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KUMBA RESOURCES LIMITED - UNAUDITED GROUP INTERIM FINANCIAL RESULTS
KUMBA RESOURCES LIMITED
Share Code: KMB
ISIN: ZAE000034310
UNAUDITED GROUP INTERIM FINANCIAL RESULTS
AND PHYSICAL INFORMATION
For the six months ended
31 December 2003
Solid operational performance
Interim dividend of 20 cents per share
18,62% us dollar iron ore price increase from April 2004
Harnessing the power of the earth
GROUP INCOME STATEMENT
Six months ended Year ended
31 December 30 June
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 3 962 3 770 7 469
Operating expenses (3 396) (3 068) (6 257)
Net operating profit 566 702 1 212
Net financing costs (130) (123) (244)
Share of pre-taxation income from (13) 30 2
equity accounted investments
Impairment charges (92) (2) (2)
Goodwill amortisation 2 (12) (21)
Profit before taxation (note 2) 333 595 947
Taxation (93) (174) (229)
Profit from ordinary activities 240 421 718
Minority interest 25 1
Net profit attributable to ordinary 265 422 718
shareholders
Reconciliation of headline earnings
Net profit attributable to ordinary 265 422 718
shareholders
- Impairment charges 92 2 2
- Share of associates goodwill 17 13 38
- Goodwill amortisation (2) 12 21
- Share of associates exceptionals 7
- Net (surplus)/deficit on disposal (61) 2 (3)
or scrapping of property, plant and
equipment
- Net surplus on disposal of (73)
investment in joint ventures and
associates
- Taxation effect of adjustments 5 (1) 1
Headline earnings 243 450 784
Ordinary shares (million)
- in issue 302 297 297
- weighted average number of shares 298 296 297
- diluted weighted average number 298 302 299
of shares
Attributable earnings per share
(cents)
- basic 88,9 142,4 241,8
- diluted 88,9 139,9 240,1
Headline earnings per share (cents)
- basic 81,5 151,8 264,0
- diluted 81,5 149,2 262,2
Dividend paid per share (cents) in 60,0 85,0
respect of the previous financial
year
Dividend declared per share 20,0
(cents)in respect of this interim
period
GROUP BALANCE SHEET
As at As at
31 December 30 June
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 8 415 6 052 8 205
Intangible assets 95 12 98
Goodwill (78) 12 (80)
Investments in associates and joint
ventures (note 3)
- listed 37 985 100
- unlisted 18 16 18
Deferred taxation 225 529 485
Other financial assets 375 341 272
9 087 7 947 9 098
Current assets
Inventories 1 481 1 047 1 369
Trade and other receivables 1 345 990 1 355
Cash and cash equivalents 1 028 967 964
Total assets 12 941 10 951 12 786
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" funds 5 057 4 633 4 921
Minority interest 1 277 582 1 191
Total shareholders" funds 6 334 5 215 6 112
Non-current liabilities
Interest-bearing borrowings 2 328 1 705 2 801
Other long-term payables 476 244 388
Non-current provisions 523 413 501
Deferred taxation 1 059 1 260 1 384
4 386 3 622 5 074
Current liabilities
Trade and other payables 801 657 941
Interest-bearing borrowings 1 276 1 259 537
Taxation 124 166 94
Current provisions 20 32 28
2 221 2 114 1 600
Total equity and liabilities 12 941 10 951 12 786
Net debt 2 576 1 997 2 374
Net asset value per share (cents) 1 675 1 560 1 657
Capital expenditure
- incurred 618 560 1 386
- contracted 362 483 345
- authorised but not contracted 385 680 624
Contingent liabilities 78 89 50
Operating lease commitments 203 223 237
Operating sublease rentals 30 25 38
receivable
GROUP CASH FLOW
Six months ended Year ended
31 December 30 June
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
Net cash flow from operating 606 335 1 616
activities
Net financing costs (127) (120) (240)
Taxation paid (137) (280) (310)
Dividends paid in respect of the (184) (252) (286)
previous financial year
Net cash used in investing
activities
- capital expenditure (618) (560) (1 386)
- proceeds from disposal of 88 8 44
property, plant and equipment
- proceeds from disposal of 100
associate
- increase in cash resources on 366
acquisition of a controlling
interest in subsidiaries
- acquisition of joint ventures and (34)
associates
- other (75) (8)
Net cash outflow (272) (944) (238)
Net cash flow from financing
activities
- cash flow from issue of shares 133
- borrowings raised 203 1 232 523
Net increase in cash and cash 64 288 285
equivalents
Cash and cash equivalents at 964 679 679
beginning of period
Cash and cash equivalents at end of 1 028 967 964
period
GROUP STATEMENT OF CHANGES IN EQUITY
31 December 30 June
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
Shareholders" funds at beginning of 4 921 4 816 4 816
period
Changes in share capital and
premium
- issue of shares
- share premium 133
Changes in non-distributable
reserves
- currency translation differences (156) (290) (432)
- financial instruments movements 72 (63) 71
- realised in associate and joint (76)
venture
- transfer of equity accounted 16 28 (38)
earnings
- transfer of insurance reserve 3
Changes in retained income
- net profit for the period 265 422 718
- dividends paid (178) (252) (252)
- realised in associate and joint 76
venture
- transfer of equity accounted (16) (28) 38
earnings
- transfer of insurance reserve (3)
Shareholders" funds at end of 5 057 4 633 4 921
period
Dividend declared after interim date amounts to 20 cents per share. STC at 12,5%
is payable.
