Transcript Document
Metair Investments Ltd Results For The Year Ended 31 December 2006 March 2007 Agenda Welcome Overview of Metair Financial Review Industry Review Operational Review Introduction to First National Battery Strategic Review Prospects Overview of Metair Listed on the main board of the JSE Registered in 1948 Market capitalisation of approximately R1.8 billion Portfolio of companies manufacturing and distributing products primarily to: - OEM’s - Replacement market - Export market Variety of products Overview of Metair Metair Group Structure Metair Outside investment 25%) Smiths Manufacturing (Pty) Ltd 75% Radiators Heaters Air-conditioners Condensers Cooling fans Hoses and pipes Smiths Electric Motors (Pty) Ltd 100% Blower Motors Smiths Plastics (Pty) Ltd 25%) Outside investment 51%) Hesto Harnesses (Pty) Ltd 100% Front end modules Horns Wheel trims Metindustrial (Pty) Ltd (First National Battery Division) 100% Unitrade 745 (Pty) Ltd 100% Automotive cable 75% Metindustrial (Pty) Ltd (Supreme Spring Division) 100% Coil springs Leaf springs Stabilisers Torsion bars Wiring Harnesses Valeo Systems South Africa (Pty) Ltd Headlights Lamps Plastic injection mouldings 100% Batteries (includes non automotive) Plastic injection mouldings Outside investment Hella South Africa (Pty) Ltd 49% Tenneco 25.1% Automotive Holdings SA (Pty) Ltd Shock absorbers Struts Track control arms Outside investment (74.9%) Overview of Metair 2006 financial results – Salient Features Group turnover increased by 23% to R2 642 million (2005: R2 151 million) Attributable profit after tax increased by 28% to R203.2 million (2005: R158.8 million) HEPS increased by 27% to 3317 cents (2005: 2603 cents) Dividend per share up to 1000 cents (2006: 850 cents) Sales of components to OEM’s up 20% to R1347.4 million – 51% of group turnover Automotive division gained market share in replacement market Overview of Metair EPS R 35 33.17 30 27.78 26.03 25 22.97 20 15.39 15 10 2002 2003 2004 2005 Compound growth – 21.2% 2006 Overview of Metair DPS R 12 10 10 8.5 8 8.5 7 6 4.5 5 4 2 0 2002 2003 2004 2005 2006 2007 Overview of Metair Cash generated by operations before working capital R’m 400 362 350 300 274 280 2004 2005 240 250 200 165 150 100 50 0 2002 2003 Compound growth – 21.7% 2006 Overview of Metair ROE Percentage 30% 25% 21% 21% 20% 20% 17% 16% 15% 10% 5% 0% 2002 2003 2004 2005 2006 Financial Review Callie van der Merwe Abridged group income statement 31 December 31 December 2006 2005 R’000 R’000 Revenue Cost of sales Gross profit Other operating income Distribution, administrative and other expenses Operating profit Interest income Interest expense Share of results of associates Impairment of investment in associate company Profit before taxation Taxation Profit for the year Minority interest Attributable to Equity holders of the Company 2,641,911 -2,050,455 591,456 30,142 -310,361 311,237 13,440 -6,846 7,100 0 324,931 -98,388 226,543 23,303 203,240 2,151,020 -1,692,776 458,244 50,698 -261,511 247,431 14,338 -10,104 3,236 -12,906 241,995 -70,540 171,455 12,656 158,799 Turnover analysis 2006 2005 9.2% 8.4% 20.2% 23.5% 51.1% 52.1% 19.3% 16.2% Non-auto Export After Market Original Equipment Turnover Segmentation Abridged group balance sheet Assets 31 December 2006 R’000 ASSETS Non-current assets Property, plant and equipment Intangible assets Investment in associates Defined benefit asset Deferred taxation Other non-current assets Current assets Inventory Accounts receivable Cash Financial assets at fair value Total assets 696,931 614,087 14,647 19,548 1,640 10,759 36,250 836,316 423,007 345,499 67,810 0 1,533,247 31 December 2005 R’000 576,137 502,118 11,676 18,249 9,094 35,000 792,889 309,486 248,428 139,011 95,964 1,369,026 Abridged group balance sheet Equity and liabilities 31 December 2006 R’000 31 December 