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Kumba Resources Limited
Registration number: 2000/011076/06
SHARE CODE: KMB ISIN CODE: ZAE000034310
Highlights
Revenue up 33%
Net operating profit up 188%
Headline earnings up 115%
* Debt reduced from R2,5 billion to R1,1 billion
Group financial results for the year ended 30 June 2002
Harnessing the power of the earth
This report is available at Kumba Resources` World Wide Web at
www.kumbaresources.com
COMMENTS
Group results
Net operating profit for the year nearly trebled from that of the previous year
to R1 683 million. All segments generated higher net operating profit with heavy
minerals making a first contribution of R54 million.
Headline earnings for the period more than doubled to R1 098 million (385 cents
per share) from last year`s earnings.
Attributable earnings increased by 152% to R976 million, after impairment
charges of R101 million which consist mainly of an R80 million impairment of
shipping assets due to the continued uncertainty of a recovery in the shipping
industry.
Net debt reduced by R1 398 million to R1 143 million after capital expenditure
of R1 085 million, which included a R631 million investment in the heavy
minerals project. This resulted in a net debt to equity ratio of 24% at year-end
compared with 78% at the beginning of the year.
Quarter ended Year ended
30 June 30 June
2002 2001 2002 2001
Rm Rm Rm Rm
REVENUE
Iron ore 1 299 723 4 340 2 944
Coal 392 300 1 489 1 241
Base metals 279 276 941 945
Heavy minerals 111 227
Industrial 16 19 57 71
minerals
Other 37 20 128 203
TOTAL 2 134 1 338 7 182 5 404
NET OPERATING
PROFIT
Iron ore 341 190 1 221 699
Coal 61 19 255 100
Base metals 36 25 102 98
Heavy minerals 29 14 54
Industrial 5 3 15 15
minerals
Other 7 (237) 36 (328)
TOTAL 479 14 1 683 584
OPERATIONS
Iron ore
Production, sales and net operating income reached record levels for the year.
Despite annual US Dollar price reductions ranging from 2,4% for fine ore to 5%
for lump ore effective from 1 April 2002, net operating income increased by 75%
to R1 221 million. Higher export sales, operational efficiencies and a weaker
exchange rate contributed to the improvement.
Production rose to a record level of 28,3 million tons of which Sishen accounted
for 25,9 million tons.
The major upgrading and refurbishment programme at Sishen to increase its annual
production capacity to 27 million tons has been completed.
Kumba concluded a new long-term agreement with Transnet, increasing Sishen`s
rail allocation to Saldanha Bay to 23,5 million tons per year.
Coal
Coal achieved substantially improved results. Revenue grew by 20% to R1 489
million due to higher sales to Eskom and a rise in exports. This, together with
the focus on operational efficiencies and costs resulted in net operating profit
increasing by 155% to R255 million.
Production increased by 7% to 18 million tons with Grootegeluk accounting for
89% of total production.
Base metals
Despite the global oversupply of zinc metal and the lowest zinc price in more
than 20 years, Zincor operated at close to full capacity throughout the year
whilst production at Rosh Pinah increased as a result of higher feedgrades in
both zinc and lead.
Net operating profit was marginally higher at R102 million due to a continued
focus on cost reductions and a weaker exchange rate together with a judicious
hedging programme.
Heavy minerals
The Hillendale mine and the mineral separation plant were successfully
commissioned and met performance criteria. In its first nine months of
production, the project in which Kumba has a 60% interest and Ticor Ltd of
Australia 40%, generated revenue of R227 million.
Zircon and rutile have met product specifications and are fully sold. Ilmenite
was successfully tested and the first bulk sale was delivered in the last
quarter. However, as a consequence of the global over-supply and depressed
market conditions, ilmenite is largely being stockpiled for smelting.
The construction of the Empangeni smelter`s first furnace was more than 80%
complete at year-end with commissioning scheduled for December 2002, well ahead
of the planned date of March 2003. Construction of the second furnace is
scheduled for completion 12 months after commissioning of the first furnace.
Capital expenditure committed to the project to date is R2,3 billion.
Kumba increased its holding in Ticor Ltd to 49,15% by year-end.
Industrial minerals
Industrial minerals consists of an atomised ferrosilicon production plant which
is of strategic importance to the beneficiation of iron ore at the group`s
mines; and the mining of metallurgical dolomite which is supplied to Iscor Ltd.
These operations have been running at full capacity and made a positive
contribution to profits.
BUSINESS DEVELOPMENT
Iron ore: The feasibility study for the development of a new iron ore mining
operation, Sishen South, with an expected production capacity of up to 10
million tons per year, is scheduled for completion by the end of 2002.
Negotiations to explore potential consolidation benefits for iron ore production
in the Northern Cape are continuing.
