Q2 2017 - Maaden
Saudi Arabian Mining Company (Ma’aden) Earnings Conference Call Q2 2017 August 1, 2017 Earnings Call Presentation Q2, 2017
1
Walid Al-Hakim
Head Investor Relations
Earnings Call Presentation Q2, 2017
2
Forward looking statement This presentation contains statements that are, or may be deemed to be, forward looking statements, including statements about the beliefs and expectations of Saudi Arabian Mining Company (the "Company"). These statements are based on the Company's current plans, estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. As a result of these risks, uncertainties and assumptions, a prospective investor should not place undue reliance on these forward-looking statements. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. The Company is not obliged to, and does not intend to, update or revise any forward- looking statements made in this presentation whether as a result of new information, future events or otherwise. This communication has been prepared by and is the sole responsibility of the Company. It has not been reviewed, approved or endorsed by any financial advisor, lead manager, selling agent, receiving bank or underwriter retained by the Company. This communication is provided for information purposes only. In addition, because this communication is a summary only, it may not contain all material terms and this communication in and of itself should not form the basis for any investment decision. The information and opinions herein is believed to be reliable and has been obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to the fairness, correctness, accuracy reasonableness or completeness of the information and opinions. There is no obligation to update, modify or amend this communication or to otherwise notify you if information, opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. You are strongly advised to seek your own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency, rate or other market or economic measure. Furthermore, past performance is not necessarily indicative of future results. The Company disclaims liability for any loss arising out of or in connection with your use of, or reliance on, this communication. These materials may not be published, distributed or transmitted and may not be reproduced in any manner whatsoever without the explicit consent of Ma’aden’s management. These materials do not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction.
Earnings Call Presentation Q2, 2017
3
Khalid Al-Mudaifer
President & Chief Executive Officer
Earnings Call Presentation Q2, 2017
4
Ramp-up continues, delivered strong quarter performance
Production
Outstanding cost performance
Strong financial performance
Growth projects underway
■ ■ ■ ■ ■
70 K ounces of gold, up 17% vs Q2 2016 349 K tonnes of alumina, up 8% vs Q2 2016 219 K tonnes of primary aluminium, in line with Q2 2016 555 K tonnes of ammonia, up 85% vs Q2 2016 668 K tonnes of ammonium phosphate fertilizer, in line with Q2 2016
■ ■ ■
Continued focus on efficiency, productivity and throughput Reduced cash cost in all our products Margins continue to increase
■ ■ ■ ■
Sales SAR 2,995 mn, up 17% vs Q2 2016 EBITDA SAR 1,509 mn, up 54% vs Q2 2016 Net income SAR 434 mn, up 146% vs Q2 2016 Net cash from operation SAR 649 mn, up 40%
■
First Ammonium Phosphate fertilizer was produced from Wa’ad Al Shamal plant in July 2017 Feasibility of our new Mansourah / Massarah mines is being finalised Feasibility study for the third phosphate project is progressing well
■ ■
Strong operating performance, supportive market conditions, benefits of low cost operations reflecting in healthier results Earnings Call Presentation Q2, 2017
5
Margin improvement with price and volume increase Commodity price movement
Rebase to 100 as on 1 Mar 2016
140
Aluminium
Copper
Gold
DAP
Ammonia
130 120 110 100 90 80 70 60 Source: Bloomberg
50 40 1-Apr-16
SAR million
1600
1-Jun-16
1-Aug-16
1-Oct-16
1-Dec-16
1-Feb-17
EBITDA and margins 1,437
1400
EBITDA
1200
EBITDA Margins
1000
