Clinker (1)

Report
‘Small Talk’ – Small and Medium Market Cap Conference
26 February 2013
Presentation coverage
Who we are
and what we
do
• Diversified
open cast
miner and
materials
supplier
• “Delivering
consistent
growth”
Corporate
activity
•
•
•
•
What is
happening in
our
environment
Strategy & rationale • Focus on smaller
Clinker
sized projects
Infrasors
adds to Afrimat’s
BEE
sustainability
How are we
performing
financially
• Excellent cash
conversion
• Strong balance
sheet
• Consistent
dividend payer
The future
and what lies
ahead
• Acquisitions
paying off
• Market
remains under
pressure
• Diversification
underpins
sustained
performance
2
Group overview
Leading black empowered open cast miner and materials supplier
Strategically diversified through location and product range
3
Afrimat’s products
Products from mines:
Aggregates (crushed stone)
Metallurgical dolomite
Metallurgical quartzite
Agricultural lime
Clinker
Products from factories:
Concrete blocks
Concrete bricks
Pavers
4
Afrimat’s products (cont’d)
Products from readymix batch plants:
Readymix concrete
Readymix mortar
Services by the contracting team:
Contract crushing
Mobile screening
Drilling
Blasting
5
Supply market segments
Transport infrastructure:
Road building materials
Materials for railroads (e.g. ballast)
Industrial minerals:
Metallurgical dolomite
Quartzite
Energy infrastructure:
Materials for power stations (e.g. Medupi)
Materials for renewable energy projects
Materials for distribution network
6
Supply market segments (cont’d)
Building materials:
Affordable housing (Government funded)
Commercial building
Residential (Privately funded)
Agriculture:
Agricultural lime
Drainage stone
Paving
7
Our diversification
… portfolio
… and footprint
MINING & AGGREGATES
Commercial quarries (24)
Sand and gravel mines (8)
Dolomite mine (1)
Clinker (1)
CONTRACTING
Mobile Crushing
Drilling and Blasting
CONCRETE PRODUCTS
Concrete brick & block factories (9)
READYMIX
Batching sites (17)
… which generates a balanced consistent income stream
8
Strategic principles
Diversified:
Wide product range
Across wide geographic markets
Effective hedge against market volatility
Competitive advantage:
Geographic location
Unique and scarce products or
Operations with structural cost advantage
Innovation and creativity
Operational expertise
9
Corporate Activity
10
Acquisitions: The underlying strategy
The goal
Enhance sustainability, profitability and robustness
Targets
Acquisition purchase consideration below 15% of Afrimat market cap
In our space of expertise
High upside
Compensate for our weaknesses
Must fit strategically into our master plan
11
Infrasors transaction
Acquired 50.4% (control) at 35 cps amounting to R32 million
Competition Commission approved transaction
Infrasors:
Listed resources group involved in mining and beneficiation of minerals used in the
industrial, metallurgical, mining and construction sectors
Lyttelton Centurion Mine – opencast mining and beneficiation of a dolomite ore-body
Marble Hall Mine – opencast mining and beneficiation of a limestone
(metamorphosed dolomite) ore-body
Delf Sand – sand extraction and beneficiation of alluvial silica sand
Delf Silica Coastal – sand extraction and beneficiation of alluvial silica sand
Conditions precedent
ABSA (ring fenced) – no material changed to debt facilities, pricing or repayment
terms
12
Infrasors transaction (cont’d)
Rationale (product and assets)
Augment Afrimat’s industrial minerals diversification strategy
Add to the aggregates product offering
Expand geographic footprint
Operational involvement
Afrimat manager appointed to oversee operations
Take control of board
Implement Afrimat’s proven management, marketing, product development and
pricing strategies
Implement a proper BEE scheme
13
Clinker Group acquisition
Effective 1 March 2012
Purchase consideration R121
million (R95 million in cash
and R26 million shares)
F2012 PAT = R35.1 million
Business with unique
competitive advantage
Already well integrated into
Afrimat
Life expectation of operation
is 10 years
Marketing and research drive
shows possibility of
extending life of mine
14
Clinker Group
15
Clinker Group (cont’d)
16
Impact of acquisitions
Glen Douglas
Open pit dolomite mine in Gauteng
(metallurgical dolomite,
aggregates, agricultural lime)
R35 million purchase
consideration
Defensive product diversification
Industrial minerals with vast
applications
Attractive margins and strong
profitability
Life of mine: >30 years
Clinker
Clinker Supplies and SA Block
(brick & block manufacturing) in
Gauteng
Processor of clinker material –
used in manufacture of concrete
products
R121 million purchase
consideration
Product diversification which adds
to current product line with
