Reviewed condensed consolidated provisional financial results for - - PowerPoint PPT Presentation

Reviewed condensed consolidated provisional financial results

for the year ended 28 February 2019

Afrimat final results presentation for the year ended 28 February 2019

Core message

2

Strategic diversity enabled growth Sound business and financial fundamentals remain key Continue to drive diversification in a responsible manner

Afrimat final results presentation for the year ended 28 February 2019

Summary of the period

3

Construction Materials

• Difficult trading

conditions

• Political uncertainty

and economic slowdown

Bulk Commodities

• Positive contribution

Industrial Minerals

• Slightly down
• Better second half

Operating Profit Importance of a balanced portfolio

Afrimat final results presentation for the year ended 28 February 2019

Operational overview

4

What we do

1

Afrimat final results presentation for the year ended 28 February 2019

Group overview

5

• A supplier of quality materials sourced from our open pit mines and

quarries

• Strategically diversified through product range, target market and

location

Afrimat final results presentation for the year ended 28 February 2019

Our products

6

Bulk commodities Construction materials Industrial minerals

Afrimat final results presentation for the year ended 28 February 2019

• Iron ore
• Coal

Bulk commodities

7

• Non-binding indicative offer to

acquire issued share capital

• f Universal Coal plc

(“Universal’) *

• Maximum consideration of

A$ 0.40 per share

(*) Refer to slide 49 - 52 for additional information. Due diligence in progress.

Afrimat final results presentation for the year ended 28 February 2019

• Lime
• Metallurgical

dolomite

• Metallurgical

quartzite

Industrial minerals

8

Afrimat final results presentation for the year ended 28 February 2019

• Aggregates
• Bricks & blocks
• Readymix concrete

Construction materials

9

Afrimat final results presentation for the year ended 28 February 2019

Diversified portfolio and footprint

which generates a balanced, consistent income stream

Northern Cape Northern Cape

1

Western Cape Western Cape

27

Eastern Cape Eastern Cape

1

KwaZulu-Natal KwaZulu-Natal

17

Mpumalanga Mpumalanga

4

Limpopo Limpopo

Mozambique Mozambique

2

Gauteng Gauteng

3 1

Free State Free State

7

South Africa South Africa Construction Materials Commodities Industrial Minerals

2 4 3

25 Commercial quarries 6 Sand & gravel mines 4 Clinker sources Mobile crushing & screening Drilling & blasting 9 Concrete brick & block factories 22 Readymix batching sites 2 Limestone mines 2 Dolomite mines 1 Silica mine 1 Iron ore and manganese mine

10

Afrimat final results presentation for the year ended 28 February 2019

• Company positioning
• Company culture
• Strategic management

What makes Afrimat different?

11

Afrimat final results presentation for the year ended 28 February 2019

• Primarily focused on mid-tier open pit mining
• Unique competitive advantage
• Geographic location
• Unique metallurgy
• Structural cost advantage
• Highly entrepreneurial culture
• Hedged against economic volatility through wide diversification

Company positioning

12

Critical set of criteria used when potential acquisitions are being evaluated

Afrimat final results presentation for the year ended 28 February 2019

• Strong operational efficiency –

executing ability

• The right people in the right

positions

• Synergistic teamwork
• Customer focus
• Values based entrepreneurial

culture

Company culture

13

Afrimat final results presentation for the year ended 28 February 2019

• Companywide understanding of desired future
• Fundamental understanding of market
• Good understanding of own abilities
• Continuous research of business environment
• Facing the brutal facts
• Meticulous strategy execution
• Financial discipline: making the returns

Strategic management

14

Afrimat final results presentation for the year ended 28 February 2019

Our performance

15

What the diversification strategy is delivering

2

Afrimat final results presentation for the year ended 28 February 2019

Headline earnings per share (HEPS) comparison

16

• 4.00
• 3.00
• 2.00
• 1.00

0.00 1.00 2.00 3.00 4.00 5.00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

• - Afrimat
• - Sephaku
• - Raubex
• - PPC
• - CIL

* * *

* Interim HEPS

Growth through diversification

Glen Douglas Clinker Infrasors Cape Lime Demaneng

Profit history with and without acquisitions

50 100 150 200 250 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Headline earnings per share Reality without strategic acquisitions