978
800
41%
600
1-Apr-17
1,509
53%
50%
50%
45% 40% 35% 30%
241
200
60% 55%
37%
400
1-Jun-17
25%
0
20% Q3 2016
Earnings Call Presentation Q2, 2017
Q4 2016 Restated 2016 numbers as per IFRS
Q1 2017
Q2 2017 6
Phosphate market softened in Q2 backed by growing supply from China and North Africa ■
Ammonium phosphate fertilizer price ~US$357/t (Avg. Tampa FOB) and Ammonia price averaged ~US$ 316/t (Avg. ME FOB)
■
Q2 Phosphate demand was low in India in Q2 mainly due to a new tax scheme (GST) and flat in South America
■
On the supply side, China and Oceania local markets are out of season and have capacity for more exports. OCP’s new project (JPH-3: ~1 million tonne) is ramping up
■
In Q2, Phosphate producers benefitted from weaker raw material costs (Ammonia, Sulphur and Phosphoric Acid)
■
Additional supplies expected in H2 2017 from MWSPC and Morocco which may exert further pressure on prices
Average DAP Price Tampa Index (US$/t) Avg. DAP Prices
Q1
Q2
Q3
Q4
Q1
Q2
-9%
-4%
-2%
-7%
19%
-8%
400 390 380 370 360 350 340 330 320 310 1-Jan-16
1-Apr-16
Earnings Call Presentation Q2, 2017
1-Jul-16
%
Quarterly change
1-Oct-16
1-Jan-17
31-Mar-17
Source: Ma’aden SBU analysis, CRU , FMB and FERTECON
29-July-17
7
Recovery of aluminium prices continued in Q2 2017 ■
Aluminum price averaged US$1,909/tonne (LME), up 32% vs Q2 2016 and up 12% vs Q1 2016
■
Japanese premiums increased in Q2 2017, due to expectations of Chinese supply regulations
■
China appears to be heading towards a balanced market in 2017
■
Prices have improved partly due to Chinese announcements of production cuts due to expected implementation of new environmental policies and supply side reforms
Aluminium Price Movement (US$/t) Q1
Q2
Q3
Q4
Q1
Q2
3%
7%
1%
1%
16%
2%
2,200
2,000
1,800
1,600
1,400
1,200
1,000 2-Jan-15
2-Apr-15
Earnings Call Presentation Q2, 2017
2-Jul-15
2-Oct-15
2-Jan-16
2-Apr-16
2-Jul-16
2-Oct-16
2-Jan-17
2-Apr-17
Source: Bloomberg, Ma’aden SBU analysis, CRU Mar 2017, Harbor Mar 2017
8
Gold firm and copper is sustaining its recovery ■
Gold prices averaged US$1,263 / ounce similar to Q2 2016; Copper prices increased by 24% in Q2 2017 averaging US$ 5,754 / tonne
■
World economic growth forecast, particularly Chinese structural reforms remain on track supporting the price outlook
■
Production disruption at world’s three largest copper mines helped to support copper prices, despite financial market weakness and industrial metals sell-off. Copper prices are expected to be driven by sustainability of Chinese demand into the second half of 2017 and US infrastructure spending
Gold and copper price movement (US$/t) Au
Cu 6,500
1,500 Copper
Gold
6,000
1,400
5,500
1,300
5,000
1,200
4,500
1,100
4,000
1,000
3,500
900
3,000
800
2,500
700
2,000 1-Apr-16
600 1-Jun-16
Earnings Call Presentation Q2, 2017
1-Aug-16
1-Oct-16
1-Dec-16
1-Feb-17
1-Apr-17
1-Jun-17
Source: Bloomberg, CRU Mar 2017, SBU secondary analysis
9
Darren C. Davis Chief Financial Officer
Earnings Call Presentation Q2, 2017
10
Second quarter of 2017 showed the underlying strength of our business (All numbers are in SAR million, except as mentioned)
Comparative analysis - quarterly Q2-16A vs. Q2-17A SR %
Q1-17A vs. Q2-17A SR %
Q2-16
Q1-17
Q2-17
2,552
2,717
2,995
443
17 %
278
10 %
-1,971
-1,792
-1,983
-12
1%
-191
11%
Gross profit
581
926
1,012
431
74%
86
9%
Gross profit margin%
23%
34%
34%
Selling, marketing and logistic expenses
-114
-98
-93
21
-18%
5
-5%
General and administrative expenses
-86
-80
-97
-11
12%
-17
21%
Exploration and technical services expenses
-11
-10
-14
-3
27%
-4
35%
-1
-16
-1
1
-50%
15
-97%
Operating profit
369
722
808
439
119 %
85
12 %
Operating income margin%
14%
27%
27%
11
22
22
11
102%
44
23
19
-25
-57%
-4
-17%
-220
-363
-351
-131
59%
12
-3%
2
-26
-32
-34
-2226%
-6
-23%
Profit before zakat and income tax
194
366
465
271
14 0 %
99
27%
Zakat and income tax expense
-18
-26
-31
-13
73%
-5
21%
Profit / (loss) for the period
176
341
434
258
14 6 %
94
28%
Profit /(loss) %
7%
13%
14%
Profit / (loss) attrib. to shareholders' of the parent co.
