01 March 2010: JSE- and AIM-listed mining and processing company Petmin Limited (“Petmin” or “the Group”) today announced its interim financial results for the six months ended 31 December 2009.
Normalised Headline Earnings Per Share (HEPS) from continuing operations rose by 10% to 8.28 cents (2008: 7.55 cents) and fully diluted HEPS from continuing operations by 11% to 8.17 cents (2008: 7.34 cents).
Cash from operating activities was R113 million, a decrease of R52 million, or 32% (2008: R165 million), a direct result of a challenging market environment. Cash-on-hand balances, however, increased by R70 million, or 93%, to R145 million (2008: R75 million) in line with the company’s cash conservation efforts in anticipation of the difficult financial and operating conditions.
Revenue decreased by R275 million, or 56%, to R215 million (2008: R490 million) and gross profit by R28 million, or 24%, to R87 million (2008: R115 million), again an indication of the reduced sales volumes experienced due to the global slowdown throughout 2009.
Operating margins, however, improved to 30% (2008: 19%), mainly as a result of effective cost management, improved prices achieved at Somkhele and the disposal of the less-profitable Springlake Colliery.
Commenting on the results, Bradley said, "The 2009 calendar year was one of enormous challenge for the Group and one in which we consolidated our resources while at the same time positioned the Group for the future. The disposal of Springlake Colliery was an important strategic step in this process.”
Production at Petmin’s anthracite division (Somkhele and excluding Springlake colliery) decreased by 68%, from 637 325 to 202 800 tonnes while sales fell by 511 012 tonnes or 75% to 171 867 tonnes. This decline reflects the weakening in the global markets during the period under review with domestic ferrochrome production being reduced to 10% of normal levels.
During the period, sales were contracted at R822.46 per tonne, a 52% increase on 2008 at R569.97 per tonne. This increase was mainly as a result of higher prices contracted on Somkhele’s long term export agreement.
SamQuarz reduced its production of silica and chert by 26% to 607 140 tonnes (2008: 815 235 tonnes) and its sales by 39% to 547 349 tonnes (2007: 902 513 tonnes). Revenue decreased by 28% to R73 million (2008: R101 million) due to the reduction in sales. The lower sales volumes were driven by a reduction in demand from the metallurgical and construction industries.
Profit margins were somewhat buffered by the changed sales mix, with the 39% reduction in volume translating into only a 14% decrease in profit before tax to R22 million (2008: R26 million). The capex spend was also reduced, R5 million (2008: R10 million) was spent on ensuring continued development of the open-pit operation in a safe and sustainable manner.
An extensive drilling and sampling programme was completed at Veremo and has delineated an updated SAMREC compliant measured resource of 44.3 million tonnes (previously 11.6 million tonnes) in the weathered zone of the orebody, at an average iron content of 43.23%. The weathered material is easier and cheaper to mine and process than the fresh ore, and this updated resource declaration will have a positive effect on the project economics.
Although the period under review has been one of the most difficult experienced by the Group, the outlook for the global commodity markets in 2010 is improved.
The anthracite division anticipates a fully committed order book for the remainder of the financial year and various projects are currently being investigated with a view to expand the division. Should these be successful, the building of a second coal processing plant may be considered at Somkhele, which would double the existing production capacity to 1.2 million sales tonnes per annum.
The silica division is expected to maintain profitability levels, with capital expenditure anticipated to increase as the open-pit mine at SamQuarz is further developed to meet future customer demand.
Veremo is considering a project team to procure a bankable feasibility study and submit a mining right application for the project.
"We have rebalanced our operating portfolio, and created a great platform for growth strategy. As the markets improve, we will continue to evaluate all opportunities to maximise our cash-generative ability and project diversity," Doig said.
Condensed Consolidated Reviewed Financial Statements for the six months ended 31 December 2009 (PDF - 74KB)
© 2009 Petmin Limited