557 139
- diluted 553 139
Attributable earnings per share (cents)
- basic 563 1 200
- diluted 559 1 200
Dividend per share (cents)
- interim 100
- final 100 40
Net asset value per share (cents) 2 875 2 490
Ordinary shares (million)
- in issue 446 446
- weighted average number of shares 446 345
- diluted weighted average number of shares 449 345
Ratios (%)
Ebitda margin 24,2 14,4
Return on ordinary shareholders" equity per annum
- Headline earnings 20,8 5,6
- Attributable earnings 21,0 47,9
Net cash/(debt) to equity 5,9 (10,3)
Market capitalisation (Rm) 7 132 9 807
GROUP BALANCE SHEET 2003 2002
Audited Audited
Rm Rm
ASSETS
Non-current assets 12 860 13 078
Property, plant and equipment 12 221 11 993
Intangible assets 33 34
Goodwill 43
Investments in joint ventures
- unlisted (Note 8) 375 419
Other financial assets 188 136
Derivative instruments against
interest-bearing borrowings 496
Current assets 5 549 5 036
Cash and cash equivalents 852 578
Other 4 697 4 458
Total assets 18 409 18 114
EQUITY AND LIABILITIES
Capital and reserves 12 815 11 104
Ordinary shareholders" equity 12 815 11 104
Minority interest 2 2
Non-current liabilities 2 198 2 354
Interest-bearing borrowings 92 726
Non-current provisions 1 047 985
Deferred taxation 1 059 643
Current liabilities 3 394 4 654
Trade and other payables 2 529 2 586
Taxation 768 474
Current provisions 87 107
Interest-bearing borrowings 10 1 487
Total equity and liabilities 18 409 18 114
Net cash/(debt) (Note 9) 750 (1 139)
GROUP STATEMENT OF 2003 2002
CHANGES IN EQUITY Audited Audited
Rm Rm
Shareholders" funds at beginning of period 11 104 7 140
Changes in stated capital 1 1 930
- odd-lot shares 1
- issue of share capital 1 995
- unbundling and rights issue costs (65)
Changes in non-distributable reserves (99) (284)
- currency translation (losses)/gains (119) 69
- financial instruments movements (48) (2)
- transfer of equity accounted earnings 80 54
- transfer (from)/to insurance reserve (4) 1
- share of foreign currency translation reserves 5
- share of hedging reserves (13)
- unbundling transaction (470)
- revaluation of mineral rights 790
- realised sale of mineral rights (621)
- revaluation transferred to retained income (169)
- realised in joint ventures (159)
- changes in attributable reserves of
associated companies and joint ventures 223
Changes in retained income 1 809 2 318
- net profit for the period 2 509 4 141
- dividend paid (624)
- transfer of equity accounted earnings (80) (54)
- transfer from/(to) insurance reserve 4 (1)
- unbundling transaction (502)
- realised sale of mineral rights 621
- distribution in specie for the unbundling (2 056)
- revaluation transferred from non-
distributable reserves 169
Shareholders" funds at end of period 12 815 11 104
GROUP CASH FLOW 2003 2002
Audited Audited
Rm Rm
Cash inflows from operating activities 3 107 1 601
Cash retained from operations 4 471 1 944*
Net financing costs (174) (318)
Dividend paid (624)
Taxation paid (566) (25)
Cash outflows from investing activities (1 218) (1 153)
Capital expenditure (1 176) (969)
Sale of assets 88 115
Investments 2 (213)
Foreign currency translation (132) 6
Exceptionals (92)
Normal net cash flow 1 889 448
Cash inflow from unbundling 906
Cash outflow from financing activities (1 615) (1 213)
Increase in cash and cash equivalents 274 141
Cash and cash equivalents at beginning of period 578 437
Cash and cash equivalents at end of period 852 578
*Excluding unbundling transactions
UNAUDITED SUPPLEMENTARY 2003 2002
PHYSICAL INFORMATION
("000 tonnes)
FLAT STEEL PRODUCTS
- Vanderbijlpark
Liquid steel production 3 711 3 512
Sales 3 052 2 984
- local 2 167 2 177
- export 885 807
Local sales as % of total sales 71 73
- Saldanha Steel
Liquid steel production 1 251 933
Sales 1 160 887
- local 406 182
- export 754 705
Local sales as % of total sales 35 21
LONG STEEL PRODUCTS
Liquid steel production 2 161 2 008
Sales 1 828 1 749
- local 965 1 032
- export 863 717
Local sales as % of total sales 53 59
TOTAL
Liquid steel production 7 123 6 453
Sales 6 040 5 620
- local 3 538 3 391
- export 2 502 2 229
Local sales as % of total sales 59 60
NOTES TO THE audited FINANCIAL statements
1. Basis of preparation
These audited Group financial results for the year ended 30 June 2003
constitute a summary of the Group"s unqualified audited annual financial
statements. They have been prepared on the historical cost basis and conform to
South African Statements of Generally Accepted Accounting Practice. They also
comply with International Financial Reporting Standards and the Companies Act of
South Africa.
