| CURRENTLY VIEWING: Final Results for the year ended 30 June » Commentary |
| |
COMMENTARY
Earnings for the financial year to 30 June 2011 have increased by 117,6% on
the previous year to R3,2 billion due mainly to the significant increase in the
earnings of Assmang Limited (Assmang), and the resulting increased
commissions earned on the higher sales of Group products, compared to
the previous financial year. The increase in earnings for the year was due to
a stronger demand for all Group products and in particular substantially
higher prices for iron ore across the year. Strength in the iron ore price was
driven by demand from China where total steel production is expected to
reach record levels during the current calendar year. However, the effect of
the higher iron ore prices on earnings was partly offset by the impact of the
stronger Rand, particularly in the second half.
As a result of the trading conditions described above, Assmang's earnings
increased by 111,8% to R5,8 billion compared to the previous year. Assore
holds a 50% interest in Assmang, which is proportionately consolidated in
accordance with International Financial Reporting Standards (IFRS).
Sales volumes
In line with higher crude and stainless steel production levels, sales volumes
for iron ore and chrome products were higher in the current financial year. In conjunction with the increased prices for iron ore, Assmang's turnover for
the year under review increased to R19,1 billion (2010: R12,9 billion). The
following table sets out the sales volumes of Assmang's commodities for the
year under review:
|
2011
'000 M tons |
2010
'000 M tons |
%
change |
| Iron ore |
10 006 |
9 799 |
2 |
| Manganese ore* |
2 882 |
3 095 |
(7) |
| Manganese alloys* |
218 |
238 |
(8) |
| Charge chrome |
238 |
189 |
26 |
| Chrome ore* |
373 |
272 |
37 |
*Excluding intra-group sales to alloy plants
Capital expenditure
The bulk of The Group's capital expenditure occurs in Assmang, and
amounted to R4,1 billion (2010: R3,3 billion) for the year under review. The
major capital expenditure for the year occurred in the iron ore and
manganese divisions of Assmang. A total of R2,8 billion was spent on the
ongoing infrastructural development at the Khumani Iron Ore Mine, which will result in the mine capacity increasing to 16 million sales tons per annum
from 1 July 2012. R313 million was spent on rebuilding manganese and
chrome furnaces at Cato Ridge Works and Machadodorp Works. Apart from
the expenditure in Assmang, R38 million has been spent on further
developing two underground mines at the chromite mines at Rustenburg
Minerals, which are expected to meet their planned production volumes
during calendar 2013.
Outlook
Although it is anticipated that world steel production will reduce marginally
in the second half of the calendar year, from the record levels in the first half
of the year, the iron ore market is expected to remain tight due to continued
strong levels of production in Asia. The world manganese and chrome ore
and alloy markets are currently in oversupply, and although prices appear to
have stabilised, it is unlikely that there will be a significant recovery in prices
in the short term. Further short term volatility is also expected, due to the
sovereign debt issues in the United States, and certain European countries.
Of particular concern to The Group, are the continuing increases in the cost
prices of electricity and other local inputs, which are placing pressure on the
sustainability of its smelting operations. Assmang and Transnet continue to
negotiate increased capacity allocation for iron and manganese ores railed
from the Northern Cape. Compounded by the above, the results of The Group remain significantly exposed to fluctuations in exchange rates.
Dividends
The results in this announcement include the interim dividend of 200 cents
(2010: 100 cents) per share which was declared on 15 February 2011 and
paid to shareholders on 14 March 2011. In line with the results for the year,
the Board has declared a final dividend of 250 cents per share, making a
total dividend for the year of 450 cents (2010: 340 cents) per share. The final
dividend will be paid to shareholders on or about 19 September 2011 and in
accordance with IFRS, is not included in the results in this announcement as
it was declared after year-end.
Review by auditors
Ernst & Young Inc, The Group's auditors, have reviewed and issued an
unmodified report on the financial results included in this announcement in
accordance with ISRE 2410 - Review of Interim Financial Information
Performed by the Independent Auditor of the Entity. A copy of their report is
available for inspection at the registered office of the Company.
Accounting policies and basis of preparation
The financial results for the year under review have been prepared under
the supervision of Mr CJ Cory, CA(SA) and in accordance with IAS 34 -
Interim Financial Reporting. The accounting policies applied are consistent
with those adopted in the financial year ended 30 June 2010. Amendments
to, and interpretations of IFRS effective in the year have not had any impact
on the results or disclosures of The Group, while no other impacts resulted
due to a set of improvements representing mostly minor changes, as
published by the International Accounting Standards Board. The
comparatives for earnings and dividends per share, and weighted average
number of ordinary shares in issue have been restated for the subdivision of
5 for 1 ordinary shares on 10 September 2010.
Event after the reporting period
The special and ordinary resolutions tabled at the general meeting of
shareholders on 10 August 2011 relating to the first phase of The Group's
third empowerment transaction were approved by the requisite majorities of
shareholders. In terms of the transaction, 11,8% of Assore's shares have
been warehoused in a special purpose vehicle (SPV), prior to being disposed
of into a broad-based BEE structure. In accordance with the resolutions,
the shares were acquired from Shanduka Resources (Proprietary) Limited
on 19 August 2011, for which bridging finance was granted by the
Standard Bank of South Africa Limited. The impact of this transaction on The Group's statement of financial position is an increase in long term liabilities
of R2,8 billion, and a decrease in equity, in the form of treasury shares, of
R2,8 billion.
Directors
Since the issuing of the Company's previous annual report, the following
changes to the board took place, on the following dates:
- 11 November 2010 - Mr RJ (Bob) Carpenter stood down as
Deputy Chairman, after 47 years of service with The Group, and on
28 February 2011 resigned as an executive director, remaining on the
Board in a non-executive capacity;
- 11 November 2010 - Mr EM (Ed) Southey was appointed as Deputy
Chairman and Lead Independent Director;
- 8 March 2011 - Mr NG Sacco resigned as alternate director;
- 3 May 2011 - Mr DMJ (Don) Ncube was appointed as an independent nonexecutive
director; and
- 19 August 2011 - following the conclusion of the first phase of the
third empowerment transaction, Mr MC (Cyril) Ramaphosa (and his
alternate, Mr RM Smith) resigned as non-executive director.
Declaration of final dividend
Final dividend No. 109 of 250 cents per share was declared on
24 August 2011, in the currency of the Republic of South Africa. The salient
dates are as follows:
• Last day for trading to qualify and participate in the final dividend
(and change of address of dividend instructions) |
Friday, 9 September 2011 |
| • Trading "ex dividend" commences |
Monday, 12 September 2011 |
| • Record date |
Friday, 16 September 2011 |
| • Dividend payment date |
Monday, 19 September 2011 |
Share certificates may not be dematerialised or rematerialised between
Monday, 12 September 2011 and Friday, 16 September 2011, both days
inclusive.
On behalf of the Board
|
|
Desmond Sacco
Chairman |
CJ Cory
Chief Executive Officer |
|
|
Johannesburg
25 August 2011 |
|
|
|