The technical report of the feasibility study to establish a 25 million tons per
year iron ore mine in conjunction with Kumba`s partner, Hancock Prospecting
(Pty) Ltd of Australia, at Hope Downs in the Pilbara region of Western Australia
was completed at year-end. Value engineering studies to optimise the project
with a target commissioning date in 2006 have been initiated and funding options
are being investigated.
Coal: Kumba is a two million ton per year participant in the phase V expansion
of the Richards Bay Coal Terminal scheduled for completion in 2004. Construction
will commence on conclusion of the lease agreement with the port authorities.
The feasibility study on Kalbasfontein confirmed the viability of producing one
million tons per year of high grade coal for the export market. The development
of the project in which it is intended to involve a black economic empowerment
partner, will be linked to the coal terminal expansion.
Base metals: A comprehensive exploration programme in the area surrounding the
Rosh Pinah zinc mine, including licences in the formerly restricted Sperrgebiet
region, is currently being conducted together with PE Minerals of Namibia.
Negotiations to participate in the expansion of the Hongye zinc refinery in
China are at an advanced stage. Kumba`s exposure will be limited to RMB140
million (around R178 million) and is subject to a number of conditions which
include the participation by an international funding agency.
BLACK ECONOMIC EMPOWERMENT
Kumba is committed to sustainable empowerment initiatives as part of the
transformation of the mining industry. During the year, an anchor empowerment
partnership was entered into with the Tiso Kgalagadi consortium which has
secured an initial 4,8% interest in Kumba. This has established a foundation for
participation by a broad grouping of black investors in Kumba`s iron ore
expansions in the Northern Cape and in its other businesses.
Discussions with Eyesizwe Coal to explore synergies and co-operative investment
opportunities in respect of the parties` coal operations, have been initiated
and are progressing.
Other notable progress includes contracts awarded for the provision of
logistical support for the heavy minerals exports and for the removal of
overburden at Kumba`s iron ore mines. A preferential procurement programme has
also been implemented.
Draft mining charter
The draft mining charter is currently being discussed by all stakeholders. A
firm commitment and balanced approach will be required to develop a final
charter serving the interests of the industry and all South Africans and Kumba
fully supports the process.
PROSPECTS
The results for the past year have been exceptional. However, the uncertainty in
the recovery of the world economy, depressed commodity prices and volatile
exchange rates will affect the group. This may make it difficult to repeat the
results notwithstanding that the good operational performance of the past year
is expected to be maintained.
DIVIDEND
Dividend number 1 of 85 cents per share has been declared in South African
currency in respect of the year ended 30 June 2002.
The dividend will be paid on Monday, 30 September 2002 to shareholders recorded
in the books of the company at the close of business on 27 September 2002. To
comply with the requirements of STRATE the last day to trade cum dividend is
Thursday, 19 September 2002. The shares will commence trading ex dividend on
Friday, 20 September 2002 and the record date is Friday, 27 September 2002.
No shares may be dematerialised or re-materialised between Friday, 20 September
2002 and Friday 27 September 2002, both days inclusive.
On behalf of the Board
HJ Smith Dr CJ Fauconnier DJ van Staden
(Chairman) (Chief Executive) (Executive Director, Finance)
21 August 2002
GROUP INCOME STATEMENT
Year ended 30 June
2002 2001
Pro forma
Rm Rm
Revenue 7 182 5 404
Operating expenses (5 499) (4 820)
Net operating profit 1 683 584
Net financing costs (242) (271)
Net profit from equity
accounted
investments before 83 137
taxation
Exceptional items (Note 2) 72
Impairment charges (Note (101)
3)
Goodwill amortisation 26 (27)
Profit before taxation 1 449 495
(Note 4)
Taxation (465) (107)
Profit from ordinary 984 388
activities
Minority interest (8)
Net profit attributable to 976 388
ordinary shareholders
Adjusted for:
- exceptional items (72)
- impairment charges 101
- share of associates 40 40
goodwill amortisation
- goodwill amortisation (26) 27
- share of associates 12 (14)
exceptional items
- net deficit on disposal
or scrapping of
property, plant and 4 203
equipment
- taxation effect of (9) (61)
adjustments
Headline earnings 1 098 511
Ordinary shares (million)
- in issue 297 272
- weighted average number 285 262
of shares
- diluted weighted average 292 262
number of shares
Attributable earnings per
share (cents)
- basic 342,5 148,1
- diluted 334,2 148,1
Headline earnings per
share (cents)
- basic 385,3 195,0
- diluted 376,0 195,0
GROUP STATEMENT OF CHANGES IN EQUITY
Year ended 30 June
2002
Rm
Shareholders` funds on unbundling from 1 400
Iscor
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 (187)
- financial instruments movements (53)
- transfer of equity accounted earnings 16
- transfer of insurance reserve 2
Changes in retained income
- net profit for the year 976
- transfer of equity accounted earnings (16)
- transfer of insurance reserve (2)
Shareholders` funds at end of year 4 816
UNAUDITED SUPPLEMENTARY PHYSICAL INFORMATION
Quarter ended Year ended
30 June 30 June
2002 2001 2002 2001
000 tons 000 tons 000 tons 000 tons
IRON ORE
Production 7 079 7 401 28 324 27 044
Sales
- Exports 5 464 4 348 19 916 18 057
- Domestic 1 778 1 932 8 186 7 924
Total 7 242 6 280 28 102 25 981
COAL
Production
- Power 3 524 2 865 13 351 12 037
station
- Coking 446 457 2 074 2 126
- Other 650 686 2 825 2 833
Total 4 620 4 008 18 250 16 996
Sales
- Eskom 3 571 3 153 13 198 11 934
- Other 816 958 3 693 3 888
domestic
- Export 287 168 1 172 1 115
Total 4 674 4 279 18 063 16 937
BASE METALS
Production
- Zinc 19 17 75 72
concentrate
- Zinc metal 24 26 105 105
- Lead 8 6 28 22
concentrate
Zinc metal
sales
- Domestic 25 24 94 89
- Export 3 8 14 17
Total 28 32 108 106
Lead
concentrate
sales
- Domestic 13 11 25 23
HEAVY MINERALS
Production
- Ilmenite 5 44
- Zircon 13 45
- Rutile 6 19
Sales
- Export 42 81
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.