2005 R’000 Share capital and premium Share-based payment reserve Treasury shares Non-distributable reserves Retained earnings Ordinary shareholders equity Minority interest Total equity 40,555 2,551 -101,508 16,755 1,039,954 998,307 79,055 1,077,362 36,414 1,831 -459 12,389 893,084 943,259 43,651 986,910 Non-current liabilities Interest bearing borrowings Post-employment medical benefits Deferred taxation Current liabilities Trade and other payables Borrowings Taxation Provisions for liabilities and charges Bank overdrafts Total liabilities Total equity and liabilities 89,077 5,069 15,228 68,780 366,808 299,335 13,052 9,092 15,569 29,760 455,885 1,533,247 126,138 53,252 14,681 58,205 255,978 210,875 15,829 9,687 13,154 6,433 382,116 1,369,026 Cash flow statement Operating activities Profit before taxation Non-cash items Working capital changes Cash generated from operations Finance charges Investment income Taxation paid Dividends paid Dividend income from associate Net cash inflow from operating activities Investing activities Proceeds on disposal of interest in subsidiary Net cash used in other investing activities Net cash outflow from investing activities Net cash outflow from financing activities Net decrease in cash and cash equivalents At beginning of the year Cash and cash equivalents at end of year 31 December 2006 R’000 31 December 2005 R’000 324,931 37,247 -119,915 242,263 -6,846 13,440 -89,857 -57,055 241,995 38,857 -77,492 203,360 -10,104 14,338 -74,434 -51,071 416 0 102,361 82,089 20,080 -165,065 -144,985 -147,868 -190,492 228,542 38,050 47,000 -116,336 -69,336 -14,645 -1,892 230,434 228,542 Financial management Each subsidiary is run on an autonomous basis with broad guide lines set by group Annual financial directors conferences are held where global parameters are agreed for budgeting purposes as well as financial parameters developed and group standards set Strict criteria in place for capital investments - Projects must achieve an IRR of 18% over 5 years Plant and machinery is amortised over the same period Assumption is that working capital is realised in the 6th year The ROA to render 22% within a reasonable period when capacity is reached. Contracts with OEM’s include pricing adjustments for: - Currency movements - Commodity price movements - Negotiated movement in operational expenses 100% of capital imports are covered forward at the time of signing the capital request 50% of net component import exposures are covered forward Industry Review Theo Loock South African vehicle market growth 2000 Total vehicle sales 2001 2002 2003 2004 2005 2006 F 2007 (including non-NAAMSA & excluding exports) Units 354 632 382 529 363 184 382 600 481 520 617 450 714 340 771 000 – 7.9% -5.1% 5.3% 25.9% 28.2% 15.7% 7.9% 68 031 108 293 125 306 126 661 110 507 139 912 179 854 220 000 – 59.2% 15.7% 1.1% -12.8% 26.6% 28.5% 22.3% 356 250 406 149 404 441 421 335 455 052 525 271 614 000 682 000 Growth – 14.0% -0.4% 4.2% 8.0% 15.4% 16.9% 11.0% GDP % 3.5% 2.7% 3.7% 3.1% 4.5% 5.1% 4.6% 4.1% Growth Total exports Units Growth Total domestic production Units F = forecast Source: NAAMSA; Economist Intelligence Unit; Business Monitor International (BMI) Total local passenger vehicle sales – units 000's 600 500 514 482 420 400 328 300 273 256 268 252 235 200 210 234 258 242 214 198 184 195 192 100 0 '90 '92 '94 '96 '98 '00 '02 '04 '06 Source: NAAMSA Total vehicle production and Exports – units 40% 900,000 800,000 27 614,000 27 455,052 110,507 220,000 421,335 126,661 125,306 108,293 300,000 200,000 250000 270000 100,000 235000 68,031 25,896 19,569 3 11,553 15,764 5 4 59,716 8 404,441 406,149 356,250 326,065 312,055 362,104 386,311 389,476 10% 600,000 400,000 179,854 19 18 700,000 500,000 139,912 20% 33 525,271 24 759000 29 720000 30 682,000 31 30% 33 807000 33 32 08 (P ro j) 09 (P ro j) 10 (P ro j) 