Transcript Slide 1

HARNESSING THE POWER OF THE EARTH
UNAUDITED GROUP INTERIM RESULTS
PRESENTATION 2004
For the six months ended 31 December 2003
www.kumbaresources.com
CON FAUCONNIER
CHIEF EXECUTIVE
HARNESSING THE POWER OF THE EARTH
2
KEY FINANCIALS
Revenue
Net operating
profit
R 3 962m
207
178
R 566m
Headline earnings
R 243m
Headline earnings
per share
82 cents
Interim dividend
per share
20 cents
152
112
82
1H02 2H02 1H03 2H03 1H04
Headline EPS
Sound performance despite challenging environment
3
HIGHLIGHTS
• Improved safety performance
• Solid operating performance from all businesses
• Successful start for second furnace at Empangeni
• Substantial strengthening of the rand (30%) mitigated
by
• Favourable commodity markets
• Strong sales volumes
• Good cost control
Solid operating performance
4
RAND STRENGTH AND COSTS
R/US$
13
12
11
average realised:
R10.08
10
• Cost impact:
9
8
• Currency impact:
10c  R 41 m EBIT
R7.04
• administered prices
• fuel
7
• Ongoing cost and revenue
focus
6
5
4
2H02 1H03 2H03 1H04
Bottom line impacted by exchange rate
5
SHAREHOLDER ISSUES
• Change in shareholding
• Competition Tribunal - 5 Sep 2003
• Anglo offer to minorities - 31 Oct 2003
• Result: 66.6% - 8 Dec 2003
• Way forward
• Support for Kumba growth strategy
• Board of directors
6
MIKE KILBRIDE
EXECUTIVE DIRECTOR OPERATIONS
HARNESSING THE POWER OF THE EARTH
7
SAFETY, HEALTH & ENVIRONMENT
Lost day injury frequency rate*
3.13 3.00
• Lost day injury frequency
at all time low
FY03
FY02
FY01
• Strategy to achieve
international safety and
environmental certification
at all operations by Dec
2004
1.91
1H04
• No fatalities for the period
- unfortunately 1 in Jan
2004
4.59
* per million man hours worked
Zero tolerance… key focus
8
IRON ORE MARKETS
Global seaborne market
Mt
• World seaborne trade
increased by 50 Mtpa
600
• Continued growth of
Chinese imports
400
• Strong domestic sales
200
• 18.62% price increase
100
300
Source: CRU
'03
'02
'01
'00
'99
0
'98
• Freight costs soar
500
China's contribution
[cut off this line]
Chinese market continues to drive growth
9
IRON ORE OPERATIONS
Total production and exports
• Continued growth in
production
• New calendar year record
at Sishen - 27.1 Mt
• Due to high exports of
FY03, low stocks at
Saldanha influenced
exports in 1H04
Mt
16
14
12
10
8
1H02 2H02 1H03 2H03 1H04
Export sales
New production record
Production
10
OREX RAIL PERFORMANCE
Sishen-Saldanha rail
performance
• Excellent operating
efficiencies
• Continued growth in
tonnage railed
• Capacity expansion to
29 Mt in 2004
Mt
15
Actual
Target
10
5
0
1H02 2H02 1H03 2H03 1H04 2H04
Kumba
Expansion critical for further growth in exports
Other
11
COAL MARKETS
• International coal prices
influenced by:
• Strong demand for
thermal coal
Thermal coal and coke prices
(US$/t)
50
200
20
50
• Strong local demand from
the metals market
Jan '04
• Thermal coal supply to
Matimba at record levels
Jul '03
100
Jan '03
30
Jul '02
• Shortage in supply of
coking coal
Jan '02
150
Jul '01
40
RBCT thermal coal FOB
Chinese market coke exports
Sources: SA Coal Report, CRU
Strong demand-driven market
12
COAL OPERATIONS
Production volumes
Mt
10
• Record production at
Grootegeluk and
Leeuwpan
9
• Strong focus on cost
control
6
8
7
5
1H02 2H02 1H03 2H03 1H04
Grootegeluk
Tshikondeni
Valuable earnings contributor
Leeuwpan
13
HEAVY MINERALS MARKETS
Zircon and pigment prices
(US$/t)
1400
380
1200
360
1000
Zircon
Q4 2003
400
Q2 2003
1600
Q4 2002
• Zircon and rutile demand
extremely strong due to
Chinese growth
420
Q2 2002
• Titania slag market oversupplied and under
pressure
1800
Q4 2001
• Signs of recovery in
pigment market
440
Pigment
Source: TZMI
Gradual recovery in some segments
14
HEAVY MINERALS OPERATIONS
Ilmenite feed rate - Ticor SA
• Furnace 2 successfully
commissioned in Sep
2003
% of design capacity
• Furnace ramp-up ahead
of schedule
• First chloride slag sales 12 kt
• Record synthetic rutile
production from Tiwest JV
- 112 kt
60%
80%
70%
50%
40%
30%
20%
10%
1 2 3 4 5 6 7 8 9
Months since commissioning
planned
World no 3 in TiO2 units
furnace 1
furnace 2
15
ZINC MARKETS
• Strong US$ price
recovery
• Strong currency
depressed Rand
earnings
• Lower treatment
charges
impacted on
results
US$/t
1000
950
900
850
800
750
700
LME Zinc metal price
ZAR/t
10000
9000
8000
7000
6000
5000
1H02 2H02 1H03 2H03 1H04
Treatment charge revenue
indexed: 100=1H02
100
75
50
25
0
1H02 2H02 1H03 2H03 1H04
Rebound in US$ zinc price
16
BASE METALS OPERATING RESULTS
54
Rosh Pinah
• Record Zn
concentrate
output
37
38
54
37
Zn conc.