Positive value gap

Afrimat final results presentation for the year ended 28 February 2019

Operational overview

18

Financial review

3

Afrimat final results presentation for the year ended 28 February 2019

Financial overview

19

Exceptional cash generation Strong quality of earnings across the group Continued focus

• n astute capital

allocation

Afrimat final results presentation for the year ended 28 February 2019

Financial overview

20

Group revenue increased to R3,0bn Tax rate HEPS increased to 234,1 cps Operating profit margin Final dividend per share of 62,0 cps Return on net

• perating assets

Net debt:equity ratio improvement from 35,5%

24,6% 27,9% 29,6% 15,9% 47,6% 25,4% 23,8%

NAV per share of 1 030 cents

15,3%

Afrimat final results presentation for the year ended 28 February 2019

Operating profit (R’000)

Financial overview

21

Revenue and operating profit

1 030 098 1 003 237 1 153 258 1 184 592 1 552 835 968 502 966 549 1 074 899 1 196 402 1 413 564 500 000 1 000 000 1 500 000 2 000 000 2 500 000 3 000 000 3 500 000 2015 2016 2017 2018 2019 1st half 2nd half 127 349 159 623 206 152 194 244 202 669 152 698 160 765 200 443 156 155 268 483 50 000 100 000 150 000 200 000 250 000 300 000 350 000 400 000 450 000 500 000 2015 2016 2017 2018 2019 1st half 2nd half

24.6% 34.5% Contribution from operations margin 15,9% (2018: 14,7%)

Revenue (R’000)

Afrimat final results presentation for the year ended 28 February 2019

Headline earnings per share – full year

22

Cents per share

135.6 156.6 196.4 180.7 234.1 50 100 150 200 250 2015 2016 2017 2018 2019 29,6% 2019 – Impairment of goodwill of R20,5m in Afrimat Concrete Products Proprietary Limited

Afrimat final results presentation for the year ended 28 February 2019

Segmental makeup

23 Gauteng Glen Douglas Western Cape KwaZulu-Natal Eastern Cape Free State Limpopo Mpumalanga Mozambique Northern Cape Infrasors Cape Lime Aggregates: Blocks and bricks Readymix Iron Ore (Demaneng)

Afrimat final results presentation for the year ended 28 February 2019

Contribution from operations

24

Contribution from operations margin (%) FY2019 FY2018 Construction Materials 10,9% 16,7% Bulk Commodities 29,5% (19,0)% Industrial Minerals 14,3% 15,8% Overall 15,9% 14,7%

59% 18% 23%

Revenue 2019

Construction Materials Industrial Minerals Bulk Commodities

69% 24% 7%

Revenue 2018

Construction Materials Industrial Minerals Bulk Commodities

Afrimat final results presentation for the year ended 28 February 2019

Segmental operating profit

25 190 182 78 012 201 329 Construction Materials Industrial Minerals Bulk Commodities

Operating profit 2019 (R’000)

274 580 88 393

• 33 443

Construction Materials Industrial Minerals Bulk Commodities

Operating profit 2018 (R’000)

Operational overview

42% 15% 17% 19% 7%

February 2018

Traditional business Glen Douglas Infrasors Clinker Group Cape Lime

26

Well diversified contribution from operations 17% 8% 9% 16% 7% 43%

February 2019

Traditional business Glen Douglas Infrasors Clinker Group Cape Lime Demaneng * Excluding Demaneng loss of R33 million

Afrimat final results presentation for the year ended 28 February 2019

Net cash from operating activities – full year

27

Rands (‘000’s)

CAGR of 11,92% (2015 – 2019)

261 646 320 339 406 046 410 484

• 50 000

100 000 150 000 200 000 250 000 300 000 350 000 400 000 450 000 2015 2016 2017 2018 2019 200 960 280 470 79 510 326 536 79 510

Afrimat final results presentation for the year ended 28 February 2019

Statement of financial position - assets

28

R’000 Reviewed Feb 2019 Audited Feb 2018 Property, plant and equipment 1 469 837 1 417 845 Intangible assets 221 873 243 970 Inventories 261 249 242 124 Trade and other receivables 435 458 391 603 Cash 191 763 112 208 Other assets / deferred tax 106 832 126 965 2 687 012 2 534 715