171
276
356
185
10 8 %
81
29%
5
65
78
73
1456%
13
20%
0.15
0.24
0.31
0.2
108%
0.1
29%
Sales Cost of sales
Write-off / impairment of plant and equipment
Share in net income of jointly controlled entity Income from time deposits Finance cost Other income / (expense)
Non-cont. interest's share of the period's profit / (loss) EPS (SR)
Earnings Call Presentation Q2, 2017
11
Core of our business built on world scale competitive phosphate and aluminium businesses aluminium phosphate gold & base metals
SAR 2,552 mn
Revenues
Price strength aluminium and phosphate businesses Negative price impact on the ammonia business Production driven growth for all businesses
Positive direction on prices and costs for aluminium and phosphate Ammonia price drop Margins are improving on efficiency and cost reduction
+17% 45% 50%
39%
43%
SAR 977
SAR 1,509 mn
11%
15%
+54% 46% 51% 38% 39%
Q2 2016 Earnings Call Presentation Q2, 2017
11%
12%
EBITDA
SAR 2,995 mn
Q2 2017 12
Strong operating performance, supportive market conditions and benefits of low cost operations reflecting in stronger results Net income bridge Q2 2017 vs Q2 2016 SAR MN
+146%
700
21
600
11
1
77
131
500 127
53
434
400
300
227 176
200
100
0 Q2 2016 IFRS
Price effect
Earnings Call Presentation Q2, 2017
Volume effect
Cost effect
Sales, marketing logistics
G&A
Write-off PPE
Finance charges
Others
Q2 2017 IFRS
13
Strong operating performance, supportive market conditions and benefits of low cost operations reflecting in stronger results Net income bridge Q1 2017 vs Q2 2017 SAR MN
+27%
700
600 162
500 266
18 400
5
17
15
12
434
8
341
300
200
100
0 Q1 2017 IFRS
Price effect
Earnings Call Presentation Q2, 2017
Volume effect
Cost effect
Sales, marketing logistics
G&A
Write-off PPE
Finance charges
Others
Q2 2017 IFRS
14
Operational performance
Earnings Call Presentation Q2, 2017
15
Phosphate performance Operational performance ■
■
■
During Q2, Ma’aden produced 668,000 tonnes and sold 733,000 tonnes of ammonium phosphate fertilizer. Production was in line with Q2 2016, whilst sales increased by 4%. Ma’aden produced and sold (external) a record 555,000 tonnes and 393,000 tonnes of ammonia, an increase of 85% and 155% respectively as compared to the same quarter last year. The increased production and sales volume is largely attributed to the start of commercial operations of Ma’aden Wa’ad Al Shamal ammonia plant.
Cost performance ■
During the quarter ammonium phosphate fertilizer cash cost was maintained at the same level as in the corresponding quarter of last year.
Ammonium phosphate fertilizer (Kt) Production 750 700 650
703
Sales
733
721
669 637 332
■
First ammonium phosphate fertilzer was produced in July 2017 from Ma’aden Wa’ad Al Shamal Phosphate Company
668 355
600
380 360 340 300 280
550
260
500
240
450
220
400
200 Q2 2016
Q1 2017
Q2 2017
Ammonia (Kt)
US$/t
Production
Sales
Avg Prices
700
450 599
555
600 500
400
300
277
300
200
154
400 350
393 340
300 250
200
152
100
150
0
100 Q2 2016
Earnings Call Presentation Q2, 2017
US$/t
320
320
400
Project
Avg Prices
Q1 2017
Q2 2017
16
Aluminium performance Operational performance During the second quarter of 2017, Ma’aden produced 219,000 tonnes of primary aluminium, in line with the same period of last year. ■ Ma’aden’s bauxite mine and alumina refinery is operating well ■ During Q2, Ma’aden produced 349,000 tonnes of alumina, an increase of 8% compared to Q2 2016. ■
Primary aluminium (Kt) Production
Sales
Avg LME Prices
240 228 227
230 220 210
220 219
1909
1793
219 217
Q1 2017
Q2 2017
1550
200
Cost performance
190
■
180
During the second quarter, our aluminium cash cost decreased significantly, by decreased fixed costs through strong cost control measures, reduction in some raw material consumption, and notably lower cost of alumina
Q2 2016
However, we see some headwinds with the prices of key inputs such as caustic soda and coke prices increasing
369 349
340
324
290
Projects
240
■
190
The rolling mill operation continues to ramp up production and is making steady progress in penetrating the market for can sheets in the Middle East region and beyond
140 90 Q2 2016
Earnings Call Presentation Q2, 2017
2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000
Alumina production (Kt) 390
■
US$/t
Q1 2017
Q2 2017
17
Gold and Copper performance Operational performance
Gold (‘000 ounces) Production
■
■
During the quarter, Ma’aden’s production of gold increased by 17% to 70,000 ounces compared to the same quarter last year, this was mainly due to increased volumes from Ad Duwayhi mine
During the quarter, we produced 10,600 tonnes and sold 10,700 tonnes of copper concentrate from the Jabal Sayid copper mine, which is operating well to reach its rated capacity
74 72 70 68 66 64 62 60 58 56 54
71
■
Continued focus on costs helped Ma’aden to maintain its overall annual gold cash cost objectives. Although some throughput issues during the quarter impacted production which in turn translated to an increase in cash cost.
