Saudi Arabian Mining Company (Ma'aden) - Tadawul
Saudi Arabian Mining Company (Ma’aden) Earnings Conference Call Q3 2017 November 6, 2017 1
Earnings Call Presentation Q3, 2017
Mohammed Al Jbali Investor Relations
2
Earnings Call Presentation Q3, 2017
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. Non-IFRS Financial Measures Some of the financial information included in this presentation is derived from Ma’aden consolidated financial statements but are not terms defined within the International Financial Reporting Standards (IFRS) as applied In the Kingdom of Saudi Arabia. Such information is provided as the Company believes they are useful measures for investors. A reconciliation of this information with the consolidated financial statements is included in the presentation.
3
Earnings Call Presentation Q3, 2017
Khalid Al-Mudaifer
President & Chief Executive Officer
4
Earnings Call Presentation Q3, 2017
Continued growth in production delivers another strong quarter
Production
Strong cost performance
Strong financial performance
Growth remains a focus
■ ■ ■ ■ ■
78K ounces of gold, up 37% vs. Q3 2016 363K tonnes of alumina, down 5% vs. Q3 2016 240K tonnes of primary aluminium, up 11% vs. Q3 2016 620K tonnes of ammonia, up 99% vs Q3 2016 744K tonnes of ammonium phosphate fertilizer, up 5% vs Q3 2016
■ ■ ■
Focus on maximizing production continues Cost performance in fertilisers and gold maintaining downward momentum Ongoing program to reduce aluminium fixed cash costs to offset higher power and raw materials costs
■ ■ ■ ■
Sales SAR 3,151 mn, up 37% vs. Q3 2016 EBITDA SAR 1,360 mn, up 46% vs Q3 2016 Net income SAR 263 mn, up 122% vs Q3 2016 Operating Cashflow1 SAR 880 mn, up 54% vs Q3 2016
■ ■ ■
Ammonium Phosphate fertilizer production from Wa’ad Al Shamal plant ramping up Next wave of gold and phosphate projects at advanced stages Looking for opportunities outside the Kingdom to support our position in base metals and in fertilisers
HIGHER VOLUMES AND IMPROVED MARKETS BUT WITH SOME HEADWINDS 1 see appendix for details 5
Earnings Call Presentation Q3, 2017
Margins have softened but remain strong Commodity price movement
Aluminium
Copper
Gold
DAP
Ammonia
Rebase to 100 as on 1 June 2016
160% 140% 120% 100% 80% 60%
40%
Source: Bloomberg
SAR million
1600
EBITDA and margins
1400
EBITDA
1200
EBITDA Margin
1,416 52%
1,475 49%
1,360
50%
43%
1000 800
200
20%
241 10%
10%
0
0% Q4 2016
6
40% 30%
600 400
60%
Earnings Call Presentation Q3, 2017
Q1 2017
Q2 2017
Note: 2016 numbers have been restated as per IFRS
Q3 2017
Phosphate market stabilised with a pick-up in late Q3 ■
Ammonium phosphate fertilizer price ~US$340/t (Avg. Tampa FOB) and Ammonia price averaged ~US$ 218/t (Avg. ME FOB) in Q3
■
South America demand was lower due to high inventory levels but Indian subcontinent demand picked up in Q3 which supported the late Q3 price improvement
■
On the supply side, US saw supply dip due to Hurricane Irma and volumes from Morocco also increased. More limited Chinese exports also contributed to a tighter than expected market
