Johannesburg, South Africa. 2 March 2011: Petmin Limited (AIM: PTMN; JSE: PET) today reported interim results for the six months to 31 December 2010. Executive Chairman Ian Cockerill commented that Petmin’s organic expansion projects are on track, and will double production at the company’s flagship Somkhele operation.
“Importantly, our Business of Tomorrow strategy is starting to deliver results with a project pipeline that will see significant business growth in our niche areas”.
At 31 December 2010, the group had cash on hand of R270 million and undrawn facilities of R65 million.
Other key features of the reporting period were:
“Our prudent marketing and sales strategy of locking in medium-term supply agreements and protecting the balance sheet, implemented prior to the financial crisis of 2008-09, has enabled Petmin to provide stable earnings during the past 24 months and to survive and thrive, with virtually no gearing,” he said.
In reviewing the Group’s performance, Mr Cockerill pointed out that although the policy of protecting earnings and ensuring the visibility of cash flows and earnings has allowed Petmin to successfully steer through the recent difficult economic conditions, it has also meant that the Company was not able to derive maximum benefit from the substantial increase in demand for anthracite (as a coke replacement) and the material increase in its price.
With the expansion at Somkhele set to more than double the operation’s capacity (to in excess of 1.1 million sales tonnes a year) and reduce the unit cost of production, Petmin has been reviewing its strategy and negotiations are under way to ensure that the Company locks up some 65-70% of its sales in price/volume-related, medium-term contracts.
Tonnes sold by the Group increased by 30%, resulting in revenue of R321 million for the six months ended 31 December 2010, an increase of 49% compared with R215 million for the same period in 2009. This was achieved despite the negative impact on revenues of a stronger rand/dollar exchange rate.
The weighted average exchange rate for the period was R6.79/$1.00 compared with R7.44/$1.00 in 2009. This had an R11 million negative impact on revenue at Somkhele and a negative impact on earnings per share of 1.37 cents.
Consolidated profit before tax rose by 11% to R73 million (2009: R66 million) but profit after tax only increased by 2% to R47 million, because secondary tax on companies of R3.5 million was paid on the inaugural dividend declared during the period under review.
The gross profit margin decreased to 29% (2009: 41%) as a result of the stronger rand and the start of mining in the deeper reserves in Somkhele’s Area 1.
Operations remained strongly cash-generative, with cash of R194 million (2009: R119 million) being generated by operations after inflows from changes in working capital of R45 million.
Capital expenditure of R138 million (2009: R56 million) was incurred in the six months to 31 December 2010, with R72 million spent on pre-stripping of the open pits at Somkhele (2009: R27 million), R60 million to expand operations (2009: R24 million) and R7 million to maintain operations (2009: R5 million).
During the period under review, Veremo Holdings (Pty) Ltd, in which Petmin has a 25% interest, applied for a mining licence for its Stoffberg magnetite project. The application is awaiting final adjudication by the Department of Mineral Resources.
Together with its joint venture partners in Canada, Petmin approved an exploration programme with the aim of defining a 40-year inferred magnetite resource, based on the production of 500,000 tonnes of pig iron a year. The initial exploration results are expected to be published towards the end of the second half of the 2011 calendar year.
The first phase of the exploration programme at Mount Ginka in Liberia – to demonstrate whether a commercially saleable magnetite concentrate can be produced – was approved.
Commenting on the future, Cockerill said: “With organic expansion at Somkhele on track (to double plant capacity and double the life of mine) and an exciting pipeline of prospective iron ore projects in place, Petmin remains well positioned for growth, with low gearing and significant cash resources.
“Petmin will continue to actively evaluate new opportunities which meet its stated highly focused commodity and geographic diversification growth strategy in order to maximise shareholder wealth in the short- to medium-term.”
View the Condensed Consolidated Interim Financial Statements for the six months ended 31 December 2010 (PDF - 45KB)
Bradley Doig (COO)
+27 82 459 7818
Charmane Russell
+ 27 11 880 3924
+27 82 372 5816
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