NOTES TO THE REVIEWED FINANCIAL STATEMENTS
1. Basis of preparation
The interim financial results are prepared in accordance with International
Accounting Standard 34 on Interim Financial Reporting and should be read in
conjunction with the 2003 annual financial statements. The accounting policies
adopted are consistent with those applied in the annual financial statements for
the year ended 30 June 2003.
Six months ended Year ended
31 December 30 June
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
2. Profit before taxation is
arrived at after
- depreciation (320) (242) (532)
- financing costs (156) (164) (321)
- interest received 26 41 77
- dividends received 5 14 49
- net realised foreign exchange
(losses)/gains on:
currency exchange differences (77) 9 (193)
revaluation of derivative 44 46 144
instruments
- net unrealised foreign exchange
(losses)/gains on:
currency exchange differences (1) (151) (92)
revaluation of derivative (5) 1 19
instruments
- net surplus on disposal of 73
investments in joint ventures and
associates*
- net surplus on disposal of 61
property, plant and equipment**
* During the period Kumba sold its share in Mincor Resources for a purchase
consideration of R100 million with a net surplus of R73 million. The taxation
effect of the amount was R22 million.
** Includes a R49 million net surplus from the sale of bulk ore carriers for a
purchase consideration of R72 million. The taxation effect of the amount was R7
million.
3. Investments
Listed investments
- market value 59 1 022 138
Unlisted investments
- directors" valuation 164 60 108
4. 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 associates
and joint ventures. These transactions were subject to terms that are no less
favourable than those arranged with third parties.
5. JSE Securities Exchange requirements
The interim announcement has been prepared in accordance with the listings
requirements of the JSE Securities Exchange South Africa.
6. Corporate Governance
The group complies with the Code of Corporate Practice and Conduct published in
the King Report on Corporate Governance.
7. Auditors" review
The interim results have been reviewed by the company"s auditors, KPMG Inc. The
review opinion is available for inspection at the company"s registered office.
UNAUDITED PHYSICAL INFORMATION
(000 TONNES)
Three months ended
31 December 30 September
2003 2003
Iron ore
Production 7 556 7 284
Sales
- Export 5 268 4 571
- Domestic 2 381 2 355
Total 7 649 6 926
Coal
Production
- Power station 3 484 3 717
- Coking 566 511
- Other 735 738
Total 4 785 4 966
Sales
- Eskom 3 469 3 944
- Other domestic 994 954
- Export 294 304
Total 4 757 5 202
Base metals
Production
- Zinc concentrate 28 26
- Zinc metal 28 27
- Lead concentrate 10 8
Zinc metal sales
- Export 5 7
- Domestic 23 21
Lead concentrate sales
- Export 8 9
Heavy minerals
- Ticor SA Project
Production
- Ilmenite 88 40
- Zircon 12 13
- Rutile 5 4
- Pig iron 16 6
- Scrap pig iron 3 3
- Chloride slag 16 11
- Sulphate slag 12 8
Sales
- Ilmenite 30 10
- Zircon 11 12
- Rutile 10 2
- Pig iron 10
- Scrap pig iron 2 1
- Chloride slag 12
Heavy minerals
- Ticor Limited*
Production
- Ilmenite 110 112
- Zircon 20 21
- Rutile 7 9
- Synthetic rutile 57 55
- Leucoxene 7 10
- Pigment 24 25
Sales
- Ilmenite 17 26
- Zircon 26 14
- Rutile 19 2
- Synthetic rutile 31 26
- Leucoxene 6 9
Six months ended Year ended
31 December 30 June
2003 2002 2003
Iron ore
Production 14 840 13 804 28 557
Sales
- Export 9 839 10 339 20 946
- Domestic 4 736 4 271 8 770
Total 14 575 14 610 29 716
Coal
Production
- Power station 7 201 6 368 13 036
- Coking 1 077 1 122 2 207
- Other 1 473 1 309 2 769
Total 9 751 8 799 18 012
Sales
- Eskom 7 413 6 367 13 051
- Other domestic 1 948 1 889 3 821
- Export 598 604 1 128
Total 9 959 8 860 18 000
Base metals
