Assmang’s headline earnings growth accelerates by 92%

5 September 2002

Headline earnings increased by 92 per cent to R443 million
Dividend increased by 107 per cent year-on-year
New chrome furnace commissioned
Nchwaning manganese mine shaft on schedule and within budget
Thursday, 5 September 2002: The benefit to mining group Assmang Limited (Assmang or the Group), resulting from the weakness in the value of the SA rand against the US dollar, has been emphasised by the headline earnings growth for the year ended 30 June 2002.

The aggregate headline earnings for the Group, which is jointly controlled by Anglovaal Mining Limited and Assore Limited, surged to finish the year at R443 million, which represents a 92 per cent increase, over the previous year. At the interim stage, headline earnings were 14 per cent higher at R120,8 million. As mentioned above, this resulted primarily from the sharp drop in the rand against the US dollar, which developed towards the end of the first half of the year and flowed through in the second half.

Headline earnings per share rose 92 per cent to 12 480 cents and dividends for the year were up by 106,6 per cent to 1 550 cents, which includes the final dividend that will be paid after the end of the financial year.

Attributable earnings rose by 327 per cent to R987 million, equivalent to R278,04 per share, which includes the R551 million proceeds received from the sale of the group’s platinum group metal (PGM) rights to Two Rivers Platinum (Pty) Limited during the year.

Good as the results are, Assmang’s chairman Des Sacco cautions that they could be �negatively affected if rail facilities, on which exports are dependant, are not fully maintained�. This is a complaint, which he notes, has been echoed by other South African exporters of bulk minerals.

Earnings contributions by the Group’s three principal divisions, before deducting STC, amounted to R504 million from chrome, R351 million from manganese and R135 million from iron ore. Other features during the year included a 46 per cent increase in revenue to R2,8 billion, mainly as a result of a combination of higher sales in all products, except manganese alloys, and better rand prices generated by the declining currency exchange rate. Manganese ore revenues rose by 45 per cent in rand terms and iron ore revenues by 38 per cent.

Sales volumes were as follows:

2002 2001
�000 metric tons
Iron Ore 4 775 4 315
Manganese ore (excluding deliveries to the Cato Ridge Works) 993 979
Manganese alloys 187 193
Charge Chrome 190 125
Chrome ore (excluding deliveries to Machadodorp Works) 39 –
Assmang continued its significant capital programme, spending R372 million during the year against R626 million previously, mostly on the two major projects: the new charge chrome smelter at Machadodorp; and the new shaft complex at the Nchwaning manganese mine. In total, the Group has spent some R1,8 billion over the past five years on re-capitalising and enlarging its business in each of the commodity divisions.

As forecast last year, the receipt of the proceeds from the PGM sale has enabled borrowings to be reduced from almost R910 million to R577 million at 30 June 2002.

Looking ahead, Assmang stresses that its performance will remain largely influenced by the relative SA rand / US dollar exchange rate, which, in turn, will be determined by various political and economic factors.

Sales of the Group’s products appear likely to remain buoyant into the new year, suggesting another good year for world-wide steel production with the probability that both iron and manganese ore sales will prevail at similar levels as the past year, but at lower dollar prices. Manganese alloy sales are anticipated to increase in line with higher production planned at Cato Ridge and US dollar prices have improved since the year-end and are expected to maintain these levels for the remainder of the year. The improvement in the stainless steel market should at least be sustained and volumes could be substantially raised by major contract negotiations. Better margins for ferrochrome are expected to materialise flowing from better utilisation of available capacity.

The interim dividend, which was paid during March 2002, was increased significantly from R2,50 to R8,50 per share in order to distribute to shareholders a portion of the surplus that was realised on the disposal of the PGM mineral rights. At the time of the interim announcement, it was mentioned that this distribution was exceptional and that the final dividend would be lower based on headline earnings. As the Group is still significantly, although not unacceptability, geared, a final dividend of R7,00 per share has been declared, which will be paid to shareholders on Monday, 30 September 2002.

Click here for full results (PDF – 152KB)

Julian Gwillim
General Manager, Investor Relations