■
Further supply from Moroccan and Wa’ad Al Shamal project ramp-ups may soften prices in the coming quarters
Average DAP Price Tampa Index (US$/t)
%
Quarterly change
Avg. DAP Prices 420
400
Q1
Q2
Q3
Q4
Q1
Q2
Q3
-9%
-4%
-2%
-7%
+19%
-8%
-5%
380
360
340
320
300
7
Earnings Call Presentation Q3, 2017
Source: Ma’aden SBU analysis, CRU , FMB and FERTECON
Aluminium prices built on recent gains in Q3 2017 ■
Aluminium price averaged US$ 2,012/tonne (LME), up 24% vs. Q3 2016 and up 9% vs. Q2 2017
■
LME prices should be supported by Chinese central government’s supply reform policies and for 2017 the market is expected to remain nearly balanced with a deficit possible next year
■
Robust demand growth at 4-5% and continued implementation of supply side reforms in China to progressively reduce overcapacity issue
Aluminium Price Movement (US$/t) Q1 2400
+3%
Q2 +7%
%
Q3 +1%
Q4 +1%
Quarterly change
Q1
Q2
Q3
+16%
+0.4%
+9%
2200 2000 1800 1600 1400 1200
8
Earnings Call Presentation Q3, 2017
Source: Bloomberg, Ma’aden SBU analysis, CRU June 2017
Gold remains strong and copper continues its recovery ■
Gold prices averaged US$1,278/oz slightly down on Q3 2016; Copper prices increased by 34% year on year averaging US$6,383/tonne
■
Gold will remain volatile but with an overall positive long-term outlook
■
Copper prices increased by 26% during the nine months period of 2017 compared to same period last year, averaging US$5,981/tonne
■
Robust long-term outlook for copper, with forecasted supply deficit by 2020 driven by strong demand and supply offset by depletion and closures
Gold and copper price movement (US$/t) Q1 Cu
Q2
Q3
%
Q4
Q1
Quarterly change
Q2
Q3
+5%
+0.2%
-1%
+15%
+6%
+3%
+9%
+16%
+6%
-1%
-12%
+7%
-1%
+5%
7500
Au
1400
7000 1300 6500 6000
1200
5500 1100 5000 4500
1000
4000 900 3500
Copper
3000
9
Earnings Call Presentation Q3, 2017
Gold 800
Source: Bloomberg, CRU June 2017, SBU secondary analysis
Darren C. Davis Chief Financial Officer
10
Earnings Call Presentation Q3, 2017
Third quarter continued a strong year for Ma’aden (All numbers are in SAR million, except as mentioned)
Comparative analysis - quarterly Q2-17A vs. Q3-17A SR %
Q3-16
Q2-17
Q3-17
2,308
2,995
3,151
844
37%
156
5%
-1,788
-1,983
-2,321
-533
30%
-338
17%
Gross profit
520
1,012
831
311
60%
-181
- 18 %
Gross profit margin%
23%
34%
26%
Selling, marketing and logistic expenses
-96
-127
-103
-7
7%
24
-19%
General and administrative expenses
-74
-97
-82
-8
11%
15
-16%
Exploration and technical services expenses
-12
-14
-17
-5
46%
-3
20%
Write-off / impairment of plant and equipment
-14
-1
-15
-1
8%
-14
Operating profit
325
774
614
289
89%
-159
- 2 1%
Operating income margin%
14%
26%
19%
-11
22
38
49
448%
16
72%
42
19
14
-28
-66%
-4
-23%
-226
-351
-384
-159
70%
-34
10%
-5
-32
0
6
107%
33
101%
125
431
283
158
12 6 %
-149
-34%
-7
-31
-20
-14
205%
11
-35%
Profit / (loss) for the period
118
400
263
144
12 2 %
-138
-34%
Profit /(loss) %
5%
13%
8%
Profit / (loss) attrib. to shareholders' of the parent co.
