| Mon 6 Dec 2004, 16:18 | | Results for the 6 months ended 30 September 2004 |
|
Merafe - Unaudited results for the 6 months ended 30 September 2004 and further
cautionary announcement
Merafe Resources Limited
(formerly South African Chrome and Alloys Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1987/003452/06)
(`Merafe`)
Share Code: MRF
ISIN number: ZAE000060000
Unaudited results for the 6 months ended 30 September 2004 and further
cautionary announcement
GROUP ABRIDGED INCOME STATEMENT
6 months to 6 months to 12 months to
30 September 30 September 31 March
2004 2003 2004
Unaudited Reviewed Audited
R`000 R`000 R`000
Revenue 359,462 226,448 554,442
Operating profit 35,938 (9,532) (23,427)
Depreciation (10,896) (14,600) (28,312)
Net financing costs (23,818) (27,530) (55,385)
Profit/(loss) before 1,224 (51,662) (107,124)
taxation
Taxation - - -
Net profit/(loss) for the 1,224 (51,662) (107,124)
period
Profit/(loss) per share 0.10 (4.74) (9.43)
(cents)
Headline profit/(loss) per 0.10 (4.74) (9.43)
share (cents)
Ordinary shares in issue 1,236,324,684 1,195,664,823 1,195,664,842
Weighted average shares 1,236,324,684 1,089,613,423 1,135,527,054
for period
GROUP ABRIDGED BALANCE SHEET
6 months to 6 months to 12 months to
30 September 30 September 31 March
2004 2003 2004
Unaudited Reviewed Audited
R`000 R`000 R`000
ASSETS
NON-CURRENT ASSETS 701,483 678,816 692,779
Options, mineral and 258 258 258
participation rights
Property, plant and 681,366 668,836 679,897
equipment
Investments 9,757 8,809 9,784
Long-term receivables 10,102 913 2,840
CURRENT ASSETS 301,188 183,986 156,312
Inventories 105,811 134,101 92,797
Trade and other 137,041 35,405 63,515
receivables
Bank and cash 58,336 14,480 -
Total assets 1,002,671 862,802 849,091
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 262,715 287,190 231,961
Share capital 12,364 11,957 11,957
Share premium 556,340 527,347 527,217
Fair value reserve 130 - 130
Accumulated loss (306,119) (252,114) (307,343)
NON-CURRENT LIABILITIES
Long-term borrowings 389,250 238,010 359,894
CURRENT LIABILITIES 350,706 337,602 257,236
Trade and other payables 280,748 208,290 199,122
Current portion of long- 38,075 129,312 49,170
term borrowings
Bank overdraft 31,883 - 8,944
TOTAL EQUITY AND 1,002,671 862,802 849,091
LIABILITIES
Net asset value per share 21.25 24.00 19.40
(cents)
GROUP ABRIDGED CASH FLOW STATEMENT
6 months to 6 months to 12 months to
30 September 30 September 31 March
2004 2003 2004
Unaudited Reviewed Audited
R`000 R`000 R`000
Cash generated 31,022 (40,904) (45,106)
by/(utilised by)
operations
Net interest 1,335 (27,530) (55,719)
received/(cost)
Cash flows from operating 32,357 (68,434) (100,825)
activities
Cash flows from investing (19,599) (12,582) (45,227)
activities
Cash flows from financing 22,639 94,187 135,800
activities
Net increase (decrease) in
cash and cash
equivalents 35,397 13,171 (10,252)
Cash and cash equivalents
at
beginning of period (8,944) 1,308 1,308
Cash and cash equivalents 26,453 14,479 (8,944)
at end of period
STATEMENT OF CHANGES IN EQUITY
6 months to 6 months to 12 months to
30 September 30 September 31 March
2004 2003 2004
Unaudited Reviewed Audited
R`000 R`000 R`000
Share capital 12,364 11,957 11,957
Balance at beginning of 11,957 10,150 10,150
period
New shares issued during 407 1,807 1,807
period
Share premium 556,340 527,347 527,217
Balance at beginning of 527,217 421,406 421,406
period
Premium on new shares
issued during
the period 29,123 105,941 105,811
Accumulated loss (306,119) (252,114) (307,343)
Balance at beginning of
period as
previously reported (307,343) (200,452) (200,090)
Net profit for the period 1,224 (51,662) (107,123)
Transfer to fair value - - (130)
reserve
Fair value reserve 130 - 130
BALANCE AT END OF PERIOD 262,715 287,190 231,961
Change of name
Shareholders are reminded that with effect from Monday, 29 November 2004, the
Company changed its name to Merafe Resources Limited to reflect its new
strategic direction of diversification and growth into other resources.