The Group"s annual financial report will be available by the end of
September 2003. The signed unqualified auditors" report issued by KPMG Inc. for
the year is available for inspection at the company"s registered address. The
principal policies are consistent with those applied in the previous year.
2. Impairment (charge)/credit
The impairment charge was raised on specific assets which will not be
generating adequate cash flows for the value in use to exceed the book value.
3. (Goodwill amortised)/negative goodwill realised
As part of a structured finance deal Iscor purchased 100% in Pybus Fifty-
Seven (Pty) Limited, resulting in R64 million positive goodwill on acquisition.
The goodwill has been amortised over three years which takes into account the
period over which future benefits will accrue.
2003 2002
Audited Audited
Rm Rm
4. Net profit/(loss) from equity accounted
investments before taxation 103 (218)
- Saldanha Steel (288)
- Ebitda (65)
- Depreciation (66)
- Financing cost (157)
- Other 103 70
5. Exceptional items 57 298
- surplus on sale of residential properties 57 52
- gain on sale of investment 364
- restructuring costs (118)
6. Profit before taxation is arrived at after
Financing costs 182 508
Interest received 46 120
Directors" emoluments
- executive 24 7
- non-executive 1 1
Auditors" remuneration
- audit fees 8 5
- other services 5 1
7. Taxation (1 215) (442)
Company and subsidiaries (1 197) (427)
Equity accounted investments (18) (15)
8 Investments in joint ventures
Unlisted investments
- directors" valuation 515 419
9. Net cash/(debt) 750 (1 139)
Interest-bearing borrowings
- non-current (92) (726)
- current (10) (1 487)
Cash and cash equivalents 852 578
Derivative instruments against interest-bearing
borrowings 496
10. Capital expenditure
- incurred 1 176 969
- contracted 414 356
- authorised but not contracted 577 824
11. Contingent liabilities 532 297
12. Operating lease commitments 68 82
- less than one year 19 25
- more than one year and less than five years 44 43
- more than five years 5 14
13. Related party transactions
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.
14. Diluted weighted avarage number of shares
Although the LNM Business Assistance Agreement provides for the issue of 10% of
the company"s issued capital to LNM Holdings if certain targets are met and
sustained for a period, the dilutionary effect, if any, has not been taken into
consideration as it is only contingent at this stage with no certainty whether
the target will be met.
15. Directors" share option benefits
Rights to options and shares held by executive directors in terms of the Iscor
Management Share Scheme totalled 1 691 970 at 30 June 2003 (2002: 3 025 070),
representing 0,4% (2002: 0,7%) of the issued shares. During the year the
directors sold a portion of their options in terms of the partial offer by LNM
Holdings, realising a gain of R15 million, of which R14 million was paid to them
in terms of the scheme during the year.
16. Corporate governace
The Group subscribes to and complies, in all material respects, with the code of
Corporate Practices and Conduct as contained in the second King Report on
Corporate Governance.
17. Listings requirements
This announcement has been prepared in compliance with the Listings Requirements
of the JSE Securities Exchange South Africa (the "JSE").
RECORD EARNINGS AND CASH FLOW
GROUP RESULTS
Headline earnings for the year of R2,5 billion reached an all-time record and
increased more than five fold from last year"s R480 million. This result was
driven by a sharp rise in global steel prices, the successful turnaround at
Saldanha Steel, generally improved efficiencies and significantly lower finance
costs, which off-set the negative impact of a stronger exchange rate.