Afrimat final results presentation for the year ended 28 February 2019

Statement of financial position – equities & liabilities

29

R’000 Reviewed Feb 2019 Audited Feb 2018 Total equity 1 409 517 1 229 320 Borrowings 383 546 436 958 Provisions 141 080 130 288 Overdraft 134 153 90 203 Trade and other liabilities 390 517 407 022 Other liabilities / deferred tax 228 199 240 924 2 687 012 2 534 715

Debt:equity ratio improved to 23,8% (2018: 35,5%)

Afrimat final results presentation for the year ended 28 February 2019

Capital expenditure

30

H1: R 115.8m H2: R 91.7m R207.5m

F2019

H1: R 108.7m H2: R 88.9m R 197.6m

Planned F2020

• General maintenance
• Includes R43.5 million for

rental replacement capital

Afrimat final results presentation for the year ended 28 February 2019

Total dividend

31

CAGR of 12,82% 2015 - 2019

Cents per share

50 57 70 62 81

• 10

20 30 40 50 60 70 80 90 2015 2016 2017 2018 2019

Record date:

Fri 14 June 2019

Dividend payable:

Tue 18 June 2019

Dividend – 2.7x cover

30,6%

Afrimat final results presentation for the year ended 28 February 2019

Operational overview

32

Operational review

4

Afrimat final results presentation for the year ended 28 February 2019

• 15% of operational profit (2017:18%)
• Good operational performance
• Flagship business
• Impacted by very slow first quarter

Bulk commodities

33

• Improved second half
• Exceptional contribution

to group

• 42,7% of operating profit

(2018: negative)

• Load out facility

completed

• Transnet rail line stable
• Stable production

volumes

Afrimat final results presentation for the year ended 28 February 2019

Pricing trends

34

20 40 60 80 100 120 01-Mar-15 01-May-15 01-Jul-15 01-Sep-15 01-Nov-15 01-Jan-16 01-Mar-16 01-May-16 01-Jul-16 01-Sep-16 01-Nov-16 01-Jan-17 01-Mar-17 01-May-17 01-Jul-17 01-Sep-17 01-Nov-17 01-Jan-18 01-Mar-18 01-May-18 01-Jul-18 01-Sep-18 01-Nov-18 01-Jan-19 01-Mar-19 58% 62% 65%

Afrimat final results presentation for the year ended 28 February 2019

Preference for quality

35

• 50
• 40
• 30
• 20
• 10

10 20 30 40 01-Mar-15 01-May-15 01-Jul-15 01-Sep-15 01-Nov-15 01-Jan-16 01-Mar-16 01-May-16 01-Jul-16 01-Sep-16 01-Nov-16 01-Jan-17 01-Mar-17 01-May-17 01-Jul-17 01-Sep-17 01-Nov-17 01-Jan-18 01-Mar-18 01-May-18 01-Jul-18 01-Sep-18 01-Nov-18 01-Jan-19 01-Mar-19 58% Discount 62% 65% Premium

Afrimat final results presentation for the year ended 28 February 2019

Lump premium

36

0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 Lump Premium

Afrimat final results presentation for the year ended 28 February 2019

Iron ore sales by rail

37

22 715 28 629 26 813 30 643 30 282 45 743 45 392 45 225 45 758 57 172 65 244 58 463 75 281 53 395 65 004 64 982 41 470 64 175 70 794

10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 Sales (tons) (*) Planned Transnet maintenance shut down

*

Stable monthly sales expected to settle at 72,500

Afrimat final results presentation for the year ended 28 February 2019

Iron ore

38

• $ exposure
• Much higher margins through the cycle
• Excellent operational fit
• Accessible opportunities

Rationale

Afrimat final results presentation for the year ended 28 February 2019

Iron ore

39

• Quality
• Cost
• Logistics
• Management expertise

Competitive advantage

Afrimat final results presentation for the year ended 28 February 2019

Iron ore

40

• Costs stable with no major additional capex expected
• Potential acquisition of future reserves
• International prices currently very healthy

Afrimat final results presentation for the year ended 28 February 2019

Industrial minerals

41

• Solid results
• 16,6% of operating profit

(2018: 25,2%)

• All regions contributed
• Lyttelton mine impacted

by economic slowdown

Afrimat final results presentation for the year ended 28 February 2019

Industrial minerals

42

• Good margins
• Constant off-take: long-term agreements
• High entry barriers
• Alternatives are scarce
• Good market: high volumes
• Reputable customers