Production
- Zinc concentrate 54 37 91
- Zinc metal 55 58 115
- Lead concentrate 18 9 22
Zinc metal sales
- Export 12 6 20
- Domestic 44 50 92
Lead concentrate sales
- Export 17 12 30
Heavy minerals
- Ticor SA Project
Production
- Ilmenite 128 43 91
- Zircon 25 28 53
- Rutile 9 12 20
- Pig iron 22 3
- Scrap pig iron 6
- Chloride slag 27
- Sulphate slag 20
Sales
- Ilmenite 40 31 50
- Zircon 23 31 59
- Rutile 12 2 20
- Pig iron 10
- Scrap pig iron 3
- Chloride slag 12
Heavy minerals
- Ticor Limited*
Production
- Ilmenite 222 217 428
- Zircon 41 34 80
- Rutile 16 18 36
- Synthetic rutile 112 97 179
- Leucoxene 17 12 26
- Pigment 49 49 94
Sales
- Ilmenite 43 60 126
- Zircon 40 45 83
- Rutile 21 17 28
- Synthetic rutile 57 39 81
- Leucoxene 15 12 19
* Ticor Limited consolidated from 1 April 2003 and the full production tonnes of
Tiwest joint venture in which Ticor has a 50% interest, are disclosed. Physical
information for the other period is provided for comparative purposes only.
COMMENTS
GROUP FINANCIAL RESULTS
The group maintained its sound operational performance with a significant
improvement in production levels on the previous comparative period whilst
recording strong sales volumes.
Revenue increased by 5% on the comparative period mainly as a result of the
consolidation of Ticor Limited, Australia from 1 April 2003. The higher iron ore
prices and increased coal and heavy minerals sales volumes were offset by a
stronger currency.
The continued strengthening of the rand at an average realised exchange rate of
R7,04 to the US dollar compared with R10,08 for the same period the previous
year, resulted in lower operating margins despite the effects of operating
efficiencies and cost control measures.
The lower net operating profit, a reduction in income from equity accounted
investments and the impairment of the cyanide plant of Ticor Limited, offset to
some extent by a lower tax charge, resulted in profit attributable to ordinary
shareholders reducing by 37% to R265 million. Headline earnings reduced by 46%
to R243 million or 81,5 cents per share.
Net cash outflow for the period was R272 million after capital expenditure of
R618 million, which included R270 million invested in the Ticor SA project. Net
debt increased to R2 576 million with a debt to equity ratio of 41%.
SAFETY
The group achieved an all time low lost day injury frequency rate of 1,91 per
million man hours worked (LDIFR) for the interim period. Regrettably, shortly
after the end of the period a fatal accident occurred at the Sishen mine. The
group is committed to a LDIFR of below 2,5 and zero fatalities.
SEGMENT RESULTS
Quarter ended
31 December 30 September
2003 2003
Unaudited Unaudited
Rm Rm
REVENUE
Iron ore 907 907
Coal 425 430
Base metals 235 236
Heavy minerals 437 339
- Ticor SA project 100 53
- Ticor Limited* 337 286
Industrial minerals 22 21
Other 1 2
Total 2 027 1 935
NET OPERATING
PROFIT
Iron ore 145 154
Coal 56 65
Base metals (15) (20)
Heavy minerals 22 17
- Ticor SA project (4) (5)
- Ticor Limited* 26 22
Industrial minerals 6 4
Other 57 75
- Disposal of non-core interests 46 73
- Other activities 11 2
Total 271 295
Year
Six months ended ended
31 December 30 June
2003 2002 2003
Reviewed Reviewed Audited
Rm Rm Rm
REVENUE
Iron ore 1 814 2 259 4 234
Coal 855 815 1 638
Base metals 471 485 892
Heavy minerals 776 152 587
- Ticor SA project 153 152 312
- Ticor Limited* 623 275
Industrial minerals 43 39 78
Other 3 20 40
Total 3 962 3 770 7 469
NET OPERATING
PROFIT
Iron ore 299 517 882
Coal 121 125 279
Base metals (35) 47 15
Heavy minerals 39 20 59
- Ticor SA project (9) 20 24
- Ticor Limited* 48 35
Industrial minerals 10 10 21
Other 132 (17) (44)
- Disposal of non-core interests 119
- Other activities 13 (17) (44)
Total 566 702 1 212
Equity accounted until 31 March 2003.