(kt)
1H02 2H02 1H03 2H03 1H04
Zincor
• Production
marginally lower
due to planned
maintenance shut
58
Zn metal
(kt)
57
55
54
51
1H02 2H02 1H03 2H03 1H04
Continued improvement at Rosh Pinah
17
INDUSTRIAL MINERALS
2415
• On track to match
record FeSi
production of FY03
FeSi
production
(t)
1918
1H02 2H02 1H03 2H03 1H04
• Growing external
sales of FeSi
• Sustained dolomite
sales despite weak
domestic growth
2647 2703 2671
Dolomite
sales
(Mt)
0.66 0.65
0.67
0.65 0.66
1H02 2H02 1H03 2H03 1H04
18
DIRK VAN STADEN
EXECUTIVE DIRECTOR FINANCE
HARNESSING THE POWER OF THE EARTH
19
REVENUE
R million
Iron Ore
1H04
1H03
% Change
1 814
2 259
(20)
Coal
855
815
5)
Base Metals
471
485
(3)
Heavy Minerals - Ticor SA
- Ticor Ltd
153
623
152
-
43
39
10)
3
20
(85)
3 962
3 770
5)
7.04
10.08)
Industrial Minerals
Other
Total
US$/R exchange rate realised
Ticor consolidated from 1 April 2003
20
OPERATING PROFIT / MARGIN
1H04
1H03
Rm) (%)
Rm) (%)
Iron Ore
299) 16)
517)
23
(42)
Coal
121) 14)
125)
15
(3)
Base Metals
(35)
47)
10
Heavy Minerals - Ticor SA
- Ticor Ltd
(9)
48)
13
8)
20)
-)
Industrial Minerals
10) 23)
10)
26
Other
132)
(17)
Total EBIT
566) 14)
702)
Total EBITDA
886)
944)
Margins impacted by strong Rand
% Change
19
(in Rand)
(19)
(6)
21
EBIT COMPARISON
R million
136
Production cost
Ticor Ltd consolidation
Significant currency impact
566
1H04 EBIT
57
(11)
Distribution cost
(87)
119
Asset disposals
34
Stock movement
Exchange rate impact
Price
Sales volume
702
1H03 EBIT
• Strong sales
volumes
• Higher iron ore
prices
• Major currency
impact
• Good cost control
• Ticor Ltd
consolidation impact
• Disposal of non-core
assets
244 (628)
22
CURRENCY IMPACT
R million
1H04
1H03
EBIT
566)
702)
EBIT excluding non-core asset disposals
447)
702)
6)
150)
Unrealised translation loss/(gain)
Realised exchange rate impact
EBIT excluding exchange rate impact
Margin excl. exchange rate (%)
622)
1 075)
852)
27)
23)
23
EARNINGS
R million
1H04
Net operating profit (EBIT)
1H03
% Change
566)
702)
(19)
(130)
(123)
(6)
Goodwill and impairment
(90)
(14)
Equity income
(13)
30)
Taxation
(93)
(174)
Profit after taxation
240)
421)
25)
1)
Attributable earnings
265)
422)
Adjustments
(22)
28)
Headline earnings
243)
450)
(46)
82)
152)
(46)
298)
296)
Net financing cost
Outside shareholders’ interest
Headline earnings per share (cents)
Average number of shares in issue (million)
Sound performance
(43)
(37)
24
CASH FLOW
R million
Opening net debt
Net cash available
Taxation and finance charges
Dividends paid
Net cash flow from operating activities
Net cash used in investing activities
Heavy minerals project capital
Other capital expenditure
Investment in associate
Other
Proceeds from non-core asset sales
Share issue
Other movements
(Increase)/decrease in net debt
Closing net debt
Net debt / equity ratio 41%
1H04
(2 374)
606)
(264)
(184)
158)
1H03
(1 143)
335)
(400)
(252)
(317)
(270)
(348)
(406)
(154)
(74)
7)
-)
-)
90)
(854)
(1 997)
15)
173)
133)
(63)
(202)
(2 576)
25
RATIOS
R million
1H04
1H03
Margin excluding captive arrangements
EBIT (%)
18
25
EBITDA (%)
26
31
EBIT (times)
4.4
5.7
EBITDA (times)
6.8
7.7
