Transcript HARNESSING THE POWER OF THE EARTH GROUP FINANCIAL RESULTS PRESENTATION 2003 For the year ended 30 June 2003 www.kumbaresources.com CON FAUCONNIER CHIEF EXECUTIVE KEY FINANCIALS Revenue Net operating profit R.

HARNESSING THE POWER OF THE EARTH
GROUP FINANCIAL RESULTS
PRESENTATION 2003
For the year ended 30 June 2003
www.kumbaresources.com
CON FAUCONNIER
CHIEF EXECUTIVE
2
KEY FINANCIALS
385
Revenue
Net operating profit
R 7 469 m
264
R 1 212 m
195
Headline earnings
Headline earnings
per share
Dividend per share
R
784 m
264 cents
60 cents
FY01
FY02
FY03
Headline EPS
Sound performance despite challenging environment
3
HIGHLIGHTS
Solid operating performance
Heavy Minerals
• Acquired controlling interest in Ticor Ltd
• Furnace #1 start-up
First venture into Chinese operations
Despite adverse market conditions, 60 cents dividend
declared
Realising diversification strategy
4
RAND VOLATILITY EFFECT
R/US$
16
R10.37
R7.42
12
• Currency impact:
10c  R 45 m EBIT
• Unrealised currency
translation impact R 73 m
8
average realised:
4
R10.18
R9.01
FY02
FY03
• Ongoing cost focus
0
Bottom line impacted by exchange rate
5
HEAVY MINERALS
• Holding in Ticor Limited increased to 51.4%
• Ticor Limited now a subsidiary – results
consolidated from 1 April 2003
• Ticor South Africa
• Mine & MSP performance
• First production of slag and pig iron
• First shipments
Diversification, control and growth …
6
STAKEHOLDER ISSUES
• Competition Tribunal
• Mineral and Petroleum Resources Development Act
• Mining Charter and Scorecard
• Royalties Bill
• Empowerment in Kumba
• Wage negotiations
• HIV/AIDS
7
MIKE KILBRIDE
EXECUTIVE DIRECTOR OPERATIONS
HARNESSING THE POWER OF THE EARTH
8
SAFETY, HEALTH & ENVIRONMENT
Lost day injury frequency rate
4
• International environmental
certifications at Sishen and
Zincor
3
• Strategy to achieve
international certification at
all operations
1
0
Zero tolerance… key focus
FY03
2
FY02
• Lost time injuries sustained
below industry average
5
FY01
• Fatalities reduced by 50%
9
IRON ORE – MARKETS
• Strong
international
demand driven by
China
• Kumba has 7.6%
of Chinese
imports
• Strong domestic
sales
• 9% price increase
Mt
120
100
80
Total
Chinese
imports
60
40
10
8
6
4
2
0
FY'98 '99 '00 '01 '02 '03
Chinese market driving growth
Kumba
Chinese
exports
Mt
% Share
10
IRON ORE – OPERATIONS
• Total production 28.6 Mt
• Production record at
Sishen 26.2 Mt
• Exports record 20.9 Mt
• Total tonnes mined +7%
• Focus on selective
mining
Mt
30
28
26
24
22
20
18
16
14
28.6 Mt
20.9
Mt
'99
'00
Export sales
Steady increase in output
'01
'02
'03
Production
11
IRON ORE - LOGISTICS
Sishen-Saldanha rail performance
• Railage record
26.1 Mt
Mt
30
• 29 Mtpa
expansion in
progress
25
• Further expansion
under
investigation
15
29
26.1
20
10
'99
'01
Kumba
'03
(Target)
'05(T)
Other
Expansion critical for further growth in exports
12
COAL – MARKETS
Coal revenue profile
• Strong demand
from metals market
• High volumes to
Matimba sustained
- 13.1 Mt
Domestic
9%
Exports
17%
Eskom
43%
• Record demand
from Iscor - 2.8 Mt
• Improved sales mix
Metals
31%
Valuable earnings contributor
13
COAL – OPERATIONS
Mt
20
• Good operational
performance
18
• Strong continuous
improvement focus
14
• Threat from rail
tariffs
10
Coal production volumes
16
12
'00
'01
Grootegeluk
Tshikondeni
'02
'03
Leeuwpan
Durnacol
14
Process overview
TICOR SA - PROCESS OVERVIEW
Hydraulic
mining
Primary
Wet Plant
ROM
HMC
Mineral
Separation
Plant
Roaster /
URIC
crude
ilmenite
Furnaces
Metal plant
Pig iron
ilmenite
Slag plant
Sand tailings
Slimes
•
•
•
•
Zircon
Rutile
Chloride slag
Sulphate slag
Mine/PWP and MSP have met all performance tests
Furnace #1 ramp-up on schedule
Slag plant in process of ramp-up
Furnace #2 construction ahead of schedule
15
HEAVY MINERALS – OPERATIONS
Ticor SA (60%)
Ticor Ltd (51.4%)
• Successful ramp-up
TiWest results:
• Zircon production 53 kt
• Zircon production 80 kt
• Rutile production 20 kt
• Rutile production 36 kt
• Ilmenite production
91 kt
• Synthetic rutile
production 179 kt
• Pigment production 94 kt
World no 3 in TiO2 units
16
BASE METALS - MARKETS
Zinc metal price
• Price remains
depressed
• Rand price down
13%
• Lower treatment
charges
US$
1,300
ZAR
10,000
1,200
9,000
1,100
8,000
1,000
7,000
900
800
6,000
700
5,000
FY00 FY01 FY02 FY03
US$/t
ZAR/t
17
BASE METALS - OPERATING RESULTS
Rosh Pinah
• Record
concentrate output
from Rosh Pinah
91
• Sales increased
by 5%
72
75
'00
'01
'02
105
105
'01
'02
Zn conc.