107
323
243
135
12 6 %
-80
-25%
11
78
20
9
82%
-58
-75%
0.09
0.28
0.21
0.1
126%
-0.1
-25%
Sales Cost of sales
Share in net income of jointly controlled entity Income from time deposits Finance cost Other income / (expense) Profit before zakat and income tax Zakat and income tax expense
Non-cont. interest's share of the period's profit / (loss) EPS (SR)
11
Q3-16A vs. Q3-17A SR %
Earnings Call Presentation Q3, 2017
2730%
Our world scale, competitive businesses are highly profitable Q3 2016 Revenues
Price strength in aluminium and gold businesses Negative price impact on the ammonia business Production driven growth for all businesses
EBITDA
12
Positive direction on prices and costs for aluminium and phosphate Negative ammonia price movement EBITDA Margins improving
Earnings Call Presentation Q3, 2017
Aluminium Phosphate Gold & base metals
Q3 2017
12%
12%
45%
46%
SAR 3,151M
SAR 2,308M
+37%
42% 43%
13%
16% 44%
SAR 930M
44%
SAR 1,360M
43% 40%
+46%
Strong operating performance and improved prices reflecting in stronger earnings Net income bridge Q3 2017 vs. Q3 2016 SAR MN
+122%
Key factor All products ↑
Key factors Aluminum ↑ Ammonia ↓
-82 -7
242
-8 -159 7
Key factors
151
Aluminum
118
APF Gold
Q3 2016 IFRS
13
Price effect
Earnings Call Presentation Q3, 2017
Volume effect
Cost effect
263
↑ ↓ ↓
Sales, marketing logistics
G&A
Finance charges
Others
Q3 2017 IFRS
Market prices and rising input costs impacted Q3 earnings Net income bridge Q3 2017 vs. Q2 2017 SAR MN
-52% Key factors All products
↑ Key factors
Key factor Ammonia
Aluminum
↓
APF, Amm Gold
400
-241
14
Price effect
Earnings Call Presentation Q3, 2017
263
-107 167
Q2 2017 IFRS
↑ ↓ ↓
Volume effect
24
Cost effect
Sales, marketing logistics
15
-14
G&A
Write-off PPE
-34
Finance charges
52
Others
Q3 2017 IFRS
Operational performance
15
Earnings Call Presentation Q3, 2017
Phosphate Performance Operational performance ■
■
■
During Q3, Ma’aden produced 744,000 tonnes and sold 770,000 tonnes of ammonium phosphate fertilizer. Production increased by 11%, and sales increased by 5% compared to Q3 2016. Ma’aden produced 620,000 tonnes of ammonia, an increase of 99% compared to the same quarter last year and sold (external) 470,000 tonnes an increase of 211% compared to the same quarter last year. The increased sales volume of ammonia is largely attributed to the start of commercial operations of the Ma’aden Wa’ad Al Shamal Phosphate Company ammonia plant.
Ammonium phosphate fertilizer (Kt) Production
Sales
Avg Prices US$/t
750 700
355 341
335
650 600 550
708
733 672
744
770
668
500 450 400 Q3 2016
Q2 2017
Q3 2017
Ammonia (Kt)
US$/t
Production
Sales
Avg Prices
700
Cost performance ■
During the quarter ammonium phosphate fertilizer cash cost decreased slightly compared to the same quarter of last year.
600
350 314
16
Ma’aden Wa’ad Al Shamal Phosphate Company produced first ammonium phosphate fertilizer in July 2017, and the project is progressing well toward commercial operations. Earnings Call Presentation Q3, 2017
300 250
400
200 100
210
555 393
312 ■
329
500
300
Project
380 360 340 320 300 280 260 240 220 200
200
620 470
150
151
0
100 Q3 2016
Q2 2017
Q3 2017
Aluminium Performance Operational performance ■
■
■
During the third quarter of 2017, Ma’aden produced 239,000 tonnes of primary aluminium, an increase of 11% compared to the same quarter of last year
Primary aluminium (Kt) Production
Sales
Avg LME Prices
250
2200 2055
240
2062
2000
230
Ma’aden’s bauxite and alumina refinery operations continue to focus on ramping up production
220
During Q3, Ma’aden produced 363,000 tonnes of alumina with all production consumed
200
1800
1739
1600 210
240 239 216 216
1400
219 217
1200
190 180
■
During the third quarter, aluminium cash cost increased due to higher power and raw material costs However, alumina cash cost increased due to the increase in key inputs such as caustic soda
Projects The rolling mill operation continues to ramp up production
Q2 2017
Q3 2017
Alumina production (Kt) US$/t Production
440
340
Sales
305
390
Avg Prices (API)
309
381
373
349
349
363
363
150
190
100
140
50 0 Q3 2016
Earnings Call Presentation Q3, 2017
300
200
90
17
350
250
239
290 240
■
1000 Q3 2016
Cost performance ■
US$/t
Q2 2017
Q3 2017
Gold and Copper Performance Operational performance ■
■
During the quarter, Ma’aden’s production of gold increased by 37% to 78,000 ounces compared to the same quarter last year - this was mainly due to increased volumes from Ad Duwayhi mine
During the quarter, we produced 10,500 tonnes and sold 7,800 tonnes of copper concentrate from the Jabal Sayid copper mine, which is operating ahead of plan
Gold (‘000 ounces) Production 90 80 70 60 50 40 30 20 10 0
■
Due to the continuous focus on costs and the increase in production, gold cash costs decreased by 12% compared to the same quarter last year.