Jabal Sayid’s continued focus on cost has helped Jabal Sayid to reduce its C1 cash cost by almost 30% compared to the same quarter last year due to increased volumes and better efficiencies.
Avg Prices 70
US$/oz 1300 1280 1260 1240 1220 1200 1180 1160 1140 1120 1100
69
1263 1238 63 60
Q1 2017
Q2 2017
Copper volumes (Kt) Production
12
US$/lb Sales
Price 10.6 10.7
10
2.64 2.11
■
70
1280
Q2 2016
Cost performance
Sales
8
7.0
2.61
7.5
3 2.5 2
6.0 6
1.5
4
1 2.5
2
0.5
0
0 Q2 2016
Q1 2017
Q2 2017
1 Ma’aden attributable production & sales @ 50% Earnings Call Presentation Q2, 2017
18
Financial position
Earnings Call Presentation Q2, 2017
19
Financial position All numbers are in SAR millions
Long term borrowing By business
Other non current assets 25,974
11,149
Balance sheet
4%
2,647 8,073
26,738
Non controlling interest Other non current liability
33% 45% 62% 31%
53,262
44,805
MPC
Plant, property & equipment
5% 20%
Equity
Capital work in progress
By source
WAS
Aluminium
Others
Banks
PIF
SIDF
Type of loan
Long term borrowing
47% Current assets
Assets
4,193
11,457
5%
53% Current Liability 95%
Liability
As at 30 June 2017 Floating Earnings Call Presentation Q2, 2017
Fixed
SAR
USD
20
Financial strategy ■
Maintain liquidity
■
Optimize capital structure
■
Ensure stable foundation for future growth
Cash & Cash Equivalent
60
29
33
Long Term Borrowing
40
Net debt
Debt/Total Capital
47
47
47
63% 62%
62%
50
54
62%
54
53
61%
61% 45
40
60%
45
59% 30
58%
33
57%
57%
57%
20
56%
56% 12
10 4
5
7
7
55%
6 54%
0 2013 2014 2015 1 Long term borrowings / (long term borrowings + total equity) 2 Long term borrowings – cash equivalents and short tern investments 3 Restated with IFRS from 2016 onwards Earnings Call Presentation Q2, 2017
53% 2016
Q1 2017
Q2 2017
21
Summary
Production ramp-up continues ▪ Continued focus on volumes: ramping up new capacities and increasing throughput at existing operations
Leading position in fundamentally attractive commodities ▪ Better overall price environment in Q2 2017 but some concerns for the balance of the year, particularly in DAP
Underpinned outstanding cost performance ▪ Strong cost performance allows us to see the full benefits of improved commodity prices
Growth projects underway ▪ Wa’ad Al Shamal first ammonium phosphate fertilizer produced in July 2017 ▪ Strong pipeline of attractive new projects
Earnings Call Presentation Q2, 2017
22
Q&A
Earnings Call Presentation Q2, 2017
23
Appendix
Earnings Call Presentation Q2, 2017
24
Debt repayment profile 2500
Al numbers are in US$ million 2,067
MIC 2000
MGBM WAS 1,712
MBAC
1,631
MRC MAC
1500 1,321
MPC
1,269 1,198 1,132 998 1000 873 806 633 575
575
500 288
0
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
As at 31 December 2016
Earnings Call Presentation Q2, 2017
25
Sales summary (All numbers are in ‘000 tonnes except as mentioned)
Particulars Phosphate business Ammonium phosphate fertilizer Ammonia MPC Ammonia MWSPC Aluminium business Alumina Primary Aluminium Gold & base metals business Gold (‘000 ounces) Copper
Earnings Call Presentation Q2, 2017
Q2 2017
Q1 2017
% change q-o-q
Q2 2016
% change y-o-y
733
637
15%
703
4%
111 282
152 315
-27% -10%
154 -
-28%
349 217
384 227
-9% -4%
324 219
8% -1%
69 10.7
70 7.5
-1% 42%
63 -
9%
26
Thank You! Copyright © 2016. Ma’aden . All rights reserved.