‘000t
Zincor
• Record zinc metal
production 115 kt
72
Zn metal
‘000t
103
'00
'03
115
'03
18
ZINC BUSINESS IMPROVEMENT
Zn refinery cost curve
USc/lb
35
• Despite low cost
operations, margin under
pressure
• Initiative to target
R 100 m improvement
30
25
20
Zincor
15
10
5
0
Source: Brooke Hunt
19
INDUSTRIAL MINERALS
• Record
ferrosilicon
production
FeSi
production
(t)
• Good market
share growth
4669 4333
4518
4105
'99
'00
'01
'02
5350
'03
1.26 1.30 1.32
• Record dolomite
sales
Dolomite
sales
(Mt)
0.97 0.92
'99
Strategically important
'00
'01
'02
'03
20
OPERATIONAL EXCELLENCE
Kumba continues to drive initiatives associated with the
performance improvement programme
2003 actuals
Increased sales tonnage
Throughput
to the value of R 429 m
Costs
Contained production
costs below inflation R 29 m
2004 targets
Targeted increase in sales
tonnage of 2% to the value
of R 426 m
Targeted reduction in real
production costs of 2% to
the value of R 123 m
21
DIRK VAN STADEN
EXECUTIVE DIRECTOR FINANCE
HARNESSING THE POWER OF THE EARTH
22
REVENUE
R million
FY03
FY02
% Change
Iron ore
4 234
4 340
(2)
Coal
1 638
1 489
10)
Base metals
892
941
(5)
Heavy minerals
587
227
159)
Industrial minerals
78
57
37)
Other
40
128
(69)
7 469
7 182
4)
5 year compound annual growth rate of 14%
23
Total
OPERATING PROFIT / MARGIN
FY03
FY02
% Change
Rm)
(%)
Rm
(%)
in R-value
Iron ore
882)
21
1 221
28
(28)
Coal
279)
17
255
17
9)
Base metals
15)
2
102
11
(85)
Heavy minerals
59)
10
54
24
9)
Industrial minerals
21)
27
15
26
40)
Other
(44)
36
Total EBIT
1 212)
16
1 683
23
(28)
Total EBITDA
1 744)
23
2 137
30
(18)
US$/R exchange rate realised
9.01)
10.18
Valuation rate at end of period
7.42)
10.37
5 year compound annual growth rate of 21%
24
EBIT COMPARISON
• Higher iron ore and
heavy minerals volumes
• Lower iron ore prices
R million
138
655
483
1683
360
• Higher coal prices
77
1212
• Stronger currency impact
• Higher production costs:
Significant currency impact
FY03 EBIT
Distribution
cost
Production cost
Total exchange
rate impact
Price
Volume
• maintenance,
stripping,
environmental,
insurance
FY02 EBIT
• volumes
25
CURRENCY IMPACT
R million
FY03
EBIT
1 212)
1 683)
73)
(9)
Unrealised translation loss/(gain)
Currency exchange movements
92)
Derivatives
(19)
Realised exchange rate impact
EBIT excluding exchange rate impact
FY02
573)
1 858)
1 674)
23)
23)
Margin excl. exchange rate (%)
Rand appreciation reduces margin
26
EARNINGS
R million
FY03
Net operating profit (EBIT)
FY02
% Change
1 212)
1 683)
(28)
(244)
(242)
(1)
(23)
(75)
70)
2)
83)
(98)
(229)
(465)
51)
718)
984)
(27)
-)
(8)
718)
976)
66)
122)
Headline earnings
784)
1 098)
(29)
Headline earnings per share (cents)
264)
385)
(31)
Excluding after tax currency impact
432)
383)
13)
Average number of shares in issue (million)
297)
285)
4)
Net financing cost
Goodwill and impairment
Equity income
Taxation
Profit after taxation
Outside shareholders’ interest
Attributable earnings
Adjustments
HEPS 264 cents
(26)
27
CASH FLOW
R million
FY03
Opening net debt
FY02
(1 143)
(2 541)
780)
2 175)
Heavy minerals project capital
(923)
(631)
Other capital expenditure
(463)
(454)
Net impact of consolidation of Ticor Ltd
(510)
Net cash flow from operating activities
Net cash used in investing activities
Other
2)