US$/oz
Avg Prices
1350 1324
1308
1300
1263
70 57
57
1250 79
78
69
1200 1150 1100
Q3 2016
Cost performance
Sales
Q2 2017
Q3 2017
Copper volumes (Kt)¹ $/t Production
12
Sales
Price 6922
10
5000
4762 6 9.9
9.9
7000 6000
5754
8
8000
10.6 10.7
4000 10.5
4
7.8
3000 2000
2
1000
0
0 Q3 2016
18
Q1 2017
Q3 2017
¹ Ma’aden attributable production & sales @ 50% Earnings Call Presentation Q3, 2017
Financial position
19
Earnings Call Presentation Q3, 2017
Financial position All numbers are in SAR millions
Other non current assets
Long term borrowing By business
26,162
27,449
1,847
Balance sheet
By source
4%
Equity
5%
20%
Capital work in progress 2,572 8,496
33% Non controlling interest
45% 62%
Other non current liability
31%
Mine, plant, property & equipment
52,538
53,929
MPC
WAS
Aluminium
Others
Banks
PIF
SIDF
Type of loan
Total Debt 5%
Current assets
Assets
4,688
11,232
47% 53% Current Liability
Equity and liabilities
95%
As at 30 September 2017 Floating 20
Earnings Call Presentation Q3, 2017
Fixed
SAR
USD
Financial strategy ■
Further optimization of the debt structure through refinancing (MPC in 2016, Aluminium on going)
■
Clear path to reduce leverage and ensure financial stability
■
Maintaining a strong liquidity position to ensure funding for new growth
Cash & Cash Equivalent
SRbn
29
60
Debt/Total Capital 1
Long Term Borrowing
33
40
47
47
62%
62%
Net debt
47
50
48
63% 62% 61%
61% 60%
40
60% 59%
30
58% 54 57%
54
53
57%
20
45
33
53
56%
56% 45
55%
10 12 0
5
4 2013
7
7
54% 6
5 53%
2014
1 see appendix 2 Restated with IFRS from 2016 onwards 21
57%
Earnings Call Presentation Q3, 2017
2015
2016
Q1 2017
Q2 2017
Q3 2017
Summary Maximizing production ▪ Our priority remains to efficiently operate our world class assets, ramping up new capacities and increasing throughput at existing operations
Fundamentally attractive commodities with strong long-term market outlook ▪ Overall improvement in the price environment in Q3 2017 with sustained improvement in
▪
the aluminium market Ammonia will remain unstable and fertiliser prices could see more pressure
Robust cost performance ▪ Strong cost performance allows us to see the full benefits of improved commodity prices
Outlook for growth remain positive ▪ Wa’ad Al Shamal ramping up steadily ▪ Strong pipeline of attractive new projects in gold and phosphate ▪ Looking for opportunities outside the Kingdom to support our position in base metals and in fertilisers
22
Earnings Call Presentation Q3, 2017
Q&A
23
Earnings Call Presentation Q3, 2017
Appendix
24
Earnings Call Presentation Q3, 2017
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
25
Earnings Call Presentation Q3, 2017
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
26
Earnings Call Presentation Q3, 2017
Q3 2017
Q2 2017
% change q-o-q
Q3 2016
% change y-o-y
770
733
5%
672
15%
179 311
111 282
61% 10%
151 -
19% -
363 239
349 217
4% 10%
373 216
-3% 11%
79 7.8
69 10.7
14% -27%
57 9.9
39% -21%
Non-IFRS Financial Measures Non-IFRS Financial Measures Some of the financial information included in this presentation is derived from Ma’aden consolidated financial statements but are not terms defined within the International Financial Reporting Standards (IFRS) as applied In the Kingdom of Saudi Arabia. Such information is provided as the Company believes they are useful measures for investors. An explanation of these terms is provided below.
27
■
Debt: Total Capital = (Long-term borrowings + Current portion long-term borrowings) / (Long-term borrowings + Current portion of long-term borrowings + Total equity)
■
Operating Cashflow = Net cash generated from operating activities
Earnings Call Presentation Q3, 2017
Thank You! Copyright © 2016. Ma’aden . All rights reserved.
