Wrap Text
Short-Form Provisional Results for the Year ended 30 June 2019
Assore Limited
Company registration number: 1950/037394/06
Share code: ASR
ISIN: ZAE000146932
(Assore or group or company)
Short form Provisional results for the year ended 30 June 2019
- Safety: three mines achieve consecutive fatality-free shift records
- Record attributable earnings for the third consecutive year
- Record dividend of R24,00 per share
- Net cash of R9 billion
CEO Charles Walters says:
"We are pleased to report record attributable earnings for the third consecutive year.
Our headline earnings are up 25% to a record high of R6,4 billion for the year. It was
particularly pleasing to achieve this together with a good safety performance, which
aligns with our objective of sustainable safety across all our operations."
Financial highlights
R million FY19 FY18 % increase/
(unless otherwise stated) Reviewed Audited (decrease)
Revenue 8 140 7 805 4
Profit after taxation, before joint venture and associates 1 451 1 667 (13)
Share of profit or loss from joint venture, after taxation 4 536 3 524 29
Profit for the year 5 964 5 175 15
Attributable earnings 5 932 5 119 16
Earnings per share (cents) 5 751 4 963 16
Headline earnings 6 382 5 109 25
Headline earnings per share (cents) 6 187 4 953 25
Dividends per share in respect of profit for the year (cents) 2 400 2 200 9
Net asset value 29 802 26 050 14
Capital expenditure - Assmang (100% basis), Dwarsrivier and other 4 894 3 486 40
Commentary
Safety
Assore operations
Dwarsrivier Chrome Mine Proprietary Limited (Dwarsrivier) achieved improvement in its lost-time
injury frequency rate (LTIFR) to 0,17 for the financial year ended 30 June 2019 (FY19 or the current year)
from 0,19 for the financial year ended 30 June 2018 (FY18 or the prior year). Dwarsrivier's achievement
of five million fatality-free shifts in March 2019 contributed significantly to an improvement of the
LTIFR of the operations controlled by Assore to 0,22 for FY19 from 0,27 in FY18.
Assmang operations
The operations of Assmang Proprietary Limited (Assmang), which is jointly controlled by Assore and
African Rainbow Minerals Limited (ARM), achieved a combined LTIFR of 0,19 for FY19, representing a
deterioration from the level recorded in FY18 of 0,13. However, its operations continue to maintain
and achieve exceptional safety records. Khumani Iron Ore Mine achieved the best LTIFR in its operational
history of 0,08, while Beeshoek Iron Ore mine achieved four million fatality-free shifts in January 2019.
In the Manganese division, the Black Rock Mines achieved seven million fatality-free shifts in
February 2019, with the Cato Ridge smelters completing a second consecutive year without a lost-time injury.
The group remains committed to pursuing sustainable improvement in its overall safety performance.
Group financial performance
Headline earnings increased by 25% to a record high of R6,4 billion in FY19 compared to R5,1 billion
in FY18. Assmang's headline earnings increased by 41% to R10,0 billion, with Assore's 50% share in Assmang
contributing R5,0 billion towards Assore's headline earnings. In accordance with International Financial
Reporting Standards (IFRS), Assmang is classified as a joint venture and accordingly, its financial results
are equity accounted. The rest of the group's operations reported headline earnings that were 13% lower
than FY18, at R1,4 billion (FY18:R1,6 billion). The contribution to the group's results from Dwarsrivier
was R516 million (FY18: R875 million), while fees and interest earned made up most of the balance.
Attributable earnings amounted to R5,9 billion, 16% higher than FY18, representing a third consecutive
annual record.
The average SA rand/US dollar (ZAR/USD) exchange rate for FY19 was R14,12, 10% weaker than the level
that prevailed during FY18. The weaker exchange rate, higher iron ore prices, elevated but steadily
declining manganese ore prices and higher sales volumes of manganese ore, resulted in a notable increase
in attributable earnings.
Production and sales volumes achieved by the group were as follows:
% (decrease)/
Metric tons '000 FY19 FY18 increase
Production volumes (100% basis)
Iron ore 17 786 18 578 (4)
Manganese ore 3 409 3 717 (8)
Manganese alloys 455 462 (2)
Chrome ore 1 551 1 619 (4)
Sales volumes (100% basis)
Iron ore* 17 543 17 874 (2)
Manganese ore* 3 434 3 177 8
Manganese alloys 398 378 5
Chrome ore 1 556 1 557 -
* Excluding intra-group sales.