Other cash flow movements
Non-cash flow movements in net debt
(25)
349)
(117)
(16)
(Increase)/decrease in net debt
(1 231)
1 398)
Closing net debt
(2 374)
(1 143)
Net debt / equity ratio 39%
28
DEBT STRUCTURE
R million
Drawn
Undrawn
Long term
Maturity profile
2004
407
Corporate
1 403)
2005
697
Heavy minerals project finance
1 059)
60 2006
1 126
746)
2007
273
Ticor Ltd
3 208)
Short term
Total debt
Cash and cash equivalents
Net debt
130)
3 338)
1 820 After 2007
705
3 208
(964)
2 374)
Post FY03 pre-tax divestment inflow: R 100 million
29
CAPITAL EXPENDITURE
R million
FY04(E)
FY03
FY02
Iron ore
241
211
254
Coal
205
125
99
Base metals
127
73
90
Heavy minerals - Ticor SA
- Ticor Ltd
480
32
923
25
631
-
4
5
3
42
24
8
1 131
1 386
1 085
Industrial minerals
Other
Total
30
TICOR LTD CONSOLIDATION IMPACT
R million
Consolidated
Group
Ticor Ltd
effect
Revenue
7 469
275
EBIT
1 212
35
2
57
Attributable earnings
718
49
Headline earnings
784
46
2 374
432
Equity income
Net debt
31
RATIOS
R million
FY03
FY02
Margin excluding captive arrangements
EBIT (%)
22
30
EBITDA (%)
28
35
EBIT (times)
5.0
7.0
EBITDA (times)
7.1
8.8
Return on equity - attributable income (%)
15
20
Net debt / equity (%)
39
22
Net financing cost cover
32
CON FAUCONNIER
CHIEF EXECUTIVE
33
STRATEGY
• Strategic thrusts
• Empowerment
• Northern Cape iron ore industry
• Heavy minerals
• China opportunities
• RBCT Phase 5 expansion
• Review of non-core assets
• Mincor
• Safore
• AST
Focused portfolio with clear strategic direction
34
OUTLOOK
• Business climate remains challenging
• Strong Rand environment
• Pedestrian global growth
• High oil prices
• Continued domestic cost pressures
• Given these assumptions, earnings are likely to be
adversely affected
• But, earnings will be underpinned by:
• Solid operational performance
• Higher iron ore prices
• Growing contribution from heavy minerals
• Continued strong focus on cost and operating efficiencies
35
HARNESSING THE POWER OF THE EARTH
THANK YOU.
www.kumbaresources.com
ADDITIONAL SLIDES
37
KEY DATES
Financial year end
30 June 2003
Dividend declaration
19 August 2003
Last date to trade cum dividend
18 September 2003
Ex dividend trade commences
19 September 2003
Record date
26 September 2003
Dividend payment
29 September 2003
Annual Report distribution
30 September 2003
Annual General Meeting
19 November 2003
38
CAPITAL EXPENDITURE
R million
Sustaining and environmental
FY04 (E)
FY03
FY02
394
264
308
- Ticor SA
480
923
631
- Ticor Ltd
-
-
-
257
199
146
1 131
1 386
1 085
Expansion
• Heavy minerals
• Group (other)
39
DEPRECIATION PER SEGMENT
R million
FY03
FY02
Iron ore
235
215
Coal
137
130
Heavy minerals
92
47
Base metals
41
29
6
6
21
27
532
454
Industrial minerals
Corporate
Total
40
EBIT CONTRIBUTION FY03
Industrial
minerals
Heavy
2%
minerals
5%
Base
metals
1%
Coal
22%
Iron ore
70%
41
COAL – PHYSICAL INFORMATION
Coal sales volumes
Coal production volumes
Mt
20
Mt
20
15
15
10
10
5
5
0
0
'01
'02
'03
Export
Other domestic
Eskom
'01
'02
'03
Other
Coking coal
Steam coal
42
HEAVY MINERALS – MARKETS
Indicative steady state Ticor SA
revenue contribution
• Strong Chinese
demand for
Zircon
• Flat US
economic activity
Rutile
7%
Sulphate
slag
11%
Ilmenite
4%
Chloride
slag
47%
LMPI
15%
Zircon
16%
Will develop into second largest business
43