28
Earnings Call Presentation Q3, 2017
Earnings Call Presentation Q3, 2017
Mohammed Al Jbali Investor Relations
2
Earnings Call Presentation Q3, 2017
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. Non-IFRS Financial Measures Some of the financial information included in this presentation is derived from Ma’aden consolidated financial statements but are not terms defined within the International Financial Reporting Standards (IFRS) as applied In the Kingdom of Saudi Arabia. Such information is provided as the Company believes they are useful measures for investors. A reconciliation of this information with the consolidated financial statements is included in the presentation.
3
Earnings Call Presentation Q3, 2017
Khalid Al-Mudaifer
President & Chief Executive Officer
4
Earnings Call Presentation Q3, 2017
Continued growth in production delivers another strong quarter
Production
Strong cost performance
Strong financial performance
Growth remains a focus
■ ■ ■ ■ ■
78K ounces of gold, up 37% vs. Q3 2016 363K tonnes of alumina, down 5% vs. Q3 2016 240K tonnes of primary aluminium, up 11% vs. Q3 2016 620K tonnes of ammonia, up 99% vs Q3 2016 744K tonnes of ammonium phosphate fertilizer, up 5% vs Q3 2016
■ ■ ■
Focus on maximizing production continues Cost performance in fertilisers and gold maintaining downward momentum Ongoing program to reduce aluminium fixed cash costs to offset higher power and raw materials costs
■ ■ ■ ■
Sales SAR 3,151 mn, up 37% vs. Q3 2016 EBITDA SAR 1,360 mn, up 46% vs Q3 2016 Net income SAR 263 mn, up 122% vs Q3 2016 Operating Cashflow1 SAR 880 mn, up 54% vs Q3 2016
■ ■ ■
Ammonium Phosphate fertilizer production from Wa’ad Al Shamal plant ramping up Next wave of gold and phosphate projects at advanced stages Looking for opportunities outside the Kingdom to support our position in base metals and in fertilisers
HIGHER VOLUMES AND IMPROVED MARKETS BUT WITH SOME HEADWINDS 1 see appendix for details 5
Earnings Call Presentation Q3, 2017
Margins have softened but remain strong Commodity price movement
Aluminium
Copper
Gold
DAP
Ammonia
Rebase to 100 as on 1 June 2016
160% 140% 120% 100% 80% 60%
40%
Source: Bloomberg
SAR million
1600
EBITDA and margins
1400
EBITDA
1200
EBITDA Margin
1,416 52%
1,475 49%
1,360
50%
43%
1000 800
200
20%
241 10%
10%
0
0% Q4 2016
6
40% 30%
600 400
60%
Earnings Call Presentation Q3, 2017
Q1 2017
Q2 2017
Note: 2016 numbers have been restated as per IFRS
Q3 2017
Phosphate market stabilised with a pick-up in late Q3 ■
Ammonium phosphate fertilizer price ~US$340/t (Avg. Tampa FOB) and Ammonia price averaged ~US$ 218/t (Avg. ME FOB) in Q3
■
South America demand was lower due to high inventory levels but Indian subcontinent demand picked up in Q3 which supported the late Q3 price improvement
■
On the supply side, US saw supply dip due to Hurricane Irma and volumes from Morocco also increased. More limited Chinese exports also contributed to a tighter than expected market
■