Earnings Call Presentation Q2, 2017
27
1
Walid Al-Hakim
Head Investor Relations
Earnings Call Presentation Q2, 2017
2
Forward looking statement This presentation contains statements that are, or may be deemed to be, forward looking statements, including statements about the beliefs and expectations of Saudi Arabian Mining Company (the "Company"). These statements are based on the Company's current plans, estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. As a result of these risks, uncertainties and assumptions, a prospective investor should not place undue reliance on these forward-looking statements. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. The Company is not obliged to, and does not intend to, update or revise any forward- looking statements made in this presentation whether as a result of new information, future events or otherwise. This communication has been prepared by and is the sole responsibility of the Company. It has not been reviewed, approved or endorsed by any financial advisor, lead manager, selling agent, receiving bank or underwriter retained by the Company. This communication is provided for information purposes only. In addition, because this communication is a summary only, it may not contain all material terms and this communication in and of itself should not form the basis for any investment decision. The information and opinions herein is believed to be reliable and has been obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to the fairness, correctness, accuracy reasonableness or completeness of the information and opinions. There is no obligation to update, modify or amend this communication or to otherwise notify you if information, opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. You are strongly advised to seek your own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency, rate or other market or economic measure. Furthermore, past performance is not necessarily indicative of future results. The Company disclaims liability for any loss arising out of or in connection with your use of, or reliance on, this communication. These materials may not be published, distributed or transmitted and may not be reproduced in any manner whatsoever without the explicit consent of Ma’aden’s management. These materials do not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction.
Earnings Call Presentation Q2, 2017
3
Khalid Al-Mudaifer
President & Chief Executive Officer
Earnings Call Presentation Q2, 2017
4
Ramp-up continues, delivered strong quarter performance
Production
Outstanding cost performance
Strong financial performance
Growth projects underway
■ ■ ■ ■ ■
70 K ounces of gold, up 17% vs Q2 2016 349 K tonnes of alumina, up 8% vs Q2 2016 219 K tonnes of primary aluminium, in line with Q2 2016 555 K tonnes of ammonia, up 85% vs Q2 2016 668 K tonnes of ammonium phosphate fertilizer, in line with Q2 2016
■ ■ ■
Continued focus on efficiency, productivity and throughput Reduced cash cost in all our products Margins continue to increase
■ ■ ■ ■
Sales SAR 2,995 mn, up 17% vs Q2 2016 EBITDA SAR 1,509 mn, up 54% vs Q2 2016 Net income SAR 434 mn, up 146% vs Q2 2016 Net cash from operation SAR 649 mn, up 40%
■
First Ammonium Phosphate fertilizer was produced from Wa’ad Al Shamal plant in July 2017 Feasibility of our new Mansourah / Massarah mines is being finalised Feasibility study for the third phosphate project is progressing well
■ ■
Strong operating performance, supportive market conditions, benefits of low cost operations reflecting in healthier results Earnings Call Presentation Q2, 2017
5
Margin improvement with price and volume increase Commodity price movement
Rebase to 100 as on 1 Mar 2016
140
Aluminium
Copper
Gold
DAP
Ammonia
130 120 110 100 90 80 70 60 Source: Bloomberg
50 40 1-Apr-16
SAR million
1600
1-Jun-16
1-Aug-16
1-Oct-16
1-Dec-16
1-Feb-17
EBITDA and margins 1,437
1400
EBITDA
1200
EBITDA Margins
1000
978
800
41%
600
1-Apr-17
1,509
53%
50%
50%