The volatility of the exchange rate during the year had a significant impact
on earnings, illustrated by a comparison of quarterly earnings expressed in Rand
and US Dollars:
Headline earnings US$m Rm
* Quarter 1 58 601
* Quarter 2 76 737
* Quarter 3 79 657
* Quarter 4 77 597
* Power contract settlement# (14) (110)
* Total 2002/03 276 2 482
* Total 2001/02 47 480
Cash flow from operations increased by 130% to R4,5 billion compared to last
year on the back of the record earnings. The net cash flow of R1,9 billion
resulted in a net year end cash position of R750 million compared to last year"s
net debt of R1,1 billion.
SEGMENT RESULTS
Operating profits at all business units improved markedly. The rate of
improvement in flat product earnings was significantly higher than for long
products due to increased volumes and greater flat product price volatility.
Operating profit+ Revenue
2003 2002 2003 2002
Rm Rm Rm Rm
Flat Steel Products
* Vanderbijlpark 2 429 842 10 205 8 051
* Saldanha
- total 608 (510) 3 147 1 724
- Iscor share 608 (379)* 3 147 1 444*
* Power contract settlement# (157)
Long Steel Products 878 679 5 180 4 509
Suprachem 142 121 763 653
Other (16) 17 115 109
Group costs (150) (104)
Inter-Group (328) (299)
Total 3 734 1 176* 19 082 14 467*
# Included in the fourth quarter results is a once-off settlement amount of
R157 million (after tax R110 million) or US$20 million (US$14 million after tax)
relating to the replacement of a commodity-linked power supply contract. This
has been shown separately to facilitate meaningful comparison.
+ Profit from operations before impairment charge (R13 million) and goodwill
amortisation (R21 million).
* Including 50% of Saldanha"s results prior to acquisition of full control
on 28 November 2001.
Includes costs relating to partial share offer (R6 million), asset
valuation for CGT purposes (R11 million), post retirement medical cost top-up
provision (R9 million) and results-linked bonus (R12 million).
MARKET REVIEW
International
The global economic environment remains uncertain with divides between the
major economic regions and steel markets demonstrating wide behavioural
disparities during the year.
* In Asia, steel prices increased gradually during the first half but
accelerated sharply in January and February 2003 due to speculative
buying in China. This trend collapsed in April 2003 in the face of rising
inventories, overbooking of forward business and the completion of the
Chinese tariff-quota. Import prices for hot rolled sheet were trading at
$265 per tonne delivered to China in June 2003 down from the $395 peak in
February. The price decline bottomed out during the latter part of
June with the re-emergence of Chinese buyers, with increases of more than
$35 per tonne recorded in order intake for September and October 2003.
* In the United States, weak steel demand and increased supply by previously
idled mills caused prices to drop from spectacular highs achieved during July
to September last year to the lowest levels in the world by January 2003. The
lucrative trading conditions in the Far East prompted some US steel mills to
export for the first time in history, inducing steel shortages in their home
market and triggering price increases of $10 -15 per tonne since January
lows. Prices in the region, however, are still trading below European levels.
* In the European Union, prices began to drop in July 2003 in reaction to
the negative global trend after six consecutive quarterly price rises brought
about by production restraint. The price pressure is likely to remain for the
rest of calendar 2003, as a result of weak domestic demand, the strong Euro
and rising imports.
* In Eastern Europe and the CIS, steel markets have been positive. Demand
has been growing faster than production as a result of healthy economic
growth in the region, although prices are largely determined by Asian steel
demand which absorbs most of the exports from the region. The inventory
crisis in China caused prices in the region to contract but pick up again
with the re-emergence of Chinese steel buying in June.
STEEL PRICE CYCLE Normal US$/t C&F invoiced
Forecasting agencies are predicting improving steel prices by the end of
2003 driven by expectations of recovery in global economic growth.
Domestic
The first half of the financial year was characterised by continuing
buoyant demand driven by large resource projects, construction activity, and
secondary exports which had become more competitive with the weaker currency.
Deliveries from domestic producers for the first six months ended 31 December
2002 were up 16% year on year, boosted also by an 11% drop in steel imports
to the very low level of 3,8% of consumption.
The robust steel consumption experienced throughout most of calendar 2002
started to slow down in December due to the impact of the currency
appreciation and high interest rates on manufacturing production and
construction. The current lower steel demand is evident in the poor
performance of all the steel consuming sectors. Steel industry despatches
dropped by 14% year on year during the second half despite imports for
2002/03 being 16% down on 2001/02.
Our domestic sales for the past year improved by 4% over the previous
year.
Notwithstanding the current downturn, economic fundamentals in South Africa
remain sound with reasonable expectations for sustainable long-term growth in
domestic consumption.
