Shareholders are advised to read this review in conjunction with the annual financial statements
The plight of the global economy impacted financial performance and sales for the 2009 financial year decreased by 31% to R26.1 billion from R37.6 billion in the previous period. In dollar terms, sales were 41% lower at $3.0 billion. This was a result of:
Cost of sales decreased by 18% to R16.4 billion from R19.9 billion in FY2008. There were several key drivers:
These decreases were offset by:
The unit cost per platinum ounce produced rose by 10% to R8 526. Excluding a share-based payment credit of R717 million, the unit cost per platinum ounce relating to operating costs increased by 32% to R9 129/oz.
|Excluding SBP*||Including SBP|
|Impala (refined)||8 559||6 546||7 854||7 489|
|Marula (in concentrate)||11 730||9 020||11 243||9 830|
|Zimplats (in matte)||11 740||9 215||11 740||9 215|
|Mimosa (in concentrate)||9 454||7 023||9 454||7 023|
|Implats Group (refined)||9 129||6 930||8 526||7 750|
* Share-based payments
|Gross profit (Rm)||Adjusted gross |
profit (Rm) *
|Impala||7 586||13 544||7 606||13 597|
|IRS||1 265||1 883||1 265||1 883|
|Inter-segment adjustment||1 095||(529)|||||
|Implats Group||9 762||17 731||9 762||17 731|
* Includes inter-segmental adjustments
The groups margins deteriorated to 37%, and Impala reported a margin of 50% for the year under review. This was due to the lower rand-metal prices.
|Gross profit margin||Adjusted gross|
profit (Rm) *
* Includes inter-segmental adjustments
Other operating expenses were 7% lower, the result of a decrease in share-based payments, offset by higher selling and promotional expenses. Royalty expenses decreased due to the lower rand metal prices and lower production used for the calculation of the Impala prepaid royalty.
Finance income grew by R274 million. Interest received rose on the back of the higher cash balances due to the sale of AQP(SA) in the latter part of FY2008.
The profit on the sale of our stake in AQP and AQP(SA) in FY2008 amounted to R4.8 billion.
Equity income from the investment in Two Rivers was R41 million, compared to R250 million the previous year. FY2008 equity income included income of R428 million from Aquarius.
The strengthening of the rand towards the end of the financial year resulted in an overall exchange loss of R211 million, versus a gain of R439 million in the previous year.
The taxation charge decreased by R1.7 billion to R3.4 billion, primarily as a result of lower earnings for the year. The effective tax rate was 36.1% for the year (FY2008: 22.3%).
Headline earnings for the financial year decreased by 52% to 1 001 cents per share, from 2 065 cents per share in FY2008, as a result of:
This was, however, offset by a decrease in taxation of R1.7 billion because of lower taxable income.
|Impala*||4 521||75.2||8 393||67.2|
|IRS||1 375||22.9||1 700||13.6|
|Headline earnings||6 015||100.0||12 485||100.0|
|Profit on sale of|
|AQP, AQP (SA)||||5 181|
|Profit on disposal|
|Impairment of assets||||(74)|
|Profit attributable to owners of the parent||6 020||17 596|
* Including holding company and minor subsidiaries
A final dividend of 200 cents per share was declared on 27 August 2009, which amounts to a further payment to shareholders of R1.2 billion.
An interim dividend of 120 cents per share was paid, amounting to R712 million.
Implats is one of the few companies to pay a return to its shareholders. The total dividend for the year will be 320 cents. The total dividend payable in FY2008 was 1 475 cents per share.
Cash generated by operations amounted to R9.4 billion before tax, impacted interest of R122 million, income taxes of R2.9 billion and adjustment resulted in net cash from operating activities R6.5 billion.
Net cash used in investing activities of R5.7 billion, mainly due to capital expenditure of R6.8 billion, offset by finance income of R0.9 billion and repayment of the shareholder loan by Two Rivers of R0.1 billion.
Net cash out flows from financing activities increased by R2.4 billion, resulting in a R7.9 billion outflow compared to a R5.5 billion outflow the previous year.
Dividend payments totalling R7.8 billion were made during the year of which R7.1 billion was for the FY2008 final dividend and R712 million for the FY2009 interim dividend. The dividend payment totalled R6.1 billion in FY2008.
The group acquired 5 562 545 (FY2008: 826 473) of its own shares during the year in terms of an approved share-buy-back scheme for an amount of R724 million (2008: R254 million). In the groups cash preservation strategy announced on 10 November 2008, Implats has suspended its buy-back programme until further notice.
Net proceeds from borrowings amounted to R563 million. These loans were raised as a result of the consolidation of the funding requirement for Zimplats expansion.
The group will continue to fund cash requirements from cash generated from operations, and will use its adequate banking facilities to cover any shortfalls.
The net result of Implats operating, investing and financing activities was a net cash outflow of R7.2 billion. When combined with the opening balance of R10.4 billion and the positive translation of R0.1 million, this resulted in a closing cash-and cash-equivalent balance of R3.3 billion.
The growth in property, plant and equipment resulted largely from capital expenditure relating to the groups current projects. Group capital expenditure for FY2009 totalled R6.9 billion, compared with R5.4 billion in the previous financial year. Of this, R4.8 billion was spent at Impala, primarily on the development of 16, 17 and 20 Shafts, accommodation and smelter expansion. The Zimbabwean operations accounted for capital expenditure of R1.6 billion, and Marula R398 million.
There were no impairment write-offs in the current financial year.
Given the current market environment and the short term outlook, cash preservation is paramount. It has been deemed prudent to defer long-lead projects such as Leeuwkop and Marula Merensky, resulting in a lower capital outlay totalling R8.8 billion over the next five years.
|Impala||4 782||3 415|
|Zimplats||1 358||1 319|
|Implats group||6 923||5 368|
Forecast capital expenditure for 2010 is R5.0 billion, and will total R23 billion over the next five years. This will be managed in line with group profitability and cash flow.
|Long-term borrowings||1 778||1 464|
|Total debt||1 985||1 510|
|Less cash||3 348||10 393|
|Net cash||1 363||8 883|
|(Decrease)/increase in net cash||(7 520)||6 379|
Due to the dynamic nature of the underlying businesses, we aim to maintain flexibility in funding by keeping committed and uncommitted facilities available. As at year-end, total committed facilities amounted to R5 205 million.
|Operating EBITDA||9 578||23 296|
|Total debt||1 985||1 510|
|EBITDA/Total debt ratio||4.8||15.4|
In February 2009, Fitch revised Implats rating, with the outlook changing from stable to negative. Implats has a AAzaf national rating and a BBB+ international rating. Implats has an International Long-Term Issuer Default rating (IDR) of ‘BBB+’, and a Short-Term IDR of ‘F2’ as well as national ratings of Long-Term ‘AA (zaf)’ and Short-Term ‘F1+ (zaf)’.
This reflects Implats significant exposure to the deteriorating global automobile manufacturing industry and the accompanying reduced demand for PGMs used in emission-control components. Fitch has a negative view of the prospects of the automobile sector over the next two to three years, as the industry faces both a severe cyclical downturn and structural changes. Fitch recognises the positive measures taken so far by Implats management to reduce cash outflows and scale back capital expenditure. The agency will continue to monitor the companys actions to preserve cash given its current expectations.