Return on equity - attributable income (%)
5.2
9.1
Net debt / equity (%)
41
38
Net financing cost cover
26
REPORTING ISSUES
• Change of year end
• Consolidation into Anglo American plc
• Quarterly reports
• Post interim event
• ZnErgy
• Funding constraints at Zoxy
• Possible impairment impact: R 29 m
• Dividends
27
CON FAUCONNIER
CHIEF EXECUTIVE
HARNESSING THE POWER OF THE EARTH
28
STRATEGIC THRUSTS
• Iron Ore
• Hope Downs
• Northern Cape optimisation
• Sishen Expansion Project (SEP)
• Sishen South
• Coal
• RBCT Phase 5
• Inyanda Coal JV (Kalbasfontein)
• Business Improvement Programme (BIP)
• Base Metals and Ticor SA
• Process well on track
• Group-wide initiative
• Multi-thrust programme
Focused portfolio with clear strategic direction
29
OUTLOOK
• Business climate remains challenging
• Strong currency environments
• High oil prices
• Continued domestic cost pressures
• But, stronger commodity markets:
• Iron ore price increase
• Higher coal prices
• Zinc price recovery
• Therefore, we believe the next 6 months should be
better
Looking ahead
30
HARNESSING THE POWER OF THE EARTH
THANK YOU.
www.kumbaresources.com
ADDITIONAL SLIDES
32
POTENTIAL IRON ORE EXPANSION
Mt design capacity
• Upcurrent classifier to optimise
fines recovery adds 0.3 Mtpa
fine ore
• Additional feed to fines and
drum plants from July 2004,
adds 0.7 Mtpa
50
Sishen South
45
40
35
• Sishen Expansion Project
• phase 1 - 3 Mtpa
• phase 2 - 7 Mtpa
Sishen
expansion
8
10
10
10
27
27
27
3
25
26
• New mine at Sishen South
2008
9
6
current
projects
30
9
27
27
27
27
20
'03 '04 '05 '06 '07 '08 '09 '10
Year ending June
33
COAL PHYSICAL INFORMATION
Coal sales volumes
Coal production volumes
Mt
10
Mt
10
8
8
6
6
4
4
2
2
0
0
1H02 2H02 1H03 2H03 1H04
Eskom
Export
Domestic
1H02 2H02 1H03 2H03 1H04
Other
Coking Coal
Thermal Coal
34
HEAVY MINERALS PRODUCTION
Ticor SA
kt
Ilmenite
Ticor Ltd
1H04 1H03
%
change
1H04
1H03
%
change
222
216
3
Zircon
41
34
21
Rutile
16
18
(11)
112
97
(15)
42
kt
128
43
198
Zircon
25
28
(11)
Rutile
9
12
(25)
22
0
Scrap pig iron
6
0
Synthetic
rutile
Chloride slag
27
0
Leucoxene
17
12
Sulphate slag
20
0
Pigment
49
49
Pig iron
Ilmenite
35
HEAVY MINERALS SALES
Ticor SA
Ticor Ltd
1H04
1H03
%
change
Ilmenite
40
31
29
Zircon
23
31
(26)
Rutile
12
2
500
Pig iron
10
0
kt
kt
1H04
1H03
%
change
Ilmenite
43
60
(28)
Zircon
40
45
(11)
Rutile
21
17
24
57
39
46
15
12
25
Scrap pig iron
3
0
Synthetic
rutile
Chloride slag
12
0
Leucoxene
36
DEPRECIATION PER SEGMENT
R million
Iron Ore
1H04
1H03
126
114
Coal
75
66
Heavy Minerals
90
28
Base Metals
23
18
Industrial Minerals
2
4
Corporate
4
12
320
242
Total
37
CAPITAL EXPENDITURE
R million
FY04*
Sustaining and environmental
1H04
1H03
394
172
95
480
270
406
257
176
59
1 131
618
560
Expansion
• Heavy Minerals
- Ticor SA
• Group (other)
*Estimate as per FY03 annual report
38
DEBT STRUCTURE
R million
Drawn
Long term
Undrawn
Maturity profile
2004
744
Corporate
1 263)
2005
842
Heavy minerals project
finance
1 145)
2006
558
663)
2007
298
Ticor Ltd
3 071)
Short term
Total debt
Cash and cash equivalents
Net debt
533)
3 604)
1 466 After 2007
629
3 071
(1 028)
2 576)
39