COST REDUCTION DRIVE
Steel production costs per tonne for the year, excluding the power
contract settlement, increased by 3,1% despite specific cost savings
totalling 8,2% due to:
* above inflationary increases in administered prices (power, rail, port);
* sharp escalation in prices of a number of major cost inputs (imported coke
and coking coal, steel scrap, shipping freight rates and pipeline gas); and
* a lag in the flow-through of the benefits of the stronger exchange rate on
our directly and indirectly US dollar-linked import costs.
We expect some unwinding of the input cost price spikes soon as well as
flow-through of the exchange rate lag effect on US$ related costs.
The latest CRU survey of international flat steel producers covering
calendar 2002 shows that Saldanha Steel has moved into the lowest quartile of
the global cost curve. While Vanderbijlpark has slipped back somewhat, the
survey does not include the major efficiency improvements achieved at the
sinter plant and hot strip mill during the second half of the year.
The recent substantial strengthening of exchange rate, if maintained at
current levels, will pose a threat to our international competitiveness. To
address this possibility we have decided to take immediate action by
implementing a major internal restructuring and a refocusing of our continuous
improvement programme.
BUSINESS ASSISTANCE AGREEMENT (BAA) WITH LNM
Excellent progress has been made on the implementation of the BAA which
provides for the issue of between 5% and 10% of Iscor"s issued capital to the
LNM Group once indexed savings of between R350 million and R700 million per
annum are achieved and maintained for a minimum period of
six months.
Savings for the past year are currently being audited and are likely to be
close to, or exceed, the minimum share issue threshold. In terms of the
agreement a maximum share issue of 4,9% can be made in any twelve-month
period with any surplus being carried forward.
OUTLOOK
International flat product selling prices for September/October delivery
have improved by some $35 per tonne from the low point of the June quarter
price collapse. However, average prices for the next six months are not
expected to exceed the average we experienced for the past financial year.
The domestic market is expected to remain flat for the remainder of 2003
and only start picking up in 2004 as the stimulatory effects of lower
interest rates start filtering into the economy.
The international steel market is essentially a US Dollar based business
and the Rand/Dollar exchange rate plays a critical role in our reported Rand
earnings. Given the volatility in the exchange rate it is very difficult to
predict our Rand earnings with any level of confidence although the September
quarter earnings will be severely impacted by the combination of low prices,
weak domestic demand and the current strong currency. In US Dollar terms our
earnings for the half year to December 2003 will not match the level achieved
during the past year.
DIVIDEND ANNOUNCEMENT
The Board has declared a final dividend (No. 23) of 100 cents per share
giving a 2,8 dividend earnings cover for the year, payable in South African
currency on Monday, 6 October 2003 to shareholders recorded in the register
on Friday, 3 October 2003. The last day to trade to qualify for the dividend
will be Friday, 26 September 2003 and the shares will trade "ex" dividend from
Monday, 29 September 2003. Share certificates may not be
dematerialised or rematerialised between Monday, 29 September 2003 and
Friday, 3 October 2003, both days inclusive. Dividend entitlements of less
than R10 will be donated to charity in terms of the articles of association.
CHANGE IN YEAR END
Subject to official approvals, it is the Board"s intention to change the
year end to 31 December with a financial reporting period of six months from
July to December 2003.
On behalf of the Board
LL van Niekerk M Macdonald
(Chief Executive Officer) (Executive Director, Finance)
18 August 2003
Registered Office Transfer Secretaries
Iscor Head Office G S Registrars (Pty) Limited
Roger Dyason Road 108 Johan Avenue
Pretoria West Sandton
Pretoria, 0002 PO Box 653224, Benmore, 2010
Directors: K Ngqula (Chairman),
LL van Niekerk (Chief Executive Officer),
DK Chugh*, WF Coertzen, RG Cottrell, M Macdonald,
S Maheshwari*, A Mittal*, LN Mittal*, Dr KDK Mokhele,
MJN Njeke, AM Thebyane, Dr MJUT van Wijngaarden
*Citizen of India.
Company Secretary: A van der Merwe
Iscor Limited:
Registration number: 1989/002164/06
Share code: ISC ISIN code: ZAE000022729
This report is available on Iscor"s World Wide Website at: ttp://www.iscor.com
Date: 20/08/2003 07:01:38 AM Produced by the JSE SENS Department
