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Kumba Resources - Group Financial Results For The Year Ended 30 June 2003
Release Date: 21/08/2003 07:02:01 Code(s): KMB
Kumba Resources - Group Financial Results For The Year Ended 30 June 2003
Kumba Resources Limited
(Registration Number 2000/011076/06)
Share Code KMB
ISIN CODE ZAE000034310
ADR CODE KBREY
Group Financial Results (Audited)
For the year ended 30 June 2003
Solid operational performance
Rand appreciation reduces earnings
Headline earnings of 264 cents per share
Dividend of 60 cents per share
Ticor SA smelter construction on schedule
Controlling interest in Ticor Limited
This report is available at Kumba Resources" world wide website at:
www.kumbaresources.com
Harnessing the power of the earth
COMMENTS
Operating results
The group maintained strong production levels and sales volumes for the past
year. Lower world commodity prices and the substantial strengthening of the Rand
have, however, placed operating margins under pressure.
Revenue increased by 4% on the previous year mainly as a result of stronger coal
prices, higher iron ore and heavy minerals export volumes and the consolidation
of Ticor Limited, Australia from 1 April 2003.
Lower iron ore prices for nine months of the year (an average decrease of 4%), a
depressed zinc price (US$ 775 per ton compared with US$ 791 year-on-year) and a
significantly stronger currency, resulted in net operating profit declining by
28% on the comparative period. The lower net operating profit and a significant
reduction in profit from the equity accounted investments in AST Limited and
Ticor Limited, offset to some extent by a lower tax charge, resulted in
attributable profit declining by 26% to R718 million and headline earnings by
29% to R784 million (264 cents per share).
Rand strength
An average exchange rate of R9,01 to the US dollar was realised on export
proceeds compared with R10,18 for the previous year. In addition the valuation
of US dollar denominated debtors and derivative instruments at a spot exchange
rate of R7,43 on 30 June 2003 resulted in an unrealised currency translation
loss of R73 million, compared with an unrealised translation gain of R9 million
at a spot exchange rate of R10,37 which prevailed on 30 June 2002.
Cash flow
The lower net operating profit, capital expenditure of R1 386 million and
payment of dividends of R286 million and tax of R310 million, resulted in a net
cash outflow of R604 million for the past year, which after consolidating the
cash resources of Ticor Limited decreased to R238 million. Net debt of the group
increased by R1 231 million to R2 374 million at the end of the year as a result
of the net cash outflow and the consolidation of the net debt of subsidiaries in
which a controlling interest was acquired in the period under review. The net
debt to equity ratio was 39% compared with 22% at the end of the comparative
year.
Segment results
Quarter ended 30 Year ended 30
June June
2003 2002 2003 2002
Rm Rm Rm Rm
REVENUE
Iron ore 993 1 299 4 234 4 340
Coal 415 392 1 638 1 489
Base metals 237 279 892 941
Heavy minerals 368 111 587 227
- Ticor SA 93 111 312 227
- Ticor Limited* 275 275
Industrial minerals 21 16 78 57
Other 17 37 40 128
Total 2 051 2 134 7 469 7 182
NET OPERATING PROFIT
Iron ore 187 341 882 1 221
Coal 72 61 279 255
Base metals (17) 36 15 102
Heavy minerals 48 29 59 54
- Ticor SA 13 29 24 54
- Ticor Limited* 35 35
Industrial minerals 6 5 21 15
Other (22) 7 (44) 36
Total 274 479 1 212 1 683
* Equity accounted until 31 March 2003.
Operations
Iron Ore
Record production, railage and shipment levels were achieved for the past year,
with export sales volumes more than 1 million tonnes higher than the previous
year. These were recorded despite inclement weather conditions affecting
production and shipments in the second and third quarters of the year.
Revenue decreased marginally as higher sales volumes and an average increase of
9% in iron ore prices from 1 April 2003 were more than offset by the stronger
realised exchange rate and lower iron ore prices for the first nine months of
the year. Net operating profit was 28% lower than the comparative period as a
consequence of an unrealised currency translation loss of R39 million, higher
production volumes and increased stripping of overburden, insurance premiums and
environmental provisions.
Coal
Despite a major generator failure at the Matimba power station which affected
sales from the Grootegeluk mine, production levels were only marginally lower
while sales volumes were maintained.
Higher sales prices accounted for an increase of 10% in revenue compared with
the previous year while stringent cost control resulted in net operating profit
improving by 9%, despite the increased cost of maintenance programmes and higher
insurance premiums in the year.