0% 0 '95 '96 '97 '98 '99 '00 '01 Total vehicle production - units '02 '03 '04 '05 '06 Total vehicle exports - units 07 (P ro j) %Exports Source: NAAMSA South African new vehicle sales forecast 382,600 363,184 354,632 300,000 382,529 400,000 914,881 837,986 847,000 765,143 710,900 771,000 481,520 500,000 658,278 617,450 600,000 646,200 700,000 714,340 800,000 810,000 900,000 895,000 1,000,000 200,000 100,000 0 2000 2001 2002 2003 2004 Actual NAAMSA BMI 2005 2006 NAAMSA BMI original original 2006 2006 forecast forecast Forecast 2007 2008 2009 2010 Source: NAAMSA; BMI Operational Review Theo Loock Operational Review Domestic production increased to 587 719 vehicles in 2006 compared to 525 227 in 2005 Focus on continuous improvement programmes and Japanese Production Systems Business model with JV partners is to achieve globally benchmarked production, delivery and quality standards Headcount increased to 5 697 from 5 186 Smith Plastics received the Supplier Recognition Award Capital expenditure Capex over the past 3 years was as follows: - 2006: R166 million - 2005: R112 million - 2004: R108 million 2007 Capex is budgeted at R90 million – a significant portion will be invested in increased capacity at First National Batteries for non-automotive and automotive aftermarket products The businesses have invested sufficient capital to cope with the growth in production expected in 2008 and 2009 First National Battery Louis Laubscher 6 Buxton Street, East London 1931 2006 4 Dedicated Manufacturing Sites Settlers Way, East London : 9 200m2 Factory AUTOMOTIVE BATTERY MANUFACTURING 8000 Batteries per day also Technical Centre Buffalo View Road, East London : 6 000m2 Factory INDUSTRIAL BATTERY MANUFACTURING Forktruck Batteries : Standby Batteries : Mining Batteries Fort Jackson : 3 800m2 Factory PLASTIC INJECTION MOULDING 50 Ton – 860 Ton Injection Moulding Machines 20 Million Pieces per annum also Toolroom Liverpool Road, Benoni LEAD SMELTER 10 000 Tons Recycled Lead per annum also Warehousing & Distribution : Formation & Finishing Line : Marketing & Finance Divisions East London Automotive Battery Factory East London Automotive Battery Factory The First Speedshift Automotive Battery Production Line on the African Continent East London Industrial Battery Factory Spine Caster Tube Filling Computerised Acid Mixing Oxide Mill Fort Jackson Plastics Processing Plant 850 Ton Nissei Injection Moulding Machine Tool Design with Autocad 2d and 3d Interior view of Fort Jackson Battery Lid Tool Pb Battery Breaker Rotary Furnace Source of feedstock for lead smelter and polypropylene scrap for recycling capable of producing lead alloys of the highest quality Market Segments Industrial Automotive Export Standby Franchise Mining Original Equipment Materials Handling Solar Replacement Strategic Review & Prospects Theo Loock Strategic Review Wesco exits to Coronation Capital and Royal Bafokeng Holdings Stronger focus on activating balance sheet Exciting growth platform – well placed to be industry catalyst Experienced management team Growth strategy – organic and acquisitive Investment criteria Prospects – Industry The overall prospects remain positive for 2007 on the back of continued GDP growth Industry production expected to expand to 662 000 vehicles during 2007 benefiting from export growth Two high volume locally produced vehicles will run out in 2007 and new replacement models will be launched The labour environment is predicted to be challenging in 2007 Prospects - Metair 2007 will be a challenging year compared to 2006, before picking up in 2008 Industry is awaiting Government’s announcement in regard to the continuation of the Motor Industry Development Programme The exchange rate remains an important factor Continue to pursue opportunities in the South African automotive component manufacturing sector