COMMENTARY
Earnings for the financial year to 30 June 2012 have increased by 25,3% on the previous year to
R4,0 billion. The increase is mainly due to the increased earnings of Assmang Limited (Assmang),
which increased by 19,0% to R6,9 billion, based on the trading conditions described below. Assore
holds a 50% interest in Assmang, which is proportionately consolidated in accordance with
International Financial Reporting Standards (IFRS). Commissions earned on the higher sales of Group
products increased by 23,2% compared to the previous financial year and also contributed positively
to the Group’s earnings.
The increased level of earnings for the year was due mostly
to higher sales volumes of iron ore and despite lower US
Dollar sales prices for all of the Group’s products, the
weaker Rand/US Dollar exchange rate offset these lower sales
prices to a large degree. This resulted in revenues from
iron ore increasing substantially, while those for the other
products of the Group were at similar levels compared to the
previous financial year.
Sales volumes
Sales of iron ore increased mainly as a result of Assmang’s Khumani Iron Ore Mine ramping up its
production to 14 million tons per annum. Production efficiencies led to increased volumes of
manganese alloys in line with the Group’s strategy to increase its ferromanganese capacity. While the
closure of chrome furnaces at Machadodorp Works for their conversion to manganese furnaces led to
decreased sales of charge chrome, it did however result in additional chrome ore volumes being
available for export.
Assmang’s turnover for the year under review increased to R23,7 billion (2011: R19,1 billion), and the
following table sets out the sales volumes of Assmang’s products for the year under review:
| |
Year ended 30 June |
Increase/ |
| Metric tons ’000 |
2012 |
2011 |
(decrease) % |
| Iron ore |
14 753 |
10 006 |
47 |
| Manganese ore* |
2 905 |
2 882 |
1 |
| Manganese alloys* |
270 |
218 |
24 |
| Charge chrome |
174 |
238 |
(27) |
| Chrome ore* |
521 |
373 |
40 |
*Excluding intra-group sales to alloy plants
Capital expenditure
The bulk of the Group’s capital expenditure occurs in Assmang and amounted to R4,5 billion
(2011: R4,1 billion) for the year under review. R3 billion was spent at the Khumani Iron Ore Mine, with
R1,3 billion being spent on the Khumani Expansion Project (KEP), designed to produce 16 million tons
of ore per annum. The KEP has been completed on schedule and within budget. A further R1,2 billion
was spent on development of the mine, largely on waste-stripping. Assmang’s Manganese Ore Mines
spent R450 million, most of which was for replacement capital items and mobile mining equipment.
The amount includes R86 million of the R5,6 billion intended spend on the expansion of the
manganese mines. R153 million was spent on the ongoing development of the Nchwaning Manganese
Mine. A further R150 million was spent at Cato Ridge Works on environmental and other sustainability
projects. The conversion of two chrome furnaces to ferromanganese furnaces at Machadodorp Works
continues and it is expected that the furnaces will be commissioned in the third calendar quarter of
2012. Apart from the expenditure in Assmang, R39 million has been spent on the development of two
underground chromite mines at Rustenburg Minerals, the scheduled commissioning of which is
expected to meet their planned production volumes during calendar 2013.
Outlook
Sovereign debt issues in Europe, the apparent economic slowdown in China and subdued recovery in
the United States, continue to hamper world economic growth, which is critical to the level of global
steel production and predicting the Group’s performance. Although world steel production in the first
half of calendar 2012 was at record levels, this level is expected to decline over the next six months,
which could result in a reduction in demand for the Group’s products. In addition, global supply of the
Group’s products has increased which has put pressure on prices. This, together with the volatility in exchange rates, makes it difficult to comment on the performance of the Group for the next six
months with any confidence.
Dividends
The results in this announcement include the interim dividend of 250 cents (2011: 200 cents) per share
which was declared on 16 April 2012 and paid to shareholders on 14 May 2012. In line with the results
for the year, the Board has declared a final dividend of 300 cents (2011: 250 cents) per share, making a
total dividend in respect of profit for the year of 550 cents (2011: 450 cents) per share. The final
dividend will be paid to shareholders on or about 1 October 2012 and, in accordance with IFRS, is not
included in the results contained 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
condensed 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 condensed 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 as it applies to final
results. The accounting policies applied are consistent with those adopted in the financial year ended
30 June 2011. Revisions and amendments to, and interpretations of IFRS effective in the year and
adopted early, have not had a material impact on the results or disclosures of the Group..
Directors
Since the interim results announcement on 15 February 2012, the following changes to the Board have
taken place:
- 3 May 2012 – Mr DMJ Ncube resigned as independent non-executive director;
- 31 August 2012 – Mr PC (Phil) Crous resigned as Group Technical and Operations Director, following
his decision to take early retirement; and
- 1 September 2012 – Messrs AD (Alastair) Stalker and BH (Tiaan) van Aswegen, both previously
alternate directors, were appointed as Group Marketing Director and Group Technical and Operations
Director respectively.
Declaration of final dividend
Shareholders are advised that the board of directors (“the Board”) has declared Final Dividend Number
111 (“the Dividend”), of 300 cents (2011: 250) per share (gross) for the year ended 30 June 2012 on
31 August 2012.
In terms of paragraph 11.17 of the Listings Requirements of JSE Limited, shareholders are advised of
the following with regard to the declaration:
- the Dividend has been declared from accumulated revenue;
- the local Dividend Tax rate is 15%;
- the Company does not have any Secondary Companies Tax (STC) credit available to reduce the
impact of the Dividend Tax;
- the net local dividend amount is 255 cents per share for shareholders liable to pay the
Dividends Tax;
- the issued ordinary share capital of Assore is 139 607 000 shares; and
- 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
|
Thursday, 20 September 2012 |
- Trading “ex dividend” commences
|
Friday, 21 September 2012 |
|
Friday, 28 September 2012 |
|
Monday, 1 October 2012 |
Share certificates may not be dematerialised or rematerialised between Friday, 21 September 2012
and Friday, 28 September 2012, both days inclusive.
| On behalf of the Board |
|
| |
|
| Desmond Sacco |
CJ Cory |
| Chairman |
Chief Executive Officer |
| |
|
| Johannesburg |
|
| 3 September 2012 |
|
|