Base Metals
The mining and refinery operations both achieved record production and sales
volumes for the past year, with higher grades at Rosh Pinah mine and improved
maintenance and successful de-bottlenecking programmes at Zincor.
Despite these operational achievements, the stronger currency and a further
reduction in the already depressed zinc prices of the previous year, together
with substantially lower globally-benchmarked zinc concentrate treatment charges
paid to refineries, resulted in a loss of R17 million for the last quarter. A
net operating profit of R15 million was achieved for the year compared with R102
million the previous year.
Heavy Minerals
The group"s heavy minerals operation consists of a 60% interest in the Ticor SA
project and a 51,38% interest in Ticor Limited, Australia which owns the
remaining 40% of the Ticor SA project.
Ticor SA Project
Following the successful commissioning of the Hillendale mine and mineral
separation plant in the 2002 financial year, production of ilmenite, zircon and
rutile increased substantially in the past year. Zircon and rutile were fully
sold while market conditions for ilmenite remained unfavourable. Crude ilmenite
is largely stockpiled for smelting and processing into titanium slag and pig
iron.
The first furnace of the Empangeni smelter is ramping-up on schedule and
construction of the second furnace is more than 90% complete. A first shipment
of titanium slag is planned towards the end of the first quarter of the current
financial year. Sales will increase as the smelter and slag treatment plant ramp
up to stable production levels.
Higher production and sales tonnages resulted in a contribution of R312 million
to revenue compared with R227 million for the comparative year. Net operating
profit declined by R30 million to R24 million as a consequence of the stronger
currency and a higher depreciation charge.
Ticor Limited
Kumba"s share of attributable profit from its investment in Ticor Limited,
before tax, was R57 million for the nine months which ended on 31 March 2003 and
R72 million for the full previous financial year. The segment results reflect
the effect of the consolidation of Ticor Limited on the group"s operating
results.
Industrial Minerals
The business continued to benefit from favourable market conditions in the steel
and construction sectors, resulting in a significant improvement in revenue and
net operating profit.
Growth opportunities
Iron Ore
Completion of a bankable study to confirm the technical and economic viability
of the Sishen South project, together with environmental and social impact
assessments, is targeted for December 2003.
Alternative expansion models involving the iron ore assets in the Northern Cape
are the subject of continuing discussions amongst all stakeholders and have
resulted in the signing of a heads of agreement between Kumba and Assmang
Limited.
The conversion to bankable status of the technical feasibility study into the
Hope Downs project in Western Australia, including provision for the
construction of new rail infrastructure and a terminal at Port Hedland, at an
estimated total project capital cost of AUD 1 600 million (R7 929 million) and a
production capacity of 25 million tonnes per year, is continuing. An information
memorandum to potential equity investors is being finalised while efforts to
reach mutually beneficial rail-access agreements continue with existing
infrastructure owners as an alternative to project-owned infrastructure.
Coal
The commencement of the joint development of the Kalbasfontein project by Kumba
Coal and Eyesizwe Coal, for the production of one million tonnes per year of
high-grade export coal, is awaiting the approval of the port authorities for the
expansion of the Richards Bay Coal Terminal to accommodate participants in the
South Dunes Coal Terminal consortium.
Base metals
The expansion of the Hongye zinc refinery in China to double its capacity to 50
000 tonnes per year is progressing on schedule. Kumba"s 60% participation in the
project, which includes overall management of the refinery, limits its exposure
to Chinese Yuan 140 million (R125 million) with a direct investment of Yuan 92
million (R82 million).
Mining legislation
In order to reach early readiness for the conversion of its current mining
rights into new order mining licences as required by the Mineral and Petroleum
Resources Development Act, the group has developed an empowerment framework. Its
focus is on sustainable broad-based ownership in a manner that advances the
growth strategies of the group while maximising skills development and
participation in management by historically disadvantaged South Africans (HDSA).
Conflicting objectives at shareholder level have complicated meaningful
progress. However it is expected that the impending ruling by the Competition
Tribunal will be conducive to an acceleration of the group"s empowerment
initiatives. Good progress has been made with procurement strategies and 15% of
the group"s discretionary requirements is targeted to be sourced from HDSA
groups in the current financial year.