Strong cash generation in the group resulted in group net cash increasing by 14% to R9,0 billion
(FY18: R7,9 billion). A final dividend of R14,00 per share has been declared, bringing the total
dividend for FY19 to R24,00 (FY18: R22,00) per share.
Market conditions
World crude steel production grew by 4,5% in the 2018 calendar year (CY18), while Chinese demand
for crude steel remained firm due to continued economic stimulus. Production in China is expected
to grow by 5,7% in the 2019 calendar year (CY19). China produces more than half of the world's supply
of crude steel, and continues to report high levels of crude steel production. The circumstances above
maintained strong levels of demand for ores, with increased prices for iron ore and stable prices for
manganese ore. Sustained, tight environmental controls continue to drive demand for the group's
high-grade raw materials.
The trade conflict between the USA and China had a negative impact on consumer confidence and resulted
in a lower than expected demand for stainless steel. As a result, prices for stainless steel and
subsequently chrome ore prices weakened throughout FY19. This occurred despite an increase in world
production of stainless steel for CY18, which increased by 5,4% from the 2017 calendar year (CY17) and
which continued at similar levels in the first half of CY19.
Assmang (iron ore and manganese)
Assmang's attributable earnings increased by 29% over FY18 to R9,1 billion (100% basis), driven mostly
by increased sales revenue, which was 29% up on FY18 to R35,6 billion. Iron ore delivered earnings of
R6,8 billion (FY18: R3,3 billion), an increase of 106%, while those of the manganese division decreased by
39% to R2,3 billion (FY18: R3,8 billion). This was brought about by impairment charges amounting to
R1,0 billion relating to the investment in Sakura Ferroalloys (Sakura).
Iron ore
The increase in attributable profit for FY19 is due to the increase in prices and the weaker
ZAR/USD exchange rate over the financial year. The average market price for iron ore increased over FY19
from USD69 per ton (62% iron content, "fines" grade, delivered in China) to USD80 per ton. A tragic tailings
dam failure in Brazil, as well as weather disruptions in northern Brazil and Western Australia, resulted in
reduced seaborne supply of iron ore. Furthermore, improved levels of demand for steel in China, mainly as a
result of economic stimulus measures, changed what was anticipated to be an oversupplied market into an
undersupplied market. The strong demand for the group's product, together with an increase of approximately
60% in the average level of the "lumpy" premium, to USD21 for FY19 (FY18: USD13) per ton, contributed
to the increase in revenue of 39%.
Manganese ore and alloys
Despite growth in steel production, the manganese ore market was characterised by significant changes in
the Chinese ferroalloy industry which saw silico-manganese production increase by 30% in CY18. This was driven
by an increase in the unit consumption of silico-manganese due to changes in the Chinese rebar quality steel
standards implemented in early 2018. The market continued to witness the decline in Chinese domestic manganese
ore production.
Demand for manganese ores remained firm throughout FY19, resulting in stable index prices, despite some
weakness in Chinese ferroalloy prices towards the end of FY19. The FY19 average index price for the high-grade
"lumpy" ore (44% manganese content) was USD6,68 per dry metric ton unit (dmtu), delivered (CIF) in China
(FY18: USD6,88 per dmtu), while the average medium-grade "lumpy" ore price index (37% manganese content) for
FY19 was USD5,55 per dmtu, free on board (FOB) from South Africa (FY18: USD5,59 per dmtu). The stable prices
together with the 8% increase in sales volumes and the weak ZAR/USD exchange rate resulted in the increased
earnings from manganese ore. Production volumes decreased by 8% due to the shut at the Gloria Mine for its
modernisation and optimisation initiative.
Despite the strong steel production and demand in the United States, due to the tariffs levied on imported
steel, the manganese alloy market has remained oversupplied. This resulted in continued price weakness and
poor profitability for ferroalloy producers, with pressure on non-integrated producers being exacerbated.
Dwarsrivier (chrome ore)
The attributable profit for FY19 decreased by 41% to R516 million (FY18: R875 million), due to lower prices
for chrome ore and increased operating costs. The reduced profit was compounded by a labour strike suffered
by the mine in March 2019, which accounted for the decrease of 4% in production volumes. The cost management
performance was disappointing, with unit costs increasing by 14% over FY18. The oversupply of ferrochrome in
the group's main market resulted in a decrease in demand for chrome ore, which saw the average index market
price decreasing to USD187 per ton from USD224 in FY18 (44% chrome content material, delivered in China).