OPERATIONS
Iron Ore
Combined production from the Sishen and Thabazimbi mines increased by 4% on the
previous quarter and 8% on the comparative six-month period. Low stock levels at
the Saldanha Bay port due to the record sales of the previous year, resulted in
a 5% decline in exports.
Revenue was 20% lower than the comparative period as the 9% average increase in
iron ore prices was more than offset by a stronger average exchange rate. Net
operating profit declined by 42% to R299 million despite better operating
efficiencies and a reduction in unit production costs.
Favourable market conditions have resulted in annual average US dollar price
increases of 18,62% with effect from 1 April 2004.
Coal
Record production and sales volumes were achieved for the first half of the
financial year to meet increased demand from Eskom and other local clients.
The higher demand resulted in revenue increasing by 5% on the comparative
period. Net operating profit was marginally lower due to a strong rand and
increased distribution costs, which outweighed the higher revenue and good cost
control.
Base Metals
Although LME US dollar zinc prices recovered significantly, the rand-denominated
average zinc prices were 22% lower compared with the corresponding period last
year.
Despite the planned maintenance shut at the zinc refinery, good production and
steady sales performances ensured that revenue was only marginally lower. Lower
treatment charges earned by the refinery, however, resulted in an operating loss
being recorded for the period.
Kumba has a 85% interest in ZnErgy (Pty) Limited at an investment value of R35
million. ZnErgy manufactures zinc air fuel battery components under licence from
Zoxy Energy Systems AG. Zoxy is also the supplier of a critical component to
ZnErgy and offtaker of the final product. Subsequent to the end of the interim
period, Zoxy filed for bankruptcy under German law. Kumba is currently
investigating the business alternatives available to it. Should it be necessary
to impair the investment in ZnErgy, the impact would be a reduction of 10 cents
per share on attributable earnings for the period under review.
Heavy Minerals
Ticor SA project
The furnaces continue to ramp-up according to the planned schedule resulting in
greater production of slag and pig iron.
Revenue remained virtually unchanged compared with the corresponding interim
period as higher sales, which included the first two shipments of chloride slag,
were negated by a stronger rand. The stronger currency resulted in an operating
loss being reported for the period.
Ticor Limited
The segmental results reflect the impact of the consolidation of Ticor Limited
on the group operating results.
Strong production volumes were achieved with synthetic rutile reaching record
levels.
Revenue and net operating profit were higher than the first quarter as increased
sales of zircon, rutile and synthetic rutile offset the impact of the strong
Australian dollar. Ticor Limited contributed R623 million in revenue and R48
million in net operating profit to the group for the interim period under
review.
Unfavourable market conditions and the stronger Australian dollar have
necessitated a review of the potential recovery of the capital investment of
Ticor Limited in its cyanide plant at Gladstone, Queensland. As a result, the
carrying value of this non-core investment has been impaired in the amount of
A$18 million (R88 million).
Industrial Minerals
The business continued to make a positive contribution to the group"s operating
results despite weaker market conditions.
BUSINESS DEVELOPMENT
Iron Ore: Value adding initiatives to optimise Kumba"s assets in the Northern
Cape and to benefit from the strong global demand for Sishen iron ore are being
fast tracked. These include increased production at Sishen mine and the planned
development of Sishen South. Negotiations with Transnet on the contemporaneous
expansion of the infrastructure facilities which are essential to Kumba"s
planned iron ore growth initiatives are being progressed.
As announced, discussions on the potential for an asset swap with Assmang have
been suspended by mutual agreement between the parties.
Completion of a technical feasibility study for the development of the A$1 600
million Hope Downs project in Western Australia, with positive market offtake
support, has been followed by the finalisation of value-enhancement studies. An
appropriate funding structure based on stand-alone infrastructure models is
being investigated while the recent positive court ruling on shared
infrastructure offers the opportunity to consider its viability.