45% 40% 35% 30%
241
200
60% 55%
37%
400
1-Jun-17
25%
0
20% Q3 2016
Earnings Call Presentation Q2, 2017
Q4 2016 Restated 2016 numbers as per IFRS
Q1 2017
Q2 2017 6
Phosphate market softened in Q2 backed by growing supply from China and North Africa ■
Ammonium phosphate fertilizer price ~US$357/t (Avg. Tampa FOB) and Ammonia price averaged ~US$ 316/t (Avg. ME FOB)
■
Q2 Phosphate demand was low in India in Q2 mainly due to a new tax scheme (GST) and flat in South America
■
On the supply side, China and Oceania local markets are out of season and have capacity for more exports. OCP’s new project (JPH-3: ~1 million tonne) is ramping up
■
In Q2, Phosphate producers benefitted from weaker raw material costs (Ammonia, Sulphur and Phosphoric Acid)
■
Additional supplies expected in H2 2017 from MWSPC and Morocco which may exert further pressure on prices
Average DAP Price Tampa Index (US$/t) Avg. DAP Prices
Q1
Q2
Q3
Q4
Q1
Q2
-9%
-4%
-2%
-7%
19%
-8%
400 390 380 370 360 350 340 330 320 310 1-Jan-16
1-Apr-16
Earnings Call Presentation Q2, 2017
1-Jul-16
%
Quarterly change
1-Oct-16
1-Jan-17
31-Mar-17
Source: Ma’aden SBU analysis, CRU , FMB and FERTECON
29-July-17
7
Recovery of aluminium prices continued in Q2 2017 ■
Aluminum price averaged US$1,909/tonne (LME), up 32% vs Q2 2016 and up 12% vs Q1 2016
■
Japanese premiums increased in Q2 2017, due to expectations of Chinese supply regulations
■
China appears to be heading towards a balanced market in 2017
■
Prices have improved partly due to Chinese announcements of production cuts due to expected implementation of new environmental policies and supply side reforms
Aluminium Price Movement (US$/t) Q1
Q2
Q3
Q4
Q1
Q2
3%
7%
1%
1%
16%
2%
2,200
2,000
1,800
1,600
1,400
1,200
1,000 2-Jan-15
2-Apr-15
Earnings Call Presentation Q2, 2017
2-Jul-15
2-Oct-15
2-Jan-16
2-Apr-16
2-Jul-16
2-Oct-16
2-Jan-17
2-Apr-17
Source: Bloomberg, Ma’aden SBU analysis, CRU Mar 2017, Harbor Mar 2017
8
Gold firm and copper is sustaining its recovery ■
Gold prices averaged US$1,263 / ounce similar to Q2 2016; Copper prices increased by 24% in Q2 2017 averaging US$ 5,754 / tonne
■
World economic growth forecast, particularly Chinese structural reforms remain on track supporting the price outlook
■
Production disruption at world’s three largest copper mines helped to support copper prices, despite financial market weakness and industrial metals sell-off. Copper prices are expected to be driven by sustainability of Chinese demand into the second half of 2017 and US infrastructure spending
Gold and copper price movement (US$/t) Au
Cu 6,500
1,500 Copper
Gold
6,000
1,400
5,500
1,300
5,000
1,200
4,500
1,100
4,000
1,000
3,500
900
3,000
800
2,500
700
2,000 1-Apr-16
600 1-Jun-16
Earnings Call Presentation Q2, 2017
1-Aug-16
1-Oct-16
1-Dec-16
1-Feb-17
1-Apr-17
1-Jun-17
Source: Bloomberg, CRU Mar 2017, SBU secondary analysis
9
Darren C. Davis Chief Financial Officer
Earnings Call Presentation Q2, 2017
10
Second quarter of 2017 showed the underlying strength of our business (All numbers are in SAR million, except as mentioned)
Comparative analysis - quarterly Q2-16A vs. Q2-17A SR %
Q1-17A vs. Q2-17A SR %
Q2-16
Q1-17
Q2-17
2,552
2,717
2,995
443
17 %
278
10 %
-1,971
-1,792
-1,983
-12
1%
-191
11%
Gross profit
581
926
1,012
431
74%
86
9%
Gross profit margin%
23%
34%
34%
Selling, marketing and logistic expenses
-114
-98
-93
21
-18%
5
-5%
General and administrative expenses
-86
-80
-97
-11
12%
-17
21%
Exploration and technical services expenses
-11
-10
-14
-3
27%
-4
35%
-1
-16
-1
1
-50%
15
-97%
Operating profit
369
722
808
439
119 %
85
12 %
Operating income margin%
14%
27%
27%
11
22
22
11
102%
44
23
19
-25
-57%
-4
-17%
-220
-363
-351
-131
59%
12
-3%
2
-26
-32
-34
-2226%
-6
-23%
Profit before zakat and income tax
194
366
465
271
14 0 %
99
27%
Zakat and income tax expense
-18
-26
-31
-13
73%
-5
21%
Profit / (loss) for the period
176
341
434
258
14 6 %
94
28%
Profit /(loss) %
7%
13%
14%
Profit / (loss) attrib. to shareholders' of the parent co.