Further supply from Moroccan and Wa’ad Al Shamal project ramp-ups may soften prices in the coming quarters
Average DAP Price Tampa Index (US$/t)
%
Quarterly change
Avg. DAP Prices 420
400
Q1
Q2
Q3
Q4
Q1
Q2
Q3
-9%
-4%
-2%
-7%
+19%
-8%
-5%
380
360
340
320
300
7
Earnings Call Presentation Q3, 2017
Source: Ma’aden SBU analysis, CRU , FMB and FERTECON
Aluminium prices built on recent gains in Q3 2017 ■
Aluminium price averaged US$ 2,012/tonne (LME), up 24% vs. Q3 2016 and up 9% vs. Q2 2017
■
LME prices should be supported by Chinese central government’s supply reform policies and for 2017 the market is expected to remain nearly balanced with a deficit possible next year
■
Robust demand growth at 4-5% and continued implementation of supply side reforms in China to progressively reduce overcapacity issue
Aluminium Price Movement (US$/t) Q1 2400
+3%
Q2 +7%
%
Q3 +1%
Q4 +1%
Quarterly change
Q1
Q2
Q3
+16%
+0.4%
+9%
2200 2000 1800 1600 1400 1200
8
Earnings Call Presentation Q3, 2017
Source: Bloomberg, Ma’aden SBU analysis, CRU June 2017
Gold remains strong and copper continues its recovery ■
Gold prices averaged US$1,278/oz slightly down on Q3 2016; Copper prices increased by 34% year on year averaging US$6,383/tonne
■
Gold will remain volatile but with an overall positive long-term outlook
■
Copper prices increased by 26% during the nine months period of 2017 compared to same period last year, averaging US$5,981/tonne
■
Robust long-term outlook for copper, with forecasted supply deficit by 2020 driven by strong demand and supply offset by depletion and closures
Gold and copper price movement (US$/t) Q1 Cu
Q2
Q3
%
Q4
Q1
Quarterly change
Q2
Q3
+5%
+0.2%
-1%
+15%
+6%
+3%
+9%
+16%
+6%
-1%
-12%
+7%
-1%
+5%
7500
Au
1400
7000 1300 6500 6000
1200
5500 1100 5000 4500
1000
4000 900 3500
Copper
3000
9
Earnings Call Presentation Q3, 2017
Gold 800
Source: Bloomberg, CRU June 2017, SBU secondary analysis
Darren C. Davis Chief Financial Officer
10
Earnings Call Presentation Q3, 2017
Third quarter continued a strong year for Ma’aden (All numbers are in SAR million, except as mentioned)
Comparative analysis - quarterly Q2-17A vs. Q3-17A SR %
Q3-16
Q2-17
Q3-17
2,308
2,995
3,151
844
37%
156
5%
-1,788
-1,983
-2,321
-533
30%
-338
17%
Gross profit
520
1,012
831
311
60%
-181
- 18 %
Gross profit margin%
23%
34%
26%
Selling, marketing and logistic expenses
-96
-127
-103
-7
7%
24
-19%
General and administrative expenses
-74
-97
-82
-8
11%
15
-16%
Exploration and technical services expenses
-12
-14
-17
-5
46%
-3
20%
Write-off / impairment of plant and equipment
-14
-1
-15
-1
8%
-14
Operating profit
325
774
614
289
89%
-159
- 2 1%
Operating income margin%
14%
26%
19%
-11
22
38
49
448%
16
72%
42
19
14
-28
-66%
-4
-23%
-226
-351
-384
-159
70%
-34
10%
-5
-32
0
6
107%
33
101%
125
431
283
158
12 6 %
-149
-34%
-7
-31
-20
-14
205%
11
-35%
Profit / (loss) for the period
118
400
263
144
12 2 %
-138
-34%
Profit /(loss) %
5%
13%
8%
Profit / (loss) attrib. to shareholders' of the parent co.