Kumba seeks a royalty regime that is in the best interests of South Africa and
does not negatively affect development and expansion projects in the mining
industry. In line with the industry, the group has a strong preference for a
profit-based royalty as opposed to a revenue-based royalty and has made
submissions to the National Treasury in this regard.
Outlook
The group expects to maintain its good operational performance in the current
financial year. Despite this and higher iron ore prices, depressed market
conditions for zinc, ilmenite and titanium slag and a continued strong Rand, are
likely to affect earnings adversely.
In order to mitigate the effect of these negative factors and as part of its
ongoing cost focus, the group has specific initiatives to achieve cost
reductions of not less than two per cent in real terms across its operations.
Capital expenditure programmes are also being carefully reviewed.
Dividend
The effect of the challenging market conditions on the group"s operating results
and cash flow has necessitated a review of the level of the maiden dividend of
85 cents per share which was paid last year based on the group"s exceptional
results in a weak currency environment in the 2002 financial year.
The Board of Directors has accordingly resolved to declare dividend number 2 of
60 cents per share in South African currency in respect of the financial year
ended 30 June 2003.
The dividend will be paid on Monday, 29 September 2003 to shareholders recorded
in the register of the company at the close of business on Friday, 26 September
2003. The last day to trade cum dividend is Thursday, 18 September 2003. The
shares will commence trading ex dividend on Friday, 19 September 2003 and the
record date is Friday, 26 September 2003.
No shares may be dematerialised or re-materialised between Friday, 19 September
2003 and Friday, 26 September 2003, both days inclusive.
On behalf of the board.
MLD Marole Dr CJ Fauconnier DJ van Staden
(Chairman) (Chief Executive) (Executive Director, Finance)
19 August 2003
GROUP INCOME STATEMENT
Year ended 30 June
2003 2002
Audited Audited
Rm Rm
REVENUE 7 469 7 182
Operating expenses (6 257) (5 499)
NET OPERATING PROFIT 1 212 1 683
Net financing costs (Note 3) (244) (242)
Net profit from equity accounted 2 83
investments before taxation
Impairment charges (Note 2) (2) (101)
Goodwill amortisation (21) 26
PROFIT BEFORE TAXATION (NOTE 3) 947 1 449
Taxation (229) (465)
PROFIT FROM ORDINARY ACTIVITIES 718 984
Minority interest (8)
NET PROFIT ATTRIBUTABLE TO ORDINARY 718 976
SHAREHOLDERS
RECONCILIATION OF HEADLINE EARNINGS
Net profit attributable to ordinary 718 976
shareholders
Adjusted for:
- impairment charges 2 101
- share of associates goodwill 38 40
amortisation
- goodwill amortisation 21 (26)
- share of associates exceptional 7 12
items
- net deficit on disposal or (3) 4
scrapping of property, plant and
equipment
- taxation effect of adjustments 1 (9)
HEADLINE EARNINGS 784 1 098
Ordinary shares (million)
- in issue 297 297
- weighted average number of shares 297 285
- diluted weighted average number of 299 292
shares
Attributable earnings per share
(cents)
- basic 241,8 342,5
- diluted 240,1 334,2
Headline earnings per share (cents)
- basic 264,0 385,3
- diluted 262,2 376,0
Dividend paid per share (cents) 85,0
GROUP BALANCE SHEET
Year ended 30 June
2003 2002
Audited Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 8 205 5 710
Intangible asset 98
Goodwill (80) 23
Investments in associates and
joint ventures (Note 4)
- listed 100 1 152
- unlisted 18 32
Deferred taxation 485 423
Other financial assets 272 212
9 098 7 552
Current assets
Inventories 1 369 955
Trade and other receivables 1 355 1 022
Cash and cash equivalents 964 679
Total assets 12 786 10 208
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" funds 4 921 4 816
Minority interest 1 191 487
Total shareholders" funds 6 112 5 303
Non-current liabilities
Interest-bearing borrowings 2 801 882
Other long-term payables 388 178
Non-current provisions 501 389
Deferred taxation 1 384 1 204
11 186 7 956
Current liabilities
Trade and other payables 941 1 050
Interest-bearing borrowings 537 940
Taxation 94 223
Current provisions 28 39
Total equity and liabilities 12 786 10 208
Net debt (Note 5) 2 374 1 143
Net asset value per share (cents) 1 657 1 622
Capital expenditure