171
276
356
185
10 8 %
81
29%
5
65
78
73
1456%
13
20%
0.15
0.24
0.31
0.2
108%
0.1
29%
Sales Cost of sales
Write-off / impairment of plant and equipment
Share in net income of jointly controlled entity Income from time deposits Finance cost Other income / (expense)
Non-cont. interest's share of the period's profit / (loss) EPS (SR)
Earnings Call Presentation Q2, 2017
11
Core of our business built on world scale competitive phosphate and aluminium businesses aluminium phosphate gold & base metals
SAR 2,552 mn
Revenues
Price strength aluminium and phosphate businesses Negative price impact on the ammonia business Production driven growth for all businesses
Positive direction on prices and costs for aluminium and phosphate Ammonia price drop Margins are improving on efficiency and cost reduction
+17% 45% 50%
39%
43%
SAR 977
SAR 1,509 mn
11%
15%
+54% 46% 51% 38% 39%
Q2 2016 Earnings Call Presentation Q2, 2017
11%
12%
EBITDA
SAR 2,995 mn
Q2 2017 12
Strong operating performance, supportive market conditions and benefits of low cost operations reflecting in stronger results Net income bridge Q2 2017 vs Q2 2016 SAR MN
+146%
700
21
600
11
1
77
131
500 127
53
434
400
300
227 176
200
100
0 Q2 2016 IFRS
Price effect
Earnings Call Presentation Q2, 2017
Volume effect
Cost effect
Sales, marketing logistics
G&A
Write-off PPE
Finance charges
Others
Q2 2017 IFRS
13
Strong operating performance, supportive market conditions and benefits of low cost operations reflecting in stronger results Net income bridge Q1 2017 vs Q2 2017 SAR MN
+27%
700
600 162
500 266
18 400
5
17
15
12
434
8
341
300
200
100
0 Q1 2017 IFRS
Price effect
Earnings Call Presentation Q2, 2017
Volume effect
Cost effect
Sales, marketing logistics
G&A
Write-off PPE
Finance charges
Others
Q2 2017 IFRS
14
Operational performance
Earnings Call Presentation Q2, 2017
15
Phosphate performance Operational performance ■
■
■
During Q2, Ma’aden produced 668,000 tonnes and sold 733,000 tonnes of ammonium phosphate fertilizer. Production was in line with Q2 2016, whilst sales increased by 4%. Ma’aden produced and sold (external) a record 555,000 tonnes and 393,000 tonnes of ammonia, an increase of 85% and 155% respectively as compared to the same quarter last year. The increased production and sales volume is largely attributed to the start of commercial operations of Ma’aden Wa’ad Al Shamal ammonia plant.
Cost performance ■
During the quarter ammonium phosphate fertilizer cash cost was maintained at the same level as in the corresponding quarter of last year.
Ammonium phosphate fertilizer (Kt) Production 750 700 650
703
Sales
733
721
669 637 332
■
First ammonium phosphate fertilzer was produced in July 2017 from Ma’aden Wa’ad Al Shamal Phosphate Company
668 355
600
380 360 340 300 280
550
260
500
240
450
220
400
200 Q2 2016
Q1 2017
Q2 2017
Ammonia (Kt)
US$/t
Production
Sales
Avg Prices
700
450 599
555
600 500
400
300
277
300
200
154
400 350
393 340
300 250
200
152
100
150
0
100 Q2 2016
Earnings Call Presentation Q2, 2017
US$/t
320
320
400
Project
Avg Prices
Q1 2017
Q2 2017
16
Aluminium performance Operational performance During the second quarter of 2017, Ma’aden produced 219,000 tonnes of primary aluminium, in line with the same period of last year. ■ Ma’aden’s bauxite mine and alumina refinery is operating well ■ During Q2, Ma’aden produced 349,000 tonnes of alumina, an increase of 8% compared to Q2 2016. ■
Primary aluminium (Kt) Production
Sales
Avg LME Prices
240 228 227
230 220 210
220 219
1909
1793
219 217
Q1 2017
Q2 2017
1550
200
Cost performance
190
■
180
During the second quarter, our aluminium cash cost decreased significantly, by decreased fixed costs through strong cost control measures, reduction in some raw material consumption, and notably lower cost of alumina
Q2 2016
However, we see some headwinds with the prices of key inputs such as caustic soda and coke prices increasing
369 349
340
324
290
Projects
240
■
190
The rolling mill operation continues to ramp up production and is making steady progress in penetrating the market for can sheets in the Middle East region and beyond
140 90 Q2 2016
Earnings Call Presentation Q2, 2017
2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000
Alumina production (Kt) 390
■
US$/t
Q1 2017
Q2 2017
17
Gold and Copper performance Operational performance
Gold (‘000 ounces) Production
■
■
During the quarter, Ma’aden’s production of gold increased by 17% to 70,000 ounces compared to the same quarter last year, this was mainly due to increased volumes from Ad Duwayhi mine
During the quarter, we produced 10,600 tonnes and sold 10,700 tonnes of copper concentrate from the Jabal Sayid copper mine, which is operating well to reach its rated capacity
74 72 70 68 66 64 62 60 58 56 54
71
■
Continued focus on costs helped Ma’aden to maintain its overall annual gold cash cost objectives. Although some throughput issues during the quarter impacted production which in turn translated to an increase in cash cost.