107
323
243
135
12 6 %
-80
-25%
11
78
20
9
82%
-58
-75%
0.09
0.28
0.21
0.1
126%
-0.1
-25%
Sales Cost of sales
Share in net income of jointly controlled entity Income from time deposits Finance cost Other income / (expense) Profit before zakat and income tax Zakat and income tax expense
Non-cont. interest's share of the period's profit / (loss) EPS (SR)
11
Q3-16A vs. Q3-17A SR %
Earnings Call Presentation Q3, 2017
2730%
Our world scale, competitive businesses are highly profitable Q3 2016 Revenues
Price strength in aluminium and gold businesses Negative price impact on the ammonia business Production driven growth for all businesses
EBITDA
12
Positive direction on prices and costs for aluminium and phosphate Negative ammonia price movement EBITDA Margins improving
Earnings Call Presentation Q3, 2017
Aluminium Phosphate Gold & base metals
Q3 2017
12%
12%
45%
46%
SAR 3,151M
SAR 2,308M
+37%
42% 43%
13%
16% 44%
SAR 930M
44%
SAR 1,360M
43% 40%
+46%
Strong operating performance and improved prices reflecting in stronger earnings Net income bridge Q3 2017 vs. Q3 2016 SAR MN
+122%
Key factor All products ↑
Key factors Aluminum ↑ Ammonia ↓
-82 -7
242
-8 -159 7
Key factors
151
Aluminum
118
APF Gold
Q3 2016 IFRS
13
Price effect
Earnings Call Presentation Q3, 2017
Volume effect
Cost effect
263
↑ ↓ ↓
Sales, marketing logistics
G&A
Finance charges
Others
Q3 2017 IFRS
Market prices and rising input costs impacted Q3 earnings Net income bridge Q3 2017 vs. Q2 2017 SAR MN
-52% Key factors All products
↑ Key factors
Key factor Ammonia
Aluminum
↓
APF, Amm Gold
400
-241
14
Price effect
Earnings Call Presentation Q3, 2017
263
-107 167
Q2 2017 IFRS
↑ ↓ ↓
Volume effect
24
Cost effect
Sales, marketing logistics
15
-14
G&A
Write-off PPE
-34
Finance charges
52
Others
Q3 2017 IFRS
Operational performance
15
Earnings Call Presentation Q3, 2017
Phosphate Performance Operational performance ■
■
■
During Q3, Ma’aden produced 744,000 tonnes and sold 770,000 tonnes of ammonium phosphate fertilizer. Production increased by 11%, and sales increased by 5% compared to Q3 2016. Ma’aden produced 620,000 tonnes of ammonia, an increase of 99% compared to the same quarter last year and sold (external) 470,000 tonnes an increase of 211% compared to the same quarter last year. The increased sales volume of ammonia is largely attributed to the start of commercial operations of the Ma’aden Wa’ad Al Shamal Phosphate Company ammonia plant.
Ammonium phosphate fertilizer (Kt) Production
Sales
Avg Prices US$/t
750 700
355 341
335
650 600 550
708
733 672
744
770
668
500 450 400 Q3 2016
Q2 2017
Q3 2017
Ammonia (Kt)
US$/t
Production
Sales
Avg Prices
700
Cost performance ■
During the quarter ammonium phosphate fertilizer cash cost decreased slightly compared to the same quarter of last year.
600
350 314
16
Ma’aden Wa’ad Al Shamal Phosphate Company produced first ammonium phosphate fertilizer in July 2017, and the project is progressing well toward commercial operations. Earnings Call Presentation Q3, 2017
300 250
400
200 100
210
555 393
312 ■
329
500
300
Project
380 360 340 320 300 280 260 240 220 200
200
620 470
150
151
0
100 Q3 2016
Q2 2017
Q3 2017
Aluminium Performance Operational performance ■
■
■
During the third quarter of 2017, Ma’aden produced 239,000 tonnes of primary aluminium, an increase of 11% compared to the same quarter of last year
Primary aluminium (Kt) Production
Sales
Avg LME Prices
250
2200 2055
240
2062
2000
230
Ma’aden’s bauxite and alumina refinery operations continue to focus on ramping up production
220
During Q3, Ma’aden produced 363,000 tonnes of alumina with all production consumed
200
1800
1739
1600 210
240 239 216 216
1400
219 217
1200
190 180
■
During the third quarter, aluminium cash cost increased due to higher power and raw material costs However, alumina cash cost increased due to the increase in key inputs such as caustic soda
Projects The rolling mill operation continues to ramp up production
Q2 2017
Q3 2017
Alumina production (Kt) US$/t Production
440
340
Sales
305
390
Avg Prices (API)
309
381
373
349
349
363
363
150
190
100
140
50 0 Q3 2016
Earnings Call Presentation Q3, 2017
300
200
90
17
350
250
239
290 240
■
1000 Q3 2016
Cost performance ■
US$/t
Q2 2017
Q3 2017
Gold and Copper Performance Operational performance ■
■
During the quarter, Ma’aden’s production of gold increased by 37% to 78,000 ounces compared to the same quarter last year - this was mainly due to increased volumes from Ad Duwayhi mine
During the quarter, we produced 10,500 tonnes and sold 7,800 tonnes of copper concentrate from the Jabal Sayid copper mine, which is operating ahead of plan
Gold (‘000 ounces) Production 90 80 70 60 50 40 30 20 10 0
■
Due to the continuous focus on costs and the increase in production, gold cash costs decreased by 12% compared to the same quarter last year.
