| Wed 30 Jun 2004, 11:41 | | RESULTS FOR THE 12 MONTHS ENDED 31 MARCH 2004 |
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SOUTH AFRICAN CHROME & ALLOYS LIMITED - REVIEWED RESULTS FOR THE 12 MONTHS ENDED
31 MARCH 2004
South African Chrome & Alloys Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/003452/06)
(`SA Chrome`)
JSE Share Code: SCE
ISIN: ZAE000022943
REVIEWED RESULTS FOR THE 12 MONTHS ENDED 31 MARCH 2004
Group Abridged Income Statement
31 March 2004 31 March 2003
Reviewed Audited
R`000 R`000
---------------------------------- --------------- --------------
Revenue 554,442 183,782
Operating loss (23,427) (74,190)
Depreciation (28,312) (24,803)
Net financing (costs)/income (55,385) (48,543)
Loss before Taxation (107,124) (147,536)
Taxation - -
Net loss for the period (107,124) (147,536)
Loss per share (cents) (9.43) (14.67)
Headline loss per share (cents) (9.43) (14.60)
Ordinary shares in issue 1,195,664,842 1,011,187,614
Weighted average share for period 1,135,527,054 1,004,208,252
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Group Abridged Balance Sheet
As at As at
31 March 31 March
2004 2003
Reviewed Audited
R`000 R`000
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ASSETS
NON-CURRENT ASSETS 692,779 675,930
Options, mineral and participation rights 258 258
Property, plant and equipment 679,897 656,314
Investments 9,784 18,786
Long-term receivables 2,840 571
CURRENT ASSETS 156,312 113,215
Inventories 92,797 75,614
Trade and other receivables 63,515 36,292
Bank and cash - 1,308
TOTAL ASSETS 849,091 789,145
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EQUITY AND LIABILITIES
CAPITAL AND RESERVES 231,961 231,466
Share capital 11,957 10,150
Share premium 527,217 421,406
Fair value reserve 130 -
Accumulated loss (307,343) (200,090)
NON-CURRENT LIABILITIES
Long-term borrowings 359,894 335,414
CURRENT LIABILITIES 257,236 222,265
Trade and other payables 199,123 176,797
Current portion of long-term borrowings 49,170 45,468
Bank and cash 8,943 -
TOTAL EQUITY AND LIABILITIES 849,091 789,145
----------- ----------
Net asset value per share (cents) 19.40 22.80
Statement Of Changes In Equity
31 March 2004 31 March 2003
Reviewed Audited
R`000 R`000
----------------------------------- -------------- --------------
Share capital 11,957 10,150
Balance at beginning of period 10,150 9,986
New shares issued during period 1,807 164
Share premium 527,217 421,406
Balance at beginning of period 421,406 407,350
Premium on new shares issued during 105,811 14,112
the period
Share issue expenses written off - (56)
Accumulated loss (307,343) (200,090)
Balance at beginning of period as
previously reported (200,090) (53,726)
Effect of adopting new accounting - 1,172
statements
Opening accumulated loss restated (200,090) (52,554)
Net loss for the period (107,124) (147,536)
Transfer to Fair value reserve (130) -
Fair value reserve 130 -
Balance at the beginning of period - 1
Transfer from income statement 130 (1)
BALANCE AT END OF PERIOD 231,961 231,466
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Group Abridged Cash Flow Statement
31 March 2004 31 March 2003
Reviewed Audited
R`000 R`000
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Cash utilised by operations (45,106) (24,432)
Net interest cost (55,719) (48,543)
Cash flows from operating activities (100,825) (72,975)
Cash flows from investing activities (45,227) (52,684)
Cash flows from financing activities 135,800 80,347
Net (decrease)/increase in cash and
cash equivalents (10,252) (45,312)
Cash and cash equivalents at 1,308 46,620
beginning of period
Cash and cash equivalents at end of (8,944) 1,308
period
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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 12 months ended 31 March 2003.
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. The review report is available for inspection
at the company`s registered address.
Turnover, on an F.O.B. basis, for the 12 months ended 31 March 2004, from the
sale of 193 832 tonnes of ferrochrome was R554 million at an average Rand:US$
exchange rate of R7.00: US$1.
Operating loss before interest, tax and depreciation was R23.4 million. Included
in this loss were transaction expenses relating to SA Chrome - Xstrata Venture
and feasibility study expenses on the expansion of our ferrochrome facility of
R3 million and R6 million respectively. After taking account of depreciation of
R28.3 million and interest on debt of R55.4 million, the net loss after tax
totalled R107.1million.
The stronger Rand against budget caused a negative variance on earnings of R115
million, cost of production variance reduced earnings by R70 million against
budget which were offset by favourable ferrochrome price variances of R45
million.
The costs of production during the twelve months under review were hard hit by
winter electricity surcharges, the high cost of coke, increase in freight rates,
lower than expected production volumes, operational inefficiencies and high
costs of chrome ore.