The weaker ZAR/USD exchange rate and sales volumes of 1,6 million tons (similar to FY18) partially negated
the decrease in prices, with revenue decreasing by 4% to R3,6 billion. Capital expenditure amounted to
R480 million (FY18: R300 million), mostly on ongoing projects aimed at increasing plant efficiency.
Outlook
Global growth is expected to slow in the period ahead. The pace of expansion in the global economy
witnessed in the past few years has now been affected by geopolitical risks that are weighing on the global
commodity markets.
Any abrupt tightening of global financial conditions will reduce expenditure on steel for development needs
across the world and hence a decline in demand for steel overall.
China has, in response to the trade tariffs imposed by the United States, ramped up its fiscal and monetary
stimulus, embarked on a new round of major infrastructure projects and announced various tax cuts. China's
economy expanded by 6,3% in the first half of CY19, and although this was marginally below market forecasts,
it is expected to remain at this level for the remainder of the year. This continued growth in China should
support prices for the group's products in the near term.
The mining industry in South Africa continues to face a high level of regulatory uncertainty and increased
expectations from its various stakeholders. Further to the factors noted above, the results of the group
remain significantly exposed to underlying commodity prices for steel-making ingredients and fluctuations in
exchange rates.
This outlook and any forward looking statements have not been reviewed and reported on by the group's
external auditors.
Declaration of final dividend
Shareholders are advised that on 4 September 2019, the board approved final dividend number 125
(the dividend), of 1 400 cents per share (gross) for the year ended 30 June 2019.
In terms of paragraph 11.17 of the Listings Requirements of JSE Limited, shareholders are advised of the
following with regard to the declaration:
1. The dividend has been declared from retained earnings
2. The local dividend tax (dividend tax) rate of 20% will apply
3. The net local dividend amount is 1 120 cents per share for shareholders liable to pay the dividend tax
4. The issued ordinary share capital of Assore is 139 607 000 shares, of which 36 459 925 (FY18: 36 445 970)
shares are accounted for as treasury shares in terms of IFRS and are therefore excluded from earnings
per share calculations
5. Assore's income tax reference number is 9045/018/84/4.
The salient dates are as follows:
Last day for trading to qualify and participate
in the final dividend Monday, 23 September 2019
Trading "ex dividend" commences Wednesday, 25 September 2019
Record date Friday, 27 September 2019
Dividend payment date Monday, 30 September 2019
Dates (inclusive) between which share certificates
may not be dematerialised or rematerialised Wednesday, 25 September 2019 to Friday, 27 September 2019
On behalf of the board
Desmond Sacco Charles Walters
Chairman Chief Executive Officer
5 September 2019
Short-form announcement
This short-form announcement is the responsibility of the board of directors of Assore Limited and is a
summarised version of the group's full announcement and as such, it does not contain full or complete
details pertaining to its results. Any investment decisions by investors and/or shareholders should be made
after taking into consideration the full announcement, which has been released on the JSE Stock Exchange
News Service (SENS) at https://senspdf.jse.co.za/documents/2019/JSE/ISSE/ASR/AssoreFY19.pdf and on the
group's website at https://www.assore.com/interim-and-final-results/. The full announcement is available
for inspection, at no charge, at the registered office of Assore Limited, (15 Fricker Road, Illovo Boulevard,
Johannesburg, 2196) from 09:00 to 16:00 on business days. Copies of the full announcement can be requested
from the registered office by contacting the Company Secretary on +27 11 770 6800.
Directors:
Executive
Desmond Sacco (Chairman), CE Walters (Chief Executive Officer), RA Davies (Finance),
PE Sacco (Deputy Chief Executive Officer and Marketing Director), BH van Aswegen (Operations)
Non-executive
EM Southey* (Deputy Chairman and Lead Independent Director), DN Aitken*, TN Mgoduso*, S Mhlarhi*,
WF Urmson*
*Independent
Registered office: Assore House, 15 Fricker Road, Illovo Boulevard, Johannesburg, 2196
Company Secretary:
African Mining and Trust Company Limited
Transfer office: Singular Systems Proprietary Limited, 28 Fort Street, Birnam, 2196
Sponsor: The Standard Bank of South Africa Limited
Additional information available on www.assore.com
Date: 05/09/2019 07:05:00
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