US$/oz
Avg Prices
1350 1324
1308
1300
1263
70 57
57
1250 79
78
69
1200 1150 1100
Q3 2016
Cost performance
Sales
Q2 2017
Q3 2017
Copper volumes (Kt)¹ $/t Production
12
Sales
Price 6922
10
5000
4762 6 9.9
9.9
7000 6000
5754
8
8000
10.6 10.7
4000 10.5
4
7.8
3000 2000
2
1000
0
0 Q3 2016
18
Q1 2017
Q3 2017
¹ Ma’aden attributable production & sales @ 50% Earnings Call Presentation Q3, 2017
Financial position
19
Earnings Call Presentation Q3, 2017
Financial position All numbers are in SAR millions
Other non current assets
Long term borrowing By business
26,162
27,449
1,847
Balance sheet
By source
4%
Equity
5%
20%
Capital work in progress 2,572 8,496
33% Non controlling interest
45% 62%
Other non current liability
31%
Mine, plant, property & equipment
52,538
53,929
MPC
WAS
Aluminium
Others
Banks
PIF
SIDF
Type of loan
Total Debt 5%
Current assets
Assets
4,688
11,232
47% 53% Current Liability
Equity and liabilities
95%
As at 30 September 2017 Floating 20
Earnings Call Presentation Q3, 2017
Fixed
SAR
USD
Financial strategy ■
Further optimization of the debt structure through refinancing (MPC in 2016, Aluminium on going)
■
Clear path to reduce leverage and ensure financial stability
■
Maintaining a strong liquidity position to ensure funding for new growth
Cash & Cash Equivalent
SRbn
29
60
Debt/Total Capital 1
Long Term Borrowing
33
40
47
47
62%
62%
Net debt
47
50
48
63% 62% 61%
61% 60%
40
60% 59%
30
58% 54 57%
54
53
57%
20
45
33
53
56%
56% 45
55%
10 12 0
5
4 2013
7
7
54% 6
5 53%
2014
1 see appendix 2 Restated with IFRS from 2016 onwards 21
57%
Earnings Call Presentation Q3, 2017
2015
2016
Q1 2017
Q2 2017
Q3 2017
Summary Maximizing production ▪ Our priority remains to efficiently operate our world class assets, ramping up new capacities and increasing throughput at existing operations
Fundamentally attractive commodities with strong long-term market outlook ▪ Overall improvement in the price environment in Q3 2017 with sustained improvement in
▪
the aluminium market Ammonia will remain unstable and fertiliser prices could see more pressure
Robust cost performance ▪ Strong cost performance allows us to see the full benefits of improved commodity prices
Outlook for growth remain positive ▪ Wa’ad Al Shamal ramping up steadily ▪ Strong pipeline of attractive new projects in gold and phosphate ▪ Looking for opportunities outside the Kingdom to support our position in base metals and in fertilisers
22
Earnings Call Presentation Q3, 2017
Q&A
23
Earnings Call Presentation Q3, 2017
Appendix
24
Earnings Call Presentation Q3, 2017
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
25
Earnings Call Presentation Q3, 2017
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
26
Earnings Call Presentation Q3, 2017
Q3 2017
Q2 2017
% change q-o-q
Q3 2016
% change y-o-y
770
733
5%
672
15%
179 311
111 282
61% 10%
151 -
19% -
363 239
349 217
4% 10%
373 216
-3% 11%
79 7.8
69 10.7
14% -27%
57 9.9
39% -21%
Non-IFRS Financial Measures Non-IFRS Financial Measures Some of the financial information included in this presentation is derived from Ma’aden consolidated financial statements but are not terms defined within the International Financial Reporting Standards (IFRS) as applied In the Kingdom of Saudi Arabia. Such information is provided as the Company believes they are useful measures for investors. An explanation of these terms is provided below.
27
■
Debt: Total Capital = (Long-term borrowings + Current portion long-term borrowings) / (Long-term borrowings + Current portion of long-term borrowings + Total equity)
■
Operating Cashflow = Net cash generated from operating activities
Earnings Call Presentation Q3, 2017
Thank You! Copyright © 2016. Ma’aden . All rights reserved.
28
Earnings Call Presentation Q3, 2017