Rationale

Afrimat final results presentation for the year ended 28 February 2019

Industrial minerals

43

• Portfolio of products
• Customised offering
• Geographic spread
• Innovative product development
• Partnering with customers
• Solving the customer’s pain points

Competitive advantage

Afrimat final results presentation for the year ended 28 February 2019

Industrial minerals: the market

44

• Glass

− Bottles − Windscreens − Plate glass

• Metallurgical

− Alloys − Chrome − Steel − Foundries

• Chemical
• Water treatment

− Drinking water − Acid mine drainage

• Industrial powders and fillers

− Fire retardants − Paints − Tiles and tile adhesives − Grout fillers

• Agriculture

− Soil pH stabilisation − Animal hygiene

Afrimat final results presentation for the year ended 28 February 2019

Construction materials

45

• 40,4% of operating profit

(2018: 78,4%)

• KwaZulu-Natal and Gauteng

impacted most

• Western Cape delivered

solid results

• Continue to supply materials

in Mozambique

• Emfuleni clinker ash dump

(Vereeniging) adds 3 – 4 years LoM

• Good recovery expected

from Mozambique

• Recovery expected

Afrimat final results presentation for the year ended 28 February 2019

Afrimat Construction Index – Q4 2018

46

95 100 105 110 115 120 125 130 135

Q 1 ' 1 1 2 3 4 Q 1 ' 1 2 2 3 4 Q 1 ' 1 3 2 3 4 Q 1 ' 1 4 2 3 4 Q 1 ' 1 5 2 3 4 Q 1 ' 1 6 2 3 4 Q 1 ' 1 7 2 3 4 Q 1 ' 1 8 2 3 4

4Q average

Afrimat final results presentation for the year ended 28 February 2019

Seasonal adjusted building plans passed

47

Residential Non-residential 2000000 4000000 6000000 8000000 10000000 12000000 14000000 16000000 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 R'000

(Source: Stats SA, May 2019. p5041.1).

Afrimat final results presentation for the year ended 28 February 2019

48

Leading indicator: Feb. 2016 – Feb. 2019

Source: South African Reserve Bank, 23 April 2019

Index (2015=100)

Afrimat final results presentation for the year ended 28 February 2019

Operational overview

49

Potential coal acquisition

5

Afrimat final results presentation for the year ended 28 February 2019

Universal Coal plc

50

• UK company, listed on the Australian Stock Exchange (“ASX”)
• Various mid-tier thermal and coking coal mining operations in SA

Entity

Afrimat final results presentation for the year ended 28 February 2019

Universal Coal plc

51

• Commodity diversification
• Leverage open cast mining skills
• Cash generation
• Coal is a commodity in demand
• Potential to access coal export markets

− Earn foreign currency / Rand-hedge

• Afrimat can make a positive contribution

Rationale

Afrimat final results presentation for the year ended 28 February 2019

Status and locations

52

• Non-binding indicative offer
• Entire issued share capital
• Max purchase price A$0,40
• Due diligence proceeding
• Subject to various conditions

Afrimat final results presentation for the year ended 28 February 2019

Operational overview

53

The future

6

Afrimat final results presentation for the year ended 28 February 2019

Looking ahead

54

• Iron ore business to continue to perform well
• Industrial minerals to grow through range expansion
• Construction materials showing signs of recovery
• Good cash flow
• LNG in Mozambique to grow
• Remain true to expertise

Afrimat final results presentation for the year ended 28 February 2019

How to assess Afrimat

55

Efficient hedge

(against volatile local business conditions)

Strength of management Moat

(geographic locations, unique metallurgy & structural cost advantage)

Cash generative | free cash flow focus Operational diversification Dividend payer

(2,7 x cover)

Scalability reduces cyclicality

(protects against commodity price fluctuations)

Rand hedge

(Iron ore & Mozambique)

Afrimat final results presentation for the year ended 28 February 2019

Risk mitigation

56

SA country risk Volatile commodity markets Macro economic threats Construction industry pressure

Implementation by Government is critical

Afrimat final results presentation for the year ended 28 February 2019

Environment, Social and Governance

57

Afrimat is an organisation which embraces leadership, ethics, and corporate citizenship in a holistic manner ensuring it forms the DNA of the business