Coal: The development of the Inyanda Coal (Kalbasfontein) joint venture project
with Eyesizwe Coal for the export of 1 million tons coal per annum continues to
be negatively affected by the delays experienced in the finalisation of the
infrastructure arrangements in respect of the Phase V expansion of the Richards
Bay Coal Terminal (RBCT). Although progress has been made on the finalisation of
the lease agreement between the National Ports Authority and RBCT for the
expansion, the project will only be able to proceed once the rail agreement with
Spoornet for the Phase V participants as well as the RBCT shareholders"
agreement is concluded.
At Grootegeluk mine, studies to investigate the viability of increasing
production of semi soft coking coal and other specialist coals for the
metallurgical sector have been initiated.
The selection of a partner to participate in a bankable feasibility study on the
Moranbah South coking coal property, in Queensland, Australia is in progress.
Base Metals: Construction of a second, 25 000 tons per annum module at the
Hongye Zinc Refinery in China (in which Kumba has a 60% interest) was completed
on schedule in December 2003. The related Lindong concentrate roaster will be
commissioned during 2004. Zinc feedstock supplies for the refinery have also
been secured.
Heavy Minerals: An agreement was concluded with Madagascar Resources NL (MRNL)
to conduct a feasibility study on mineral sands tenements held by MRNL in
southwestern Madagascar. The deposit has potential to provide ilmenite feedstock
that could support the expansion of the smelting facilities at Empangeni.
OUTLOOK
The group is pursuing cost containment and value-enhancing initiatives
previously reported on in order to protect operating margins.
These initiatives, together with the 18,62% average increase in the US dollar
price of iron ore from 1 April 2004 and the recovery in LME zinc prices will
have a positive impact on the group"s results. Earnings, however, will continue
to be affected by the value of the rand.
SHAREHOLDING AND REPORTING
On conclusion of the mandatory offer made to Kumba"s minority shareholders,
Anglo American plc announced on 8 December 2003 that it had increased its
shareholding in Kumba to 66,62%.
In line with the year-end of its controlling shareholder, Kumba will change its
year-end from 30 June to 31 December. Interim and annual results will be
announced accordingly without quarterly publication of operating and physical
results as they are not always reflective of the nature of Kumba"s bulk
commodity business.
DIVIDEND
The Board has reviewed the group"s policy of considering dividends annually
based on the full year"s results and has approved the payment of an interim
dividend. The Directors have accordingly resolved to declare dividend number 3
of 20 cents per share in South African currency in respect of the interim period
ended 31 December 2003.
The dividend will be paid on Monday, 29 March 2004 to shareholders recorded in
the register of the company at the close of business on Friday, 26 March 2004.
The last day to trade cum dividend is Thursday, 18 March 2004. The shares will
commence trading ex dividend on Friday, 19 March 2004, and the record date is
Friday, 26 March 2004.
No shares may be dematerialised or re-materialised between Friday, 19 March 2004
and Friday, 26 March 2004, both days inclusive.
BOARD OF DIRECTORS
Following the change in control of Kumba, the board has appointed Messrs. PM
Baum, WA Nairn and PL Zim as non-executive directors of Kumba with effect from
17 February 2004.
On behalf of the board
MLD Marole Dr CJ Fauconnier DJ van Staden
(Chairman) (Chief Executive) (Executive Director,
Finance)
17 February 2004
If you have any queries regarding your Kumba Resources shares, please call 0861
100 912, or +27 11 370 5000 if calling from outside South Africa.
Kumba Resources Limited
Registration number 2000/011076/06
JSE Share code KMB
ADR CODE KBREY
ISIN CODE ZAE 000034310
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
DIRECTORS
MLD Marole (Chairman),
Dr CJ Fauconnier* (Chief Executive),
PM Baum, BE Davison, TL de Beer, JJ Geldenhuys,
MJ Kilbride*,Dr D Konar, CF Meintjes*, AJ Morgan,
WA Nairn, SA Nkosi, CML Savage, Dr NS Segal, F Titi,
DJ van Staden*, RG Wadley*, PL Zim *Executive
Company Secretary Marie Viljoen
Investor Relations Trevor Arran +27 12 307 3292
Corporate Affairs Pat Mdoda +27 12 307 4553
Sponsor JP Morgan +27 11 507 0300
This report is available at Kumba Resources" world wide website at:
http://www.kumbaresources.com
Date: 19/02/2004 07:00:38 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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