- incurred 1 386 1 085
- contracted 345 625
- authorised but not contracted 624 588
Contingent liabilities 50 92
Operating lease commitment 237 217
Operating sublease rentals receivable 38 27
GROUP CASH FLOW
Year ended 30 June
2003 2002
Audited Audited
Rm Rm
Cash flow from operating activities 1 616 2 560
- net financing costs (240) (236)
- taxation paid (310) (149)
- dividends paid (Note 6) (286)
Cash used in investing activities
- capital expenditure heavy (923) (631)
minerals
- other capital expenditure (463) (454)
- proceeds from disposal of 44 25
property, plant and equipment
- increase in cash resources on 366
acquisition of a controlling
interest in subsidiaries (Note 7)
- acquisition of joint ventures and (34)
associates
- other (8) (50)
Cash flows from issuance of shares 393
Unbundling expenses paid (44)
Net cash (outflow)/inflow (238) 1 414
Calculation of movement in net
debt:
- cash flows included above 2
relating to non-interest bearing
debt
- loans from minority shareholders 95
- increase in net debt on (891)
acquisition of controlling interest
in subsidiaries (Note 7)
- non-cash flow movements in net
debt of the group arising
from currency translation (199) (16)
differences
(Increase)/decrease in net debt (1 231) 1 398
GROUP STATEMENT OF CHANGES IN EQUITY
Year ended 30 June
2003 2002
Audited Audited
Rm Rm
Shareholders" funds on unbundling 1 400
from Iscor
Shareholders" funds at beginning 4 816
of year
Changes in share capital and
premium
- issue of shares 3
- share premium 2 721
- unbundling costs (44)
Changes in non-distributable
reserves
- currency translation differences (432) (187)
- financial instruments movements 71 (53)
- realised in associate and joint (76)
venture
- transfer of equity accounted (38) 16
earnings
- transfer of insurance reserve 3 2
Changes in retained income
- net profit for the year 718 976
- dividends paid (252)
- realised in associate and joint 76
venture
- transfer of equity accounted 38 (16)
earnings
- transfer of insurance reserve (3) (2)
Shareholders" funds at end of year 4 921 4 816
NOTES TO THE GROUP FINANCIAL RESULTS
Year ended 30 June
2003 2002
Audited Audited
Rm Rm
1. Basis of preparation
The group financial results have been
prepared on the historical cost
basisexcluding financial instruments
which are fair valued, and conform to
South African Statements of Generally
Accepted Accounting Practice and
International Accounting Standards.
2. Impairment charges
- shipping assets (80)
- other (2) (21)
(2) (101)
3. Profit before taxation is arrived
at after
Depreciation (532) (454)
Financing costs (321) (318)
Interest received 77 76
Dividends received 49 47
Net realised foreign exchange
(losses)/gains on:
- currency exchange differences (193) 164
- revaluation of derivative 144 (51)
instruments
Net unrealised foreign exchange
(losses)/gains on:
- currency exchange differences (92) 5
- revaluation of derivative 19 4
instruments
4. Investments
Listed investments
- market value 138 1 340
Unlisted investments
- directors" valuation 108 60
5. Net debt
Net debt is calculated as being
interest-bearing borrowings less cash
and cash equivalents. The impact of
the increase in net debt on earnings
per share was approximately 19 cents.
6. Dividends paid
- Kumba 252
- Ticor Limited to minorities 34
286
Magnetic
Ticor Minerals ZNergy
Ltd Ltd* (Pty) Total
Ltd**
Rm Rm Rm Rm
7. Acquisition of
a controlling
interest in
subsidiaries
The assets and
liabilities
arising from the
acquisition are
as follows:
- cash and cash 370 4 374
equivalents
- property, plant 1 442 113 9 1 564
and equipment
- financial 9 9
assets
- investments 823 823
- intangible 87 2 12 101
assets
- inventories 254 254
- trade and other 480 480
receivables
- trade and other (238) (12) (6) (256)
payables
- interest- (876) (15) (891)
bearing
borrowings
- non-current (59) (59)
provisions
- current (7) (7)
provisions
- deferred (49) (49)
taxation
Fair value of net 2 236 107 2 343
assets
Negative goodwill (204) (204)
Minority interest (1 085) (1 085)
Total purchase 947 107 1 054
consideration
- Less: cash and (370) (4) (374)
cash equivalents
in subsidiaries
acquired
- value of shares (943) (103) (1 046)
held before
consolidation
Cash (inflow) on (366) (366)
acquisition of
controlling
interest
* Subsidiary of Ticor Limited - acquisition and exploration of minerals
tenements prospectives.