While the first three factors were outside of the company`s control, a
determined effort is taking place to reduce the costs of chrome ore, increasing
operational efficiencies and thereby increasing production volumes.
Review Of Operations
Progress on operations was slower than expected during the second half of the
reporting period compared to the performance reported at the half year mark.
Ferrochrome production rate improved by 4% to reach 195 000 tonnes or 14% less
than budget expectations. Likewise, plant cost of production improved by 7% in
the second half of the year on the first half`s performance but still fell short
of expectations for the year by 16% in Rand per tonne terms.
The main reasons for slower than expected performance improvement were:
* The metal from slag recovery plant, although partly commissioned during
October 2003, was only completed after the end of the financial year. An
estimated 5% of production went unrecovered to the slag dump. It will be at
least a year before the backlog of previously unrecovered production will
be brought to account.
* The cost of raw materials and in particular, imported coke, were
responsible for a price variance of 5% on total production cost. With the
cost of coke increasing from R1 300 per tonne at the beginning of the year
to over R3 000 per tonne. Drastic measures were taken to avert this cost by
substituting coke consumption by more affordable reductants. In the process
of reaching a workable substitution level, process instability resulted
during the last quarter of the financial year, which also hampered
performance improvement.
Having said this, there has been a steady improvement in performance. This is
expected to continue under the SA Chrome - Xstrata Venture.
Market Review
Global ferrochrome demand remained exceptionally strong, in excess of 4.9
million tonnes, in 2003, supported by continued growth in stainless steel
production, with output up 18% to 5.9 million tonnes for China, Taiwan, India
and Korea combined. Europe also showed about 3.9% growth, rising up to 8.4
million tonnes.
Underpinned by strong demand, ferrochrome prices have increased substantially
over 2003 and into 2004. A 7 USC/lb Cr contained increase was achieved in Q1,
2004 and a further 12 USC/lb Cr contained increase followed in 2Q, 2004 to 69 US
cents/lb after year end.
The outlook forward remains strong. Stainless steel melt is expected to grow by
a further 6-7% to over 24 million tonnes in 2004, supported by improving global
economic conditions and new melt in China. As a consequence, the fundamentals
for ferrochrome demand remain exciting and strong consumption growth is
anticipated.
With no meaningful increase in ferrochrome production in 2004, the supply and
demand balance should remain tight and prices firm. Cost pressure is also
evident from high coke prices and firm ocean freights, which together with the
strong Rand, make a compelling case for stronger market prices.
SA Chrome - Xstrata Venture
On 24 February 2004, SA Chrome announced that, subject to certain conditions
precedent, it had reached an agreement with Xstrata South Africa (Pty) Limited
(`Xstrata`) to pool their respective South African chrome and ferrochrome assets
and share in the earnings before interest and tax therefrom (`the Venture`). The
Venture allows SA Chrome and Xstrata to participate jointly in the world`s
leading ferrochrome producer.
The Venture has been approved by:
1. The South African Competitions Authorities under the Competition Act on an
unconditional basis;
2. The relevant European and other international competition authorities;
3. The JSE Securities Exchange South Africa; and
4. the lenders to SA Chrome, being ABSA Bank Limited and the Industrial
Development Corporation.
Shareholders are advised that the Venture remains subject to the approval of
shareholders and a circular to shareholders setting out full details of the
Venture and containing a notice of general meeting, has been posted to
shareholders.
For SA Chrome the establishment of the Venture is a unique opportunity to
participate in significant future growth and to increase its exposure from one
mine and two furnaces to the output of six mines and 16 furnaces, which will
significantly reduce its operational risk. Within three years of the
implementation of the Venture, Xstrata and SA Chrome will participate in the
aggregate earnings of the Venture in the proportions of 82.5% and 17.5%
respectively.
SA Chrome further has the right to increase its participation in the Venture to
26% (and thereafter by agreement) as well as the right to participate in Project
Lion, the planned Xstrata ferrochrome facility in the Eastern Bushveld.
Future Prospects
Having gone through a difficult period, characterized by some technical start-up
and design problems at our plant, we are now able to focus our attention on
bedding-down the SA Chrome - Xstrata Venture. As a result of improving
production levels, strong ferrochrome prices and the creation of the Venture,
the future of SA Chrome looks bright.
The board will also shift its focus to that of growing the company. We have
always viewed SA Chrome as a growth company, well positioned to take advantage
of the window of opportunity currently available in SA with its empowerment
credentials and its strong shareholder base. To this end, the company`s growth
strategy is two-fold, namely to grow organically and acquisitively within
ferrochrome (through the joint venture with Xstrata, with project Lion expansion
being the immediate example) and to diversify into other resources. Shareholders
will be approached in due course with details of this strategy.
Chris Molefe Steve Phiri
Non-Executive Chairman Chief Executive Officer
30 June 2004
Johannesburg
Date: 30/06/2004 11:17:36 AM Produced by the JSE SENS Department