Jabal Sayid’s continued focus on cost has helped Jabal Sayid to reduce its C1 cash cost by almost 30% compared to the same quarter last year due to increased volumes and better efficiencies.
Avg Prices 70
US$/oz 1300 1280 1260 1240 1220 1200 1180 1160 1140 1120 1100
69
1263 1238 63 60
Q1 2017
Q2 2017
Copper volumes (Kt) Production
12
US$/lb Sales
Price 10.6 10.7
10
2.64 2.11
■
70
1280
Q2 2016
Cost performance
Sales
8
7.0
2.61
7.5
3 2.5 2
6.0 6
1.5
4
1 2.5
2
0.5
0
0 Q2 2016
Q1 2017
Q2 2017
1 Ma’aden attributable production & sales @ 50% Earnings Call Presentation Q2, 2017
18
Financial position
Earnings Call Presentation Q2, 2017
19
Financial position All numbers are in SAR millions
Long term borrowing By business
Other non current assets 25,974
11,149
Balance sheet
4%
2,647 8,073
26,738
Non controlling interest Other non current liability
33% 45% 62% 31%
53,262
44,805
MPC
Plant, property & equipment
5% 20%
Equity
Capital work in progress
By source
WAS
Aluminium
Others
Banks
PIF
SIDF
Type of loan
Long term borrowing
47% Current assets
Assets
4,193
11,457
5%
53% Current Liability 95%
Liability
As at 30 June 2017 Floating Earnings Call Presentation Q2, 2017
Fixed
SAR
USD
20
Financial strategy ■
Maintain liquidity
■
Optimize capital structure
■
Ensure stable foundation for future growth
Cash & Cash Equivalent
60
29
33
Long Term Borrowing
40
Net debt
Debt/Total Capital
47
47
47
63% 62%
62%
50
54
62%
54
53
61%
61% 45
40
60%
45
59% 30
58%
33
57%
57%
57%
20
56%
56% 12
10 4
5
7
7
55%
6 54%
0 2013 2014 2015 1 Long term borrowings / (long term borrowings + total equity) 2 Long term borrowings – cash equivalents and short tern investments 3 Restated with IFRS from 2016 onwards Earnings Call Presentation Q2, 2017
53% 2016
Q1 2017
Q2 2017
21
Summary
Production ramp-up continues ▪ Continued focus on volumes: ramping up new capacities and increasing throughput at existing operations
Leading position in fundamentally attractive commodities ▪ Better overall price environment in Q2 2017 but some concerns for the balance of the year, particularly in DAP
Underpinned outstanding cost performance ▪ Strong cost performance allows us to see the full benefits of improved commodity prices
Growth projects underway ▪ Wa’ad Al Shamal first ammonium phosphate fertilizer produced in July 2017 ▪ Strong pipeline of attractive new projects
Earnings Call Presentation Q2, 2017
22
Q&A
Earnings Call Presentation Q2, 2017
23
Appendix
Earnings Call Presentation Q2, 2017
24
Debt repayment profile 2500
Al numbers are in US$ million 2,067
MIC 2000
MGBM WAS 1,712
MBAC
1,631
MRC MAC
1500 1,321
MPC
1,269 1,198 1,132 998 1000 873 806 633 575
575
500 288
0
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
As at 31 December 2016
Earnings Call Presentation Q2, 2017
25
Sales summary (All numbers are in ‘000 tonnes except as mentioned)
Particulars Phosphate business Ammonium phosphate fertilizer Ammonia MPC Ammonia MWSPC Aluminium business Alumina Primary Aluminium Gold & base metals business Gold (‘000 ounces) Copper
Earnings Call Presentation Q2, 2017
Q2 2017
Q1 2017
% change q-o-q
Q2 2016
% change y-o-y
733
637
15%
703
4%
111 282
152 315
-27% -10%
154 -
-28%
349 217
384 227
-9% -4%
324 219
8% -1%
69 10.7
70 7.5
-1% 42%
63 -
9%
26
Thank You! Copyright © 2016. Ma’aden . All rights reserved.
Earnings Call Presentation Q2, 2017
27