Afrimat final results presentation for the year ended 28 February 2019

Social

58 CSI spend: Categorisation (R’000)

R766 R664 R507 R914 R403

2018

Art, sports & culture 23,5% Basic needs 20,4% Education projects 15,6% Uplifting community 28,1% Skills development 12,4% R172 R442 R1 205 R1 275 R142

2019

Art, sports & culture 5,3% Basic needs 13,7% Education projects 37,3% Uplifting community 43,7% Skills development 0,1%

Afrimat final results presentation for the year ended 28 February 2019

Sustainability

59

Safety & Health

0.5 1 1.5 2 2.5 2013 2014 2015 2016 2017 2018 2019

Historical LTIFR

Afrimat final results presentation for the year ended 28 February 2019

Sustainability

60

Safety & Health – ASPASA ISHE

86.25 87.01 87.70 86.03 87.80 88.74 84.50 85.00 85.50 86.00 86.50 87.00 87.50 88.00 88.50 89.00 F2014 F2015 F2016 F2017 F2018 F2019

Afrimat Group Safety & Health Audit Averages

Afrimat final results presentation for the year ended 28 February 2019

Sustainability

61

Environmental – ASPASA About Face Audit

76.81 92.18 95.41 96.45 92.74

• 20.00

40.00 60.00 80.00 100.00 120.00 2012 2014 2016 2017 2018

Afrimat Group Environmental Audit Averages

Afrimat final results presentation for the year ended 28 February 2019

SLP internal compliance – per site

62

95% 95% 95% 95% 91% 91% 91% 91% 91% 91% 91% 91% 91% 86% 86% 86% 86% 86% 86% 82% 82% 82% 82% 82% 82% 82% 77% 73% 68% 59% 50% 50%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Afrimat final results presentation for the year ended 28 February 2019

Core message

63

Strategic diversity enabled growth Sound business and financial fundamentals remain key Continue to drive diversification in a responsible manner

Q & A

64

Thank you for your attendance and participation For any further Investor Relations questions please contact:

www.afrimat.co.za Andries van Heerden (CEO) 021 917 8840 Vanessa Rech (Keyter Rech Investor Solutions) 087 351 3814 Andries van Heerden (CEO) 021 917 8840 Vanessa Rech (Keyter Rech Investor Solutions) 087 351 3814

Afrimat final results presentation for the year ended 28 February 2019

Operational overview

65

Appendix

7

Afrimat final results presentation for the year ended 28 February 2019

Board attendance

66

The board meets at least four times a year with ad hoc meetings when necessary to review strategy, planning and financial performance, resources, operations, risk, internal control, capital expenditure, standards of conduct, transformation, diversity, employment equity, human resources and environmental management

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 2 2 2 2 2 2 4 4 4 4 4 4 4 Andries van Heerden Pieter de Wit Gert Coffee Loyiso Dotwana Francois Louw Matie von Wielligh Helmul Pool Phuti Tsukudu Jacobus F vd Merwe Hendrik van Wyk Johan HP vd Merwe Board (4) Audit & Risk (4) Remuneration & Nom (3) Social, Ethics & Sustainability (2) Non-executive meetings (4)

Afrimat final results presentation for the year ended 28 February 2019

AGM results

67 Resolutions % vote - For Ordinary Special

Adoption of the 2018 AFS Issuing unissued shares or other equity securities for cash Place unissued shares under the directors' control Re-election of Phuti RE Tsukudu as director of company Re-election of Matie von Wielligh as director of company Re-election of Franscois Louw as director of company Re-election of Loyiso Dotwana as member of Audit & Risk Re-election of Helmut Pool as member of Audit & Risk Re-election of Jacobus F vd Merwe as member of Audit & Risk Re-election of Hendrik van Wyk as member of Audit & Risk Re-election of Matie von Wielligh as member of Audit & Risk Reappointment of auditors PricewaterhouseCoopers Non-binding Remuneration Policy Approve Implementation Report as per King IV Approve Share Appreciation (SAR”s) plan rule Authorise directors or the company secretary to sign documentation General authority to repurchase shares Pay fixed fee annual payments to non-executive directors Authority for financial assistance for subscription of securities General authority to provide financial assistance to related/inter-related companies Amendments to MOI