geographic diversification
Vast applications
Attractive margins and strong
profitability
Life of project: 10 years +
17
BEE update
BEE ownerships is 26.1% (including 6.4 million shares
purchased)
Mega Oil SPV’s 7-year lock-in period expires November 2013
Afrimat BEE Trust purchased 6.4 million shares from Mega Oils
Afrimat provided funding (R40 million)
Purchased shares prior to expiry date to eliminate any BEE risk to mining rights
21.25% owned by black employees
18
Business Environment
19
Macro environment
Slower growth:
European economic woes continue
China and India showing signs of slower growth
USA – slow growth at best
In South Africa:
Increasingly exposed to a more uncertain China
Internal growth dynamic is fragile
Downgraded by credit agencies
Government’s focus on infrastructure backlog will act as economic
stimulus when implemented
Excellent opportunities continue to present themselves
20
Trends in Afrimat’s markets
Difficult time for aggregates business
Western Cape slow and under pressure
Diversification strategy has assisted Afrimat performance
Strong increase in tender activity in most market segments
Industrial markets stable, not as competitive as construction
Action against incompetent government departments (e.g. Provincial
roads to SANRAL)
Strong pipeline, specifically government infrastructure (small to medium
sized projects)
Exciting opportunities
21
GDP by sector
% y/y
20
15
10
5
0
-5
-10
-15
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Mining
Manufacturing
Construction
Wholesale and retail trade
Transport, storage and communication
Finance, insurance and real estate
Source: SARB, Standard Bank
22
Financial Overview
23
Financial highlights
Revenue
Operating profit
900,000
20,000
64 609
45,268
42,336
2010
2011
2012
75,623
40,000
65,521
506,717
455,874
15.4%
60,000
64,329
100,000
392,517
200,000
100,000
80,000
400,000
300,000
120,000
66,588
500,000
32.5%
671,349
600,000
398,622
700,000
385,499
800,000
489 420
140,000
0
2010
2011
2012
1st half 2nd half
2013
2013
1st half
2nd half
24
Segmental contributions to revenue
80%
71%
70%
67%
60%
50%
Returning to previous levels
40%
HY2011
HY2012
30%
17%
20%
19%
14%
12%
10%
0%
Mining & Aggregates
Readymix
Concrete Products
25
Headline earnings per share
HEPS for the six months
40.0
17.4%
Cents per share
35.0
30.0
25.0
29.6
29.9
29.8
2009
2010
2011
35.0
24.5
20.0
15.0
10.0
5.0
2008
2012
26
Net cash from operating activities
100,000
86,860
90,000
80,000
64.8%
77,378
Rands
70,000
60,000
52,712
51,305
50,000
39,337
40,000
34,222
30,000
20,000
10,000
0
2007
2008
2009
2010
2011
2012
Net cash at end of period: R106.4m (2011: R63.7m)
27
Dividends
Interim dividend
Cents per share
9.0
8
8.0
7.0
7
6.0
6
6
6
2010
2011
2012
Afrimat remains a
consistent dividend
payer
5
5.0
4.0
2008
2009
2013
28
What differentiates us?
Operating margin 13,2% vs. industry average 6,4%
Strong financial position:
Healthy cash flow
Strong balance sheet
Industry leading margins throughout economic cycle
Active innovative strategic positioning:
Good market intelligence and expertise
Continuously identifying and evaluating opportunities
Track record of successful acquisitions
Successful greenfield projects
Operational competence:
Flexible
Reliable quality supplier
Superior reaction time
29
Risk mitigation
Risk
Mitigating action
Slow delivery on
Government infrastructure
projects
Widely diversified over markets, products and
locations
Construction companies
under financial pressure
No single dominant debtor, all less than 4%
Macro-economic threats
Constant strategic management (avoiding
threats, exploiting opportunities)
Actively seeking and exploiting opportunities
Strict efficient credit control
Entrepreneurial culture and creative
innovative solutions
Strong balance sheet
Country risk in South Africa
Seeking opportunities outside South Africa
30
What does the future hold?
Prospects
Short term outlook:
Clinker group exciting
Glen Douglas a real gem
Remainder of the market conditions remain under pressure
Integration of Infrasors acquisition
Momentum drivers:
Power stations
Low cost housing
Roads – SANRAL, provinces
Renewable energy
Industrial minerals
Afrimat will pursue a conservative growth strategy
preserving the status of the balance sheet
32
Take away
Afrimat will pursue a conservative but strategic
diversified growth strategy
Preserve the status of the balance sheet
Continue to deliver high cash conversion rates
Final results due to be released during week of 6 May 2013
33
Q&A
Thank you for your attendance and participation
www.afrimat.co.za
For any further Investor Relations questions please contact:
Andries van Heerden (CEO): 021-917-8840 or
Vanessa Rech (Keyter Rech Investor Solutions): 011-447-8656
34

similar documents