** Subsidiary of Kumba Base Metals (Pty) Ltd - producer of zinc-air fuel cells.
8. Related party transactions
During the year the company and its subsidiaries, in the ordinary course of
business, entered into various sale and purchase transactions with associates
and joint ventures. These transactions were subject to terms that are no less
favourable than those arranged with third parties.
9. JSE Securities Exchange requirements
The announcement has been prepared in accordance with the listings requirements
of the JSE Securities Exchange South Africa.
10. Corporate Governance
The group complies with the Code of Corporate Practice and Conduct published in
the King Report on Corporate Governance.
11. Audit opinion
The auditors, KPMG Inc, have issued their opinion on the group"s annual
financial statements, for the year ended 30 June 2003. The audit was conducted
in accordance with South African Auditing Standards. An unqualified audit
opinion has been issued which is available for inspection at the company"s
registered office. These summarised annual financial statements have been
derived from the group annual financial statements and are consistent in all
material respects, with the group annual financial statements.
UNAUDITED PHYSICAL INFORMATION (`000 TONNES)
Quarter ended 30 Year ended 30
June June
2003 2002 2003 2002
IRON ORE
Production 7 774 7 079 28 557 28 324
Sales
- Exports 5 463 5 464 20 946 19 916
- Domestic 2 229 1 778 8 770 8 186
Total 7 692 7 242 29 716 28 102
COAL
Production
- Power station 3 428 3 524 13 036 13 351
- Coking 536 446 2 207 2 074
- Other 762 650 2 769 2 825
Total 4 726 4 620 18 012 18 250
Sales
- Eskom 3 641 3 571 13 051 13 198
- Other domestic 977 816 3 821 3 693
- Export 226 287 1 128 1 172
Total 4 844 4 674 18 000 18 063
BASE METALS
Production
- Zinc concentrate 28 19 91 75
- Zinc metal 30 24 115 105
- Lead concentrate 6 8 22 28
Zinc metal sales
- Domestic 23 25 92 94
- Export 11 3 20 14
Total 34 28 112 108
Lead concentrate
sales
- Domestic 12 13 30 25
HEAVY MINERALS
Production - Ticor
SA project
- Ilmenite 29 5 91 44
- Zircon 13 13 53 45
- Rutile 5 6 20 19
- Pig iron 3 3
Sales 41 42 129 81
Production - Ticor
Limited(1)
- Ilmenite 103 109 428 445
- Zircon 19 20 80 77
- Rutile 9 9 36 29
- Leucoxene 6 6 26 18
- Synthetic rutile 45 42 179 178
- Pigment 23 24 94 91
Ticor Limited consolidated from 1 April 2003 and the full production tonnes of
the Tiwest joint venture in which Ticor has a 50% interest, are included in the
quarter ended 30 June 2003. Physical information for the other periods is
provided for comparative purposes only.
Kumba Resources Limited
REGISTRATION NUMBER 2000/011076/06
SHARE CODE KMB
ISIN CODE ZAE000034310
ADR CODE KBREY
REGISTERED OFFICE Kumba Resources Limited, Roger Dyason Road, Pretoria West,
Pretoria, 0002
TRANSFER SECRETARIES Computershare Limited,
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
TEL NO +27 12 307 5000
FAX NO +27 12 307 4080
DIRECTORS MLD Marole (Chairman), Dr CJ Fauconnier* (Chief Executive), TL de
Beer,
JJ Geldenhuys, GS Gouws, MJ Kilbride*, Dr D Konar, CF Meintjes*, AJ Morgan, SA
Nkosi, CML Savage, Prof NS Segal, F Titi, DJ van Staden*, RG Wadley* *Executive
COMPANY SECRETARY MS Viljoen
INVESTOR RELATIONS Trevor Arran (+27 12 307 3292)
CORPORATE AFFAIRS Pat Mdoda (+27 12 307 4553)
SPONSORING BROKER JP Morgan (+27 11 507 0300)
JP MORGAN LOGO
The audited annual financial statements for the financial year ended 30 June
2003, are available at Kumba Resources" world wide web site at:
http://www.kumbaresources.com
If you have any queries regarding Kumba Resources or your Kumba Resources
shares, please call the Kumba Sharecare Line toll free on 0800 006 709 or +27 11
775 3430 if calling from outside South Africa.
Date: 21/08/2003 07:02:31 AM
Produced by the JSE SENS Department
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