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 2004.
Review of results
The Company is pleased to announce maiden earnings before interest, tax and
depreciation of R35.9 million. After accounting for depreciation of R10.9
million and net interest paid of R23.8 million the net profit after tax was R1.2
million.
The Pooling and Sharing Venture (`the Venture`) with Xstrata SA (Pty) Ltd, which
became effective on 1 July 2004, resulted in SA Chrome sharing in 11% of the
earnings before interest, tax and depreciation (`EBITDA`) from the Venture. The
Company`s share of the EBITDA from the Venture will increase to 14% from 1 July
2005 and 17.5% from 1 July 2006 onwards.
The financial results split pre and post the formation of the Venture are
summarised as follows:
- For the three month period pre the formation of the Venture, being 1 April
2004 to 30 June 2004, the EBITDA was R7.9 million and after accounting for
depreciation of R6,5 million and net interest paid of R12.6 million the net
loss after tax was R11,2 million.
- For the three month period post the formation of the Venture, being 1 July
2004 to 30 September 2004, the EBITDA was R28 million and after accounting
for depreciation of R4.4 million and net interest paid of R11.2 million the
net profit after tax was R12.4 million. Shareholders are reminded that this
three month reporting period includes the months of July and August where
winter electricity surcharges increase the production costs.
As previously announced the Company has changed its year end to 31 December and
as such the next set of published results will be for the nine month period
ending 31 December 2004, expected to be published on 3 March 2005.
Review of operations
Production performance of SA Chrome`s Boshoek furnaces improved throughout the
reporting period from 83% of design capacity during the previous financial year
to 90% in the first half of this reporting period to a pleasing 105% during the
second half. Although the Company`s fortunes since 1 July 2004 are no longer
solely dependent on the performance of its Boshoek furnaces, but rather on a
participation share in the combined performance of the whole Xstrata: SA Chrome
Venture, it is gratifying to note that the original performance targets have
been exceeded.
These positive trends have continued beyond the reporting period.
Market review
Demand for ferrochrome continues to increase, driven by strong stainless steel
melt growth. China continues to be a major factor with stainless steel melt up
24% in 2004. Increases are also evident in Europe (+6%), the USA (+8%) and South
Korea (+16%), giving global stainless steel melt growth of around 8% to 24.3
million tons.
This increase in stainless steel melt growth is expected to result in
ferrochrome consumption rising by over 6% in 2004 to over 5.5 million tons.
The continuing strong demand coupled to cost pressures for South African
producers have seen ferrochrome prices increase to USCents (USD)73/lb in quarter
4, 2004, from USCents (USD)57/lb in quarter 1, 2004.
With stainless steel melt expected to continue to grow in 2005 and no meaningful
increases in ferrochrome capacity until 2006, the outlook for ferrochrome demand
and prices remains strong through 2005.
Xstrata - SA Chrome Venture
The Company is currently assessing the first stage of Project Lion, being the
360,000 tonne per annum ferrochrome expansion of the Venture. An announcement
regarding the Company`s participation in the project will be made in the first
quarter of 2005.
Future prospects
The decision to enter into the Venture with Xstrata is fast proving to be the
correct one as evidenced by the accelerated turnaround in the Company`s results
as from 1 July 2004. Shareholders are reminded that the Company`s future
performance is closely linked to the Rand: US$ exchange rate which has continued
to strengthen from an average of R6.49: US$1 during the six month reporting
period.
We announced previously that the Company is a growth company and will be
focussing on organic and acquisitive growth in ferrochrome as well as through
diversification into other resources. This strategy is on course, and in
addition to project Lion, we expect to announce further acquisitions over the
course of 2005.
These acquisitions should go a long way towards the Company realising its vision
of being one of the highly regarded resource companies listed on the JSE
Securities Exchange South Africa (`JSE`).
Further cautionary announcement
Further to the cautionary announcement dated 16 November 2004, shareholders are
advised that the negotiations are still in progress, which if successfully
concluded, may have a material effect on the price at which the Company`s shares
trade on the JSE.
Shareholders are accordingly advised to continue to exercise caution when
dealing in their shares until a further announcement is made.
Chris Molefe Steve Phiri
Non-Executive Chairman Chief Executive Officer
6 December 2004
Johannesburg
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Corporate Finance
Transactional Sponsor
Investec Corporate Finance