GROUP BALANCE SHEET
At 30 June
2002 2001
Pro forma
Rm Rm
ASSETS
Non-current assets
Property, plant and 5 710 4 987
equipment
Goodwill 23 47
Investments in associates
and joint
ventures (Note 5)
- listed 1 152 709
- unlisted 32 101
Other financial assets (Note 238 294
5)
7 155 6 138
Current assets
Cash and cash equivalents 679
Inventories 955 800
Trade and other receivables 996 777
Total assets 9 785 7 715
EQUITY AND LIABILITIES
Capital and reserves
Shareholders` funds 4 816 3 270
Minority interest 487 349
Non-current liabilities
Interest-bearing borrowings 882 1 242
Other long-term payables 178
Non-current provisions 389 398
Deferred taxation 781 727
7 533 5 986
Current liabilities
Interest-bearing borrowings 940 1 299
Other 1 312 430
Total equity and liabilities 9 785 7 715
Net debt (Note 6) 1 143 2 541
Net asset value per share 1 622 1 202
(cents)
Capital expenditure
- incurred 1 085 1 297
- contracted 625 293
- authorised but not 588 393
contracted
Contingent liabilities 92 29
Operating lease commitment 217 161
GROUP CASH FLOW
As at 30 June
2002
Rm
Cash flow from operating activities 2 175
Cash used in investing activities
- capital expenditure heavy minerals (631)
- other capital expenditure (454)
- proceeds from disposal of property,
plant and equipment 25
- other (50)
Cash flows from issuance of shares 393
Unbundling expenses paid (44)
Adjusted for:
- currency translation differences (16)
Decrease in net debt 1 398
Notes to the group financial results
1. Basis of preparation
The Group financial results have been prepared on the historical cost basis and
conform to South African Statements of Generally Accepted Accounting Practice
and International Accounting Standards.
2002 2001
Pro forma
Rm Rm
2. Exceptional items
- loss on sale of (9)
investments
- surplus on sale of 81
investment
72
3. Impairment charges
- shipping assets (80)
- other (21)
(101)
4. Profit before taxation
is arrived at after
Depreciation (454) (340)
Financing costs (318) (282)
Interest received 76 11
Dividends received 47
5. Investments
Listed investments
- market value 1 340 1 049
Unlisted investments
- directors` valuation 60 42
6. Net debt
Net debt is calculated as being interest-bearing borrowings less cash and cash
equivalents.
7. Pro forma comparative figures
Pro forma comparative figures for the year ended 30 June 2001 are shown per the
Kumba pre-listing statement dated 29 October 2001. Pro forma comparative figures
for the cash flow statement and the statement of changes in equity are not shown
as it is not meaningful.
8. 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.
9. Audit review
The audit for the financial year ended 30 June 2002 is in the process of being
finalised. As required by the JSE Securities Exchange the financial results have
been reviewed by the company`s auditors, KPMG Inc. The review opinion is
available for inspection at the company`s registered office.
Registered office
Kumba Resources Limited
Roger Dyason Road
Pretoria West
Pretoria, 0002
Transfer secretaries
Computershare Services Limited
2nd Floor, Edura House
41 Fox Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Directors
H J Smith (Chairman), Dr C J Fauconnier* (Chief Executive), T L de Beer, J J
Geldenhuys,
G S Gouws, M J Kilbride*, Dr D Konar, M L D Marole, C F Meintjes*, A J Morgan, S
A Nkosi,
C M L Savage, Prof N S Segal, F Titi, D J van Staden*, R G Wadley*
*Executive
Company Secretary: M S Viljoen
Date: 22/08/2002 07:05:00 AM Produced by the JSE SENS Department
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